BUSINESS

Navigating rough seas

The future looks bleak for National Sea

JOHN DeMONT March 5 1990
BUSINESS

Navigating rough seas

The future looks bleak for National Sea

JOHN DeMONT March 5 1990

Navigating rough seas

BUSINESS

The future looks bleak for National Sea

Three or four mornings a week, Henry Demone dons his running gear, leaves his comfortable Cape Cod-style house in Halifax’s South End and takes a brisk, predawn run through nearby Point Pleasant Park. When he was training for triathlons— one of the world’s most gruelling endurance contests—Demone used to run, swim and bicycle up to 10 hours a week. But, lately, he is lucky if his busy schedule allows him even two hours of exercise a week. Just 35, the serious, hardworking fishing captain’s son has one of the toughest jobs in Canadian business: piloting National Sea Products Ltd., the largest seafood company in North America, back onto a profitable course. And since Demone was appointed president and chief operating executive of the money-losing, Halifax-based company last August, almost everything else in his life—exercise, friends, even his wife and three young children—have been secondary. Said Demone in an interview: “The family meal is breakfast.”

But even those brief moments that Demone steals with his family in the morning may soon be a luxury that he will have to drop because National Sea—and with it, virtually the entire

Atlantic fishing industry—is in a steadily worsening crisis. Not only has a declining demand for fish crippled National Sea, but there is also an alarming decline in the number of cod, flounder and other fish, which have drawn fishermen from around the world to Canada’s Atlantic coast for more than four centuries. To save his 91-year-old company, Demone is performing drastic surgery. Last year, National Sea permanently closed a fishprocessing plant in Lockeport, N.S., and temporarily closed others throughout the Atlantic regions. And Demone plans to trim dramatically operations at plants in Canso, N.S., and St. John’s, Nfld., where more than two-thirds of the 1,200 jobs will be lost.

Altogether, the measures could put up to 5,000 people out of work. And the prospects for a turnaround in the foreseeable future are bleak indeed. In January, as part of a fishconservation strategy, Ottawa announced a sharp reduction in the quota of fish that National Sea and other East Coast firms will be allowed to catch in 1990. But even those cutbacks may not be enough to restore fish stocks on the Grand Banks, or return National Sea’s profits to healthy levels. Last week in

Ottawa, the government received yet another pessimistic report about declining stocks from the federally appointed Northern Cod Scientific Review Panel. Delivered to then-Fisheries Minister Thomas Siddon, it called for further cuts in quotas and tougher conservation methods, but Siddon rejected the recommendations. In one of his last acts before being replaced at week’s end by Bernard Valcourt, Siddon said, “The social and human impact of more cuts is immense.”

As closures and layoffs loom at National Sea, Demone has become reviled in fishing villages throughout Atlantic Canada. Last week at a conference in St. John’s called to discuss the fisheries crisis, Richard Cashin, head of the 20,000-member Fishermen, Food and Allied Workers union, said that fishèrmen and plant workers are paying a heavy price for what he described as National Sea’s incompetence. Said Cashin: “Somehow, through some magic way, we are supposed to solve the fisheries problem by closing fish plants, by relocating people and by clinging to that elusive phantom of hope: economic diversification.” And, speaking at the same conference, Fraser March, head of the Newfoundland Union of Public Employees said, “Maybe this is time for us to seriously look at whether or not this Confederation business really did us any good.”

But, despite the attacks, Demone’s friends and associates say that he remains determined to make National Sea profitable by 1991. For his part, Demone, who traces his

roots to Lunenburg, a postcard-perfect fishing village 90 km southwest of Halifax said, “I have a historical and emotional attachment to this company.”

A return to profitability will require luck as well as skill. After posting a record profit of $36.1 million in 1986 and a profit of $24.8 million in 1987, National Sea lost $5.8 million in 1988.

Last August, as losses worsened to an expected 1989 year-end figure of more than $20 million, National Sea’s board of directors abruptly fired the firm’s outspoken president, Gordon Cummings.

