Aker Biomarine ASA

OSE:AKBM

Earnings Call Transcript 2020-Q3

[Operator]

Hello, everyone. I would like to welcome you all to Aker BioMarine's Q3 presentation presented by CEO, Matts Johansen; and CFO, Katrine Klaveness. [Operator Instructions]

[Matts Johansen, executive]

Let me go kick off presentation of Aker BioMarine's Q3 results 2020. I'll share my presentation here now. Okay. Starting with the highlights. So we delivered an EBITDA of $27 million, adjusted EBITDA for the quarter, in line with our expectations for although our plan to reach the target EBITDA of $80 million to $90 million for the year. It's a result that we are very satisfied with because we've been having some challenges that we'll get back to you of a temporary nature, but we've been able to balance that off with more sustained improvements in other parts of the business.

And one of those challenges that we've been having for the quarter and also early in the year is related to harvesting. And then as a result of that, we have less product to sell, and that impacts the revenues from our Qrill Aqua segment. But still, the demand is very high there, and we're now selling everything that we're producing, and we had an all-time high for the quarter and also September, an all-time high month with 5,000 tonnes sold worldwide in the aquaculture segment.

The key element that drove this performance up is the performance in our onshore manufacturing operation, where we have stronger output, more output with lower costs driving up the margins in the Superba business significantly and compensating for the shortfall in harvesting. Kori are rolling out in the U.S. according to plan. It's responding very well to marketing, and we have new retailers being onboarded continuously with 2 new retailers coming onboard now in the third quarter.

It's been a very active segment in Aker BioMarine, lots of activities. We have several new patents granted. We have several new research program that's now been published with documenting the benefits of our products, both on the human side and on aquaculture. And we have also strengthened our ESG credential, and we'll get back to a little bit later.

So as I mentioned, we are still targeting our EBITDA range of $80 million to $90 million. Right now, our forecast is in the lower range of that $80 million to $90 million range. A little deeper look on the numbers. As you can see for the quarter, just some slight growth there because the aquaculture revenues didn't come as expected. But you can see year-to-date, a strong 22% growth, especially by strong performance in the Brands segment. And because of those improvements that we have done on the onshore manufacturing and also implementation of cost efficiency programs across the company, you can see that our EBITDA result is growing significantly faster than our revenues, both for the quarter and for year-to-date figures.

We'll take you through status on our Ingredients segment, starting with operations. I mentioned the strong onshore production performance. We are now producing 26% more versus the same period last year at a lower cost base. So that does have a big impact on our unit cost and the margins for our Superba products. Those cost reductions are coming from successful implementation of big data in our Houston manufacturing, allowing us to optimize the process and increase capacity in the factory we have over there.

We had lower-than-expected harvesting, both due to the ice conditions that we talked about during our Q2 presentation but also because Antarctic Endurance didn't come up to full capacity utilization before the year was finished, and that has significantly impacted both product availability and loss of revenues and margin from sales in the aquaculture segment and also increasing the unit cost for the aquaculture products.

Aker BioMarine is a company strongly focused on ESG or sustainability. And in the quarter, we have strengthened our sustainability credential when it comes to the fisheries. We renewed our MSC certifications with top scores. And we also -- for the sixth year in a row, we're the only fishery in the world that received an A rating from Sustainable Fishery Partnership, allowing us to actually say that we are the most sustainable fishery in the world.

Looking at the Superba segment, we have owned several customers across several markets during the quarter. One element that has impacted our sales in Q3 is the regulatory changes in South Korea. In South Korea very aggressive growth there last years. And when you have strong growth, it attracts also in serious players to the market. And the Korean -- South Korean government decided to strict up their regulatory requirements for krill oil and basically stopped all imports while they were implementing the new regulatory requirements.

Aker BioMarine is meeting all those new regulatory requirements and have now all approvals needed to sell in the Korean market, and we're now selling in the Korean market again. And to our knowledge, we are now the only krill oil company that are allowed to sell in the South Korean market. We have also launched a new line extension of our Superba product family called Superba Performance on the back of newly published scientific data documenting the performance benefits for Endurance at least.

