BUSINESS WATCH

Newfound riches for National Sea

Peter C. Newman January 19 1987
BUSINESS WATCH

Newfound riches for National Sea

Peter C. Newman January 19 1987

Newfound riches for National Sea

BUSINESS WATCH

Peter C. Newman

This spring National Sea Products of Halifax will confirm that net profits in 1986 amounted to $20 million after taxes—a 300-per-cent jump from last year. The anticipation of such a quantum leap has already pushed the company’s stock to the equivalent of $43 from a low of $4.50 two years ago.

Still, the actual results will top even the most optimistic predictions, with sales exceeding $500 million, a healthy 12 per cent ahead of last year, which was the company’s great turnaround. National Sea is continuing to pour money into new equipment. Capital expenditures in 1986 were $40 million and are budgeted at $45 million or more for 1987—much of it to rebuild a groundfish freezing plant at Louisbourg, in Cape Breton.

The company has been modernizing its fishing fleet which, at 59 vessels with a catching capacity of 196,000 tons, is among the free world’s largest. The conversions from pens aboard the fishing vessels to containers is not so much to increase their capacity as to reduce the amount of handling required. Sandy Roche, a former Newfoundland deputy minister of development who is now the company’s chief of operations, told me: “Now, once the fish comes out of the water, it goes into plastic containers and is not handled again until it’s processed down the line in our plants. That’s important, because meat and fish are opposites. From the day you kill a steer, you’re trying to tenderize meat; with fish, you’re trying to keep it as firm as possible, because by nature it tends to be brittle and break apart, which would not look good on a plate. Texture is the big issue.”

The company has also pioneered the use of Canada’s first factory ship (all in the aid of what Roche calls “better plate coverage”), which cuts the handling of the fish by one more step because they are processed almost as soon as they are caught.

National Sea diversified recently by starting to market four new frozen fish entrées in the United States and will continue to introduce new non-fish products during 1987. Its chicken nuggets, strips and burgers, sold under the Highliner name, already have captured 27 per cent of the Canadian market for frozen chicken.

National Sea president Gordon Cummings, a former management consul-

tant with Woods, Gordon in Toronto, is the mastermind behind the company’s remarkable recovery, having been brought in to advise on its fate three years ago. At the time, National Sea was at the bottom of a long, declining cycle. More than $40 million was lost in 1983 and 1984, and the situation looked so desperate that Ottawa was talking nationalization as the only way to keep the essential Maritime industry alive.

At the same time, the Bank of Nova

Scotia was threatening to pull its $75million loan. Then a rescue team led by David Hennigar, representing the Jodrey family, pumped in $20 million and the Toronto-Dominion Bank took up most of the Nova Scotia’s debt load, though that bank still owns 14 per cent of the equity. The illustrious Sobey family joined the effort, and, through a complicated arrangement, the Sobey and Jodrey interests together control 45 per cent. Ottawa is in for a residual 20 per cent, and an-

other 20 per cent or so is publicly held.

The rescue package pumped about $135 million into the restructured company, which has a board of directors that reads like a rollcall of the Maritimes Establishment: as well as Don Sobey and Hennigar, it includes K.V. Cox, the head of New Brunswick Telephone; F. J. Dickson and J. T. MacQuarrie, the prominent Halifax lawyers; and W.O. Morrow, representing the family that once owned the company and retains 130,000 shares.

While Cummings is chronically bullish about the company he is running, he is becoming increasingly concerned that Ottawa may not be able to negotiate the kind of comprehensive free trade agreement he believes would be good for the industry. If that ever did happen, he can foresee doing much more fish processing on this side of the border and being able to create at least 400 new jobs. “We’re still very much in favor of such an agreement, and I must say that Ottawa, particularly Trade Minister Pat Carney, has been listening to our point of view,” he told me. “But I am no longer sure we are going to get the kind of comprehensive agreement that must include such nontariff items as countervailing duties.”

Cummings’s domestic sales strategy is simple. He says that per-capita fish consumption in the United States, the company’s fastest growing market, is rising so fast that it went up last year as much as during the previous three years. And Canadian fish consumption is 28 per cent higher than in the United States (18.5 lb. per capita a year here and about 14.5 in the United States). A recent issue of The Erkins Seafood Letter, which is the industry’s bible, forecast the world’s worst seafood shortage crisis in the coming months: “Shortages and resulting high prices will have major effects at all industry levels well into 1987.”

Despite such talk, the Canadian industry is far from safe. There are something like 125 foreign-flag trawlers and factory ships operating off the Atlantic coast, both inside and outside our fishing limits, many dragging the ocean with giant nets in water up to 1,500 feet deep. But Gordon Cummings, the presiding genius of the Canadian fishing industry, isn’t worried. “Our sales prospects for fish are so buoyant,” he maintains, “because they are based not on a fad but a real need—the fact that people want to be thinner and healthier.”