Mowi ASA
OSE:MOWI
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Mowi ASA
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Together with me to present today, I have our CFO Ivan Vindheim, and we will just run straight into the numbers. Operational EBIT for the first quarter was -- ended at EUR 196 million. It's one of the better first quarters for our company. We saw high prices and high demand in most markets. Cost per kilo harvested decreased again compared to the fourth quarter 2018 on the back of high volumes and actually the highest volume in a first quarter ever for our company. I'm also happy to announce that our Chilean operation did very well, all-time high earnings in Chile in this quarter on the back of high volumes and good operations. Also, our financial department has done a fantastic job this quarter, secured a Schuldschein loan unsecured at 7 years at margin EURIBOR plus 170 points, which I think is excellent financing as part of our financing packaging -- package for the company. Quarterly dividend, the board has decided it to be NOK 2.6 per share, so unchanged from previous quarters.If we then look at key financials. Turnover is up 14% to EUR 980 million compared to Q1 2018. Operation EBIT is up 24% compared to Q1 '18. Harvest volume, 104,000 tonne, up 28% compared to Q1 2018. So all in all, an excellent quarter if you sum it up for Mowi.Salmon prices in the quarter started out maybe on the lower side and increased during the quarter, ended at high prices towards the end of the quarter. Basically, good prices, I would say, in all markets.If we then look at price achievement for our operation. Norway, unchanged. We actually gained on contracts, but we had to harvest out a few sites with small fish that took down the price of the fish, same with the [ spare ] share slightly under our expectation but still okay at 91%. Scottish salmon, very good price achievement in the quarter at 106%, slightly down from last year on the back of lower contract share, also much higher harvest volume, which I will get back to, in Scotland this quarter. Canada, 99%, slightly up from last year on the back of larger fish, superior share at 88%, normal for this season in this part of the world. And Chile 101%, up from 94%, 21% on contact share. So all in all, good price achievement for the major business regions in Mowi.If we then bridge this from the operational EBIT in 2018, which ended at EUR 158 million. Feed improved slightly. Farming, on the back of better prices, was the business unit that improved the most in these results. Markets up EUR 5 million. Consumer Products, down EUR 16.1 million on the back of fierce competition but also that Easter came in, in the second quarter in 2019 compared to first quarter in 2018. And at the end, we ended up at EUR 196 million.If we then go into the different business units. The Norwegian operation, all in all, a good result for this unit, increased harvest volume and good performance in Region North and improved biology and result in Region South, which we are very happy for. We see cost is slightly higher than Q1 2018 due to higher feed cost but also due to we had to harvest out a few sites in Region Mid with PD on low average weight. The contract portfolio is stable, around 21,000 tonne, both for Q2 and Q3 going forward at good prices.If we look at the different regions in Norway. We see the improvement in Region South coming from EUR 1.9 per kilo to EUR 2.2. Region Mid is down on the back of slightly lower volumes but also that we have harvested out 2 -- actually, 3 PD sites in Region Mid forced out from the food authorities at lower weights than ID-ed. Region North, still an excellent quarter at EUR 2.47. And all in all, we ended at EUR 2.07 per kilo this quarter, slightly down from last year but still a very good quarter for the Norwegian operation.Scotland doubled and more so their operational EBIT on the back of almost doubling their harvest volumes, so a very good result in Scotland; good growth; increased volumes; reduced cost in the operation; positive contribution from their contracts; and improved biology. So all in all, Scotland is -- has really improved a lot in the first quarter of 2019, so coming from EUR 14 million and ending -- no, EUR 16 million ending up at EUR 36 million, very good.Our Canadian operation improved results have -- on the back of high volumes. In this region, we combined both East Coast and West Coast in Canada. So the higher volume comes from the Northern Harvest, which was not part of Mowi in Q1 2018. Stable costs year-over-year improved results because of good price achievement in this quarter for our operation in Canada. And then we have deployed the first well boat from our -- from Dess Aqua in Aqua Tromøy that will -- that's really changing the game in Canada on the