So we're positioning a variant of Superba krill oil for sports and performance and currently rolling that out in the B2B ingredient market. On the animal side, [ Qrill Aqua ] the segment. As mentioned, we have less product to sell because we've been harvesting less. And as we always presented, we are selling everything that we are producing in aquaculture and that's also the situation right now. So the underlying demand is very good. And everything that we are producing is being directly shipped out to customers.

And we have strong demand, and I mentioned in September with 5,000 tonnes sold globally and an all-time high for the company [Audio Gap] reported a breakthrough in the Chinese market for our animal ingredients, and the development in China has continued positively throughout the quarter, and China is now a significant market for our Qrill segment.

We are investing significantly in studies to document the benefits of our product. That's what drives our growth. That's what drives our kind of value that we get out of our product. And through the quarter, we published several new studies documenting new benefits for our Qrill Aqua ingredients, both on the shrimp market for salmon's fishes and other marine fish.

As you also know, we have a kind of quite a new pet business, that's growing very healthy, 80% growth year-to-date versus the same period last year. And that's growing on the back of this Qrill PAWS marketing concept that we have presented earlier where we have taken ownership of these long distance dog sled races creating a real championship that we are owning in creating TV company that we're distributing worldwide.

And from this winter season, we have more than 14 million viewers in our YouTube channel, and we distributed the TV company to produce to more than 60 TV channels, global, and we see clearly that that's driving demand for the Qrill Pet products.

Then talking about Brands segment. Our private label business is performing well. So year-to-date growth of 28%. This is according to plan. We have aggressive growth plans for the private label business. And we're very happy that we're able to stay in that plan and that growth in that kind of unsettled retail environment in the U.S. these days.

So these products sell more or less only in physical stores. So during the COVID outbreak, it's much less people in the stores. The top-performing products on the private label side is Krill and fish oil. So we can see already now the effect of the marketing on Kori have that also driving private label sales of Krill. And we see, for instance, like retailer, our Target growing 44% year-over-year and also big retailers like Walmart growing at a strong 14% year-over-year.

When it comes to Epion, sales continue to respond very well to marketing. We have new retailers on the shelves during the third quarter, and we're especially proud to tell you all that now Kori, our Omega-3 brand is on the shelf in Costco. To get into Costco, it's very, very difficult. They have few products, and it's a sign of quality that Costco is listing your product.

So in -- during Q3, we started appearing the shelves in Costco and also in a smaller retail chain called Big Y. We have also got onboard a celebrity TV doctor and the best-selling author as a spokesperson for Kori. And she has been touring Breakfast shows this autumn, naturally been appearing in more than 224 TV stations, different type of daytime Breakfast shows talking about the importance of Kori and effects of immune health in these COVID times.

Even if we are focused on retail sales with Kori, we also have a direct-to-consumer sales channel, meaning that people can go to the Kori webpage and order the product themselves. And even though we're not marketing that, we see quite strong growth coming from our own website sales site and sales directly to the consumers.

As a result of this strong performance, you can see to the right hand that our -- the share of branded revenues in Aker BioMarine has been growing from 30% last year to now 37% now in 2020.

Some more details about Kori that I want like to share with you today. This is -- what you see here on the chart is sales out of stores for those stores that are reporting that to us on a daily basis. And what you can see here is that since we turned on marketing in the 1st week of July, sales has increased 5x out of stores.

And the red line you see on the graph here, that's our marketing impressions. And the plan now is that we're going to be 2 weeks on marketing, 2 weeks off marketing towards the end of the year -- throughout the whole year. And you can see how well it responds to the marketing and from once a week marketing off, it plateaus at another higher level. And we're currently now at 7 major retailers in the U.S., and key retailers like Costco and Walmart being part of those.

And also, I'm really proud to announce that we were just awarded what's called Buyers Choice Award and something called ECRM. ECRM is some of the biggest premium retail event where you are matching retailers with brands and then you basically need 50, 60 retailers for half an hour present their products in a kind of speed dating fashion over a week.

And at the end of that week, all the buyers from all those retailers, they rate everything they've seen and then they give up this Buyers Choice Award, and we were actually given second place. So that, I think, is also a testament that the retailers and the buyers at the retailers really love our product.

