Our 'BBB' issuer rating on Lerøy Seafood ASA (Lerøy Seafood) is unchanged following the publication of its results for the first half of 2021.
Strong rise in profitability
The results were broadly in line with our expectations, with higher revenues and EBITDA than in the corresponding period a year earlier. This was a reflection of stronger demand and higher prices due to the gradual easing of COVID-19-related restrictions. In the second quarter, the Farming division reported 80% higher EBIT before fair value adjustments than for the corresponding period of last year. This was due to a combination of 8% higher spot prices and improved price realisations adding a further 3%. Costs were relatively flat in the quarter while volumes were down 5.5%. Lerøy Seafood expects to harvest 60% of full-year volumes in the second half at strong prices due to expectations of a fall in global supply (lower volumes from Chile) and better biological performance (fewer quality downgrades due to winter wounds).
The Value-Added Processing, Sales and Distribution division reported 8% higher EBIT in the second quarter compared with the corresponding quarter of last year and 33% higher in the year to date, adjusted for a NOK 38m extraordinary gain related to the acquisition of Seafood Denmark A/S (consolidated from 1 Apr. 2021). However, the results were negatively affected by start-up costs related to new plants in Spain and Italy.
The Wild Catch division reported a 173% improvement in EBITDA in the second quarter compared with the second quarter of last year, but the figure was 2.5% lower in the year to date. The second quarter was positively affected by mix effect and improvements recorded by the company's land-based operations. A significant proportion of the company's cod quota remains to be caught in the second half, representing a prospective increase of 60% in the second-half catch compared with last year.
Further improvements in EBITDA likely
As of 30 Jun. 2021, Lerøy Seafood's NCR-adjusted net debt/EBITDA remained solid at 1.9x, compared with our expectation of 1.5x for fiscal 2021, while NCR-adjusted EBITDA/net interest was 16.2x compared with our projection of 15.8x for the full year. We do not adjust our estimates at this point as we expect the company's future credit metrics to reflect higher profitability.
Figure 1. Lerøy Seafood key credit metrics, 2018-June 2021
|
NOKm |
2018 |
2019 |
2020 |
LTM to June 2021 |
|
Total revenue |
19,838 |
20,427 |
19,960 |
20,172 |
|
NCR-adjusted EBITDA |
4,455 |
3,997 |
3,123 |
3,009 |
|
NCR-adjusted net debt |
4,136 |
4,015 |
4,740 |
4,990 |
|
Total assets |
28,373 |
30,189 |
30,163 |
31,843 |
|
NCR-adjusted debt/EBITDA (x) |
0.9 |
1.0 |
1.5 |
1.9 |
|
NCR-adjusted EBITDA/interest (x) |
27.2 |
19.9 |
14.9 |
16.2 |
|
NCR-adjusted FFO/debt (%) |
86.7 |
83.1 |
54.0 |
36.4 |
|
Based on company data. LTM-last 12 months. All metrics adjusted in line with NCR methodology. |
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This commentary does not constitute a rating action.
If you have any questions, please contact:
Geir Kristiansen, credit rating analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com