Stock Takes: Sanford riding wave of high seafood prices

Sanford says that demand for fish in Asia longer term is likely to outstrip its ability to supply. Photo / Brett Phibbs

Seafood company Sanford is back in favour, helped along by a strong performance of New Zealand's fishing industry. The stock has done so well that it has come to the attention of the NZX, which issued a "please explain" notice.

The exchange wanted to know if there was any reason for the 70c (14.7 per cent) escalation in Sanford's share price between March 15 and April 8. Sanford said it wasn't aware of any factors that would explain the share price movement, but noted there had been renewed interest in the stock.

"Also, Sanford, being in the seafood industry, is affected by worldwide, publicly available, positive trends in commodity market prices and the recent public release of export price statistics indicate improvements in seafood prices compared to the same period last year," the company said.

Sure enough, Statistics NZ said that for the three months ending on February 28, seafood exports rose in value by 12.9 per cent to $312 million. In the 12 months to February, the number was $1.33 billion, up 9.7 per cent.

Sanford says it expects its second half to be better than its first. Longer term, the company's view is that demand in Asia, as growing middle class consumers seek higher quality seafood, is likely to outstrip its ability to supply.

But Sanford, as a major exporter, will be watching the New Zealand dollar/US dollar exchange rate, which is rapidly closing in on its November 10, 2010, high of US79.75c, with concern.

Sanford shares closed steady yesterday at $5.50.

DILIGENT BACK

It's been a while coming, but corporate software provider Diligent Board Member Services is now back up to its listing price of $1 a share.

Diligent yesterday produced its best ever quarterly sales result in the first quarter of 2011, with annualised licence fee income of US$1.88 million - three times more than the comparable period a year earlier.

The first quarter is historically one of the company's slowest quarters. Diligent introduced an Apple iPad-compatible version of Diligent Boardbooks last September. Since then the company said it has experienced hot demand for its Diligent Boardbooks.

Diligent listed on the NZX December 2007 at $1 a share after raising $24 million in an IPO.

Its share price quickly plunged to 5c after revelations about the previous business activities of executive director Brian Henry.

But the stock has staged a dramatic comeback, closing yesterday at $1.01, up 11c, and well clear of its 52-week low of 54c.

Diligent was brought to the market by Mark Weldon, who now heads up the NZX, Peter Huljich, who resigned from the board this week, and Henry.

Huljich remains a significant shareholder in Diligent.

CHOPPER SALE

The reasonably swift sale of Allan Hubbard's Helicopters NZ to the Canadian Helicopters Group for $160 million has got the investment community talking. One investment banker said that, on the surface, it looked to be a good price.

"Things are still tough out there but it is nice to see pockets of activity," he said.

There's no shortage of distressed assets in New Zealand at present, he said, and potential overseas buyers are lining up for Pike River Coal.

While the aftermath of the mining tragedy plays itself out, the reason the mine was built in the first place - high coking coal prices - remains a feature of the international mining scene.

Coking coal prices have almost doubled during the past year to US$225 a tonne, with analysts picking more gains in the year ahead.

State-owned Solid Energy has declared itself interested and said it was prepared to spend up to $100 million on a concept plan to resume mining at Pike River.

COMMODITIES RULE

It seems that, despite the mostly fiscal gloom facing the country, commodities prices across the spectrum are doing well - a fact that has not gone unnoticed by central bank chief Alan Bollard.

The Governor said this week that New Zealand's agricultural export prices are likely to remain strong for some time. The bank expects the higher terms of trade to continue to be reflected in the exchange rate, as it is currently.

Global commodity prices have experienced the largest boom in more than 100 years, he noted. While hard commodities have seen the biggest surge, agricultural commodity markets have also seen a fundamental change.

Another surge in prices has since seen food prices surpass the 2008 record level, boosted by supply disruptions, particularly in grain markets.

Analysis by the bank indicates New Zealand's agricultural export prices are likely to remain elevated for some time, although he noted history shows it is "fiendishly difficult" to predict the future path of commodity prices.

Wool - for years the poor cousin of the primary sector - is going from strength to strength. Terms of trade data for the December quarter showed export meat prices rose 5.1 per cent in the quarter, or 14.2 per cent for the year.

Wool prices jumped 23 per cent in the quarter, or 34 per cent for the year, pushing them to a nine-year high.

Dairy prices fell 8.8 per cent though they were still 37 per cent up on a year earlier. Inflation impacts notwithstanding, there appears to be considerable cause for optimism surrounding the primary sector.

Stock Takes notes with interest the influential Economist magazine is profiling economies which it sees as being at the centre of wider global commodities trends, among them being New Zealand's.

CONFIDENCE DOWN

Perhaps the least surprising headline in today's Business Herald is "Confidence in finance sector tumbles to new low".

According to the latest RaboDirect Financial Confidence Index (FCI), public confidence in New Zealand financial service has dipped sharply.

Given the revelation that Mark Hotchin, a director of failed finance company Hanover Finance, invested $560,000 of his personal funds in a Ponzi scheme that promised a 160 per cent return over just two months, the index might be in for another dip.

OUT OF THE WIND

NZAX-listed wind turbine manufacturer Windflow Technology plans to wind down its operations because orders have dried up.

Construction of the Te Rere Hau wind farm at Palmerston North is now approaching the time when all 97 Windflow 500 turbines will be installed, commissioned and handed over to NZ Windfarms.

Interest in the Windflow 500 turbine continues to grow in Britain, but to date none of the expected orders has been confirmed, the company said.

Furthermore, the UK Government had created delays by reviewing a tariff scheme for renewable energy. As well, the Long Gully wind farm in Wellington has been deferred by Mighty River Power.

"Until Windflow has received further confirmed orders and deposits, following the completion of Te Rere Hau wind farm, the directors have decided that it is in the company's best interest to slim down the company's operations for the time being, so as to manage its cash burn, with the expectation of rebuilding the company's production capacity again on receipt of the expected orders," it said.

It said it was ironic that the company was slimming down for the first time in seven months after going through the process of gaining certification for its Windflow 500.

Windflow said the wind-down was temporary and it would explore avenues for further capital raising.

NZ Windfarms shares closed up 0.5c yesterday at 16.5c.