So we've been guiding $80 million to $90 million adjusted EBITDA since we got listed earlier this year. And we maintain that guiding through Q2, and we are also maintaining it today. Even if we are now seeing a forecast at the lower end of the range instead of the higher end of the range that we saw during Q2. And as I said, we are especially proud that we have this performance because we've been having some significant challenges in the quarter and in the year as such, but those challenges are of temporary nature.

So we have this low krill harvesting impact coming from the ice conditions that we had during the summer and also adding to that, that Antarctic Endurance didn't come up to full capacity at the end of the year like we expected. That has a significant impact, tens of millions of dollars impact on our EBITDA. On top of that, we have extra costs related to logistics to get our crew safely in and out Antarctic. And also, we lost some sales during the freeze in South Korea, while we were getting our new approval for the market there through the regulatory bodies there.

So we have these one-off impact significantly hitting our EBITDAs, but that's been balanced out by sustained long-term improvements in our business. That is the improvements that we've been doing in our onshore manufacturing, and the onshore manufacturing has just a high impact on our economics as the harvesting side. So we are producing 26% more at lower cost, that significantly improves the margins that we have on Superba.

On top of that, we have implemented cost efficient programs across the company, taking down our cost base significantly, and we also see positive development in markets all around the world. So they are more or less balancing off the negative impacts that we saw in those one-off impacts. And I think that tells us two things. It tells us, first of all, like we have a robust business where we can handle [indiscernible] that will us. We have so many levers to come or work on.

But even if we get a big challenges in one area, we can compensate that in another area. And I think the other thing it demonstrates is that the underlying business Aker BioMarine is very strong, and it gives us even more confidence in the long-term target of $200 million EBITDA in 2024.

I want to tell you a little bit more about Antarctic Endurance. So Antarctic Endurance is a state-of-the-art new vessel field with innovations, both when it comes to CO2 and emissions and waste handling, but also in terms of making efficient production and harvesting technology onboard.

I mean now that when you implement a lot of new technology like that, there is risks and there's challenges in the beginning. And we communicated earlier that we expect a 2-year ramp-up time for these vessels to kind of producing at its full capacity. We were expecting that vessel to reach our full capacity about the middle of the year, but that took longer than expected. So as you can see here, what was the plan for us originally for the year that it was going to come up for the full year at 84% capacity. It ended at 62%.

So we had some bigger challenges that were hard to solve. We sold most of them at sea in Antarctic with our fantastic crew. But the last ones and adjustments we're now doing in shipyard in Montevideo, where the vessel currently is. So when the vessel now is leaving back to the fishing field soon, we expect it to be close to full capacity. But as you can imagine, this 20% plus variation in capacity utilization has a big impact on how much product we are harvesting and the unit costs coming out of there.

Yes, I just want to repeat what we have said before that we are targeting a $200 million EBITDA in 2024, coming up from $53 million through '19 and $80 million to $90 million in 2020. And there are 4 key drivers to reach that $200 million EBITDA. One of them is scale, and one of the most important ones is scale, getting Endurance at the full capacity, continue to grow the Superba market and get more scale in our Houston factory and drive cost optimization through the increased scale that will drive our gross margin significantly up and boost EBITDA.

On the Ingredients side, it's about two things. It's about just taking the increased product that comes from Antarctic Endurance placing it out in the market. And then after that, continue to drive value and price like we have done historically. And in the Superba market, just continue the same growth -- the same growth rate that we've been seeing in the last years.

And then third is to build branded capabilities to continue to position Lang as a preferred private label partner for the major retailers in the U.S. when it comes to innovative products and then drive a brand presentation in those segments that where we see good growth in the market and then continue to develop the Kori brand to a $100 million brand towards 2024.

And then last but not least is the innovation pipeline, accelerating the new product launches. And you can expect significant new product launches from Aker BioMarine in the near future and also then continue to build and mature that quite large innovation pipeline that we have as a company.

