Financial Decision Making in New Zealand's Seafood Industry

Assignment – Financial Decision Making
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Table of Contents
New Zealand’s Seafood Industry – An Overview...................................................................................3
Sanford Limited.......................................................................................................................................3
Ratio Analysis:.....................................................................................................................................4
Moana New Zealand................................................................................................................................5
Ratio Analysis:.....................................................................................................................................5
Financial Decisions:.................................................................................................................................6
Sanford Limited...................................................................................................................................7
Moana New Zealand............................................................................................................................7
Operating Environment for Iwi/Māori organisations:.............................................................................7
Economic and social environment.......................................................................................................7
Legal Environment / Taxation System................................................................................................8
Accounting standard and reporting system..........................................................................................8
Iwi/Māori value in business (i.e. Tikanga)..........................................................................................8
References..............................................................................................................................................10
Appendix................................................................................................................................................12
1. Calculation of Ratios:................................................................................................................12
2. Ratio analysis of Sanford Limited based on financial performance (Consolidated basis) of past
five years............................................................................................................................................12
3. Ratio analysis of Moana New Zealand based on financial performance (Consolidated basis) of
past five years....................................................................................................................................13
4. Cash Flows and Working Capital analysis of Sanford Limited.................................................14
5. Cash Flows and Working Capital analysis of Moana New Zealand.........................................14

New Zealand’s Seafood Industry – An Overview
New Zealand entails a total territorial water space also known as EEZ (Exclusive Economic Zone) of
4.4 Mn Sq. Km, which is 4th biggest globally thereby framing the country as a superpower in ocean
space. In absolute terms, the coastline is spread across approximately 15,134 kms (Seafood New
Zealand, 2017).
New Zealand accounts for an approximate 600,000 metric tonnes production of seafoods (excluding
aqua-culture) every year an employs more than 13,000 dependent work force. In 2017, the total
exports of seafoods accounted for NZD 1.8 Bn and in absolute terms accounted for ~127,760 tonnes
(Seafood New Zealand, 2017).
This report evaluates and analyses the working capital requirements, capital budgeting techniques and
future investments etc. for two of the significant players in the said industry, namely, Sanford Limited
and Moana New Zealand.
Sanford Limited
Since its inception in 1881, Sanford is eyeing to be “Best Seafood Company in the world” on back of
its rich experience of more than 130 years. Sanford’s prominence in the area of holding (fishing area)
at ~23% New Zealand’s quota of the fishing waters along with 211 aquaculture farms and 49 fishing
vessels, frames the company as New Zealand’s biggest consolidated seafoods business (Sanford
Limited AR, 2017).
Sanford Limited operates in New Zealand, Australia and China, furthermore, the company exported a
total of ~3498 containers in 2017. For the year ended 30th September 2017, Sanford posted an annual
revenue of NZD 478 Mn, indicating a y-o-y growth of 3.12%. However, despite of an average
decrease in cost of sales of the company by ~1.66% in past five years (2013-17), the overall increase
in revenues are flat at CAGR of ~0.82% during the said period (Sanford Limited AR) based on
several inferences quoted by NZherald (2018) in its news article NZ dollar sinks to two-year low
against pound.

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462.64
452.42
444.29
463.47
477.94
20.40 22.36 24.44
37.81 37.48
Sanford Limited Performance in past five years
Revenue (In NZD Mn) PAT (In NZD Mn)
Source: Sanford Limited Performance over previous five years (Sanford Annual Reports)
On the other hand, due to increasing efficiency in operations the company has witnessed a significant
growth in its profitability measures namely, gross profit, operating profit, PBT and PAT all increasing
by a CAGR of 11.89%, 23.87%, 15.36% and 16.42% respectively during the period 2013-2017
(Sanford Limited AR).
Ratio Analysis:
On the profitability front (Ratio Analysis), the company witnessed a drop in in net profit margins
from ~8.16% in 2016 to ~7.84% in 2017 mainly because of relatively higher growing cost of sales at
~4.25% as compared to growth in revenue at 3.12% annually (Appendix 2) based on
recommendations given by Investopedia (n.d) in Profitability Ratios.
Company has reduced its current ratio from 2.81 in 2013 to 1.22 in 2017, indicating its inefficiency
in maintaining the working capital during the said period; accordingly, the quick ratio has also
decreased from a healthy 2.09 in 2013 to 0.86 in 2017 based on inferences stated by MorningStar Inc.
(n.d) in Liquidity Ratios. In capital structure, the debt-equity ratio is maintained below ~0.3 times,
indicating stable operations backed by equity and neglecting the impact of debt, thereby creating more
value for their stakeholders (Appendix 2).
Coming over to turnover/efficiency ratios, Sanford Limited has maintained a healthy asset turnover
at over 3 times consistently. However, the company has witnessed a fixed asset turnover ratio around
~0.7 times, indicating a working capital driven operation as these recommendations are quoted by
Drake in Financial Ratio Analysis. Furthermore, the working capital turnover has witnessed
fluctuations during the past five years (mostly positive), ranging from lows of 2013 at ~5.53 times and
highs of ~32.61 times in 2015, presently, in 2017 the working capital turnover is pegged at ~17.91
times based on the propositions made my EduPrestine (2014) in Ratio Analysis – Turnover Ratio
(Appendix 2).