Good morning, everybody, and thank you for joining us on this fine Monday morning in Cape Town. Our Annual Results Presentation for 2025. Let me just take you through the format. We have about an hour and a half. I will take you through an overview, and I'll cover our three pillars, and then I'll hand over to Zaf, who'll take us through the financial results, and then I'll go back to our outlook and give you an indication of what we're facing for the next year, and then happy to answer some questions. Let's kick off. I just want to take you back a step. What I've done slightly different this presentation, I've put four context slides in the presentation, one for Group and one for each of the divisions.
The purpose of that is to give you a view not only of the numbers, of the environment that currently exists, both from a Group point of view and each of the divisions and what they're facing and some of the issues that affect their business. I want to start off with the Group because we put out a trading statement about two months ago, and obviously, you've all seen the trading statement, and it showed our figures, our results were going to be somewhere between 38% and 42% down. Immediately, I started getting questions from the market and from friends and everybody about Oceana, was Oceana in trouble, what was happening. It made me think a bit about where Oceana is quite right now.
The more I thought about it, the more I wanted to put this slide up in here because Oceana is, in fact, in a very, very good position at the moment. Numbers and performance are annual, but structure, strategy, and position is far more important in terms of taking this business forward. This opening slide, I just really wanted to cover where we believe we are. Lucky Star, once again, a great business, iconic brand that is in strong demand and loved by the SO consumer and remains that brand and has lots of potential going forward. We've invested heavily over the last three years in our Wild Caught business and enhanced both the vessels from a maintenance point of view and a reliability point of view, but also from a productivity point of view. Upgraded the factories, made the vessels much more reliable and productive.
That is starting to pay dividends going forward and will pay dividends going forward. I will go through some of the details later on. As you know, in both the U.S. and in S.A., we have invested quite heavily in the fish meal and fish oil plants. We underinvested deliberately over the last couple of years because we did not have certainty around rights. Once the FRAP process was over and we had some certainty in terms of rights, we invested quite heavily in both S.A. plants and in our U.S. plant. Those are starting to pay dividends. Despite the figures, I think Oceana, and in covering all of that, we have a great team that is running Oceana. I think that the management team and the people who work for Oceana are settled. It is a fantastic culture.
I think we are very well positioned to take advantage of issues that change. I can't control climate, I can't control catching, I can't control the weather, but those are cyclical. When those turn, I think Oceana and I know Oceana is in a fantastic position to take advantage of that. Figures aside, I think this Group is in a very, very good position. Let's now look at the actual performance for the year. I'll start off with just giving you some of the highlights in the various parts of our business. Lucky Star, very good performance, very solid performance here, once again, in a very tough environment, and I'll talk a little bit about that later. Our Wild Caught had a significant turnaround in performance.
Obviously, off a low base last year, but notwithstanding that low base, a very, very good performance coming through, particularly from our Hake business. In our two fish meal and oil businesses, despite the price of oil dropping significantly, the factories in both U.S. and South Africa performed extremely well. I will take you through some of the stats there that showed how the investments that we put in those factories have started to deliver and will deliver going forward. I have put a point there about Africa. African businesses, our collective African businesses, have done extremely well, 58%. The reason I put it up is just to show the diversity of our Group. We are multi-species, multi-geographies, multi-currencies. When one does not do well, like the oil prices declined, our African businesses have done extremely well.
It just shows the strength of this business and being our continued diversity. I'm going to go through the three pillars now. There are a lot of stats in here, and I won't cover all of the stats, but I'll talk about the business. A context slide. This slide, and a lot has been spoken about the S.A. consumer. What I try to focus here is not the broad S.A. consumer. This is Lucky Star's consumer, LSM- 125. What are the things that are affecting them? As you can see, the minimum wage has gone up by 38% over the last five years. The food basket has increased by 68%. They're under pressure to keep their families fed and buy affordable protein. Household costs, as you say, 30% of their disposable income is spent on food.
Everybody's spoken about the gambling spend that has become a problem in this country. I know I read a comment from the ghostwriter saying that FMCG companies were blaming drop in volumes on the spend on gambling. In fact, despite the spend on gambling, Lucky Star has done extremely well. We've seen volume growth in Lucky Star. Shopping habits have changed. Those shoppers that are really needing to make that ZAR go longer are looking at different ways of spending. They are shopping largely on deals. They cross-shop. They don't shop at one particular store. They will look at what the deals are on pamphlet, and they'll move between them. They're leaning on spaza convenience. Spaza are becoming much more effective in terms of being cost-competitive versus the major retailers. They've got buying groups now. They've become very, very organized in their structure.
Their pricing is relatively priced, considering that the consumer does not have to travel by taxi to one of the major centers. Spaza stores have become a major factor in the spending habits of our consumers. What we have seen is the retailers and wholesalers are also trying to amend their structure in terms of taking advantage of it. The retailers are going and expanding their footprint into the townships in various formats, container store formats. Even the wholesalers are now starting to open their stores on a periodic basis to invite consumers, household consumers, into their stores to take advantage of wholesale prices. The market is a tough market out there. Within that tough market, Lucky Star has done extremely well. Revenue up 6%, operating profit up almost 10%, and our OP margin increasing slightly by 0.3% to just below 10%.
I always get asked this question about OP margin and the correlation between volume, value, and margin. We play a very careful game, and Lawrence Dougall and his team are always looking at managing price, price points, and volume growth in Lucky Star. Certainly, we could put an additional price increase through, and we've been very prudent in terms of our price increases, but we want to maintain our market share and the volume growth. This year, we sold just over 9.5 million cartons, up slightly 2% volume growth, given what's happened in the consumer, a very commendable performance. People are looking for affordable and available protein. What is interesting, our export, what we call our cross-border countries, Botswana, Zambia, Zimbabwe, Mozambique, we've seen strong growth in Lucky Star in those categories.
