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Cleans Seas Tuna Corporate Update
Annual General Meeting 15th November 2012 Annual General Meeting 15 November 2012
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Certain statements contained in this presentation, including information as to the future financial or operating performance of Clean Seas Tuna Limited (“CSS”), are forward looking statements. Such forward looking statements may include, among other things, statements regarding targets, estimates and assumptions in respect of CSS’s operations, production and prices, operating costs and results, capital expenditures, and are or may be based on assumptions and estimates related to future technical, economic, market, political, social and other conditions; are necessarily based upon a number of estimates and assumptions that, while considered reasonable by CSS, are inherently subject to significant technical, business, economic, competitive, political and social uncertainties and contingencies; and involve known and unknown risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in such forward looking statements. CSS disclaims any intent or obligation to update publicly any forward looking statements, whether as a result of new information, future events or results or otherwise. The words “believe”, “expect”, “anticipate”, “indicate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule” and similar expressions identify forward looking statements. All forward looking statements made in this presentation are qualified by the foregoing cautionary statements. Investors are cautioned that forward looking statements are not guarantees of future performance and accordingly investors are cautioned not to put undue reliance on forward looking statements due to the inherent uncertainty therein.
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NOVEMBER 2011 OPTIMISM
Market prices were continuing to firm Strategic advancement of spawning in both Yellowtail Kingfish and Southern Bluefin Tuna New grow-out sites to ensure a supportive environment free of possible disease In the process of recruiting a new Chief Executive Planned Share Purchase Plan (SPP) ASX: CSS
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SETBACKS The Shareholder Purchase Plan was undersubscribed Significant challenges to the health of the grow-out stocks of Kingfish Deep fiscal impact on the Company requiring: • Severe cost containment • Cash raising initiatives • Write down of Kingfish Assets Share price fell to extremely low levels, levels in the Board’s opinion that are well below realisable asset value.
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Additions to the Clean Seas Team Appointment of Dr. Craig Foster as CEO – an experienced CEO, aquaculturalist, veterinarian and fish nutritionist with sound biological understandings and awareness
Appointment of Mr Nick Burrows as an independent nonexecutive Director – 30 years senior experience with listed entities and private companies
Sadly the lack of kingfish biomass resulted in many senior roles becoming redundant, excellent people who had served the company well, lost their executive positions.
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FORWARD STRATEGY Right sizing and restructuring will result in an efficient, streamlined organisation. Surplus capital assets have been made available for sale, significant sales already achieved. Controllable costs have been reevaluated and constrained where possible At an early stage, the Board reduced Directors fees by 20% The Board and with support of the Financial Services Group BBY are examining all capital funding options.
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Forward Strategy – cont’d With careful marshalling of cash resources we are again able to undertake spawnings for Yellowtail Kingfish and for Southern Bluefin Tuna.
Both the above are advanced on previous timings to advantage warmer temperatures in their early life.
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Yellowtail Kingfish FY 2012 Devastating health impacts on our two year classes at grow-out in the beginning of 2012
Steps taken to mitigate and more importantly identify the causal event or events Dramatic drop in harvest availability carefully managed within the market place to best value Marked improvement in the biological performance of our remaining fish in grow-out Yellowtail Kingfish fingerling production undertaken this year – for the first time using F1 broodstock (first generation from wild fish) ASX: CSS
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Southern Bluefin Tuna Propagation
Our performance last year: an improvement on the previous year some good survivals through to around 500 grams But nevertheless inadequate for the step-up progress needed. This year: we have advanced the spawning even earlier yet again and with the continued build in knowledge of the fry, their diet and handling needs we remain hopeful that much better progress can be achieved. Our goal is to achieve 5,000 fingerlings into the sea, with Winter survival. ASX: CSS
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OVERALL FY2013 Critical year for the Company Strategies in play provide an extension of operations while seeking additional investment The Board recognise the nature of biological risk and uncertainty in new aquaculture ventures The developments and proofs Clean Seas has pioneered needs to be remembered A very difficult year but your Board and Management remain committed to solutions and survival Tribute must be paid to our Chief Executive, Dr Craig Foster who joined when the impact was reaching its zenith, but still unknown.
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PRIMARY OBJECTIVE SINCE APPOINTMENT AS CEO To work with the Clean Seas team to ascertain the cause of the health issues that beset the Company’s Kingfish division.
Key Actions taken: Additional resources were recruited to help accelerate the health investigation and explore possible solutions
Local and international experts were engaged to achieve a resolution The size of the workforce was reduced to account for the likely reduction in sales from the Kingfish health issue.