[Katrine Klaveness, executive]

Okay. Good morning. I will take you through the financial figures for the third quarter 2020. Starting with some high-level KPIs. And so far, I must say it has been a good year, despite the operational challenges related to harvesting, which Matts had talked about. Revenue is a bit behind where we would have liked it to be, but despite lower Aqua sales as a result of harvesting challenges and lower Superba sales as a result of the South Korean situation, we are still up more than 20% year-on-year.

For our earnings, we have, to a large extent, managed to compensate these negative effects by strong development in other areas. And this is reflected in our EBITDA result with a 27% growth year-on-year and a year-to-date EBITDA margin of 27%, which is slightly up from last year. I will come back to more details over the next few pages. One last KPI that I would also like to draw your attention to is the development of our net debt.

After the capital injection in July, we paid down all our debt to Aker ASA in addition to paying down also under our corporate RCF and reducing our net debt with 42% compared to same period last year. As a result of this, we currently have large undrawn capacity under our debt facilities.

Moving into more details on the group level. Starting with revenue development. The revenue for the group over the past year has been relatively flat quarter-over-quarter. The Ingredients segment has delivered lower-than-expected sales, while the Brands segment, mostly in line, has shown strong growth in the same period. The gross margin is a bit down from same period last year due to product mix. We have sold more Qrill Aqua versus Superba. Q3 is usually our best gross margin quarter as both Aqua sales are high combined with low unit cost as a result of strong harvesting first half of the year.

Superba and Brands should have a relatively flat profile throughout the year on gross margin. However, Superba is also affected by the cost of [ Nutramine ] from harvesting. So for example, expensive [ Nutramine ] from the Q4 2019 has negatively affected our Superba COGS, both in Q1 and Q2 this year. For Brands, especially Lang, the gross margin is affected by the customer mix, where they have customers with gross margins ranging between 15% and 30%.

Moving over to the EBITDA. We see an increased EBITDA margin this quarter, driven by better gross margins, higher contribution from Lang, but also a range of cost initiatives reducing SG&A costs in the Ingredients segment. The EBITDA for Q4 2019 was heavily impacted by inventory adjustments due to low harvesting volumes in Q4, where we had to reduce our Aqua inventory value with almost $4 million, which would have taken the current $8 million from Q4 2019 up on a more similar level to the remaining quarter.

For Q1 2020, we had the Qrill PAWS marketing platform cost, which was not adjusted out, reducing the EBITDA with approximately $2 million.

The Ingredients segment showed no sales growth compared to Q3 last year, but the product mix was different with higher portion of Qrill meals sold, 53% versus Superba, which is opposite from the same period last year, where the portion of Qrill meal sold was 45%.

September this year was the all-time high sales month of Qrill meal, while Superba actually had its all-time high month last September in 2019. This, of course, also lowers our margin for the quarter with Qrill being our low-margin product. For year-to-date, this segment showed a 13% growth due to strong Q1 and Q2 compared to last year with a total of $16 million increase in revenue, split 50-50 between Superba and Qrill.

We see stable prices in the Superba category, while the Aqua category has experienced some price pressure due to lower demand in the aquaculture and shrimp industry as a result of COVID. The Ingredients EBITDA for the quarter is slightly up with key positive drivers being record low cost of goods sold for the Superba product combined with several implemented cost initiatives in the SG&A area.

This is partly offset by less favorable product mix combined with lower Aqua margins due to harvesting shortfall. Largest driver behind the 23% increase is volume growth and the improved Superba cost of goods sold as a result of strong performance in Houston throughout the entire year.

Key EBITDA adjustments for the quarter totals $5 million and includes the following 3 elements: $4.3 million in Kori launch costs. Year-to-date, we are now up at $10 million of the planned $15 million; a negative effect or minus $0.4 million for Juvel net gain when that vessel was sold. For year-to-date, that is now a minus $1 million in adjustment effects; and then finally, $1.1 million for transaction-related costs for the IPO this summer. Year-to-date, this number is now $1.4 million.

Moving on to production volumes, both onshore and offshore. This slide is showing our production volumes on a last 12-month rolling basis. Looking at onshore, we see the strong trend that is a key driver behind the positive development in unit cost for Superba oil. 60% increase in LTM volumes over the last 6 quarters. In addition to the capacity in Houston, we have also secured additional production capacity, both in the U.S. and in New Zealand, to make sure we can meet future demand growth. We are also initiating a project where the objective is to double the current Houston capacity with the use of new technology within the next 2 years.

