BUSINESS WATCH

Troubled waters in Atlantic Canada

‘If greed means losing $32 million, says National Sea president Henry Demone, ‘then I need a new definition of greed’

Peter C. Newman July 23 1990
BUSINESS WATCH

Troubled waters in Atlantic Canada

‘If greed means losing $32 million, says National Sea president Henry Demone, ‘then I need a new definition of greed’

Peter C. Newman July 23 1990

Troubled waters in Atlantic Canada

BUSINESS WATCH

‘If greed means losing $32 million, says National Sea president Henry Demone, ‘then I need a new definition of greed’

PETER C. NEWMAN

Even in this down time for Canada’s economy, few industries are in as deep trouble as the East Coast fishery. Fed up to their gills with the Meech Lake debate, the few fish that remain have been keeping their distance from Canadian shores; an overvalued dollar is cutting into export sales; and obsolete plants require major capital investments at a time when most companies are burdened with huge debts, crippling interest rates and red balance sheets.

No exception is the largest of the Atlantic operations, National Sea Products Ltd. in Halifax. Paying out a monthly $2 million in interest on a $200-million bank loan, having suffered a $32-million loss last year, and faced with inexplicable but drastic declines of vital stocks of cod, flounder and haddock, the company has already closed or drastically reduced plant operations in Canso and Lockeport, N.S., as well as in St. John’s, Nfld.

But unlike some other operators, National Sea is successfully rationalizing its facilities and, under aggressive young management, may be on the verge of a turnaround. “In some ways, this company is a microcosm for Canada under free trade,” I was told by Henry Demone, the 36-year-old ex-trawlerman who was recently appointed president. “We have maintained our dominant position in Canada with a 60-per-cent market share in frozen seafoods, yet only a quarter of our sales are domestic. We can’t be a successful company by just relying on the home market. We have to be good, very good, compared to the rest of the world.” “Free trade,” he points out, “means having to radically rationalize our processing and production facilities. As well as some Canadian plants, we’ve had to close down in Rockland, Me. We’ve reduced our processing capacity from 320 million to about 200 million pounds, which is close to our raw-material availability of 175 million. At the same time, we’ve moved production of all our frozen seafood entrées to Lunenburg, where we’re competitive with the largest American processors, despite the re-

maining 11-per-cent tariff and high value of the Canadian dollar.”

The Lunenburg plant, which employs 400, has also started to produce for the Australian market, while in the United States, National Sea now ranks fourth in retail fish sales with its Booth and Fisher Boy brands. “The United States,” adds Demone, “is not really a national market, so we’re going to be trying to become dominant in the Mississippi region, leaving New York and California to others.”

The company’s fleet has been similarly rationalized, with the number of trawlers reduced from 60 to 32. Its one factory ship, the 270-foot Cape North, and the freezer-trawler Cape Adair are fully occupied nine months of the year, but less than half of the fish the company sells is its own catch. To maximize cost efficiencies, fish from Alaska, Poland, Argentina and Uruguay have been added to the product mix.

Since 1984, National Sea Products has lost more than 159 million pounds in fish quotas because of reduced ocean stocks. That’s part of an overall 27-per-cent reduction imposed by Ottawa. “Many of us who have worked in this industry,” complains Richard Cashin, president of the 23,000-member Fishermen, Food

& Allied Workers Union, “are astounded at the paralysis that seems to grip those responsible for the management of the resource. Never in my 30 years of association with government and the industry have I ever felt the fisheries to be so far removed from the broad political agenda of our country.”

Demone is equally upset about the quota reductions, but blames overfishing by Portugal and Spain, as well as by Nova Scotia fishermen trying to catch up on debt repayments for their boats. But he applauds the fact that Ottawa is putting more funds into research to trace fish cycles. “The federal government has taken a balanced view of the industry and done its best even when its decisions are politically unpopular,” he contends. He is particularly happy with Fisheries Minister Bernard Valcourt’s recent decision to pump $584 million into rebuilding fish stocks and encouraging diversification.

With National Sea controlled by four dominant shareholders—the Jodrey family of the Annapolis Valley (28 per cent), the Sobey family of Stellarton, N.S. (16 per cent), the Bank of Nova Scotia (13 per cent) and the federal government (19 per cent)—the company has enjoyed solid financial backing through its profit downturn. But Gordon Cummings, Demone’s predecessor, was unceremoniously fired for not anticipating the company’s fiscal crisis early enough. The choice of Demone (whose family name dates back to Huguenot ancestors who came to Lunenburg in the 1700s) surprised corporate Halifax because he is still in his mid-30s.

The son and grandson of trawler captains, Demone grew up in the industry, working at sea during the summers while studying mathematics at the University of Acadia in Wolfville, N.S., and at Dalhousie University in Halifax. He dropped out of his master’s program to join National Sea’s export department in 1977, but resigned three years later to become regional sales manager for Western Europe of Franz Witte AB, a Swedish food group. He lived in France and was set to make his career there when William Morrow, National Sea’s president at the time, asked him to head up the company’s international division in 1984.

The drastic plant closures and other rationalizations he has put into effect since becoming president last year have produced limited results. National Sea’s first-quarter earnings showed a $2.5-million profit on revenues of $179.5 million, but 1990 will still be a year of heavy losses. “I think the company has seen its worst days,” he predicts, “though I’m not sure this is true for the industry as a whole.”

Meanwhile, Demone is angry with left-wing political critics who accuse his company of being greedy. “When you close fish plants in Atlantic Canada, you’re painted as a villain,” he says. “But the fact is that National Sea was deprived of a lot of fish quotas between 1984 and 1989, yet we didn’t close any fish plants for social reasons. That’s how we lost so much money. If greed means losing $32 million, then I need a new definition of greed. Even the NDP at their worst can’t be that illogical.”

Demone is determined not to give them another chance.