To fill the president’s chair, National Sea chairman William Morrow, whose Lunenburg family once owned the company, turned to Demone, his personal protégé who had led National Sea’s profitable international division since 1984. Demone’s appointment surprised many National Sea employees, who respected his hard work but did not consider him as a candidate to tackle one of the toughest jobs in corporate Canada. Said one former National Sea official who declined to be identified:

“Cummings had always felt Henry would be his successor—but in 10 years’ time.” Declared Demone: “Things have always happened early for me.”

Demone has the demeanor, at least, for captaining one of Atlantic Canada’s most important companies. Lean, six feet tall, with fashionably slicked-back hair and tailored suits, he exudes confidence.

Even the young president’s family roots qualify him for the job. Demone’s grandfather was a fishing captain who sailed out of S Lunenberg for 30 years, and sj his father, Earl, retired just g this past year, after a 155 year career at National Sea, 5 most of it as chief of the company’s fishing fleet - where he earned a reputation for being a tough but extremely able taskmaster.

Demone received a practical introduction to the fishing industry on his summer vacations by working on the fish-processing line at a Lunenburg factory. Later, he worked for his father on National Sea fishing trawlers—hauling in nets, cleaning and packing

fish and spending up to 10 days at a time on the storm-tossed Atlantic. Finally, in 1977, he decided to build a career with the company and he dropped out of a master’s program in science at Halifax’s Dalhousie University.

But Demone was looking to get out from under his father’s shadow and, in 1980, he left to set up the Canadian subsidiary of Franz Witte AB, a Swedish seafood company, in Halifax. A year later, at 28, he moved to Royan, a small town 60 km from Bordeaux, France, where he spent three years as president of Nord Morue SA, a French seafood importer and distributor. But in 1984, William Morrow lured him back to Halifax by offering him the international vice-president’s job.

Now, hé is confronted by more than just declining fish stocks. Both the strong Canadian dollar, which has made exports more expensive, and stagnant levels of consumption of seafood in North America, have hurt National Sea’s critical exports to the United States. Those exports account for 50 per cent of the company’s annual sales, which reached a high of $560 million in 1988 and appeared as though they would remain steady in 1989, with sales of $454 million in the first nine months of 1989.

At the same time, National Sea’s $200million debt limits its flexibility. Demone says that he wants to issue more stock to pay off some of the debt, but until financial results

improve he says that new shares would be difficult to sell. Said Demone: “We will have to put some profit on the bottom line before investors will be interested in new National Sea stock.”

Demone has also been trying to increase productivity by building up the morale of National Sea’s remaining 5,695 employees, visting the company’s various operations

across North America.

At the same time, the firm is trying to hold onto its existing markets by improving reliability, delivery time and other services for its customers and by buying foreign fish supplies to make up for the cuts in National Sea’s cod quotas.

But National Sea may have to wait a long time for its quotas to return to earlier levels.

Last spring, Siddon cut quotas for northern cod—the backbone of the Atlantic fishery— by 12 per cent to 258,500 tons from 292,600 tons annually.

Still, that was far less than the 53-per-cent reduction that was recommended by government scientists to rebuild the fish stocks.

And last week’s report on the Atlantic cod stocks showed that the supply was actually much smaller than the government first realized. The report recommended that quotas should be slashed from current levels to 137,500 tons a year in order to rebuild fish stocks in the next five years. The report also recommended that fishermen switch to nets with a wider mesh, which would allow smaller fish to escape, and that the enforcement of existing conservation regulations be intensified.

Meanwhile, the Atlantic fishery’s latest savior is trying to spend as much time as he can with his wife, Rena, who was born in Blue Rocks, only a few kilometres from Lunenburg, and their three children, aged 6, 3 and three months. When not in the office, the avid sportsman says that he enjoys windsurfing, skiing and especially sailing, but he concedes, “I just don’t have the time anymore.” Now, though, he will likely need all his navigational skills to pilot National Sea through the rough seas ahead.

JOHN DeMONT with RUSSELL WANGERSKY in St. John’s

RUSSELL WANGERSKY