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Clean Seas Tuna ‘Clears The Decks’; Incurs USD 6 Million Net Loss

Clean Seas Tuna Ltd (ASX:CSS) today warned it would incur a net loss of about $6m for the second half of the 2009 year, compared with the first-half net loss of $6.6m.

For the full 2008 year, the company incurred a net loss of $658,000.

In light of encouraging results achieved from the Southern Bluefin Tuna (SBT) spawning and growout in March, directors decided to “clear the decks” as part of the finalisation of the 2009 year accounts.

This has included:
* writing down Mulloway inventories by $2.2m to a carrying value of $4.3m;
* writing down Kingfish inventories by $4.9m to their carrying value of $38.2m, and writing off $1.2m spent on new market entry costs;
* expensing $3.7m in SBT development costs post capitalisation of $2.1m of SBT development costs in accordance with accounting standards; and
* interest and financing expenses of $1.6m and depreciation and amortisation of $1.8m.

Having “cleared the decks” for the sale of excess inventories and the costs of new market entry, Clean Seas expects an operating profit for the Kingfish division in FY2010.

The considerably better margins that are available from SBT in the medium term have caused a refocusing of Clean Seas' business priorities towards SBT, including:

* diverting some of the resources which would have otherwise been utilised in Kingfish and the majority of resources otherwise utilised in Mulloway to SBT;
* lowering Kingfish fingerling production from 1.25m to 1.0m to ensure the SBT division operates without capacity limitations; and
* utilising some of the existing Kingfish and Mulloway inventories for market entry/development strategies into new Asian offshore markets where the company's medium-term preference will also be to market SBT.

“Clean Seas recognises that it must continue to improve. The profitability of the Kingfish business must be optimised while the longer-term upside from SBT is being achieved. The board views FY2010 as the ‘changeover year’,” the company said.