JUST days after Shetland Catch announced it had received a £3 million injection from shareholder Norway Pelagic, accounts published by Companies House have revealed that it fell to a £6m pre-tax loss last year as a result of competition from cheap Faroese mackerel and an overfishing fine.

The Lerwick-based company, which claims to operate the largest pelagic factory of its kind in Europe, revealed that turn-over for the year to March 31, 2012, was down 31.4% from £70.9m to £48.7m. A £5.6m pre-tax profit for 2011was followed by a £6m loss in 2012.

Gross profit margins plunged from 23% to 10%

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The company's directors said in their review of the business: "The loss this year arose as a direct result (of) the significant increase in mackerel prices, followed by an influx of high volume/low margin mackerel from Faroe into Shetland Catch Limited's usual markets.

"The impact of this increased volume meant cold stores in certain markets were full and stocks moved very slowly, resulting in high levels of stock at the year-end and significantly lower margins being achieved."

The review added: "This stock has gradually shifted after the year-end, clearing the position for the autumn season, but meant profitability was impacted for 2012."

In July, after the year-end, the High Court in Edinburgh fined Shetland Catch £150,000 and ordered it to repay £1.5m it had earned from assisting customers landing fish in excess of their quotas.

Between 2002 and 2005, Shetland Catch was part of a £47.5m "black fish" scam, during which it helped vessel skippers who falsely declared the quantity of fish they landed as a means of evading the annual fishing quota allowed to each vessel.

Shetland Catch said it had included the £1.65m in its accounts as an exceptional item. "The company has time to pay the penalty which is due to be paid by June 2015," it said. "The directors welcome the con-clusion of this investigation."

Market conditions have improved for Shetland Catch in the current autumn season, with the company reporting that lower mackerel prices are helping it rebuild sales to its traditional customers in Eastern Europe and Africa, as well as the UK. It has also been adding to sales in the Far East.

However, there remains no deal about mackerel fishing between the European Union, Norway, Faroe and Iceland, leaving the Scottish fishing industry vulnerable to unilateral catching by Faroe and Iceland hitting their markets. Shetland Catch said the impact in 2012 is less noticeable than in 2011 due to its lower prices.

Earlier this week, Shetland Catch said Norway Pelagic had invested £3m in the business which has increased its shareholding in the business from 25% to 50%. The deal valued Shetland Catch at £12m.

Norway Pelagic made its initial investment of £1.5m in Shetland Catch in 2007.

The number of employees at Shetland Catch fell from an average of 96 to 89 during the year although it still remains a significant employer on the islands.

The remuneration of the highest-paid director fell from £254,000 in 2011 to £214,000 last year.