Last year, you'll remember, we closed both factories for a period of time to do major upgrades. Our production volume that went through the factories this year is substantially up, 24% up on last year, produced 5 million cartons through the two factories here. Our canned meat production, we've expanded our lines, we've added additional lines, and canned meat production is up almost double on last year. We've taken a conscious decision to increase the pricing on canned vegetables. Our canned vegetables is all on a contract pack basis, so we have no fixed costs, and it's a highly competitive market, and we produce quality products in the canned vegetables. We've decided to reduce the volume targets, increase the margin to assist the overall margin of Lucky Star. That is a deliberate strategy in canned vegetables.
The factory performance, once again, as I said, the investment that we put into these factories has done extremely well. Look at that damage rate that has dropped from 1.5% down to 1% in the full year. Our throughput substantially up on a shift basis. What has improved is the yields that we have achieved. That relates to 73 cartons per ton of fish that they process. Moving from 69 cartons to 73 cartons per ton. Obviously, production costs have come down. On a closing stock, which is an important issue for us, remember, 85% of our production and sales is from imported raw material.
The lead time to buy a pilchard somewhere in Mexico or Japan or Morocco and get it processed and delivered to South Africa in a can and cleared by the NRCS takes anywhere between three and a half to four months. Stock holding and the managing of that stock holding is a key component to keeping Lucky Star on shelf all the time. We close with a reasonable amount of stock. That's about five months' stock, 3.9 million-4 million cartons, a little bit of frozen, most of it in finished goods. A good position going into the new year on our raw material supply, our finished goods supply.
On the resource point of view, from a supply of fresh fish from our own factories and from Namibia, a little disappointing in the fact that what we're seeing from our vessels, what we're seeing from our vessels catching and what the scientists are telling is very different. You saw last year we had a 65,000-ton quota going up quite nicely on the previous year. This year, they initially gave us 35,000 tons of quota. The reason being the research that was commissioned by the department was late, and their findings were disappointing. Yet, when we went to sea and our vessels went to sea, our catches were phenomenal. Remember, half the quota is issued on the East Coast and half is on the West Coast. Our vessels went out and caught that 35,000 tons in record time.
Anecdotally, our findings of the availability of pilchard is far better than what the science is saying. They've recently given us an additional allocation of 9,000 tons, up to 44,000 tons, and our vessels are fishing right now. We've seen some signs, which is quite positive because generally pilchards are not, this time of the year, generally have started to disappear, but we still see pilchards. Unfortunately, those of you living in Cape Town at the moment will have experienced the high wind that we've experienced for the last three weeks, and that has prevented our vessels getting to sea. They have been able to, and they've seen good signs of pilchards. What is very positive is the allocation of a quota for the first time. It's an experimental quota in Namibia.
As you know, Namibian scientists and government put a moratorium on pilchards for the last five years. In the latest research, the biomass has rebounded strongly, just below 1 million tons. They did an experimental issue of 10,000 tons of pilchards to our factory in Namibia. We are a shareholder in the last factory in Walvis Bay. We own 45% of that factory. They issued a quota of 10,000 tons. I can tell you that the catch has been really, really good, both from a daily catch point of view and from a quality of fish. The sizes and the quality of the pilchard we are catching has been very positive.
We're hoping it was a very late allocation, so we haven't had the time that we would like to, but we're hoping that we're going to land that full 10,000 tons through that factory, which is positive. Obviously, Lucky Star being one of their major customers, will acquire that product into South Africa and Namibia because Lucky Star is in Namibia as well. Very positive from a resource recovery. Why that is important, both from a South African and a Namibian point of view, own catch of fresh pilchards is far more margin enhancing than frozen product we buy from somewhere in the world. Certainly, the higher that percentage of input, the better for us as a company. The other issue that has changed quite dramatically over the last couple of years is where we buy pilchards.
As I said, 85% is bought from somewhere in the world. Traditionally, over the last 10 years, we buy bulk of that comes from Morocco and Mauritania. This year and the latter part of 2024, we've seen Morocco and Mauritania resource not performing well, but the Pacific has performed extremely well. We have switched our purchase pattern, and we bought almost 93% in the first half of the year because the Pacific season runs from about late October, early November through to January, February. We have to buy a large portion of our raw material in a very short period of time. Obviously, it puts pressure on our balance sheet because we're expending that money upfront and carrying that stock for almost the full year. The quality of the fish that's coming out of the Pacific is very, very positive, and it certainly has.
In terms of Zaf and the way he manages our balance sheet, it means a way of thinking, but it's certainly positive from a quality of fish. Going forward, where are we? As I said, canned meat. We now have acquired the final 25% of the plant that we bought in Kraaifontein. We now own 100% of that. We've introduced two further lines in our factory on the West Coast. We've seen strong demand from our customers, and we've almost doubled our production out of those two factories. We are looking at some new developments in terms of ranges out of that factory. As with any factory, we are focusing on input costs. A large portion of the input is Brazilian chicken that comes in from Brazil that forms the basis of the raw material.
We are focusing because we have a very strong procurement team that sources product, both pilchards and chicken MDM from Brazil to focus on reducing costs. Two-minute noodles, a new category for us, a category in excess of ZAR 5 billion in South Africa. We started last year with contract packing under the Lucky Star brand. We've seen some very positive signs for the product, in particular, one of the major retailers. Very interesting market this. It is a combination of price and quality from a range of high quality to low price. We have positioned Lucky Star more or less in the middle. We have strong demand for the brand. We certainly won't be doing anything that'll damage the brand. Lucky Star is too important a brand, so we would never compromise on quality. It's been an interesting development.
