SalMar ASA

SalMar ASA

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Agricultural Farm Products

SalMar ASA (SALRF) Q1 2021 Earnings Call Transcript

Published at 2021-05-12 16:01:07
Trine Romuld
As usual, I will start giving some comments to each of the segments, starting with Farming Central Norway. In the quarter, we harvested 20,800 tonnes with operational EBIT of NOK 386 million, and thus EBIT per kilo NOK 18.54. Central Norway continues the trend by delivering solid results. The volume in the period comes from autumn 2019, which has had a stable biological development and where most of the volume was harvested at the end of the period. Spring 2020 has accounted for the rest of the volume, a generation, which has shown stable biological performance compared to autumn 2019.Harvest of autumn in 2019 is finished and harvest of spring 2020 will continue in the second quarter. The biological status of the fish in sea is good, and we expect similar cost level and volume in quarter 2. The volume guiding for 2021 is unchanged at 107,000 tonnes. Farming Northern Norway. We harvested 13,500 tonnes in the quarter. Operational EBIT of NOK 195 million, resulting in EBIT per kilo of NOK 14.45. Northern Norway continues to deliver good results, where autumn 2019 has accounted for the harvest volume in the period. Most of the volume was harvested at the end of the period. This is a generation that has shown good biological performance, but with a somewhat higher cost level than spring 2019. The cost level is also affected by high harvesting and wellboat cost. During the quarter, we used many different harvesting facilities, and we also harvested some of the volume at InnovaMar. This increased cost are costs that we'll avoid when InnovaNor is in operation expected this summer. In quarter 2, we expect similar volume and slightly lower cost over, where we will continue harvesting our autumn 2019 generation and start with spring 2020. Guiding for the year is kept unchanged. Sales and industry delivers operational EBIT of NOK 118 million in the quarter. Our strategic focus on local processing strengthened the results. This, combined with higher volume through our harvesting and processing plants and solid operational performance has given strong margin from our harvesting and operating activities and spot sales. Contract share at to 24% in the quarter, with a positive contribution due to the low salmon prices at the start of the year. Contract share in quarter 2 is expected to be around 25% and for the entire year 2021, we expect around 20%.We are close to completion of InnovaNor, and we look forward to the summer when we can use the facility and process our own fish locally on Senja. Icelandic Salmon, we harvested 2,500 tonne in the quarter with an operational EBIT of NOK 4 million and EBIT per kilo NOK 1.48. After several quarters with negative results, lower cost, good capacity utilization at the harvesting plant and increased salmon prices have resulted in a small positive margin in the first quarter. We are now harvesting from the 2019 generation, which has shown significantly improved biological performance compared to previous generation. This generation has accounted for all the volume in the period, and we will continue to harvest from the same generation in quarter 2. In quarter 2, we expect similar volume and stable cost level. Guiding for the 2021 is kept unchanged at 14,000 tonnes. I also will mention that in May this year, we acquired 2 new small facilities on Iceland. This increased our further capacity for growth in the value chain, and the acquisition will give the company access to approximately 1.5 million smolt from 2023 and onward with the flexibility to produce the size that is right to optimize utilization of existing licenses. And then Scottish Sea Farm. The company harvested 5,900 tons in the quarter and delivers an operational EBIT of NOK 74 million, resulting in EBIT per kilo of NOK 12.39. The company is continuing the trend by delivering solid results with cost improvements and increased volume compared to last year. The biological status is good with low sea lice levels in all regions. Guiding for 2021 is kept unchanged at 36,000 tonnes. And then on overall comments, starting with operational EBIT compared to last quarter. The first is a comparison from the previous quarter only with Norway, where we see an increased EBIT per kilo of NOK 7.34 compared with the previous quarter. As already commented, the salmon prices increased in the period, and together with slightly higher cost in Northern Norway. This explains the net increase. For the group, including Icelandic Salmon, EBIT per kilo has increased with NOK 7.51 and increased salmon prices and also improved margin from Iceland accounts for the increase. Group profit and loss. Some comments to the P&L for the quarter compared with the same quarter in 2020. And we have a lower revenue due to lower volume and lower spot price compared with the corresponding quarter.As you can see, we have included a new line in the P&L, and that is production tax. In Norway, that was introduced with effect from January 1, 2021, and we also have a similar resource tax in Iceland, which is all accounted for in the same line. Fair value adjustment is positive due to higher forward prices in the calculation compared to the same period last year. Income from associates, mainly Scottish Sea Farm, and is positive due to improved results and -- but also positive fair value adjustment. Compared with last year, other financial items is positive due to lower currency movements. This also affects the OCI where the strengthening of NOK gives a negative OCI. Group EBIT per kilo is only reduced with NOK 9.60 per kilo compared with 2020 despite NASDAQ is down by NOK 15.72. This improvement is due to lower cost and improved price achievements. Balance sheet, where we compared end of quarter 1 with end of quarter 4, 2020. Some key comments. Investments are progressing according to