Austevoll Seafood ASA

OSE:AUSS

Earnings Call Transcript 2021-Q1

[Arne Mogster, CEO & President]

It's a pleasure for me to welcome you to Austevoll Seafood first quarter financial presentation. I will briefly take you through the highlights in the quarter. Thereafter, we'll go through segment by segment. And Britt will take you more in detail through the financial figures. And we will end the presentation by giving our view on the different market for the different segments we are operating within. Starting off, I would say that the underlying operations and activity in first quarter has been quite high, both when it comes to salmon farming or slaughtering level has been 42,000 tonnes in Lerøy. We have a record high fishery in the whitefish segments. However, if you look at the price achievement, both for salmon and whitefish, has been harmed by the COVID-19 effect. Then moving on to the pelagic activity, is also pleasant for us to also deliver quite good result from this segment this year. And I would say is marked by a good operation, a good start of the season and also increasing prices throughout the quarter for our pelagic products. So all in all, a good quarter for us. Revenue of just below NOK 6 billion and EBITDA of just below NOK 1.1 billion and EBIT of just above NOK 700 million and a pretax profit marginally higher than same quarter last year, mainly driven by a better performance of our associated company. And we also had some negatively agio effects in the first quarter 2020, which we have not had in first quarter '21. Strong balance sheet, just below NOK 40 billion, net interest-bearing down to just below NOK 4 billion and equity ratio of 58%. If you also include the EBITDA from our associated company, Pelagia, we have EBITDA on this quarter of NOK 1,162,000,000, and about NOK 750 million of portion is coming from salmon and whitefish and NOK 400 million from the pelagic activity. And its main driver behind these figures is South America, particularly Peru, which has had a very good quarter. Britt will come back to that later. Looking at our operational map. We normally give this map and give our indication when it comes to volume in the group. And the latest guidance we have is that we will catch this year approximately 450,000 tonnes from our own pelagic fishing vessels. We are aiming to process around 1.850 million tonnes in our pelagic processing plants. We are aiming to catch 72,000 tonnes of whitefish in Havfisk and process approximately 30,000 tonne on our land-based product on whitefish factories. And the last guidance on volume gives us an estimate between 215,000 to 220,000 tonnes of slaughter salmon volumes. Then starting up going through segment by segment. And what I can say now is that we are entering into, I would say, the third good season we have seen from Peru. The quota, which was put up in April, was 2.5 million tonnes, more or less in line with the same quota, which was in 2020. But what's worth to mention is that the start of the season is earlier, so we have a better time to catch the quota this year compared with the same season last year. That also means that we are aiming to process a higher percentage of our own volumes and also maybe be able to buy a higher percentage of third-party fish during this season compared with last season. We have had a good activity also when it comes to both fishing and processing in the quarter. We finalized our second quarter quota in 2020 in January. And we caught approximately 41,000 tonnes in January. And we have also gone through a very good season in the south where we have been purchasing approximately 30,000 tonnes, more or less in line with the same volume that we caught, and for the human consumption products, a bit less. But this is compensated with -- but with higher prices in Peru. So I would say, all in all, a very good start, which is also reflected in our figures. And we have had a good start so far for the season. And we have caught approximately 75,000 tonnes and purchased approximately 30,000 tonnes of the first season in '21. Chile continued to develop positive. We had a very good quarter in 2020 first quarter, and we are beating this with marginally higher fishing numbers and better performance in this quarter. Quota is up by 15%, and we are now having around quota of 40,000 tonnes. In addition to that, we are purchasing and have purchased so far 24,000 tonne to be caught on our own vessels. So far, we have been catching approximately 45,000 tonnes and have 20,000 tonnes to go off the quota we have already purchased. Also worth to mention that fishing for sardine and anchovy, where we're buying fish from third parties, coastal fishermans has had a better start this year and this season compared with the same season last year. This graph we showed in first quarter as well. The only difference is that the sand eel quota is down by approximately 50% versus 2020, down from 500,000 tonnes to 250,000 tonnes. This is a quota normally going in for fishmeal and fish oil. And together with the reduction of the blue whiting quota, we see that, I would say, the raw material for fishmeal and fish oil will be down in North Atlantic versus same period last year, and we can also see effect of that. If you look at the fishmeal and fish oil raw material intake in the quarter, where we are processing approximately 60,000, 70,000 tonnes less in first quarter, and I think this is volume that will be difficult to recover during the year. Another effect as well is that normally, we are exchanging some blue whiting quota with cod quota with U.K., but due to -- there is no agreement with U.K. post Brexit. The actual reduction of the Norwegian blue whiting quota is 32% down instead of 20% down compared with 2020. We're also seeing that prices are increasing slowly, and also, it's more or less driven by purchase from China. Good execution of the season in first quarter, more or less in line with same quarter last year, has both to do with production and sales. When it comes to second quarter, we are expecting -- which normally is a low season quota, we are expecting production of North Sea herring. And also due to no agreement with U.K., we also believe that the salmon, mackerel will be a higher percentage than normally. There will be more vessels going up north trying to catch blue whiting -- oh sorry, mackerel. Looking at the result, first quarter from Pelagia. Revenue of NOK 2.3 billion; EBITDA, NOK 50 million, more than last year, NOK 133 million; and an EBIT of NOK 73 million. Then going into the salmon and whitefish segment. And as indicated in the start, I would say that the slaughtering level has been good. But the price achievement has been far lower than it was, I would say, both for whitefish and for salmon compared with same quarter last year. And we have also had some biological issues up in Lerøy Aurora, which has reduced our EBIT substantially in this region. But EBIT of NOK 455 million, down from NOK 816 million. The EBIT from Lerøy Havfisk and Lerøy Norway Seafood is down by NOK 85 million. I will come back to that later, but it's mainly caused by, I would say, lower price achievement for haddock and cod. And the performance of -- from the land-based activity is marginally better than it was the same period last year. Spot prices down by 24% from quarter -- first quarter this year versus first quarter last year, and that's account for NOK 16, which is substantially. Volume, 42,000 tonnes, 9,000 tonnes from Aurora, 16,000 tonnes from Midt and 70,000 tonnes from Lerøy Sjøtroll. EBIT from Lerøy Aurora per kilo is NOK 2 per kilo. Lerøy Midt just about NOK 8 per kilo. And then we have a positive development, I would say, in Lerøy Sjøtroll of approximately NOK 96 per kilo. Net interest-bearing debt is approximately NOK 3 billion in -- by the end of first quarter '21. Volume-wise, we maintain the volume. We guided on last year 192,000 tonnes from Norway and 18,000 tonnes from Norskott. All in all, 210,000 tonnes in Lerøy Norway Seafood. And again, although we have had record high fishing volumes, our margins has been reduced by falling prices versus same quarter last year. Cod prices is down by NOK 10 and haddock prices is done by NOK 4 versus same quarter last year. What we can say is that prices now seems a bit higher, and we also have a higher portion to be caught by the remaining 9 months compared with 2020. Then I will give the floor to Britt.

