Nordic Credit Rating (NCR) has affirmed its 'BBB-' long-term issuer rating on Norway-based Austevoll Seafood ASA. The outlook is stable. The 'N3' short-term issuer rating and 'BBB-' senior unsecured issue rating have also been affirmed.
Rating rationale
The affirmation reflects Austevoll Seafood's strong linkage to Lerøy Seafood Group ASA through a 52.7% ownership stake. Lerøy Seafood has a strong market position in the profitable salmon farming industry and has diversified into wildcatch fishing. Austevoll Seafood'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. In addition, the long-term rating 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 Seafood, as a holding company, obtains its cash flows almost exclusively from group contributions and dividends from subsidiaries and joint ventures.
Stable outlook
The stable outlook reflects our view that growing demand for seafood and moderate 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 2027. In addition, we expect Austevoll Seafood's South American subsidiaries to continue to generate strong operating cash flows despite volatility created by variations in quotas.
We could raise the rating to reflect an increase in Lerøy Seafood's creditworthiness that improves Austevoll Seafood's ability to repay debt, or to reflect lower financial leverage at the company's joint ventures.
We could lower the rating to reflect a decline in Lerøy Seafood or other subsidiaries' creditworthiness, or reduced dividends from subsidiaries. We could also lower the rating to reflect increased financial leverage leading to NCR-adjusted FFO/net debt below 40% and EBITDA/net interest below 10x over a protracted period, or loss of control of Lerøy Seafood.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB- | BBB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Christian Yssen, analyst, +4740019900, christian.yssen@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.