We certainly have learned a lot over this year. We believe that this has some very positive outlook for us to invest through the full value chain in two-minute noodles. On the pilchard side, strategy remains the same. Affordability, availability, and making sure that our service levels to our customers are as close to 100% as possible. We want to be in every store across the country all the time at an affordable price. That remains the same. We are very structured in terms of how we get that product out. Our market share remains very high and remains at a very competitive basis. Remember, we do not only compete in the pilchard market. We compete in the broader protein market. In fact, we compete against starches as well. Price is key.
That ratio between margin, value, and volume is a key component that we're looking at on a constant basis to manage our price and retain our customers. We have introduced a new flavor this year, Peri-Peri Flavor. It has made some nice inroads into the market and is helping with the volume growth. Just recently, I visited Ghana about two months ago. We entered this market with a partner. We're not just selling into the wholesalers. We've gone in properly with a local partner who has established a sales team and a marketing team that is supported by our South African team. Ghana is a country that has very similar eating habits to South Africa. They eat and they recognize a tall can with canned pilchards and canned fish. It's not changing the eating habits.
It's basically introducing the Lucky Star brand into that market, both in Accra and Kumasi, which is a big canned fish eating area. We have seen some very nice progress in that market. Certainly watch the space, and I'll certainly report back in the half year of how that business is going. The strategy remains there. Grow Lucky Star. Keep our customers supplied with affordable protein. Just on the right-hand side, just those two graphs, it's interesting that our export market is growing substantially. The cross-border markets that we see, all of the SADC countries have shown strong growth in volume. That top graph is the foods allocation, the non-fish allocation of our total basket, 10% and growing. Very positive. It gives us some nice road to develop this business. On the Wild Caught Seafood , and again, I want to put a context slide.
I attend a conference annually which is called the Groundfish Conference. It is all of the major species and companies that catch and produce groundfish, fish that are caught close to the bottom. Hake, our product, is in that sector. This was a graph that was presented at that conference two months ago, stats supplied by the FAO Fisheries Stats, showing the world fisheries production. You can see the bottom blue line on that. I think that is total w ild caught, wild-capture seafood. It has been approximately the same, around 90 million tons for the last 20 years. It is fairly static. One species goes up, one species goes down. What is interesting is the aquaculture growth. You can see in 2023, this is the last update that FAO gave us.
In 2023, aquaculture accounted for 100 million tons of farmed fish per annum, which is now in excess of the wild-capture species. Within the wild-capture, we have groundfish as the species that we compete in, and that is cod, pollock, hake, ling, a number of groundfish. That has been also fairly static at around 7 million cartons, 7 million tons, as you can see on the top right there. What is projected for 2026 is a slight drop in that, down to 6.6 million tons. What is more important is the global cod supply. Cod is the number one whitefish supplied and demanded by consumers worldwide, in particular, European customers. Over the last five years, the biomasses and the TAC allocation has dropped from about 1.5 million tons to about 950,000 tons.
A massive drop in the supply of cod, both in the Atlantic and the Pacific. That is the species that hake generally competes with from a pricing point of view. They're more expensive than us, and we sit just below them. With the massive shortage, there is a switch from cod and the availability of whitefish into hake. Hence, our market has been very, very strong in terms of demand. The point that I want to make on this slide is that wild-capture seafood is finite and will be going forward. Most of the species are well-managed by governments. You do have, obviously, some poaching in some small areas, but generally, they're well-managed. The key is that wild-capture species is finite and will continue to grow in demand.
Consumers, as much as they don't mind eating aquaculture or farmed fish, their preference is for a wild-caught sustainable seafood. With static supply, demand will continue to grow, and pricing will continue to grow. Important component, and remember, this is what we compete in all of the Wild Caught Seafood division. All of the species are in this global fisheries production. Let's look at the overall performance of this division. Obviously, off a low base, operating loss last year, ZAR 53 million, but a nice turnaround, ZAR 222 million, revenue up almost 20%, and margin up to 12%, a little bit disappointing. I'll go through the various species. Certainly, I would like to see that improve. The business is based on the investment we put in this business, is certainly ripe to start delivering on future upturns in biomass and catch.
Started with the Hake business, and really an exceptional performance, and driven by the investments that we've put into this business unit over the last couple of years. We've spent on all of the hake vessels and the horse mackerel vessels in upgrading both the level of reliability and maintenance and upgrade the production. You see that top left-hand sea days. That's an important component of how we measure this business. A fishing vessel alongside doesn't make any money. A fishing vessel at sea is when we really make. We've moved our sea days from 859 days at sea to 1,027. That's a collective hake vessels at sea. Catch costs have come down almost 12.5% because of a combination of less maintenance, more sea days, and better catch rates. I'll talk about catch rates just now.
That's resulted in improved volume going through to the market, 12,000 tons relative to 10,000 tons sold last year. You see there we put in the export price in euro terms. We've seen on average our euro pricing move up by almost 8% across the board. A very commendable performance from the Hake business this year. I just wanted to show you some catch rates because catch rates drive the three main components of a fishing vessel: maintenance, labor cost, and fuel, all underpinned by catch rates. Those three make up 85% of the running cost of a vessel. When you have higher catch rates, the division is just exponential in terms of dropping the daily per kilo catch cost. We saw catch rates drop over the last five years, up until the early part of 2025.
Suddenly, in the second half of this year, we've, as an industry, just experienced a massive upturn in catch cost and catch rates, 42% up. Generally, what I've seen, and again, I've been in this business for 40 years, there's definitely an upward trend in the southern hemisphere catch rates of most of the species. You'll see when I go through all the species, with us moving into a neutral zone from an El Niño zone, we're seeing a lot more positive coming from most of the species within the southern hemisphere. That certainly is indicative of what we've seen in hake. Fuel costs, big component of the running cost of vessels, has come down quite nicely and will continue to go down.