[Britt Kathrine Drivenes, Chief Financial Officer]

Thank you, Arne. We start as usual with summing up the intake of raw material in the quarter. And you can see that we have had a small increase in intake of raw material from the pelagic segments compared to last year. The increase are from the South American operation. We have had a small reduction in the volumes in the North Atlantic operation. But all in all, an increase of approximately 27,000 tonnes compared to same quarter last year. Arne has already taken you through the key figures. So I will start at the EBIT level. The EBIT in first quarter this year is NOK 706 million, down from NOK 834 million. The global pandemic has had a negative impact on the demand and has resulted in lower prices, both for redfish and whitefish. And this is the main factor behind the fall in earnings from farming and wild catch, whitefish from Q1 2020 to Q1 2021. At the same time, the group can report a very good underlying demand for seafood. When we look at the pelagic operation, we have seen an increase in both revenue and earnings in first quarter when compared to the same quarter last year. The main reason for that is that the Austral Group in Peru have had a very successful second fishing season, which started in November and ended in January 2021. Good access to raw material, combined with high sales volumes of finished goods, have produced a significantly higher earnings in Q1 this year compared to same period last year. When we look at the earnings from associated company, that is NOK 56 million in the quarter, and that is up from a negative income from associated of minus NOK 21 million in the same quarter last year. That can be explained by a higher harvested volume of salmon in Norskott Havbruk. And for Pelagia, they had a significantly negative impact from exchange effects disagio in first quarter in 2020. Net finance in the quarter is minus NOK 80 million. Net interest is minus NOK 74 million. And that was -- and that is the same level as it was in first quarter last year. But in first quarter last year, we had substantially effects from exchange rates and disagio, and that was -- and that contributed for minus NOK 80 million of the 140 -- NOK 155 million in first quarter in 2020. Pretax profit is NOK 682 million in the quarter, and that is excluding tax and excluding the biomass adjustment, and that is up from NOK 659 million in same quarter last year. And reason for the increase in that result is due to the increased earnings from income from associated and also substantially less exchange rate effects disagio in first quarter this year compared to same quarter last year. The net profit, and that is included biomass adjustment, is NOK 852 million, and that is up from minus NOK 4 million in the same quarter last year. And earnings per share, and that is earnings ex biomass adjustment, is NOK 1.47, up from NOK 1.15. The main -- looking at the segments. We start with Lerøy. And the main driver behind Lerøy's earnings are the harvested volume of salmon and trout. They have harvested a little bit above 42,000 tonnes in first quarter this year, up from 39,000 tonnes in same quarter last year. EBIT per kilo, ex wild catch, is NOK 7.4, and that has included a new production tax of NOK 0.40 harvested kilo, and this production tax was implemented from 1st of January this year. EBIT per kilo for the same quarter last year was NOK 14.80. The spot prices are substantially lower compared to same quarter last year and down with NOK 16 and down 24%. In addition, Lerøy Aurora had some winter wound, and that has also impacted the price achievement in the quarter. On the positive side, the contract prices have been higher than the spot prices, and the contract share for -- in first quarter this year was 25%. Looking at the release from stock cost. That has increased a little bit from fourth quarter in 2020, but are in line with first quarter in 2020. Wild catch, we have had a very good harvest in the first quarter, and it's a little bit up from same quarter last year. As I said in the start, the price achievement has been lower compared to same period. And the prices for cod and haddock are reduced by 27% for cod and 14% for haddock compared to first quarter last year. There is a good demand for the products, but on a lower -- on lower prices. The EBITDA in first quarter for Lerøy is NOK 759 million, and that is down from almost NOK 1.1 billion in first quarter last year. And the EBIT is NOK 455 million and down from NOK 860 million. The net interest-bearing debt by the end of first quarter 2021 is almost NOK 3.1 billion, down -- a little bit up from NOK 3 billion last year. Austral Group have