Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brimstone Investment Corp Ltd (JSE:BRN, Financial) reported a significant increase in headline earnings per share, up 110% from the previous year.
- The company successfully repaid ZAR357 million of its debt, showing a strong commitment to reducing its financial liabilities.
- Oceana Group, a key investment, delivered a phenomenal performance with equity-accounted earnings up 97.1%, driven by strong results from its US operations and the iconic Lucky Star brand.
- Brimstone Investment Corp Ltd (JSE:BRN) has diversified its income streams across multiple currencies, including the US dollar, Euro, Sterling Pound, Chinese Yuan, and Aussie dollar.
- The company has actively repurchased shares, buying back 4.5 million shares, which is expected to enhance shareholder value.
Negative Points
- The business environment remains extremely challenging with high unemployment and consumer pressure, impacting overall performance.
- The deconsolidation of Sea Harvest resulted in a significant accounting loss of ZAR562.1 million, affecting the company's financial results.
- The volatile Rand and high interest rates continue to be a burden, especially on working-class people.
- Port and rail infrastructure, as well as water security issues, remain significant challenges for the company.
- The share price of Sea Harvest has seen a decline, closing at ZAR8.09 compared to ZAR9.45 in the same period last year, indicating market concerns.
Q & A Highlights
Brimstone Investment Corp Ltd (JSE:BRN) Earnings Call Highlights
Q: Can Brimstone exit assets such as Oceana and Sea Harvest without damaging these assets as they lose the BEE credentials?
A: Mustaq Enus-Brey (CEO) - We are not restricted from selling our shares in Oceana and Sea Harvest. However, exiting these investments would require the companies to find new BEE partners to maintain their credentials, which is not Brimstone's problem but the companies'.
Q: Do you feel that the focus of Sea Harvest is appropriate given its acquisitions in Australia and dairy, which have resulted in poor overall returns?
A: Mustaq Enus-Brey (CEO) - The dairy business has been quite positive, and fluctuations in fishing assets are natural. The agriculture sector is beginning to show good signs, and we expect improvements as the Chinese market recovers.
Q: Does it still make sense for Brimstone to be listed given the erosion of benefits from BEE deals?
A: Mustaq Enus-Brey (CEO) - We are investigating this. There are restrictions from funders that require us to remain listed. Unbundling shares would impact the BEE scorecard of underlying companies, potentially affecting their quotas.
Q: Has anything fundamentally changed in Brimstone's interactions with Sea Harvest now that it is an associate rather than a subsidiary?
A: Mustaq Enus-Brey (CEO) - Nothing has changed in our interactions. We still have non-executive directors on the board and continue to provide guidance and support.
Q: What is the retirement age at Brimstone, and how does it compare to other companies?
A: Mustaq Enus-Brey (CEO) - We are facing the same issue as many companies in South Africa. Forcing early retirement can be detrimental in a country where skilled labor is scarce. We focus on ethical behavior, delivery, and integrity rather than age.
Q: Should Sea Harvest retain its operations in Australia given their performance?
A: Fred Robertson (President) - Sea Harvest needs to focus on integrating its new acquisitions and understanding the pelagic market. The Australian market is under pressure, but we expect improvements as consumer confidence returns.
Q: Are you looking to buy more FPG and FES shares?
A: Mustaq Enus-Brey (CEO) - We are restricted in the number of shares we can buy back, but we will continue to do so as it enhances shareholder value. We will consider further investments in FPG if they call for additional capital.
Q: How does Brimstone plan to address the deep discount to NAV?
A: Mustaq Enus-Brey (CEO) - We are responsible shareholders and will consider offers for our stakes in Oceana and Sea Harvest. We aim to repay debt and enhance shareholder value while maintaining our BEE credentials.
Q: What will Brimstone's debt look like after repaying ZAR600 million by 2025?
A: Mustaq Enus-Brey (CEO) - We expect to be down to ZAR1.6 billion in debt by December 2025. We are committed to reducing debt and enhancing shareholder value.
Q: Will share buybacks make the shares more illiquid and difficult to narrow the discount?
A: Mustaq Enus-Brey (CEO) - We are restricted in the number of shares we can buy back, but we will continue to do so as it enhances shareholder value. We are responding to shareholder suggestions and will continue to retire debt and sell non-core assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