West Coast. It's the first really modern well boat in that part of the world. That will help a lot. It has a big recirculation -- or a reverse osmosis freshwater plant onboard. So it helps with any kind of treatments.Chile, also a good quarter, operational EBIT from EUR 16 million to EUR 29.2 million, higher volumes coming from 12,000 tonne almost up to 20,000 tonne and increased operational EBIT. This is the best result for Chile ever in a first quarter for Mowi. Improved biology and also we see reduced antibiotics in our operations in Chile, which is one of our main KPIs in Chile, to reduce antibiotics also going forward.If we then look at 2 smaller units. Ireland, exceptional good result at EUR 4.3 per kilo, stable from last year but still a good result. Faroe Islands also improved slightly. We harvested only 1,200 tonne in Faroe Islands this quarter, and we harvested that in January, so not the best price achievement maybe but still improved result over last year.If we then go into Consumer Products. Operating revenues grew from EUR 533 million to EUR 550 million. But operational EBIT was reduced from EUR 21 million or close to EUR 22 million to EUR 5.8 million. This is on the back of very hard competition in this operation, especially in the chilled segment or the smoked salmon segment in Europe. It's tough competition. And even though Easter came in, in Q2 -- Q1 2018 and in Q2 2019, we'll see this continuing on also going forward. So especially in the chilled segment, this will impact earnings also going forward and into Q2.But this segment is also working a lot on branding, and the first brand launch was in Poland. We launched in several of the biggest European retailers with actually very good success. We launched the first product in the Pure, MOWI Pure product range and fresh, cold smoked and hot smoked products was the first product we did. This is salmon coming from a special farm with special feed and specially selected for this segment and also smoked in a special way, so 20% more omega 3 in this fish, also guarantee on color and a special color in the feed, so an excellent fish. And if we look a little bit more into that. We have used a new traceability tool. So if you have your cell phone, you can try it out. You just take up your cell phone and you hit that QR code, and you can find out where the fish was born, what you actually are going to do for dinner today. The recipe is all in there, so check it. I would recommend pasta with smoked salmon, excellent choice. But you also will know where the fish were born, how it -- where it was raised, what farm it was raised on, what kind of feed it was given, harvest date and so on and so on. So lot of information for the consumers. Nobody else is doing this on salmon, and nobody else has the capability to do both breed, feed farming and the selection and the process. So I hope this can be a tool that we also can use and find these products also in Norwegian shops in the future.We also launched a new web page in the quarter, mowisalmon.com, linked to the brand. This is more a consumer web page, so you can go in and again check. And we are on all the social platforms there is. So we started in Poland. We're going to continue to launch this in selected markets in the world, we're not saying where, during 2019. And even though we know this is a long-term project, it's not a quarter-to-quarter project, this is something that's going to change the industry over time. We really believe in this. It's going to give us an edge when it comes to consumer communication. And also, we are focusing on quality of the end product, which we are in a special situation to do.And part of that is due to our Feed operation. Feed, low season in Q1, slight improvement from last year on higher volumes. In terms of our new plant, the picture in the bottom, we started production last week, our first trial production and we'll commence production in Q2 for the farms. So even though it's taken a little bit longer time than we like, now it's finally there and it's a great plant. It's a plant with extreme flexibility in terms of what kind of product we can produce. And the one that you see in the top picture there is more a machine that is producing more efficient than any plant in the world. So both built on LNG as part of the energy source, in Norway also windmill and grid and in Scotland grid as the extra energy to the site.In the Feed segment, we have caused it strong new competition. That was part of the reason for doing this. But also we are in a position now where we can really design feed for special products. And consumer, one of the things they're wondering most about is what's actually in the fish feed. There, we can give them pretty good answers.With that, I think Ivan, you are ready for the numbers and the markets.