Offshore still, unfortunately, shows a bit of a different story. The reason being the delayed ramp-up of Antarctic Endurance, and hence, we have not yet seen the expected improvements in unit costs. Q3 2020 LTM dropped because of a very low Q4 last year, but we are confident that we will see the expected ramp-up when the vessel now starts its next season after it leaves the shipyard in a few weeks' time.

Moving on to the Brands segment. The Brands segment consisting of Lang and Epion showed a nice development, both in the quarter and year-to-date. Epion is increasing their sales after the Kori launch with a $4 million sales year-to-date. However, Lang is still the key driver behind the growth, both for the quarter, but also for year-to-date. Behind the 56% year-to-date growth, keep in mind that we acquired Lang in March 1, 2019, but still even pro forma growth shows a strong 28% growth from year-to-date 2019 to year-to-date 2020.

And in Q3, some of the largest U.S. retailers, including Sam's Club, Walmart and Target, showed very high growth in Lang's portfolio and with fish and krill oil as the key growth products, last one mainly driven by the Kori launch. EBITDA figures are related to Lang with trending between 12% to 14% EBITDA margin, depending on customer mix and promotional activity.

Q3 2019 was an extraordinary low quarter with a combination of low sales on a fixed cost base combined with low-margin customers, which drove the earnings down. But for Q3 2020, we are back to the more normalized earnings or EBITDA margins.

Moving into the financial reporting for the group. Just a few items I would like to address on the P&L. First one being the SG&A where you see that we have gone from 23 -- or [ $223.6 ] million, up from $20.3 million last quarter. As alluded to earlier, the company has taken measures to reduce cost to protect earnings. If adjusting out Kori launch and IPO cost of $5.5 million for Q3, SG&A has been reduced with almost $2 million in that period, despite higher sales activity, which drives increased freight and warehouse costs.

Next item is the deprecation. The impairment amounted to almost $6 million of the $8.7 million for Q3 2019. The remaining amounts, both in that quarter and also third quarter 2020, relates to amortization of acquired customer portfolios. Depreciation for operating assets, as you will remember, is part of our cost of goods sold. And the amount for the quarter is $7.6 million for the quarter or approximately 20% of our cost of goods sold. And you will see in the EBITDA reconciliation at the bottom of the page, we have specified the production line for our production assets.

The third item of other operating income at -- sorry, at $5.2 million includes easing of $2.6 million for the quarter and also a reversal of an inventory accrual, where we have found alternative sales outlet and hence, could reverse that accrual.

Last point I would like to mention is related to tax. We are not paying tax in Norway. And with the tax loss carryforward position that we have, we estimate that our first tax paying year in Norway will be 2024.

In U.S., on the other hand, we will now most likely utilize our tax loss carryforward this year as we are unwinding a loan structure called NMTC, new market tax credit, which will be accounted for as a financial gain and tax for federal tax purposes in the U.S.

Moving to cash flow. Cash flow from operations were negative $34 million. Key items included inventory buildup of $19 million and the repayment of interest and guarantee fees to occur, which was repaid in full after the IPO of $12.3 million. These are the 2 main elements of the changes in working capital. Cash flow from investing activities included general project CapEx of $3.8 billion, plus the $10 million milestone payment for the successful Kori launch, which was paid to the previous Lang owners.

Cash flow from financing activities included a capital injection of $224 million as well as down payment under our corporate facilities, both in the Brands and the Ingredients segment. The net cash flow for the quarter is minus $6 million.

Finally, the balance sheet. We have now a robust balance sheet after the IPO in July. Lower cash position than last year, but with more than $100 million available under our corporate credit facilities. The Kori launch milestone of $10 million have been recognized as part of the purchase amount when acquiring Lang and is booked as an intangible asset. Total debt sits at $235 million after the capital injection and the following repayment to occur of $88 million and down payment under the RCF of $75 million. And with current cash on hand, we show a net debt of $222 million, with an equity ratio of 53%.

