Austevoll Seafood ASA

OSE:AUSS

Earnings Call Transcript 2022-Q1

[Arne Møgster, executive]

It's a pleasure for me to invite you to Austevoll Seafood's first quarter presentation. I will start by giving you the highlights of the quarter. Thereafter, I would take you through segment by segment and give you also the [indiscernible] in how we are doing so far this year. Britt will take you through more in detail the numbers, and then we will end the presentation by giving our view on the different markets we are operating within.

Starting off, I would say we are delivering a good quarter, and it's mainly driven by high salmon prices and also very good prices on whitefish segment, which is the difference between this year result compared with last year result.

Looking to the numbers, you can see, our revenue is NOK 6.5 billion. Our EBITDA is up NOK 350 million, delivering an EBITDA for the quarter of NOK 1.450 billion, EBIT up by NOK 300 million, just north of NOK 1 billion and a pretax profit of NOK 1.050 billion.

Our total asset has increased, and it's mainly due to a higher working capital during the period, and that's mostly related to higher cost on biomasses, but also the account receivable has increased due to higher prices on our finished products.

Net interest-bearing debt, NOK 4.2 billion, and an equity ratio of 58%. If you take into account Pelagia's 50% share of the result of EBITDA, we are delivering this quarter an EBITDA of NOK 1.5 billion. And you can see that the increase is coming mainly from the salmon and whitefish segments. And we are delivering a bit weaker on the pelagic segments.

In short, this is due to lower activity in Peru. Otherwise, we are delivering better in our fishing activity and salmon activity in Br. Birkeland also better in Pelagia and also better in Foodcorp in this quarter. I will come back to that later on.

And the Board has recommended to the Annual General Meeting a dividend of NOK 4.50 per share. This year, we are aiming to catch approximately 450,000 tonnes on our own quota. We are aiming to handle just sort of 1.9 billion tonnes on our pelagic factories, aiming to catch on our whitefish vessels approximately 68,000 tonnes of whitefish and process approximately additional 30,000 tonnes on our plants. And altogether, we are aiming to harvest approximately 216,000 tonnes of salmon.

Then starting off, going through segment by segment, and we start in Peru. The season was finally announced and was opened the 4th of May on an exploratory fishery. Quota and biomass was -- I would say quota was a bit higher than the market expectation. Started up amounting to 2.8 million tonnes, which is up 300,000 tonnes compared with the same period last year. And again, it's a proof of very healthy biomass.

Saying that, the season started up approximately 3 weeks later on the same period last year, meaning we are in a hurry to catch our quota. And again, the quota was approximately for, our vessels, approximately 20,000 tonnes higher.

The season started up also with our exploratory fishery. And you can see on the map there that it's a zone on the north side, where we are not able to catch. So in the start of the season, we have only caught fish south of the red zone, close to our factory in Chancay and in Pisco.

We have had a good start of the season, received and caught approximately 30,000 tonnes in the first week, which is a good start, but still it's a bit premature to say how the fishery will develop. We will have access to the red zones at least close to the 40 miles in red zone in approximately 19th of May.

Taking a look into this quarter, I would say it's been a low activity quarter. We finished our second season quota before New Year in '21, and we didn't have more fish to catch in January, which we had same period in first quarter '21. So we had approximately 45,000 tonnes less fishery this quarter compared with the same quarter last year. And that's the main reason why our result is a bit weaker.

And if you add also a lower sale in the quarter, which is transferred to second quarter, I would say that this is the explanation why we are delivering lower in Peru this season compared with the same season last year. And South has been marginally lower catches, but is also a good start, and that's the same for catches for direct human consumption.

Looking to Chile. We had a very good quarter in first quarter '21, and we have even surpassed that achievement in this quarter. We have been landing 35,000 tonnes of horse mackerel and increased our yield into frozen fish from 63% to 78%, which also you can see in our result, which Britt will take you through later on.

I would say the biomass is healthy. Our quota this year is 46,000 tonnes, up from 40,000 tonnes last year. And so far, we have been able to buy just sort of 30,000 tonnes to be caught and to be processed on our -- with our fishing vessels in our plant.

We are seeing that the logistic challenges continues, and we need to think more in advance to secure boxes, to secure raw material for our production. We are seeing an inflation in prices for fuel, for electricity. And also, it is a challenge to get access to containers. So we are working quite close to our customers in order to secure our reefer vessels, and has done that quite successfully during the first quarter and also in the second quarter. Also started off with anchovy season in Peru. So far this quarter, we have caught 16,000 tonnes with good yields both on fishmeal and fish oil.