Yes. Thank you, Alf-Helge, and good morning, everyone. As usual -- sorry. As usual, we start with a P&L, revenues of close to EUR 980 million in the quarter, top line growth of 14% on 28% more harvest volumes, 104,000 tonnes. And as Alf-Helge said initially here, record-high seasonal volumes. Operation EBIT, EUR 196 million. Further down in the P&L, positive biomass adjustment of EUR 41 million on higher prices. Associated companies is EUR 7.1 million. This is including biomass adjustment and also calculate taxes. The underlying profit, which is more or less related to Nova Sea, was EUR 2.2 per kilogram on 6,100 tonnes. Very solid margins although somewhat lower than what we achieved in Region North.Net financial items this time around impacted by the introduction or introducing of the IFRS 16 standard and the currency effects. If you take out those 2 items, interest expenses was at a normal level at EUR 11 million. Underlying earnings per share in the quarter, EUR 0.28; cash flow per share, EUR 0.31; and dividend, as Alf-Helge has already said, NOK 2.6. This was for the previous quarter, but it's similar for this quarter.Turn over to the financial position or the balance sheet. In total, it amounts to EUR 5.6 billion, substantially up from the same period last year, EUR 4.4 billion. EUR 357 million is related to the introduction of the IFRS 16 standard and the capitalizing of the operation leases -- leases is what we now call right-of-use assets. We also have increased our biomass in sea, 31,500 tonnes, plus a higher IFRS adjustment, in total approximately NOK 300 -- sorry, EUR 300 million -- billion. Net CapEx effect and effect from purchase of new license in Norway last year, EUR 175 million and the acquisition of Northern Harvest of EUR 215 million. All in all, close to EUR 1.1 billion which is the increase from the first quarter last year. Equity ratio, at a healthy 54%.Then over to the cash flow and cash flow statements, a very good cash flow in the quarter. As you all are aware of, the first quarter is the quarter we release working capital. So with a very healthy earning, together with release of working capital, we saw EUR 237 million come from our operations. Net CapEx of EUR 65 million is in line with the CapEx guidance and the budget we have internally. Other investments is a net amount. EUR 15 million is related to last part of the capital infusion in our associated company, DESS Aquaculture. In addition, we also achieved EUR 13 million in extraordinary dividend from Nova Sea in the quarter. Interest expense, as already mentioned, EUR 11 million. Dividend was the NOK 2.6 per share distributed in the last quarter, so from EUR 1.037 billion to EUR 1.050 billion. So all in all, net interest-bearing debt was stable during the quarter.Cash flow guidance, unchanged since last time. So the plan was not to spend time on it. So we just flip to next page, overview financing. We are very happy to announce that we have entered into agreement of our Schuldschein loan, EUR 120 million, 7 years tenor, a senior unsecured loan at very attractive 1.7% margin on EURIBOR. So a very attractive financing for us with a long tenor. The rest of the financing is unchanged since last time we presented our figures. So much about the financial figures. Turn over to the supply development. The total supply, global supply was close to 5% in the quarter, in line with the guidance we had for the quarter. The same is the case for all the big regions. So no surprises with regard to supply development.Reference price, somewhat up in Europe, somewhat up for the Chilean salmon but down for the Canadian salmon in the North American market. On that note, our price achievement for our Canadian salmon is actually up year-over-year. So our internal numbers, they are not similar when it comes to the North American markets. Blended price year-over-year for Mowi was up 3%. And combined with the supply growth of 5%, that indicates a very healthy demand development during the quarter.Then over to the consumption. More or less, all markets grew in line with the supply increase. Good development in EU and in Europe as a whole. Russia is down in the first quarter. But as late as in the fourth quarter, it was up by 5%. So it's a little bit early to say something certain about Russia. We know that the Brazilian market developed very well in the first quarter. And as you know, Chile is the main provider of salmon to Russia these days on the trading barriers we have for European salmon. So there is reason to believe that some of the Chileans decided to export to Brazil on high prices, but let's monitor this going forward. Americas, 4.9% in total, very good. China, this time around 17%, very healthy. South Korea is down. But bear in mind, South Korea was substantially up in the fourth quarter. So according to our intelligence sources, this is inventory movements driving down the consumption for the first quarter. I guess you will have the answer during the second quarter. So again, all in all, a very healthy development in demand, and we see good response in all main markets for the salmon.Turn over to industry supply outlook for this year. 2019 is more or less unchanged in the range of 4% to 7%. This is also in line with what we saw in '18, '17 and '16. So it's quite stable, although there are some deviations within the regions. So not much more to say about supply for this year really. Turn over to our internal volumes. They are also unchanged at 430,000 tonnes for this year. It's up by 15% compared to '18. In the fourth -- the first quarter, as you saw, we were even higher at record-high 28% growth. So 40% of the growth of this year is already taken out, and I think we are in good shape to also deliver on the remaining part of the growth. We have done just a minor internal adjustment in the quarter. Scotland up by 2,000 tonnes and Ireland down by 2,000 tonnes. But the total is still 430,000 tonnes.Then Alf-Helge, it's outlook, and the floor is all yours again. Thank you.
Okay. Thank you, Ivan. Just quickly on to the outlook. We believe strongly that fundamentals in the sector is strong. Fish food forward price 12 months at the strong EUR 6.1 per kilo. At the same time, we see, as already mentioned by Ivan, an increase in supply this quarter at close to 5% and an increase in our prices at 3%, which both indicate strong demand. Organic growth, we have potentials in all parts of our value change -- chain. The new feed plant is coming on. That's an important part for us now going forward. On the Farming side, we have a potential to grow going forward. East Coast Canada is one part of our operation that we are growing as we speak, but basically in all regions. And on the processing side, we gradually increase our operation. We just moved the plant in Miami now to -- from one location to a 10,000 square meter plant in Miami.In terms of Consumer Products and Feed, there is tough competition in these segments and -- which I think is healthy and good and develops new products in terms of Consumer Products and give us an edge on the Feed side in terms of actually making feed that delivers quality fish. Mowi launched -- successfully launched in Poland, started first with restaurants and then we went into 4 major retail chains in Poland, and we'll continue this in several markets in 2019. And the quarterly dividend is still NOK 2.6 per share. So that sums it up.And with that, I would like to open up for questions. So please state your name and employer, and Kim has the microphone. But maybe Kim, will you start with a question from the web?
Yes. So we have the first question from the web from Tore Tønseth, Sparebank in 1 Markets (sic) [ SpareBank 1 Markets ]. He's asking harvest weights seems to be under pressure in Norway. How do you see the biological situation going forward into the spring and summer?
In Norway, I think it's still early days. It's March. The biological situation in our operations in Region North, Region South is very healthy and good. In Region Mid, we have one site with ISA which we put pressure. We have to take that site out. We know that. So -- but all in all, I think the biological situation for our operation is healthy and good. More questions?
Carl-Emil Johannessen from Pareto. Can you say something about the development in Chile? I see you guided for a 3% to 6% growth in the Chile industry. How do you see the biological performance going there at the moment and into second half of the year?
As we speak, they are going into winter as we are going into summer. So normally in a winter time, biology is good. From what we see in our operations in terms of usage of antibiotics, it's coming down still. Maybe we are one of the better performance in terms of use of antibiotics, which is an indicator on fish health per se. Sea lice is always an issue in all operations. But in Chile, again there is a different sea lice, but that's something we are watching closely. But other than that now in the short term, it looks good.
Do you expect harvest weights to come down this year for your own operations?
In Chile?
Yes.
Not really.
And second question on the development licenses in Norway. Have you decided anything with the 2 projects you have got approved and you will appeal, I guess, the latest one that was rejected last week?
Yes. We are -- especially on -- we have the Donut approved. That's in operation and is coming on. It's not decided yet. We'll be late in where we put it because we are waiting for a location, an approved location for that project. In terms of the Egg, we applied to build it in [ state ] to reduce production cost. I think that is a wise thing to do with any kind of technology, to try to make it as cheap as possible, to reduce production costs. In the long term, I think if Norway will be #1 in production, it's important to be #1 in production costs. And then these projects should reduce biological impact, sea lice and escapes, but also be -- you can't build more expensive and actually take down production cost. So that must be #1. So far, we haven't gotten a lot of -- how to say it, a lot of traction on that argument, to me that seems strange. I think in Norway, we should fight for competition. That's one of our edges. But so that is to the department now for under -- in motion, to put it that way. The last one was AquaStorm. That was denied. In reality, a fantastic project that really could lift this industry. And that is combining subsea technology, should be ideal for Norway. But I guess -- I'll just put this in a nice way, maybe the [ reason ] could be better in some parts of the bureaucracy.
