Of all the headwinds facing fishing group Sea Harvest, few analysts would have had “pilchard herpesvirus” on their 2026 bingo cards. And with good reason. The virus had never previously been recorded in South African sardines — the fish commonly sold locally as canned pilchards — before a mass mortality event emerged along the Western Cape coast in late July.
Thousands of dead fish washed ashore, while Koeberg’s Unit 1 had to reduce output to 50% as dead and dying sardines clogged its seawater intake system. The closest precedents were two major Australasian outbreaks in 1995 and 1998/1999. The latter wiped out about 60% of the pilchard biomass in southern and western Australian waters.
Although the virus is now considered the leading explanation for the deaths, its presence at lower levels in some apparently healthy sardines suggests that other factors may also have played a role. Scientists are still investigating whether stresses such as low oxygen or unusual ocean conditions intensified the die-off.
A few years ago, this might have been of little interest to Sea Harvest shareholders. But in mid-2024 Sea Harvest acquired several subsidiaries of fishing group Terrasan for R965m — including the Saldanha canned pilchards brand.
For Sea Harvest, at least, the outbreak came after the June reporting date. The headwinds it faced in the first half were more conventional, though hardly insignificant: a stronger rand, which weighed on a business that now earns 63% of its revenue offshore; hake catch rates down 9% from a strong 2025 base; sharply higher fuel prices amid the Middle East conflict; one of the weakest anchovy seasons on record; and a cyclone that disrupted its Australian operations.
Despite all that, Sea Harvest still delivered record ebit of R547m, while headline earnings per share from continuing operations rose 14% to 97c a share. The standout was hake, which contributes close to 80% of group ebit and encompasses Sea Harvest’s Saldanha operations, Viking in Cape Town and its Mossel Bay business.
The 9% decline in hake catch rates looks less concerning in context. CEO Felix Ratheb tells the FM that current catch rates are healthy and the underlying biomass is stable. Hake is a demersal, or ground, fish caught hundreds of metres below the surface, making it less sensitive to short-term changes in ocean temperatures and weather patterns than shallow-water pelagic species. Ratheb also expects the total allowable catch, which was cut by 5% this year, to stabilise and potentially edge higher as the stronger catch rates of the past two years feed through to the quota-setting model with a lag.
Pricing has more than made up for the volume pressure. European hake prices were up about 17%, compared with only 5% locally, as a shortage of cod created a supply gap in the global whitefish market. Sea Harvest has responded by directing more product to higher-return export markets, including the UK and US.
Ratheb believes the cod shortage could persist for five or more years because of the species’ slow growth cycle. That could have benefits beyond simply supporting current prices. “We’re gaining market share in markets that we traditionally wouldn’t have been in,” he says. The hope is that some of those gains become entrenched, leaving Cape hake with a larger permanent foothold even when cod supply eventually recovers.
Pelagic, roughly 20% of Sea Harvest’s ebit, is more complicated. About half the business is canned pilchards sold locally, where its Saldanha brand competes with Oceana’s Lucky Star, while the other half is mainly anchovy and red-eye processed into fishmeal and fish oil for export.
Until the herpesvirus appeared, local pilchards had actually been a bright spot. Strong catches allowed Sea Harvest to replace imported fish with its own stock. The difference in economics is dramatic. Ratheb says imported pilchards generate margins of only about 5%, against roughly 20% when Sea Harvest catches and cans the fish itself.
The virus therefore represents more of a lost opportunity than an existential threat to Sea Harvest, but its timing could hardly be worse. Producers normally turn to imports when the local resource is weak, but international sardine availability is also tight, with Ratheb pointing to problems in markets including Morocco, Russia and Japan. “If this continues, we will have shortages of product,” he says.
Pricing offers only partial relief. Canned pilchards are fundamentally an affordable protein. “It’s LSM 4–7, so I think there’s a ceiling there,” says Ratheb. Rather than aggressive price increases, he expects producers initially to reduce promotional activity, with more modest increases if necessary.
The anchovy half of pelagic faced exceptionally poor catches, even as fishmeal and fish oil prices reached record levels. Peru’s vast anchovy resource is under pressure amid strong El Niño conditions, while Ratheb says weakness is evident across several global pelagic fisheries. There are even unconfirmed industry reports of weaker landings in the normally dependable US menhaden fishery that supplies Oceana’s Daybrook operation.
Fishmeal and fish oil are important ingredients in aquaculture feed, including salmon farming. Ratheb thinks current prices could persist into next year, meaning any recovery in anchovy catches would provide considerable earnings upside.
Australia, meanwhile, should deliver a much stronger second half. In March, Cyclone Narelle damaged jetties and roads, disrupted electricity supply and delayed fishing by about two months. Prawn catches have since recovered sharply and the prawns are larger, which should support better pricing.
Asked whether Sea Harvest might eventually sell the Australian business once the cycle improves, Ratheb says that is not on the agenda. Although returns are lower than in South Africa, Australia provides useful diversification across geography, species and currency. Its fishing rights are also held in perpetuity, rather than for fixed terms, which adds strategic value to the operation.
The ballast on the balance sheet tilted better, with net debt falling from R2.23bn to R1.66bn, taking net debt to ebitda to 1.1 times. But Ratheb wants another R300m–R400m reduction before he is fully comfortable with the balance sheet. Thereafter, the capital allocation order is to maintain decent dividends, further invest in efficiencies and then do share buybacks. Capex should settle at around 5%–6% of revenue. “In pelagic, I’m building two new vessels,” he says. Older vessels catch about 2,000t against roughly 8,000t for a new vessel, possibly allowing Sea Harvest to replace seven vessels with three or four.
There is further upside potential in abalone, where Sea Harvest operates the largest business of its kind in the southern hemisphere. After several difficult years, cost cuts, improved animal size, firmer pricing and better access to Asian markets have helped push the operation into profitability over the past two months.
For 2026, Ratheb expects the second half to be slightly softer than the first, largely because elevated fuel prices — Sea Harvest’s single biggest cost line — affected only a few months of the first half but will be felt for the full second half. But he does not foresee a major deterioration. “We had a good July. August has been OK. So I think it’s going to be a pleasing year.”
Ratheb believes South African investors still undervalue fishing companies by focusing too heavily on their exposure to nature and cyclicality. He likens sustainably managed fishing rights to a mine with a resource that continually replenishes itself, while pointing to high barriers to entry, global customer bases and hard currency revenues as additional attractions. “I don’t understand why they don’t get the value they should in South Africa,” he says.
The valuation at Sea Harvest certainly looks undemanding. At around 860c a share, Sea Harvest trades on roughly 4.2 times trailing earnings from continuing operations. That puts Sea Harvest in the same basket as poultry producers Rainbow Chicken and Astral, with trailing multiples of 4.9 and 4.4 respectively, but well off the JSE’s best-known food conglomerates, Tiger Brands (12.5) and AVI (11).