On the North Atlantic quota, I think the main driver behind the increase is the Icelandic capelin, which, more or less, are finished this season. The quota was extremely much higher this year compared with last year, and we are seeing it later on that has been produced in particular, on Iceland, a higher stake of fishmeal and fish oil in Iceland compared with other regions.

Still not decided if we have any agreement with U.K. in terms of the fishing zones and it's unclear how the final macro quota for the Norwegian player is going to be. And also, we are expecting for an increase in the standard quota today, which is our foundation for further catches to our fishmeal plants.

I would say Pelagia has performed quite well in the fishmeal and oil segment for the quarter. Volume is more or less in line with how it was last year. What we have seen this season is that more blue whiting, which traditionally is fish -- for fishmeal and fish oil has gone for direct human consumption production on Ireland.

Also, the Norwegian capelin quota was not caught, so we are expecting a bit lower volume in fishmeal this year compared with our expectation. But you can see it's more or less on the same level as it was in '21. And we are seeing also a positive price development on fishmeal and fish oil going forward.

Human consumption segments, also in terms of volume, more or less stable. We are entering now to a low quota season, mainly catching North Sea herring. And I would say that it's quite control of our sales, and we have limited unsold stock.

Pelagia is delivering quite well. You can see that revenue is just sort of last year's revenue in the quarter, NOK 2.2 billion, but the EBITDA is better, NOK 184 million and EBIT NOK 99 million versus NOK 73 million. So a good performance from Epax in the quarter.

Then going to -- looking at the salmon and whitefish segments. And again, for a detailed explanation of the quarter and also the view on the market, I suggest that you go into Lerøy's webcast for a more detailed presentation done by Henning and Sjur today.

But summing up, I would say that EBIT from this quarter is more or less double from last quarter, and it's, as I said, mainly driven by the increase of salmon prices and also increase of the whitefish prices, which are doing a better performance both from farming and whitefish segments.

When it comes to the sales and distribution segments, it's been a challenging quarter for them. And I would say that most of the EBIT this quarter is from the salmon farming and also from the whitefish segment. And you can see whitefish prices has been increasing. The volume is more or less equal to last year quarter. So you can see that we are delivering approximately NOK 50 million better this quarter compared with same quarter last year on the whitefish segment. I will come back to that.

In terms of volume, lower volume this quarter versus last quarter, 10,000 tonnes down from last quarter, and it's divided by 5,000 tonnes in Lerøy Aurora, 12,000 tonnes in Lerøy Midt and approximately 15,000 tonnes in Lerøy Sjøtroll. Spot prices is up 53% year-on-year, but we also have a high portion of contracts here during this quarter, 43%, which, of course, affect our price achievement.

If you look at EBIT per kilo, it's all inclusive. It's approximately NOK 20 per kilo, where Lerøy Aurora is having NOK 19, Lerøy Midt is NOK 24 and Lerøy Sjøtroll approximately NOK 16 per kilo.

Volume. We retained our volume guidance from -- for '22, 185,000 tonnes in Norway and our share of Scotland, 23,000 tonnes, and in total, 208,000 tonnes is our expected harvest volume during this year.

Now looking at the whitefish segments of the wildcatch. You can see that the prices have been strong. Cod prices is up approximately 46% versus same quarter last year. Haddock prices is up approximately 24% and saithe prices is up 36% by last year. And you can see that the EBIT is affected by that and is offset a bit by higher cost, both on salaries on the fishing vessels and also on the fuel prices.

Saying that, the high prices is also challenging for the land-based activity, and it's very difficult for the land-based activity to transfer the high raw material prices out in the end market. But again, a very good start, I would say, for the whitefish segment in the group.

And I give the words to Britt.

[Britt Drivenes, executive]

Thank you, Arne. As usual, we start with this table, summing up actually the operation for the first quarter.

And as Arne mentioned, some lower volume in Peru due to the fact that they had caught all their quota for second season in 2021 before the end of the year. Last order season in 2020, they caught a little bit more than 40,000 tonnes in January 2021.

Looking at key figures for our first quarter. As Arne has mentioned, there has been a very strong price development on seafood, and that is the main factor behind the significantly higher earnings in first quarter 2022 compared with same period in 2021. The revenue was up by 10% up to NOK 6.6 billion, up from NOK 5.9 billion. And the EBITDA is over NOK 1.4 billion, up from NOK 1.1 billion in first quarter 2021. The EBIT is a little bit over NOK 1 billion, up from NOK 706 million. Looking at the income from associated company, that is more or less on the same level as first quarter last year.