We have a hedging policy, and we've hedged a large percentage of our future fuel costs going into the balance of this year. Fuel costs is certainly likely to hold at the similar levels for the balance of the next financial year. Our Horse mackerel business, better than last year, but hesitant to say a little bit disappointing. I obviously know this business extremely well, and I'm used to catch rates that are far better than this. Given that we've spent substantial money on those vessels, we are certainly a little disappointing with the catch rates in Namibia and South Africa. Desert Diamond had an abysmal year last year and has certainly had a turnaround. We've started to see the resource coming back. It recorded a break-even result this year compared to a substantial loss last year. Catch rates, although they have improved, have been very sporadic.
Not in a wide area, in a very isolated, very condensed area, but certainly an improvement. In Namibia, very in line with the previous year, the market remains strong. Exactly the same as Lucky Star. Customers looking for affordable protein. This is where Horse mackerel plays in. Our African demand, remember, we sell to many countries in southern Africa, up to DRC, Mozambique, across border countries. The demand for Horse mackerel is extremely strong. We just need the resource to start recovering as we are seeing other resources recovering. I am used to catch rates of 110, 120 tons from those vessels. A catch rate of 68 is half of what I am used to. It is still positive, but certainly not at the levels that we used to in the past. Still a good business, and we will continue to drive that. Looking for better things in the new year.
Two smaller parts of the business, Squid and Lobster. I'm going to start with lobster because they are the smallest component of our business on the West Coast. Traditional West Coast lobster that you know that is served in many of the restaurants here. A species that has been under threat for a long time because of the levels of poaching. Interesting now, the scientists are saying over the last two years, the resource has rebounded nicely. In fact, we've got a 58% increase in TAC for the 2026 year. Very positive. Small part of our business, but very profitable and very variable. We don't have high fixed costs. On the South Coast, that's a deep-water lobster, no poaching. Again, responding very nicely to the climatic conditions improving. We catch that mainly on the East Coast of Africa. We are expecting an increase in both TAC and catch rates.
Both those businesses have performed well. Again, indicative of what is happening to many of the species, both South Coast and lobster, seeing increases in TAC. On Squid, we had a poor season. Remember, in squid, you have two seasons. One, your dominant season is November through to February. At the beginning of this calendar year, our season was fairly poor. The signs are certainly more productive. We have a mid-season, a fairly small season in the middle of this year, not great. Certainly, the signs are very positive. Again, squid is a short-lived species. Depending on the environmental conditions on the South Coast, that promotes egg-laying and the growth of the species. We have seen some positive signs over here. We will go back to see, in fact, at the end of this week, our season starts on the 28th of November.
We go to see it on Saturday. We are certainly looking for positive signs there. What I want to talk a bit about is squid because it's certainly an industry that I believe in. I think we have invested. We bought additional rights, and we introduced a new vessel. That photograph is of our new vessel. It was launched about two months ago. That is a catamaran, more effective at catching squid because you've got a wider area. It's more stable. If you see the front of that vessel, it's got three anchors. It allows you to anchor your position on a school of squid and allow the fishermen who are fishing by hand to maximize catch as opposed to the monohulls, which tend to swing around and move off the fish. What we've done, we acquired an additional five vessels and additional 77 permits.
We've rationalized those 11 vessels into seven most effective vessels and maximized the permits on those vessels. I'm certainly looking at some goods going forward for the opening of the season for this industry to actually perform nicely. The reason I like this industry is because it's fairly variable. It is not a high fixed cost business. The vessels don't require massive capital or massive maintenance. When the season doesn't perform, you can minimize costs. When the season does perform, it translates very quickly into a profitable business. Excited about the Squid business going forward. Right, let's move on to Fish meal and oil. Again, I've got a number of slides that I want to talk about, context slides that talk to the future and the reason that we invested in this industry.
The first one I want to talk about is the Peruvian landings. You remember one of the reasons we had record performance was when Peru had a very poor season in 2023, caused by the El Niño effect of warming of the waters. They had a very low season. It meant there was a shortage of supply. That supply translated into record prices for, in particular, fish oil. This season, and the Peruvian season is split into two. You have a first season, which has happened already. The second season has just started. We had 3 million tons allocated in the first season. There was an expectation of a further 2.5 million tons, as was done in 2024. On average, they produce about 5 million tons, and they produce about 35% of the world's fish meal and fish oil requirements.
The second season this year was announced about two weeks ago. Based on the research, it has been dropped quite significantly to 1.6 million tons. Obviously, that translates into a potential shortage. Right now, the market is sitting on the fence, trying to ascertain how good catches were going to be and how good their oil yield is. It is certainly pointing to a more favorable pricing for the Fish meal and fish oil business. On the right-hand side is a graph just showing the biomass. That is the overall biomass for Peru. You can see it is fairly static in terms of it is flat, but bounces up and down quite dramatically every year, affected by climate conditions. I want to just show you. This graph on the top right-hand side is the anomalies in sea temperature.
That middle line is the average sea temperature over many years, going back to 2000. The effect of El Niño and La Niña on the differential in temperature from the norm, you can see over the years, because of the frequency of El Niño and La Niña effects and climate change, the warming or cooling of the waters is exacerbated and got closer together. Why I say that is because this is what affects Peruvian catch. We can expect going forward with climate change to see greater effects on not only Peru, on world fishing, but certainly it has a major effect on the Peruvian anchovy season. On the left-hand side, I just wanted to again highlight the fact of the growth in aquaculture expansion. Remember, aquaculture is the single largest consumer of Fish meal and fish oil.
