First detected by authorities in August 2021, fears of the QX parasite infecting East 33’s (ASX: E33) oyster have come to fruition with the aquaculture company confirming that re-emergence of the parasite is likely to see 11-17 million saleable oysters lost.
QX, the designation for Queensland Unknown, is a disease that impacts Sydney Rock Oysters caused by a protozoan parasite. It is known only to infect invertebrates and does not have any implications for human health. It does however lead to a deterioration of health in its infected hosts before leading to death through Autumn and Winter according to the Department of Primary Industries (DPI).
For East 33, who have a large operation in Port Stephens where they farm Sydney Rock Oysters, the likely damage caused by QX has led the Company to withdraw all previously issued revenue guidance while external experts have been engaged to conduct a system wide stocktake.
Initial estimates from the Company are that 11-17 million oysters will be lost which will significantly reduce the 51.2 million saleable oysters that East 33 had forecast to have in inventory by June 2022.
The confirmation of QX in Port Stephens and their Tilligerry Creek farms could not have come at a worse time for East 33 whose operations have fallen victim to prolonged and heavy rain across the Eastern coast of Australia. For oysters, this prolonged exposure to fresh water has resulted in additional loss of inventory with increased rainfall having resulted from the current La Niña weather event.
Through the months from December to March, rainfall on the Eastern coast of Australia has been 20% higher than the long-term average which has resulted in major flooding across New South Wales.
Unfortunately for East 33 and the NSW oyster farming industry, prolonged rainfall may still be to come with meteorologists flagging a negative Indian Ocean Dipole (IOD) system which could be heading towards Australia. The last time a La Niña clashed with a negative IOD was in 1974 which resulted in the wettest year in Australian history since data was first recorded 122 years ago.
All of these headwinds have forced East 33 to concede its multi-year growth plans will be notably slowed with reduced oyster harvests from Port Stephens in the immediate future.
Since the start of 2022 when East 33 shares were trading at $0.22, E33 shares have fallen as the DPI investigation of QX has continued, to have last closed at $0.08.
For the half year ended 31 December 2021, East 33 reported $11 million in revenue. Included in their market update of QX in Port Stephens, the Company reported $5.6m in revenue for the March quarter but this was generated from previous harvest not impacted by QX.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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