The net finance is heavily impacted by exchange [indiscernible] in first quarter this year. There is a positive [indiscernible] of NOK 53 million. Last year that was negative, it was [indiscernible] of minus NOK 6 million.

Looking at the net interest cost, that was minus NOK 70 million in first quarter this year, down from minus NOK 74 million in same quarter in 2021. Pretax profit is above NOK 1 billion, up by 53% from NOK 682 million, and that gives an earnings per share of NOK 1.85, up from NOK 1.47 in first quarter last year.

As mentioned, we have seen a very strong price development on seafood, and that is both salmon, trout and also whitefish. And this is the reason behind almost doubling of the EBIT in Lerøy Seafood Group also in first quarter this year compared with last year.

Spot prices were up 53%, and that is almost NOK 28, up in first quarter this year compared with same quarter last year. However, Lerøy has a contract share of 43%, and price realization on contracts are well below the realized prices for spot. So in total, the price achievement for Lerøy is below the spot prices in this quarter.

Release from stock cost is up. It's up from fourth quarter last year, but it's also up from first quarter 2021. And we have seen cost inflation on almost all input factors, and especially on feed.

The harvested volume is 32,000 tonnes, and that is down from 42,000 tonnes same quarter last year, and the EBIT per kilo is NOK 20, substantially up from the NOK 7.40 in same quarter in 2021.

Looking at the Wildcatch segment. They have -- the vessels have prioritized catching of cod and haddock, and also we have seen increased prices for those species. Cod up with 46%, haddock with 24% and saithe up with 37%. Cost inflation also in this segment, especially on the fuel cost. The higher price achievement for the raw material is, of course, positive for the vessel, but it is a challenge for the processing activity onshore.

As Arne mentioned, we have had a seasonal low activity in Peru. They finalized their second season 2021 before the end of the year compared to the second season in 2020, which they had some quota left, which was caught in January 2021. So you can see the raw material intake this quarter is 36,500 tonnes, down from almost 90,000 tonnes in same quarter in 2021.

And they have sold some lower volumes of fishmeal and fish oil. The price achievements are up. It's up 12% for the fishmeal and up 57% for the fish oil. But they have some higher inventory by the end of the quarter compared to the end of first quarter 2021.

What I can also mention is, of course, they have used this quarter to do maintenance on vessels and plants to be ready to the first fishing season now in 2022, and that season started 4th of May.

Foodcorp, they have had a good start of the year, and they have had a good catch rate. They have increased their frozen yield. And you can see that we have approximately 5,000 tonnes higher sales volume in first quarter this year compared with same quarter last year. And also the good catch rate and higher frozen production has given higher inventory by the end of the quarter compared to same quarter last year.

The revenue of NOK 189 million, EBITDA of NOK 84 million and EBIT of NOK 41 million. Br. Birkeland farming. The farming operation, they have had some challenging quarters up to now. So it's really positive to see good figures this quarter.

And they sell all the salmon in the spot market. So of course, the increased prices on salmon has been favorable for Br. Birkeland farming. They have harvested 1,548 tonnes, down from 1,831 tonnes. And the EBIT per kilo is NOK 22.6 this quarter compared with a negative EBIT of NOK 1 in same quarter last year.

Of course, costs released from stock is still at a high level and cost inflation also hurts Br. Birkeland farming and especially for feed. Revenue in the quarter, NOK 121 million, EBITDA of NOK 52 million and EBIT of NOK 35 million.

Br. Birkeland owns the fleet operation. They have now 4 vessels in operation, and they bought a new vessel for fishing snow crab last year. And that vessel started operation in the mid of February this year. And of course, the earnings in the quarter has been impacted by start-up cost related to this vessel.

There have also been some challenging ice condition for the snow crab vessel. So the catch rate has been some -- lower than compared to same quarter last year. And the volume they have caught in first quarter has not been sold in the first quarter. It will be mainly sold during second quarter this year.

The vessel -- the pelagic vessel has been catching capelin, blue whiting and some herring. And the earnings for the pelagic vessel has been at the same level in first quarter this year compared as the same quarter last year. Revenue of NOK 68 million, EBITDA of NOK 11 million and a negative EBIT of NOK 1 million.

Looking at the group statement of financial position, we have total assets of NOK 45 billion. There is a booked equity of NOK 26.3 billion, which gives an equity ratio of 58%. The net interest-bearing debt is a little bit above NOK 4.2 billion. And if you include the debt related to right-of-use assets, the amount is NOK 6.2 billion.