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Bennan Chen, CST R&D
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Results We are optimistic that we have resolved the cause of the kingfish health issue by supplementing our feeds with a small amino acid called Taurine. Since the introduction of this feed supplementation, the health of our fish has dramatically improved. Gill and skin fluke control on stock weakened by the long period of poor health has been difficult, however we are now gaining control. We have entered into discussion with the feed companies to protect the companies interest. ASX: CSS
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Marcell Boaventura
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Graph of Taurine Mortality and Recovery of the 2011 Fish 2011 Year Class - Average Daily Mortality % 2 week intervals pre and post taurine diet 1.40%
Average Daily Mortality %
1.20%
Taurine supplementation
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
12wks >14wks
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Health Recovery with the 2012 year class 2012 Year Class - Average Daily Mortality % 2 week intervals pre and post taurine diet
Original Diet
New Diet Supp
0.70%
Average Daily Mortality %
0.60%
New Diet Start
0.50%
0.40%
Fluke Issues
Taurine Diet Start
0.30%
0.20%
0.10%
0.00%
12wks>14wks
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Strategic moves – we have:
Extensively modelled and risk assessed our current Kingfish farming in the sea
Exploring other methods of production, such as producing the yellowtail on land. Formed from these models, the basis of our decisions on both future directions and risk mitigation and management strategies for the Clean Seas Kingfish division.
Consolidating our production to the Company’s Port Lincoln sites where, subject to finances, we hope to rebuild the business and implement key improvements that will fundamentally change and enhance the nature of the Kingfish business - both in risk and financial performance. ASX: CSS
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The future for Cleanseas’ Hiramasa Kingfish Clean Seas has: pioneered production of the Hiramasa Kingfish species outside of Japan. done an excellent job at positioning the fish at the high end of the Sashimi market. The credit for this is due to the fish characteristics and the efforts of all our staff.
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The future for Cleanseas’ Hiramasa Kingfish (Cont’d) Your Board and Management firmly believe that the Company’s Kingfish division has good potential now that we have resolved our feed related health issues. As previously announced, we are seeking further investment in Clean Seas : to assist in rebuilding the business or to separate the Kingfish division into a Joint Venture. possible contract growers
It is hoped that we will have a result from these negotiations by early in the new year.
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Southern Bluefin Tuna The Company’s unique Southern Bluefin Tuna breeding program during 20112012 saw our tuna mainly spawn late in December and early in January.
The resulting fingerlings were not able to achieve the targeted one kilogram size before the onset of cooler sea water temperatures. Following our review of the tuna fingerling production and risk assessment of the SBT division, we advanced the spawning time to October 2012 for the current season.
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Southern Bluefin Tuna (cont’d)
Following our risk assessment we are now implementing a less risk-adverse operational approach in an attempt to accelerate our rate of progress in the SBT division.
These strategies include: Advancing the timing of spawning to allow sufficient time for the SBT to get to 1 kilogram before the onset of low sea water temperatures.
Reviewing and challenging all aspects of early feeding of the SBT larvae and fingerlings.
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Southern Bluefin Tuna (cont’d)
We are limited in our opportunity to achieve juvenile production: by the fact that we only have egg availability of four to six weeks per year and currently do not have sufficient funds to build a second brood stock tank to double the duration of the egg supply. This means we will be working on methods to extend the availability of eggs from the existing stock of brood stock. ASX: CSS
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Clean Seas SBT propagation – eggs to juvenile
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SUMMING UP Clean Seas has achieved some remarkable milestones in the history of the Company and has led the world stage in some key areas of development of its fish species.
However, the record of delivering on the promises has been poor and financial performance has been most disappointing. The Company’s SBT division is a long term investment that has considerable opportunity in Australia. We will need to strategically but prudently take on more risk in an attempt to accelerate our rate of progress in achieving our goals with this business. In contrast, while the kingfish division needs to be repositioned to reduce the farming risk, it has the strong potential to deliver reasonable profits in a short time frame. Additionally it offers the potential for the establishment of similar production in other countries.
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THE CHALLENGE The challenge we now face is to: •
refinance the Company after the poor FY2012 performance
and •
to profitably reposition Clean Seas to manage the two key business divisions, whilst balancing the costs of the development in the business as a whole.
These priorities include reducing the risk in the kingfish division and capturing the immediate upside, while at the same time challenging the degree of risk that we assume in the SBT division and securing the longer term upside.
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The Start of FY2013
It is pleasing to report that the Company has achieved significant progress in the opening months of the new financial year in improving the operations of both the Kingfish and SBT propagation divisions. Importantly, the Company has now repositioned itself and is better placed to begin reaping some rewards from the hard work and dedication of its employees and the investment of our patient, supportive shareholders. However it must refinance to deliver on its’ goals.
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My thanks to the Clean Seas Directors for their total support during very difficult circumstances. They have not shied away from making some very difficult and strategic decisions to reposition this Company into what was originally envisaged by the shareholders.
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Thank you and Questions?
Contact: Craig Foster (Chief Executive) Phone: + 61 8 8621 2932 Email:
[email protected]
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Annual General Meeting 15 November 2012