That growth continues to grow, similar to the graph I showed you on ground fish. If you look at, and I've broken this into two components, fish meal and the outlook for fish meal, and then in the next graph, outlook for fish oil. It's a very interesting graph. 91% of fish meal supply goes to the aquaculture market. Very different from a couple of years ago. Ten years ago, it was only 80%, and a large went to the poultry and the pig industry. They've downscaled their requirements, and they're using alternate proteins for their feed supply. Aquaculture doesn't have an alternative. It is a lot harder to substitute fish meal in the diet of aquaculture species. Strong demand from the aquaculture industry for fish meal.
The graph on the right-hand side is, and this was done by a bank called Rabobank, which is one of the leading agricultural banks in Europe. They have done studies over the last 10 years, and they track the supply and demand dynamics of fish meal and the demand for fish meal and oil and the aquaculture industry. What this is showing, and obviously, they do not always get the timing right, but what this is showing is by 2028, their view is there is going to be a shortage of fish meal. The demand will outstrip supply. Now, whether they will get that number right, that timing right, the long-term trend is there. The other interesting point, and I will talk about it just now later, is that fish meal and fish oil, the elasticity of the pricing is very different.
When there's a shortage of fish meal, pricing does move, but it doesn't move as strongly as fish oil does. The reason being, there are some alternatives. You can get alternative protein sources from soya, from another source. They can substitute a portion of the fish meal requirements into their diet. We see pricing move up when there's a shortage, but not as much as fish oil. If I look at the same graph and the same stats that Rabobank have put out on fish oil, 64% of it is used in aquaculture. A large portion of it goes into pharmaceutical use. That's the tablets that get processed out of fish oil. High omega, very strong market, and it's grown substantially. Their view is that we are already at a point where supply and demand dynamics are equal.
In fact, they believe that there's going to be a shortage of oil going forward. It does depend on what the level of omega is in. If the omega is very high, then there's a shortage in the aquaculture industry. If the omega is low, then it's not suitable for pharmaceutical use, and it'll go into. What I want to point out is this is one of the reasons that Oceana invested in this industry. The dynamics show that as an industry, pricing and demand for fish meal and oil will continue to grow, and supply will be relatively static. Very positive for us. Whether to translate into this year or next year, certainly over the next four to five years, we're going to see continuous growth in demand and continuous growth in pricing, in particular for oil.
Oil and that elasticity that I spoke about on fish meal is dramatic in oil. In terms of aquaculture requirements, when you're producing feed for fish, you need a certain component of high omega oil in the feed. It's good for the health of the fish and good for the growth of the fish. There isn't any affordable alternatives to fish oil. They find it very difficult to find, and there are developments, and I'm sure there will come. Certainly in the short to medium term, fish oil is a prime requirement for aquaculture feed. Let's look at our business. Again, one area of decline is our two Fish meal business. That was driven primarily because of price.
Both businesses are in a, and I'll go through the stats now, but both businesses are in a very positive position in terms of the factory performance and the vessel performance. Operating profit on the S.A. side are two Fish meal and oil businesses here. Operating profit dropped by almost 70% down to ZAR 26 million. Obviously, a very low margin driven by the oil price. Remember, this Fish meal and fish oil business, there's two major components to it. One is obviously price, which is important. The other is volume. It's a high fixed cost business. Both factories have a high fixed cost, both S.A. and U.S. The requirement is to get the volume through those factories. We believe that that certainly is possible going forward.
When I spoke about in that initial graph about how our factories have been invested in and we're seeing strong operational performance of those factories, these graphs are really showing is trying to depict that. A 25% increase in production volumes. Top left-hand corner there, 106,000 tons of industrial fish was processed through our two factories here, up on 91,000 tons. What is a little bit disconcerting is that that was all South Atlantic herring, red eye, not anchovy. We had a record season. I'll show you the graph just now. Record season for South Atlantic herring, very poor catches on anchovy. Strong performance from the factory affected by the price. As you can see, a drop in oil price of almost 53% and a drop in fish meal price of almost 9%, which obviously goes straight through to the bottom line.
One of the things we did in our two factories here is we enhanced the ability to track fish meal and fish oil production through the production line to understand the makeup of that fish meal. Maybe just a little quick lesson on what makes up fish meal. You have four components in fish meal: protein, moisture, ash, and fat. Protein is what the feed manufacturers want that promotes growth in the species they're feeding. Moisture is water. Ash comes from the bones of the fish. Fat is in the body of the fish. All of that makes up 100%. What you try and do is maximize the protein and have a reasonable component of fat.
You can do that if you have the right components in your production line so that you can manage as you're producing the fish meal, you can start drying a little longer, increase the heat, take a little bit more water out. We have done that in our new production line. I did not realize the stats until I saw this one. It was quite an eye-opener to me. In 2023, only 30% of our finished product was high quality, high protein levels, above 67%. In this year, because of this new technology that we have put into the two plants, we achieved almost 70% of the fish meal, the output of fish meal at that top-ended spectrum. Remember, customers pay per percentage of protein. If you are a 60% or a 67%, that has a massive difference on price.
These are a major component for the improvement in output and improvement in price from these two factories. This is the biomass of industrial fish that goes into our two fish meal plants in South Africa. One very positive, one very negative this year. Top graph is showing our red eye landings. That is controlled by what is called a puckle, which is an industry allocation. It is on our Olympic system. They issue a quota for the full industry. The industry can go and catch out there. First come, first serve, whoever catches more. What was positive is that the initial allocation was around 120,000 tons. As the season progressed, because of our phenomenal catches, the government and DAFF issued additional quota. We were issued almost 200,000 tons of red eye. What was also positive, you see those graphs there, 73% in 2024.