What we see is that we tie up some more working capital compared with previous periods, and that is related to biological assets at sea. What -- we have mentioned already that there is a higher cost, especially related to feed, but also other factors. And also there are higher receivables, and that is also impacted by the higher prices on seafood. We will look a little bit closer into that when we come to the cash flow statement.

So due to this, the cash from operations in first quarter this year is NOK 300 million, and as you can see, impacted by the -- more tied up working capital. The cash from investing activity is minus NOK 400 million, and the cash from financing activities is also just above NOK 400 million. So we end the quarter with a cash position of NOK 4.8 billion.

The Board has recommended to the annual general meeting in 2022 that there is the payout of NOK 4.5 per share. And if this is approved by the general meeting, the payment will be done by June 9. Thank you.

[Arne Møgster, executive]

Now I will end this presentation by giving a view on the different markets we are operating within. Starting up on the supply side, on the fishmeal. And on the table on the left-hand side, you can see that the production is mainly down in all the main producing areas. It's still early in the season.

And I would say that you would see also different development going forward since the start is delayed, for example, in Peru. Some of this volume will be recovered. But you can see, so far this year, is a reduction of 14.5%.

Quota, again, in Peru higher than last year, a bit higher than the market expectation. And I think that we were going to a period of a couple of weeks where we are seeing -- and looking at the development on the fisheries in terms of seeing how the prices will develop further in Peru.

Then looking to China, which is the main market. And it's fair to say that stock level is more or less on the same level as last year. I would also say that the consumption is more or less on the same level as last year. What we are seeing is that freight from Peru to China is increasing. We are seeing that the exchange rate is weakening towards the dollars.

So there are some negative effect in terms of -- which we have not seen that much earlier. However, if you look at the soybean ratio, we are still seeing levels that makes it favorable to use fishmeal in the diet versus soya meal.

Fish oil situation is a bit changed. I would that prices has been extremely good the last year. And I think also prices will continue on the high side going forward. What we have seen from the first week of fishing in Peru now is that the fisheries are quite low. And if this continue, you would see good prices also, in particular, from Peru on fish oil, both for feed and also for the omega-3 grade going forward.

Salmon market, I would say that after a growth of almost 7% last year, we are expecting negative growth in '22, on 1.2%. And you're seeing that it's mainly from all regions producing. It's down, and that's again one of the reason also why we have expectation for prices going forward.

I would say prices we have seen in the first quarter and also into second quarter has been extremely high. I think we have never seen prices like this before. And I would say, although if you look at the last part of last year, where volumes were high, I would say that we still achieved quite good prices and volume coming, don't know in first quarter and second quarter prices was expected to be good, but not on this level.

And if you look at the demand side, I would say that when the supply is going down, we are seeing here on the demand side in the first quarter that it's the U.S. market, which is the strongest, which are increasing during this period.

So summing up, I would say that we have seen extreme price development, which is very positive for both farming and our catching activity, but of course, equal challenging for our downstream activity. We are seeing that it's our current inflation in, I would say, all our costs, but it's mainly noticed on fuel prices and also the feed prices in for salmon. However, we are still working with underlying improvement in our productivity and hope to reduce the effect of the increased cost by simply doing it better during the year.

Volumes, 208,000 tonnes, up from 203,000 tonnes in '21. And the contract share will still be on the high side also for second quarter where, of course, the contract prices is lower than the spot prices we are seeing in the market.

The quota for cod is down by 18%. Saithe is -- haddock is down by 20% and has impacted the prices as well as the market has been recovered after the COVID pandemic. And the increase we have seen on prices has really affected EBIT on our fishing vessel activity on a positive way and equally has been more challenging to buy raw material and produce it in a land-based plant.

What I can say on the pelagic side is that we are very excited of the new season. We have had a good start in Peru. It's going to be a race to catch our quota. And -- but again, both our plants and our vessels are really in a good shape to meet this challenge.

The good thing is that the biomass situation is very good. That's also the same for Chile, which is -- has an increase on biomass for -- and quotas for the -- for 50% for the third year in a row and expecting also to have another good year and also a good quarter both in Peru and Chile for second quarter and going forward also.

Pelagic activity as well, I would say that raw material intake is more or less on the same level as we saw in '21. Pelagia is an extremely interesting company now with human consumption activity, fishmeal activity, the health segment, and after buying Hordafor, one of the largest players producing protein concentrate and oil based on salmon trimmings.

And we are expecting to have synergies between the different departments in Pelagia and are constantly working to add value to the raw material we have available. And this, we're also going to continue going forward in 2022.

So that was it. Thank you for following.