Tassal will spend up big on a prawn operation it bought for $31.9 million.
The Tasmanian-based salmon and seafood company said wholly owned subsidiary De Costi Seafoods on Friday completed the acquisition of the land, assets and inventory of the Fortune Group prawn aquaculture business.
“Tassal has acquired from Fortune Group one of the largest footprint prawn farming businesses in Australia,” Tassal said.
The assets included three prawn farms, at Yamba, in New South Wales, and Proserpine and Mission Beach, both in Queensland.
Tassal said the acquisition was funded via a newly arranged, $75 million debt facility.
It foreshadowed a capital investment program worth about $34 million for the prawn business over the next two to three years.
It said the acquisition would immediately increase earnings for shareholders.
Tassal managing director and chief executive Mark Ryan said the acquisition was “strategically compelling”.
“We currently process and sell prawns through De Costi Seafoods and we are conscious of the fact that our customers are demanding more prawns than we can currently supply,” Mr Ryan said.
“We estimate that for financial year 2019 we will have around 700 tonnes of prawns for sale from the inventory acquired once fully grown out.
“Our focus is to grow over 3000 harvest tonnes per annum in the next three to five years.
“We are experienced in aquaculture with the success of our salmon farming operations and in the seafood industry with the successful acquisition and integration of De Costi Seafoods.”
He said the industry dynamics were attractive, with Australian demand for tiger prawns outstripping supply.
Tassal said the annual prawn market in Australia was about 60,000 tonnes, with Australian acquaculture supplying about 10 per cent.
The salmon market was a similar size, but Australian aquaculture met about 90 per cent of demand.
Tassal said it was targeting earnings before interest, tax, depreciation and amortisation (EBITDA) of $15-25 million within five years from the three prawn farms with existing licences.
Tassal reported EBITDA of $110 million and net profit after tax of $57.3 million for 2017-18.
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