That is the catch of the allocated puckle. This year, we caught almost 96% of what was allocated. That drove the 100,000 tons that went through our two factories. On the negative side, and generally, these species swim and live together. What, on the negative side, is quite unusual is there's almost been zero anchovy landings. We caught almost nothing this year. Interesting that if you remember my presentation last year, I was fairly certain that this would bounce back this year, and it was based on history. You see the graph on the top right there. That's the biomass. You can see, again, a short-lived species. When it has a downturn, it bounces back very strongly, depending on climatic conditions. We know that there's probably going to be a very low quota for anchovy next year, given what has happened this year.
Again, I'm positive with the climatic conditions changing in the southern hemisphere, and we're seeing the other species starting to rebound. Hake, the two lobster species, squid, red eye. It's only a matter of time before anchovy bounces back as well. Good and bad. We need the volume through our factories to deliver. Obviously, we need the price. I think that certainly we're going to see some upward trend in pricing, given Peru's catch. It needs a combination of both. Long term, this business is in a very good position from a structural point of view to take advantage of when the resource rebounds. I certainly believe price is going to go, the trajectory is going to be continued to upward. I certainly believe these businesses are in a very good position to take advantage of when those conditions improve.
On the U.S. side, very similar story. Operating profit down 50%, both in dollar terms and in rand terms, driven by particularly the fish oil price, fish oil price going from approximately $6,000 to $2,500. This factory, again, has performed very well, both from a catching point of view and from a production point of view. We obviously have a partnership with Westbank. We're a shareholder in Westbank, the fishing operation. There on the top left, you see the total catch of 630, that is in million fish, 632 million fish were caught this year, well up on last year, 526 million.
The oil yield, which is an important component of our profitability, and the oil yield comes from the fattiness of the fish, held at a very respectable level of just below 12%, which is, if you look at the long-term average of oil yields in that species, is around 10%. Very positive in terms of oil yield. Again, bottom, good sales volumes, but the negative was the price. Price down 48% and 9%. The difference between the price in S.A. and U.S. is generally just the quality of the oil and the quality of the meal. Lower protein in the U.S., higher protein in S.A. The omegas are slightly different between the two species. Very good factory performance, but negative because of the pricing. Again, I wanted to show you the performance of this factory. Production stats, and that figure there, plant downtime.
These factories run at, as you can see, 116 tons per hour, phenomenal factory. Yet, in the full season from April to November, they only had 0.2% downtime. A phenomenal performance of maintenance and the team there that is running that factory almost 24/7, seven days a week, flat out. Very good performance from a factory point of view. Just in terms of closing stock, obviously, as we have done over the last couple of years, we hold stock for our customers, in particular our pet food customers in the U.S. They buy consistently from us on a monthly basis. We hold stock to keep them supplied. Because of the good catch and the good yield that we've achieved, we're carrying forward 34,000 tons of raw material of fish meal and around 30,000 tons of oil.
A large portion of that fish meal has been forward contracted, but a large portion of the oil has not been forward contracted. We are holding now, and there is a bit of roulette being played between buyers and sellers to see where the pricing ends up. We are holding back, and we will see where that pricing ends. That certainly will be a lot more positive than this year. I have covered the stats. I am going to hand over to Zaf now, who will take us through the financials. I will talk a little bit at the end about strategy and handle some questions. Over to you, Zaf.
Thank you, Neville. The group's strong operating performance was underpinned by a 58% increase in operating profit in our Africa businesses, coupled with improvements across most key performance indicators. Revenue decreased marginally to ZAR 10 billion. The positive impact of increased sales volumes across all segments and firm pricing for wild caught seafood was offset by the decline in U.S. dollar fish oil prices, which halved from the record levels achieved in the previous year. Operating profit decreased by 23.2% to ZAR 1.3 billion compared to the ZAR 1.6 billion achieved in the prior year. Headline earnings per share decreased by 38.4% to ZAR 5.648 per share, primarily due to the lower earnings, increased net interest expense, and higher effective tax rate.
The Group declared a final dividend of ZAR 1.75 per share, bringing the total dividend for the year to ZAR 2.85 per share, which is a decrease of 42.4%, which is slightly higher than the decline in headline earnings per share. The Group's net debt to EBITDA ratio increased to 1.7x compared to 1.3x at the end of September 2024, primarily due to the decrease in U.S. earnings. Operating profit of the second half of the year at ZAR 577 million was only 6.2% lower than the comparative period, which partially mitigated the significant decrease reported for the first half of 2025. The benefits of being a diversified business are reflected in the operating profit contribution by segment, with the Africa businesses growing operating profit by 58%.
Both the fish meal and fish oil businesses in South Africa and the United States achieved higher catches, resulting in increased sales volumes. This was, however, not sufficient to offset lower global fish oil sales prices following the recovery in Peruvian anchovy resource and production levels. Daybrook contribution reduced from 72% of total operating profit in 2024 to 43% in 2025. Lucky Star Foods delivered a solid performance despite ongoing pressure on consumer discretionary spending, and its contribution to operating profit increased from 26% to 37%. The Wild Caught Seafood segment delivered a significant turnaround, driven by record-breaking performance from the Hake business and an improvement in the Horse mackerel business, resulting in a contribution of 18% compared to the loss in the previous year. Fish oil price movements have had a significant impact on Daybrook's performance over the past four years.