had a very good quarter, and they have caught 41,000 tonnes of the remaining quota for second season 2020. In addition, they have been -- also been catching mackerel. The season in the south started also up in first quarter, and the company has bought raw material from the coastal fleet. And this is going in for production of fishmeal and fish oil in factory in Ilo. The combination of a good raw material intake and high sales volume of finished products, again, given a substantially higher turnover and earnings in first quarter this year compared with same quarter last year. And revenue are NOK 700 million, up from NOK 264 million. And EBITDA is NOK 225 million, up from NOK 23 million. And there is a EBIT of NOK 182 million, and the EBIT in first quarter last year was negative with minus NOK 29 million. And net interest-bearing debt by the end of the quarter is NOK 543 million, down from almost NOK 1.2 billion in same period last year. Also, Foodcorp has had a very good start of the year, and the raw material intake have been 53,000, up from 34,000 tonnes in the same period last year. Sales volume of finished goods are almost at the same level as last year. But the price achievement for frozen products are up by almost 25% compared with the same period in 2020. The revenue in the quarter was NOK 157 million, up from NOK 138 million. And the EBITDA was NOK 66 million, up from NOK 40 million. And the EBIT is NOK 58 million, up from NOK 33 million. The company has a net cash position of NOK 145 million, and that is up from a net cash position of NOK 65 million in same quarter last year. Looking at the farming part of Br. Birkeland. The harvest volumes are up 27%. They have harvested over 1,800 tonnes in first quarter. The EBIT per kilo is minus NOK 1. In same quarter last year, the EBIT per kilo was NOK 12.3. The company is selling all their fish in the spot market, and the spot prices are substantially down compared to same quarter last year, down by 24%, NOK 16. The company has harvested their autumn '19 generation in first quarter, and that was a generation with a high release from stock cost. The company has a net interest-bearing debt by the end of the year of NOK 248 million. And by the end of last -- the first quarter, it was NOK 110 million. And of course, this is -- this reflects that they had a very tough year in 2020. The pelagic vessels in Br. Birkeland has finalized the rewilding quota in first quarter. Last year, this quota was caught partially in first quarter and partially in second quarter. And they have also had some capelin catch in first quarter this year. The EBITDA in the first quarter was NOK 28 million, up from NOK 10 million same quarter last year, and the EBIT was NOK 18 million. Last year, the EBIT in the first quarter was 0. The company has a net cash position of NOK 253 million, and that is up from a net cash position of NOK 184 million by the end of March 2020. The group has total assets of a little bit less than NOK 41 billion, and that is approximately the same as last year. The equity is NOK 23.8 billion, and that gives equity share of 58%. Net interest-bearing debt by the end of the quarter was a little bit less than NOK 4 billion, and that is down from NOK 4.6 billion by the -- at the same time last year. The group and the parent company's financial position is very strong. And the group has and shall continue to have a significantly financial flexibility to allow it to finance further organic growth and also to carry out strategic acquisition and sustain the company's dividend policy. Looking at the cash flow. The cash from operating activity was NOK 1.1 billion in first quarter this year, and we have released some working capital and also paid NOK 100 million less in taxes in first quarter this year compared to same quarter last year. When we look at the cash from investing activity, that is minus NOK 258 million. Last year, that was minus NOK 629 million. But last year, we took over the new fishing trawler, Kongsfjord, in first quarter, and that impacted the cash from investing activities. Cash from financing activities is minus NOK 566 million, and we have paid down quite a lot on the short-term credit lines in first quarter this year. Last year, it was a positive cash from financing of NOK 188 million, and we draw on the short-term credit facilities. We started the period with a cash position of almost NOK 4.5 billion, and we ended the quarter with a cash position of almost NOK 4.8 billion. The Board has recommended to the Annual General Meeting, that will be held on May 27, a dividend of NOK 3.50 per share. If this is accepted by the shareholder meeting, the payment will be done on June 9.