With that, I think I'll leave the word back to Matts.

[Matts Johansen, executive]

Okay. So concluding remarks. It's -- as I mentioned earlier, it's been quarter of very high activity in Aker BioMarine with lots of news and exciting things happening. We are kind of gathering it all up here, and it's not practical to go through all of it. I will come to take some of the highlights, but we will also now going forward, inform investors on a kind of a running basis as these type of use comes out.

So you will come on see more communication from us in terms of these kind of key events that's happening in the company. So a few things that I would like to highlight from what's been happening in the quarter. And I think -- I mean, I would love to speak to all, but I have to select a few. Starting at the bottom, this first one at the bottom here, a new study that's been published in documenting how our Ingredients improves growth for shrimps while actually reducing the cost of feed.

So you can basically take out expensive ingredients, put a little bit of krill and get more growth. So better performance, lower cost, which is great in these times when shrimp prices are under pressure. And then also as part of that study, there was some stress test on shrimps on both soft labels and maybe more important, higher temperatures. And we got a significant higher survival when temperatures were increasing. And I think that's important in these days of increasing sea temperatures, which is a big challenge for shrimp farmers in Asia and other places in the world. So that's a key study for us to drive growth in the shrimp segment in Asia.

Next one I want to mention is this one here, which is we got a new patent for high concentrated krill oil granted in the U.S. High concentrate krill oil is the future for krill oil. And we have a significant part of our sales is that already today, and it's following some of the development of the fish oil market, but it went from standard fish oil into fish oil concentrates. So that is an important pattern to protect that business and those investments that we have done in R&D related to that.

The next one I want to talk about is this a field study that we have done together with extreme competition called Norseman which is here in Norway where we have tested the competitors in that competition with our product, and we have demonstrated that by -- when you do Endurance sports, you deplete your levels of something called choline in your body and krill oil is a very good source of choline. And we will see that by supplying or eating krill oil prior to a competition like that, your choline levels are not being depleted. And through that, you will have higher performance in competition or in training. So that's the data that's on the back of the launch of our Superba performance product that I mentioned earlier.

The next one, which is a key part. It's published in British Journal of Nutrition, which is kind of like Lancet for medicine. So it's one of the highest journals where you can publish science. And it basically documents how krill ingredient in salmon improves the quality of the filet and also boost the immune system, making salmon more robust through stress and diseases. So that's a key study for us to continue our growth in the salmon segment.

Next one I want to mention is that our fishing and/or harvesting operation is starting to be quite big and complex. And I have extended the management team of Aker BioMarine with the new Executive Vice President that will be responsible for that segment. And that's a guy called Webjørn Barstad. He was the CEO of Havfisk and Norway Seafoods and they were sold to Lerøy, and been having responsibility for that at [indiscernible] and he starts 1st of December and have vast competence and experience in managing challenging harvesting operations. And I think that will be a big kind of step-up for Aker BioMarine as a company.

And the last thing I want to mention is our new ESG credentials related to sustainable harvesting. I mentioned it earlier, but I just wanted to show you the numbers. So on the left side here, you see the scores that we got from MSC. So MSC is a kind of strict certification you can get for sustainable fisheries. And they rate you according to 3 main principles: The sustainability of the stock, how much krill is it; ecosystem impacts, meaning when we fish that krill, are we impacting whales or birds or anything else; and the third one is effective management, how robust is the management and the quotas related to the fishery.

And they give us score from 1 to 100. And as you can see, we are scoring top in all parameters. And the MSC is giving very few certifications out. But among those on, let's say, most sustainable fisheries out there, we have the -- we are within the 6% higher score that have ever been given by MSC. So this is -- again, we can say we are by this certification of being one of the most sustainable fisheries in the world.

To the right side, you can see we got during Q3 our A rating again from Sustainable Fishery Partnership. They rate all the fisheries in the world according to sustainability and give out ratings, A, B1, B2, C and so on. And there's only one fishery that's given an A rating, and that's krill fishery. So we can actually say by this data that we actually are the most sustainable fishery in the world.