Calculating the fish oil price variance by applying the average realized dollar prices to the previous year's volumes, the cumulative positive impact on our operating profit has been approximately ZAR 95 million over that four-year period. The impact of the steady increase of the fish oil price from 2022, followed by the subsequent cancellation of the Peruvian anchovy season in early 2023, generated a cumulative positive profit contribution of approximately ZAR 820 million over the three financial years from 2022- 2024. The subsequent recovery in the Peruvian anchovy biomass in 2024 led to a significant price correction, with a corresponding negative profit impact of approximately ZAR 725 million in 2025. This was despite sales volumes of 23,000 tons in 2025, which was significantly higher than each of the previous three years. Revenue remained steady compared to the prior year.
Operating profit decreased by 23.2% to ZAR 1.3 billion, and gross profit margin decreased to 27.8% compared to the 31.8% achieved in 2024, attributable mainly to low margins in the fish meal and fish oil segment. The Lucky Star Foods margin improved due to increased local production volumes, supported by higher local pilchard landings, a consistent frozen fish supply, and operational efficiency gains. Strong market prices and improved catch rates for hake and horse mackerel contributed to good margin growth in Wild Caught Seafood. Overhead and expenditure decreased by 12.3% to ZAR 899 million, mainly due to lower employment costs combined with cost savings from reduced insurance premiums. The higher net interest expense of ZAR 288 million was primarily due to increased borrowings in S.A. to fund the recent capital expenditure program, as well as increased working capital investment during the year.
Higher imports of frozen fish in the first half of 2025 led to increased Lucky Star Foods inventory levels for most of the year. The renewal of the U.S. interest rate swap in February 2024 at higher rates, covering 50% of the U.S. debt, further contributed to the increased interest expense. The effective tax rate increased to 25% compared to 20.8% in 2024 due to the Africa businesses contributing a higher proportion of the Group earnings compared to the U.S., with South African and Namibian earnings attracting higher tax rates. Profit after tax decreased by 35% to ZAR 724 million, and headline earnings per share decreased by 38.4% to ZAR 5.648 per share. Detailed financial statements are included in the appendix to this presentation and the results booklet, which is available on our website.
Net working capital across the group increased 7.6% to ZAR 2.5 billion, with Lucky Star Foods and Daybrook comprising 48% and 43% of the total, respectively. The increase in net working capital was primarily driven by high levels in the Lucky Star Foods segment compared to the previous two years. Lower frozen fish inventory levels in Lucky Star were partially offset by higher finished stock inventory levels in Lucky Star, Daybrook, and hake. Capital expenditure returned to more normalized levels at ZAR 327 million compared to ZAR 645 million in the prior year. The main projects included the ongoing maintenance of the Group's processing facilities and vessels, upgrades to the wild caught seafood fleet, and the addition of a new squid catamaran vessel. The Group is planning to invest ZAR 307 million in replacement CapEx and ZAR 21 million in expansion CapEx for 2026.
The primary focus over the past five years has been to reduce U.S. dollar debt. We repaid a further $15 million from surplus cash during the 2025 financial year, bringing the total debt repayments to $54 million since 2021. At the end of FY 2025, we reached net debt of $31 million and a net debt to EBITDA ratio of 0.8x. This has enabled us to target refinancing and replacement of our term debt with a revolving credit facility and thereby mitigate the negative interest carry effect. Discussions with our lenders in the U.S. are currently being finalized in this regard. In South Africa, debt increased by ZAR 1 billion to ZAR 2.1 billion since 2021 to fund the capital expenditure program and working capital investment.
Net debt to EBITDA in South Africa reduced from 2.7x to 2.2x , primarily due to the 58% increase in earnings in the Africa businesses and the significant improvement in free cash conversion. The Group's total net debt increased marginally to ZAR 2.6 billion, with a decrease in the U.S. debt being offset by an increase in S.A. debt. U.S. net debt as a proportion of total net debt has reduced from 54% in 2021 to 20% in 2025, while S.A. debt now comprises 80% of the total. As mentioned, the U.S. debt reduction included a one-off prepayment of $15 million from surplus cash, adding to the $17.5 million prepayments paid in prior years.
As a result of the decrease in net debt, the U.S. net debt to EBITDA ratio increased slightly to 0.8x despite the reduction in EBITDA from ZAR 1.3 billion achieved in the prior year to ZAR 635 million in the current year. S.A. debt rose due to a ZAR 348 million increase in short-term facilities to fund working capital needs. As a result of EBITDA increasing from ZAR 636 million to ZAR 939 million in the current year, the S.A. net debt to EBITDA ratio reduced to 2.2x from 2.7x in the prior year. On a combined basis, the Group's net debt to EBITDA ratio increased to 1.7x from 1.3 x, mainly due to the reduction in total EBITDA. The Group complied with all lender covenant requirements relating to both its South African and U.S. debt.
The net cash balance reduced slightly from ZAR 760 million in 2024 to ZAR 603 million in 2025. Cash operating profit declined to ZAR 1.7 billion from ZAR 2 billion in the previous year. This was partially offset by a reduction in working capital investment of ZAR 245 million, down from ZAR 517 million in the previous year. Cash generated during the year was allocated to capital expenditure, settling debt and tax obligations, and dividends, with short-term borrowings from existing facilities covering the cash shortfall in South Africa. The significant improvement in free cash conversion to 103% compared to 34% in the prior year was driven by higher cash flow from operating activities and lower replacement capital expenditure. Operating profit plus interest income reduced from ZAR 1.7 billion to ZAR 1.3 billion in FY 2025, which resulted in the group's return on net assets decreasing from 14% to 10.6%.
