This result incorporates impairment charges of $29.736 million in line with guidance provided to the market on 21 December 2012. Underlying operations improved significantly with the loss attributable to underlying operations for the six months reducing to $4.373 million, compared to an underlying loss of $7.068 million for the same period last year.
The resolution of the substantive feed-related Kingfish health problems and return to normal Kingfish growth and improved survival provide the Directors with confidence that the Kingfish grow-out business can grow profitably into the future. The Company is planning for expanded Yellowtail Kingfish production on the back of improved fish performance, continued control of production costs and additional financial support.
The company is confident that with its expertise and experience along with resolution of its fish health problems it can build a fish production company centred on Kingfish production. The confidence in profitable Kingfish production is supported by improved feed and management practices leading to:
- Reduction in mortalities to normal levels
- Improvement in growth rates, returning to normal levels and a consequential improvement in FCRs (feed conversion ratios)
- Return to robust health and appearance, good fish colouring and premium flesh quality which continues to be reflected in excellent farmgate prices of +$12.50/kg
- Encouraging performance of this seasonfs juveniles which were bred from cultured broodstock for the first time in the Companyfs Kingfish program
As announced in December, the Company's Tuna propagation program has been suspended to focus on expansion of a profitable Kingfish production program. It is the Company's present intention to continue to maintain its Tuna broodstock to allow for a potential return to Tuna propagation once the Company establishes a strong financial base to support the Tuna program.
The Company had $4.392 million cash as at December 31, 2012. We expect to use further surplus asset sales and existing cash reserves to support the Company while alternative strategies, including capital initiatives are advanced to enable the Company to fund a revitalised Kingfish business.
Although the company has now addressed and corrected the underlying issues, the disappointing results in its Kingfish business as a result of the biological impacts carried through from early 2012 negatively impacted its first half FY2013 result and led to the review of the Company's strategic direction.
The company has now addressed the causes of the deficient biological performance, and its strategy includes the need to suspend Tuna propagation program in the medium term and concentrate on those business activities that are more likely to deliver profitability in the near term.
Kingfish has the potential to deliver good returns now that we have identified the major feed-related factor that interfered with the profitable production. The company has positioned its Yellowtail Kingfish as an excellent sashimi product, proving that there is a sizeable market with premium pricing for its product in Australia and overseas. The company is well positioned with its hatchery expertise, improved selected stock and extensive grow-out resources to build a successful business in Kingfish production. The company is focusing on de-risking the production and rebuilding the valuable human resources to make the business operate efficiently and profitably.