plan. Standing biomass is higher both comparing to year-end and also by previous quarter or corresponding quarter in 2020.And net interest-bearing debt, including leasing, has increased with NOK 402 million and is at end of quarter 1 at NOK 6.2 billion. In total, we still have a very solid financial position with an equity share of 50.9% and net interest-bearing debt, including leasing versus EBITDA of 1.84. Please also note that the proposed dividend of NOK 20 per share will be voted at the Annual General Meeting, June 8.Moving in interest-bearing debt in the quarter, some comments there as well. Start with the net interest-bearing debt, including leasing at the end of 2020 at NOK 5.8 billion. EBIT in the period of NOK 820 million. Investments, which are progressing according to plan. And also, we have some increased net working capital, that's a combination of various balance sheet items, including both customer receivables and accounts payable. We end the quarter with SEK 6.2 billion in net interest-bearing debt, which is an increase of NOK 400 million compared to end of this year.To ensure our financial flexibility so that we can continue our work with sustainable investment throughout the entire value chain, we have at the beginning of this year, entered into new agreements of total NOK 7.5 billion in green financing. In this way, most of our financing is now green, which clearly shows our commitment to pull the industry in an even more sustainable directions. In addition, we have, for the first time, received the credit rating from Nordic Credit Rating, where we received a rating of A- with stable outlook. For further details, you can go to our website. In April, a successful issue, our first green bond was completed. This is the largest green bond in Norwegian kroner and was a NOK 3.5 billion and was priced at NIBOR 3 months plus 135 points and has a duration until January 2027. The funds from this will now be used for investments in the entire value chain, where our green framework -- that is available also via our website -- shows which areas these funds can be used for. And as we also said at our first quarter presentation, we have refinanced existing credit facilities, where we have entered into a 5-year sustainable linked revolver credit facility with a limit of NOK 4 billion. With this, we have come to the end of this operational and financial part, and I give the floor back to Gustav, who will give you even more insight into investments in the value chain. Gustav Witzøe: Thank you, Trine. Sustainability in everything we do is a key postulate in SalMar. And as Trine mentioned, SalMar has now secured NOK 7.5 billion in green financing, which will help drive our operation in an even more sustainable direction.An important strategic foundation for SalMar is to contribute to environmentally sustainable growth in aquaculture industry. For us, there is a close connection between environmental, social and economic sustainability. For this reason, the sustainability strategy is also one of the most important pillars in SalMar's business strategy. And in SalMar, we had 3 key pillars for how we work with sustainability. One, passion for salmon is the basis for SalMar. Our goal is to produce a sustainable and healthy marine protein for growing world population. And we will do that with the salmon in focus. Continued sustainable production needs to be on the salmon terms. Two, at the same time, we must ensure minimal footprint in the areas where we operate. An important part of our social responsibility is to take care of the ocean and the environment for future generations, so that they can inherent the oceans and this planet in a better state than we did. Three, and last but not least, we will ensure local value creation, safe and secure jobs and support for the local communities. We are part of -- along the entire Norwegian Cost, and in all the other nations where we operate. SalMar shall be the most cost-effective salmon producer, and we will secure that position through strategic operational focus throughout the value chain from smolt to consumer. If we succeed with the operative -- operations, we will also succeed with the sustainable goals. In SalMar, we want clear and transparent KPIs for sustainability. This, to make sure that we have the course and the direction we want for both people and salmon. Survival, feed factor, a reduction of greenhouse gas emissions and sickness absence rate or just a few such example of key KPIs. We will ensure that we have good reports with relevant KPIs that work in our day-to-day business as well as in our sustainable report. This will give us a clear indication of how the status is in relation to the hard goals we have to set ourselves. As we say in SalMar, what we do today, we do better than yesterday, and that devil is in the details. To get an even better insight in how we think and work in respect of sustainability, I recommend you all to take a look of our new sustainable report, which is available on our website. In SalMar, we shall always be ready for future growth. SalMar's ambition is to be a leader in the traditional coastal aquaculture, as well as farming in more exposed areas in the open ocean and in sales and industry. That is also why we invest heavily in all parts of the value chain, especially to ensure that we have this front position. But the best fish, the best equipment and leading technology is not enough alone. The most important input factor we have is our employees, a strong culture and fantastic employees who have competence, see opportunities and has a willingness to go the little extra. Combined with another input factors gives us the ingredients we need for future economic and sustainable growth. And this strategic and operational focus is the basis for investment we are now making in SalMar. People, in a challenging time with a COVID, it is extra important that everyone is seen and that it's safe to go to work. This means that we must comply with all the measures we impose to reduce the possibility for infections. We must also ensure that we, at the same time, maintain the passion and the energy needed to be on top of our game and ensure optimal conditions for the salmon. In addition, SalMar will continue to take social responsibility in the areas where we operate. Coastal farming, our coastal farming business is the very foundation and core of what we do at SalMar. We will continue to get an even more optimal and sustainable utilization of our licenses and locations. We will continue to be at the forefront of technologic development and acquire new knowledge by developing existing and trying new operations regimes. At the same time, we are always looking for interesting M&A and growth opportunities. Industry and sales. The upgrade at Vikenco has been completed and the complexion of InnovaNor will be this summer. 