Average net assets remained steady at ZAR 12.2 billion and has increased 37% from ZAR 8.9 billion in 2021. Given the higher South African debt levels at this time, it is proven prudent to increase the dividend cover from 1.85x to 1.98x . The Group declared a final dividend of ZAR 1.75 per share compared to ZAR 3.00 per share, which together with the interim dividend brings the total dividend for the year to ZAR 2.85 per share compared to ZAR 4.95 per share, which is a decrease of 42.8%, which is slightly higher than the 38.4% decrease in headline earnings per share. Over the past three years, significant progress has been made on capital allocation, with substantial debt reduction in the U.S., reinvestment in our asset base, and strategic bolt-on acquisitions that complement our existing business.
Having invested in our vessels, we are currently evaluating our Wild Caught Seafood fleet to ensure it remains fit for purpose, including options for operating a dual-purpose vessel. The Group will maintain a disciplined approach to capital allocation, prioritizing shareholder returns and reducing debt through efficient capital expenditure and building capacity to capitalize on opportunities. Thank you, and I hand you back to Neville, who will cover our outlook.
Thank you, Zaf. It is always disappointing when we see a drop in earnings. Obviously, the focus is to grow earnings consistently. What I have said to the management team here and to the staff here is we have to focus on what we can control. Control what you can well. I think that has been the focus of the last couple of years, is invest in our assets, and our assets are in good shape.
They certainly are in a position to deliver. On the Lucky Star side, really is to continue to make available affordable protein at a competitive price to the consumer. We will focus on cross-border countries, which we've seen strong demand for our product. There are a number of opportunities in adjacent food categories, which we think lends itself to the Lucky Star brand, and we certainly are looking at expanding into that, both from outside of just noodles. There are some adjacent categories which we are looking at. Across the board, we are focusing on efficiencies to reduce costs and on our margins. Obviously, supply is a key component of this business, the raw material supply. Without sufficient raw material business, we wouldn't have sufficient stock to supply our customers. That is a key focus for us under the Lucky Star brand.
This is a less volatile business than fishing. It has an element of fishing in because we buy fish from all over the world. It is to try and grow this component as a larger percent of our total operating profit, to try and reduce the volatility of Oceana earnings. This is certainly a focus for us, and we believe there is lots of room to grow this part of our business. On the Wild Caught Seafood side, as I explained, I think wild caught demand and pricing consistently will grow because of the static supply of Wild Caught Seafood in the world. From a top-line point of view, we will see increasing prices. What the focus here has to be is minimizing costs, making sure that the vessels are as efficient as possible.
Knowing that we've only got a finite quota, we can't grow out our supply. We have to grow our ability to take costs out of the business. On the hake side, and hake and horse mackerel, we're looking at changing our horse mackerel vessel to a more versatile vessel that is not a dedicated horse mackerel vessel. It will have the ability to catch multiple species so that when horse mackerel is not performing and not delivering the catch rates that we require, the vessel can switch to other species. It allows us to be more, again, more pricing so we can manage our pricing a lot better in terms of costs. I spoke about the squid fleet. We've rationalized our squid fleet.
We're optimizing licenses, and I'm looking forward to this new season, which starts next week, to see how those seven vessels are going to perform with the maximum permits on board. Namibia always is an issue for us. A different management regime there, and particularly the politics there in terms of how they allocate quotas. We are a major operator there. I've had a lot of dialogue with the regulators there to understand their foreign investment policy, to understand that in order for us to continue investing in that country, we have to have certainty and sustainability in terms of allocation of quotas. I certainly will continue to drive that part of our business because I certainly believe that Namibia offers us an opportunity as partnerships and as guests in that country to grow that business. We are strong operators both in the canned pilchard and the Horse mackerel business.
As long as we are welcome there, we are going to invest in that country. I am looking forward to some good discussions with the regulators there in the next couple of years. On the fish meal and oil side, as I said, our factories are in good stead. We are looking at, in the U.S., some new technologies, fishing technologies with our partner, Westbank. Certainly, as those develop, I will share those with the market, but ways to enhance our ability to catch fish in the Gulf of Mexico. We still operate under TAC, so we have unlimited ability to catch fish in a fixed season, and that will drive volume through those factories. On the S.A. side, I certainly believe that the redeye resource is strong. We will have to work through this low anchovy season.
The factories are, and the focus will be on taking costs out of the business to try and increase the variability of cost in those two businesses. When the season starts, does fire, when anchovy comes back, that we're in a better position to take advantage of. Increased pricing, as I showed in those graphs, we believe pricing is going to continue to grow, in particular on the oil side. A tough year, but a year that I'm still very proud of the management team and what we've done in this business. We've created a structure that will allow us to take advantage of those uncontrollables, and I know those uncontrollables will turn. Hopefully, at some stage, they will operate in our favor, and this business is in a good state. I'm very optimistic about the coming years.
With that, I'm going to close and happy to take some questions from people in the audience.
Thanks, Neville. First question is from Jan Malms at Holberg. On the quality of the fish oil inventory in the U.S., is this on a high-end quality to the omega- 3 market?
Hello, Jan. Generally, the quality of the oil that we produce in the U.S. is not of pharma level. It's in the agriculture spectrum. Just interesting, I'm going to digress a bit, but the production that's coming out of Peru, the latest stats that we're seeing coming out of Peru, their catch rates in the north have been very positive. In the center and the south have been less positive. The oil yield has been very high, but it's been mainly on the omega- 3 side.
Very strong, high omegas in that oil, which is positive for us in the sense that less goes into aqua and more goes into farmer. There is a shortage of farmer oil at the moment, but our oil plays in the aqua space, both in S.A. and U.S.
Neville, that appears to be our lone question. Zaf himself, obviously, done a good job explaining the results.
Very happy to do it. Thank you very much for everybody for joining us, and I look forward to a positive 2026 within a volatile industry. We certainly believe that this company is well positioned. Thank you, everybody.
Thank you.