Summing up, what I've been presenting. So delivering adjusted EBITDA of $27 million, a strong result given the fact that we had a lot of but we've been able to balance that by sort of strong and sustained performance in other parts of the business. Revenue has been impacted by lower availability of Aqua products and also by this regulatory change that it does in Korea during the quarter, but we had a solid margin uplift from stronger onshore performance and general lower cost base in the company and the favorable product mix.

Kori is rolling out well in the U.S. according to plan. And we have, as we just went through, lots of activities in the company, a lot of exciting things happening that's going to be important to drive the growth in the company. And we are still maintaining our EBITDA target of $80 million to $90 million for the year. And the forecast right now shows that we are in the lower part of that range. And then [Audio Gap] long-term ambitions for Aker BioMarine. We're targeting a strong growth profile. We're going to grow from $246 million revenue in 2019 to around $700 million in 2024.

We're going to have significant profitability expansion, targeting $200 million EBITDA in 2024, up from $53 million in 2019 and part of that is driving the EBITDA margin from 22% to 30%. We're the undisputed market leader, and we have an unsurpassed scale. I mean we are harvesting 60% to 70% all the trade in the world. We have about 85% of the krill product sales globally. So we are an undisputed leader, and we're building now a brand for ourselves and for the category that will be an important engine going forward.

And last but not least, sustainability is in the core business. We are -- have improving human and planetary health as our purpose. And we are every year implementing new initiatives related to ESG. And we're going to update the investors and the financial markets as we are implementing new initiatives like that. So with that, we move into Q&A. I don't know -- I'm going to take it on my mobile here because I think we have some problems, I'm going to mute the presentation, and then I'm going to take the of my phone here instead.

[Unknown Analyst]

Thomas from Arctic. Can you hear me?

[Matts Johansen, executive]

Yes.

[Unknown Analyst]

Yes. Just a few questions. First, related to your guiding. You previously mentioned also a top line growth in the range of 20% to 30% for '20 and '21. Is it reasonable to assume that growth rates will continue to be at these levels in light of your comments related to both Endurance approaching full utilization next year and also your comments related to the South Korean market regarding the Superba sales?

[Matts Johansen, executive]

Yes, I can answer that. So yes, I think we are expecting that growth to continue. I think this harvesting challenge and Korean challenge that we have this year is of kind of one-off or temporary nature, but the underlying kind of growth is still there.

[Unknown Analyst]

Great. And then second question, are you able to say something about Kori shipments as of Q3? You mentioned USD 1.6 million in July.

[Matts Johansen, executive]

In terms of revenues -- you mean revenues for Kori?

[Unknown Analyst]

Yes, yes, yes.

[Matts Johansen, executive]

We are not going to report that. So we -- I mean, you get some limits, but generally, we're not going to report the details of the revenues for the brand.

[Unknown Analyst]

Okay. And then the last question to Katrine. The other and eliminations were positive in the quarter. Can you please just add some comments on why?

[Katrine Klaveness, executive]

Eric, can you say that again?

[Unknown Analyst]

As this quarter, other and eliminations were positive. So can you say something about the reasons why it was possible and not kind of was -- yes, I think we expected $2 negative, reflecting group costs, et cetera.

[Katrine Klaveness, executive]

And the reason basically that we just kind of gone a bit more into detail on how this whole elimination structure will work. And we saw that we had accrued -- or yes, we had measured a too high elimination at the end of second quarter. So we have reversed now to reflect the correct elimination as we see it towards the end of the year.

[Unknown Analyst]

Hello? Can you hear me?

[Matts Johansen, executive]

Yes.

[Unknown Analyst]

Lars Johnsen from here. Could you say something about the margin development into the Ingredients segment. And especially in the light of the upcoming volume ramp up, how do you see the development now with the second round of COVID-19 heading us?

[Katrine Klaveness, executive]

Well, I mean, in terms of the margin for this quarter, it looks very good. And because of this strong underlying performance at Houston, we are also at a record high margin for the Ingredients segment as a whole. How will it develop going forward? I mean, will, of course, depend on continued the good performance than the ramp-up of Endurance as we have discussed.

So we probably -- I'm not going to be too specific in what I expect in terms of gross margin. But we expect it to continue the improvement that we've seen for the past 3 quarters. But very strong margins at -- in the high in the 70s -- 60s, 70s.

