Our 'BBB' issuer and 'BBB-' senior unsecured issue ratings on Lerøy Seafood Group ASA (Lerøy) are unchanged following the publication of its fourth-quarter 2021 results.
Early harvesting in third quarter drags on full-year margins
Lerøy reported 26% year-on-year growth in revenue and 63% growth in EBITDA in the fourth quarter of 2021, with growth of 16% and 22% respectively for the full year. Annual revenue growth somewhat exceeded our expectations thanks to strong prices, but EBITDA margins were lower as a result of early harvesting at lower average prices and higher costs per kg in the third quarter. Lerøy expects raw material cost inflation to offset improvements in operational efficiency in its farming operations in 2022. The wild catch and value-added processing operations maintained strong performances in the fourth quarter of 2021, with EBIT margins of 20% and 3% respectively.
Record annual volumes in 2021 could reduce output this year
Lerøy reported a record annual harvest of 186,635 tonnes in 2021, which could drag on volumes in 2022. Harvesting guidance for 2022 was revised to 185,000 tonnes in the fourth-quarter report from 190,000 tonnes a quarter earlier. At end-2021, Lerøy had 107,242 tonnes of fish in its sea farms, down 10% from end-2020. We expect prices to remain strong, at least until mid-2022, with global harvest volumes likely to remain flat through year-end.
Strong cash position has positive impact on net debt
Lerøy's credit metrics for full-year 2021 were better than we originally expected as a result of a stronger cash position, which positively impacted net debt. We expect only moderate investments of NOK 1bn in 2022 compared with NOK 1.4bn in 2021. However, we note that the proposed cash dividend for 2021, at NOK 1,489m, is about NOK 600m higher than our original forecast.
Figure 1. Lerøy key credit metrics, 2018–2021
| NOKm | 2018 | 2019 | 2020 | 2021e | 2021a |
|---|---|---|---|---|---|
| Total revenue | 19,838 | 20,427 | 19,960 | 22,537 | 23,136 |
| NCR-adj. EBITDA | 4,473 | 4,013 | 3,138 | 3,856 | 3,791 |
| NCR-adj. net debt | 2,550 | 3,882 | 4,582 | 5,792 | 4,629 |
| Total assets | 28,373 | 30,189 | 30,163 | 31,869 | 34,194 |
| NCR-adj. net debt/EBITDA (x) | 0.6 | 1.0 | 1.5 | 1.5 | 1.2 |
| NCR-adj. EBITDA/net interest (x) | 27.3 | 20.0 | 14.9 | 15.8 | 19.5 |
| NCR-adjusted FFO/net debt (%) | 141.4 | 86.3 | 56.1 | 45.7 | 61.5 |
This commentary does not constitute a rating action.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com