Grand plans for diversification

27 Feb, 2016 01:00 AM

MARETERRAM Limited, formerly Style Limited, has grand plans to diversify across the agribusiness sector, focusing on the increased demand for protein.

The prawn agri-business company was listed to the ASX early last month after raising $18 million at 20 cents per share and completing the acquisitions of Norwest Seafoods and the food services division of the Craig Mostyn Group (CMG).

Mareterram managing director David Lock, who was previously CMG's chief executive officer, told Farm Weekly the company plans to be a big player in the protein sector.

"It will be unlikely that it would be any significant real estate investment," Mr Lock said.

"We are happy to look outside WA, looking at livestock not the land, and we would potentially look at abattoirs, processing and value adding such as feedlots, as long as we can control the supply.

"The company wants to be bigger, it wants to be a diversified agribusiness, that's where we aim to be.

"The step to growth in our business is to make sure our boats can fish every day they are allowed, making them reliable and capable.

"The boats tie up from November till the beginning of April, that is four months doing nothing. So we need to look at what else those boats can do, perhaps look at other quotas on them to fish other things.

"Then the third thing is acquisition growth."

Mr Lock said the company would look at other businesses it could acquire that would help it grow.

"As the name Mareterram suggests, we are looking at sea and land," he said.

"We would like to focus on protein.

"We will look at seafood assets as we are in seafood now, so it makes sense, but we won't be prohibited from looking at land based protein."

Mr Lock believes that in the next five years Australia will see strong growth in food and protein businesses.

"I think there is beef, sheep, potentially chicken, land based aquiculture opportunities, it is unlikely we would invest in pork, especially in WA," he said.

"These are proteins which we could have supply chain control, have a differentiated product and something niche and an export component as well as domestic - which are the attributes we would look for.

"We will look at sea and land simultaneously, so as opportunities come up we will look at them.

"At this point I can't tell what our first investment will be in, sea or land-based.

"I think all protein prices have been dragged up.

"Pork and poultry have been dragged through the roof, for beef there is an indication that the price is coming off, but the long-term trend is that protein is going to stay high for a long time, so getting involved with protein makes sense."

Meat and Livestock Australia's (MLA) January 2016 Australian sheep industry projections indicates that while supply will be down there will be long-term opportunities.

"By 2019, lamb exports are forecast to be 280,000 tonnes swt, up 19 per cent from 2015 levels, the result of increased Australian production and growing global demand," the projections stated.

"The demand for Australian lamb in 2016 will continue to be heavily influenced by international customers, with the Australian dollar tipped to hover below the US70((xA2))¢ mark, which will assist trade and Australian lamb prices considerably.

"That is not to discredit the domestic market, where per capita consumption is forecast to hold steady at 9kg and remain the largest lamb market on both a value and volume basis.

"The United States and Middle East are likely to remain the most influential export markets in 2016, where trade is expected to build further on the 2015 levels."

As for cattle, the latest Australian cattle industry projections from MLA indicates supply will be tight, however the cattle market will still be in a good position in 2016.

"With no major demand changes predicted, it is the much tighter supplies and higher beef prices that seem likely to dictate significant changes between markets in the short-term - with most markets taking less Australian beef, including domestic retail and food service," the projections stated.

"Tighter supplies and the continuing strong global demand should see the domestic market stretched for product, with exports accounting for about 70pc of production over coming years.

"From 2018 onwards, exports are expected to recover with production levels, and rise to 1.15mt swt in 2020 - still below the peak of almost 1.3mt in 2014.

"China was Australia's fourth largest beef export market in 2015, at 148,222t swt, with the value from January to November reaching $917m, with 95pc of this volume being frozen product.

"Consumer spending is expected to remain strong in China, particularly among the urban affluent population who are the key target consumers for Australian beef.

"Strong demand will likely keep China wholesale beef prices high compared to other proteins and ended 2015 steady."

Mr Lock said the company has been clear it has the potential and the appetite to diversify into sea and land.

Since joining the company on January 4, Mr Lock has already seen growth.

"We are getting opportunities coming to us, because we are listed and they know we are inquisitive," he said

"A lot of people believe in the growth story of food and protein prices and want to be involved in it, so this gives them that opportunity. So with us being diversified, we want to get away from a single fishery, because we know agri is versatile, so we want to balance the risks.

"Our earnings come at the first half of the year as we don't start fishing till April, so we don't have anything in the second half from January till June, so a business that smoothed our earnings would be a good thing as well."

The company acquired NorWest Seafoods for $20m, acquiring 10 boats and 10 prawn trawl licences in Shark Bay.

It later purchased the CGM's food service division for $3m, which gave the company a sales and distribution arm, Mr Lock said.

The company listed on the ASX on January 6.

"Since then we have 10 boats moored in Carnarvon as it's not fishing season until April 1, so they are going through a refit," he said.

"The first step is to refit the boats and get them ready for the new season, and fish every day they are allowed, from April 1 till the end of November.''

In recent weeks, Mareterram also entered into an agreement to purchase the share capital and the net assets of Focus Fisheries for $1.3m.

Focus is a major facilitator of contract off-shore processing of Australian wild caught seafood.

Over the past two years, Focus has also performed a fully integrated assistant marketing and management role for Norwest Seafoods.

The company hope the distribution of Focus' Famous Australian Seafood brand via Mareterram Trading, trading as Mareterram Foods, will increase margins captured through vertical integration.

"A few weeks ago we brought Focus fisheries, which is a small fishing business, which was run and owned by Brett Hogan," Mr Lock said.

"This came with some stock and people who will start work on March 1.

"It is small, but it is a nice little add-on because it has a lot of skills in the export markets and gives us more opportunity.''

Mr Hogan has been appointed as Mareterram's marketing and fisheries development executive manager.

"We welcome all new shareholders and are pleased with the response so far, as demonstrated by strong demand for the placement and the subsequent share price gain," Mr Lock said.

"We are excited by the value proposition presented by the entry into the protein and agribusiness sector.

"With the re-listing completed, we look forward to a successful year ahead as we develop and grow the business.

"It has been a busy week with the company's reinstatement on the ASX and our relocation into our new Mews Road premises in Fremantle.

"It is a real coup for Mareterram to attract a person of Brett's calibre in the seafood industry in Australia. He brings decades of hands-on knowledge of the industry as well as domestic and export markets.

"As we prepare for the start of the 2016 fishing season, the integration of the Famous Australian Seafood brand into the Mareterram Foods product will offer immediate benefits.

"We see a number of areas to leverage the vertically integrated nature of the Mareterram business through considered and value adding transactions for shareholders."

Mr Lock said there was lots of energy in the company and everyone was getting ready for the fishing season.



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