[Unknown Analyst]

Okay. And the second one for me is regarding the Qrill Aqua segment. A bit of the same question there. You say that volumes are good. Demand is good. At the same time, as I understand, your prices a bit under pressure. Could you comment on that?

[Matts Johansen, executive]

Yes. I think the prices are under pressure because prices for seafood is under pressure. So our customers are pressuring us. And we are kind of working with long-term partners -- partnership with a lot of our customers. So some of the discussions in terms we have also given some extra rebates to customers to help them out in a challenging time.

[Unknown Analyst]

So in terms of what kind of estimates going into 2021, maybe given the volume ramp up, assuming a bit lower prices into next year than this year?

[Katrine Klaveness, executive]

I would say you can assume same price level next year.

[Matts Johansen, executive]

No more questions. Okay. Then I think we can...

[Unknown Analyst]

Can I have one question, please?

[Matts Johansen, executive]

Sure.

[Unknown Analyst]

On the volume -- production volumes for this year and also for next year, you've previously mentioned some 60 -- around 60,000 tonne product weight this year and 70 to 74 for next year. Is there any -- I assume there are changes to -- especially this year, but given that you say that Endurance is nearing full operations from 1st of December. Is there any changes to any of those production volume.

[Matts Johansen, executive]

No, I wouldn't say that. So this kind of shortfall in production is related to those one-off situation that we've been experiencing this year.

[Unknown Analyst]

Okay. So the produced volumes of 60,000 tonnes in 2020, that is still your target?

[Matts Johansen, executive]

Not for 2020. But in terms of what we expect for the years to come, we expect to Antarctic Endurance to come up to full capacity. And we don't expect to have challenges like we have with the ice in the summer in a normal year. So these are kind of one-off situation that hit us this year, and we don't expect them to follow us into next year and the years to come.

[Unknown Analyst]

And just one final question. This Annual Meeting that's going on now and closing today, I think, is there any news? I mean there's been some suggestions on both protection of marine areas in the Antarctic. Is there any -- do you have any insight into the meeting and are there any news from there that affects you guys?

[Matts Johansen, executive]

Yes. No changes. As you see, I mean, there are talks about marine-protected areas. I think we presented that earlier. We are very involved in those discussions. And we have in partnership with [ Greenbase ] also defined some marine-protected areas that we, on a voluntary basis, are staying out of and the discussions ongoing now is it's not going to be just volunteer but it's going to be permanent.

And we are supporting the development of that, and it's a part of those discussions going on in.

[Unknown Analyst]

I got one question here. From Q3 2019 to 2020, the Brands segment takes a greater share of the sales. And could you explain a bit about how the Epion team is working with the Brands?

[Matts Johansen, executive]

Yes. I would say they are working in, let's say, classical fast-moving consumer goods approach. So I mean, we have a very strong team of talent, recruiters from the leading fastener and consumer goods companies in the U.S. that really know how to kind of build a successful brand in the U.S. market. So they're working with all channels. We're going to reach every American older than 35 years old minimum 10x before Christmas.

So everybody above 35 years will minimum see our advertising 10x before Christmas. And to be able to reach that, TV is an important part of it. So TV advertising is about 60% of the marketing mix. And we're present in the right channels to meet these type of audiences. But then we're also working with social media with influencers with this celebrity doctor that's going to TV shows and a whole range of different kind of creative marketing activities.

So I think we see that the team is performing really great, and we can also see that in the numbers that the consumers are resonating with the communication that we are working with.

[Unknown Analyst]

And second question is, you recently hired a guy from Danske Bank. Could you explain a little bit about what you expect of that hiring?

[Katrine Klaveness, executive]

I think we just see that we need some competence and experience within kind of the field of investor relations. So just strengthening the finance team with the right person. And I think we just improve further the work we do towards the new stakeholders as a result of the IPO.

[Matts Johansen, executive]

We still have time for more questions if there's any questions. Okay. If not, then we thank everybody for listening to our presentation today, and wish you all a good day. Good night. Bye.

[Katrine Klaveness, executive]

Bye.