2 fantastic project for us, which I will return to a little later in the presentation. Offshore farming is one -- is an important part of SalMar's strategy to ensure future growth. We, therefore, continue our work both with Ocean Farm 1 and the design of Smart Fish Farm that will be our door opener to the open oceans. We are now working in detail design, and we'll be ready to make a decision on the Smart Fish Farm project as soon as we have been allocated a site and receive permission to produce the volume described in the application we submitted in January this year. Smolt. Our small facility on Senja is well underway, a very important investment for us and our growth ambition in the North. At the same time, we are planning for a new smolt facility here in Central Norway. To succeed with a strong value chain, good access to the right smolt is crucial. Therefore, we are now planning to build a new small plant at Tjuin in Central Norway, in close to our existing facility and competence center for smolt Follafoss. We are planning for a state-of-the-art RAS system. The plant will give us an annual production of approximately 4,000 tonne or about 20 million smolt, of course, depending on the smolt size.The facility is also important part of our strategy for continued sustainable growth. Good smolt are a starting point for a strong biological performance. It's among our most important sustainable elements. We will also ensure that we take care of the sludge so that this can be used in the circular economy in production of, for example, biogas or fertilizer. The groundwork has already started, and we expect to make a final investment decision -- final investment decision shortly. Where we are planning for a major investment in Tjuin, another investment has just been completed. The upgrade of Vikenco, our harvesting and processing plant in Møre og Romsdal has taken into use at the beginning of 2021. A fantastic plant operated by a very talented local group of people in Aukra.The Vikenco plant has the latest technology and value-add for value-added production, which strengthens our local processing capacity, which means that we can continue to offer the market, the products they demand to an even greater extent. The plant has a capacity of approx. 40,000 tonne per year, both within harvesting and value-added production. The investment also ensure increasing sustainability. We reduced the needs of transportation and increased our production and processing capacity, which again reduced our greenhouse gas emissions. In addition, our new harvesting and processing facility on Senja in Northern Norway, InnovaNor will be ready this summer. This will have a significant effect on our efficiency, logistic cost and quality from the Northern region. From the start, in InnovaNor, we'll have a harvesting capacity of 75,000 tonne per shift per year and a value-added capacity of 30,000 tonnes per year, with significant opportunity for increased capacity both within harvesting and value adding. When both Vikenco and InnovaNor are completed, combined with in InnovaMar in Frøya, SalMar will have a significant harvesting and processing capacity for our Norwegian production. In addition, this plant gives us the flexibility we need to optimize our biological production and get the most out of each salmon. At the next quarterly presentation, we intend to give you a real deep dive into InnovaNor and what fantastic opportunities this facility represents for our entire value chain in Northern Norway. Therefore, it is with pleasure that I can announce that we plan to stream our next presentation in August directly from InnovaNor and Senja. Then moving to the outlook. We will continue to have focus on the things we can impact and do something with. Good financial results come from good biological conditions and operations at the salmon -- on the salmon terms. Therefore, our strategic investment for future sustainable growth continues along the entire value chain from the row to the complete product. The volume guiding for 2021 is unchanged. In Q2, we expect similar volume with cost at the same level as in Q1. The contract share is approximate 25% in the second quarter and 20% for the whole 2021. We expect low supply growth in 2021 with continued market uncertainty in respect of COVID-19. SalMar is well positioned to handle a demanding market with strong operational and financial flexibility. We have a positive view for the future for salmon and salmon has kept its strong market position through this difficult time. More and more vaccines going out in the world also gives hope for an even brighter future going forward. Our job is to implement the measures that strengthens us today, and at the same time, will make us even stronger going forward. We focus on the solution, not the problems. With this, we have come to the end of the presentation, and we would like to thank all of you who have been watching. Our next quarterly presentation will be in August, until then, we hope all of you stay safe and healthy and, of course, continue to eat a lot of salmon. Thank you for the attention. End of Q&A: