Nordic Credit Rating (NCR) said today that it had assigned a 'BBB-' long-term issuer rating to Norway-based Austevoll Seafood ASA. The outlook is stable. At the same time, an 'N3' short-term issuer rating and 'BBB-' senior unsecured issue ratings were assigned.
Rating rationale
The long-term rating reflects Austevoll's strong linkage to Lerøy Seafood Group ASA through a 52.7% ownership stake. Lerøy has a strong market position in the profitable salmon farming industry and has diversified into wildcatch fishing. Austevoll's creditworthiness is supported by the breadth of the operations of its holdings in pelagic fishery companies which are fully integrated seafood producers with significant processing and distribution capabilities. The rating also reflects the company's moderate financial leverage and strong cash flow.
The rating is constrained by the seafood sector's historical earnings volatility due to unstable prices as a result of variable supply and the fact that salmon farmers are effectively price takers, particularly in recurring periods of oversupply. It is also constrained by environmental and disease-related challenges, with the industry particularly impacted by high costs for treating sea lice and winter wounds. We lower the issuer rating by one notch from our indicative credit assessment to reflect the fact that Austevoll, as a holding company, obtains its cash flows almost exclusively from group contributions and dividends from subsidiaries and a joint venture.
Stable outlook
The stable outlook reflects our view that growing demand for seafood and low salmon supply growth will support global prices over the next three years. We anticipate global salmon prices and demand for fishmeal and fish oil will remain strong over our forecast period through 2025. We also expect Austevoll's operating subsidiaries to continue to generate strong operating cash flows although we believe that Lerøy's capacity to pay dividends will be negatively impacted by a new 25% "resource rent" tax on sea-based salmon and trout farmers.
We could raise the ratings to reflect an increase in Lerøy's creditworthiness that would improve Austevoll's ability to repay its debt or lower leverage in joint ventures.
We could lower the ratings to reflect a decline in Lerøy or other subsidiaries' creditworthiness, or reduced dividends from subsidiaries. We could also lower the ratings to reflect increased financial leverage leading to NCR-adjusted net debt/EBITDA above 2x and EBITDA/net interest below 10x over a protracted period. In addition, any loss of control over Lerøy could also lead to a lower rating.
| Rating list | Rating |
|---|---|
| Long-term issuer credit rating: | BBB- |
| Outlook: | Stable |
| Short-term issuer credit rating: | N3 |
| Senior unsecured issue rating: | BBB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Rating Principles published on 24 May 2022, NCR's Group and Government Support Rating Methodology published on 18 Feb. 2022 and NCR's Corporate Rating Methodology published on 8 May 2023. For the full regulatory disclaimer please see the rating report.