[Arne Mogster, CEO & President]

Then I will end this presentation by giving our view on the different markets we are operating in. Starting off with the fishmeal market. What I can say here, and if you look at the table on the left-hand side, you can see that the increase of the volume from the largest fishmeal producers in the world is mainly driven by the volume from, I would say, and second season caught in January in Peru And we also had a marginally better fishery in the south compared with last year. And you see one is from Peru is by far higher than the same period last year. This is also compensated by a bit reduction, particularly from the blue whiting and sand eel quota in Norway and North Atlantic and the rest of the North Atlantic. Interesting part is that although the quota has been on a normal level, we have seen an increase in prices from the quota until today. And prices now for Peru is just below $1,700 per tonne for high-quality meal and $200 discount on low-quality meat -- meal. The main driver behind the demand is China. They have been building up their stock from last season and also been the main market requiring fishmeal also from this season. They have a stock now which is 55% higher than the same period last year, and we also see that the offtakes and the consumption is higher now than we have seen last year. I would say also, other protein has been increasing during the period, and the soya bean ratio is still favorable for fishmeal consumption. Fish oil, same development in terms of increase in volume, mainly driven by volumes from Peru. And also, I would say, the yield from last season was also better than we have seen historically. What you can see here is that prices has been more or less stable since the beginning of the year for feed grade, just below or just ahead of $1,800 and with a premium of approximately $200 to $300 for fish oil for human grade omega-3. The Atlantic salmon volume. Global growth in 2021 is estimated to be around 2% for 2022, 6% in 2021. We have seen -- we will see a higher growth from Europe, but this is also offset by a lower growth from Americas. And 6% in 2022 is also on an acceptable level in terms of supply. If you look at the first quarter prices and also into second quarter prices, you see that it's still a lot of volatility in prices. And I would say that the predictability is lower than this post COVID. You see prices is approximately NOK 16 down in the first quarter this year versus first quarter last year, but it also pleasant to see that prices is now what we are seeing in second quarter is coming up. So I would say we are seeing now that the HoReCa segment is giving their entrance in the market coming back. Main, I would say, consumption is driven from EU and from U.S. and other markets. And I would say that retail has been, I would say, the end market for the salmon products now in the last 9 months, but a very strong market in particular in EU. To sum up, I would say, the end of the COVID-19 restriction are unpredictable. Still is challenging to do operation, in particular, in South America. And still, we don't see the full effect of, I would say, the market prices and particularly on salmon and whitefish products. But all in all, we are seeing improvements, and we are also looking quite positive for the remaining of the year. If you go to the salmon market, you see that we are estimating our production of 205,000 to 210,000 tonnes, a bit lower slaughtering volume expected in second quarter versus second quarter last year. Still, I would say that we have a high quota left for the whitefish segments now in the last 9 months versus the same 9 months in 2020. And we also see that prices are slowly recovering from first quarter. South America, in the middle of the production. So far, fishing and production has been on an acceptable level. Again, it's the third season in Peru, which is executed in a good way and are expecting a good development also throughout the year in Peru. Chile is also delivering a good quarter as they did same quarter last year. And as normal, Chile is doing the year in first half of the year, and second half is mainly all the quota has been caught. It's going to be interesting season in the North Atlantic. Again, we don't have any agreements with U.K. and the fishing patterns and particularly for North Sea herring, and mackerel will be changed compared with last year. And it's going to be interesting to see how that will be developing now during, in particular, this last 3 months. That's all. Thank you for following us.