Lars Johnsen, Fearnley Securities. Could you say something about the Canadian operation? I mean it's -- you're starting to grow in Canada, but costs are still stable. What should we expect going forward, both from the East Coast and West Coast?
I think on -- going forward, I think West Coast, hopefully slightly reduced cost, stable on East Coast. East Coast is still a small operation. It takes time. We are currently building a hatchery there, increasing the capacity in [ our reso ] corporation, which at the end of the day in -- on the East Coast will give higher volumes. But first, we need to build a hatchery, put the smolt out and then harvest them. So that takes time. So I would say slightly improved this year in Canada West, based on a pretty weak year last year, and stable on the East Coast.
Martin Kaland, ABG. It seems that the Food Safety Authority in Norway are starting to get more concerned about fish welfare using on chemical treatment methods here in Norway. Are you concerned that you might face this summer or the peak sea lice season with a smaller toolbox than before? Or do you have the suitable tools to manage the sea lice situation going forward?
I think it's important to work on tools to manage the sea lice situation continuously. To improve current tools in terms of fish welfare is key. To use wrasse and lumpsuckers better is also a key component. It's certainly important that any decision on this is based on science and science that kind of mirrors the factual processes that happens in the industry. So we are obviously always concerned around fish welfare because fish welfare -- if you don't have good fish welfare, you don't have good production. So that is important for us. That's why I think to continue to improve these methods as we go forward and as we have done is essential.
So we have 2 questions from Alexander Aukner in DNB. He's asking any comments in production costs in individual regions going forward, up or down. And the second question is how big impact did IFRS 16 have on EBITDA and EBIT in the quarter.
To start with the last part, this is extensively explained in the note of the quarterly report. So I will recommend all of you to have a look at that report. In terms of operational EBIT, the effect is very, very small. It's EUR 1 million to EUR 2 million, so marginal. But the balance sheet effect, as we saw previously, is much higher. So again, please have a look at the note in the quarterly report. With regard to costs guiding going forward, we have never been that specific in the -- I think we will keep to -- the communication [ positive ] we have had so far. So we give a heads up if there is something particular to pay attention to. If not, we stay silent.
Okay. Moving on to Christian Nordby in Kepler Cheuvreux. He's asking can you talk a bit about the licenses that is set to be lost in Ireland and how that will affect volumes going forward.
In terms of this license in Ireland, it's -- in Ireland, the regulations are extremely old. We are in dialogue with the government there in terms of -- because the regulation was made before we started with all-in, all-out year classes. So back then you harvested every year, and you harvested 500 tonne every year. Let's say that is the example. Now after we change this, they have not amended new regulations. We still harvested -- we still harvest 500 tonne every year, but now we do it at the end of the cycle and take out all the fish and then we're fallow. So we are in dialogue with the government, and hopefully, we can change that so we don't lose any sites.
Mikkel Nyholt, Carnegie. On the price allegation situation currently running around, one, what are you doing internally about this? And two, have you heard anything back from clients? What are you discussing with your clients when -- I'm sure they're asking about this.
Yes. This is an inspection from the EU in terms of -- which is -- we don't know exactly where this started. But we are inspected in our operations in Europe, that's meaning Scotland and Holland, and it's inspection of the entire industry. And then you have a few American law firms that is kind of piggybacking on this inspection. That is something I guess you would expect coming from that part of the world. So then we have to defend and then we have to defend ourselves, which is the right we have in terms of the U.S. lawsuits, and try to not have them amended into court. That is the first thing we try to do. And then we work together with the EU Commission helping them with all information they are asking for because we do not have anything to hide and we are not guilty in any of these accusations.Then I think it's -- there's no more hands. So then I -- have a great day, and thank you for coming.