Our 'A-' issuer rating on Norwegian fish farmer SalMar ASA is unchanged following the publication of its results for the first quarter of 2021.
Lower market prices drag on improved biological performance
SalMar reported EBITDA of NOK 820m for the first quarter 2021, down from NOK 1,251m in the corresponding period of 2020, but up from NOK 648m in the fourth quarter of 2020. The first quarter is normally weaker than the fourth, mainly due to lower harvesting rates. However, the main swing factor was the market price of salmon, which was 23% lower than pre-COVID-19 prices in the first quarter of 2020, but 20% higher than in the fourth quarter.
The company's farming operation in central Norway harvested 20,800 tonnes of salmon in the first quarter, broadly similar to the fourth quarter of 2020. Operating costs per kg harvested were down by 3.5% from the fourth quarter due to an improved, and more normal, biological performance. The farming operation in northern Norway harvested 13,500 tonnes and reported relatively stable costs, although the company expects that cost levels will decline when a new processing plant (InnovaNor) is up and running in the third quarter. Volume guidance for full year 2021 is unchanged at 163,000 tonnes.
Salmar's Sales and Industry division reported operating margin of 3.9% in the first quarter, up from 2.6% in the fourth quarter and minus 0.5% in the first quarter of 2020. Low market prices for salmon are positive for this division, which was also positively affected by fixed contracts (24% of volumes in the quarter).
Daughter company Icelandic Salmon and associate company Scottish Sea Farms reported better profitability and improved cost performance from a year earlier. Volume guidance for 2021 is unchanged at 14,000 tonnes in Iceland and 36,000 tonnes in Scotland.
Green financing secured in April
SalMar is in a high investment phase and net interest-bearing debt increased by NOK 402m during the quarter to NOK 6,228m. Since the end of the first quarter, the company issued a senior unsecured green bond amounting to NOK 3.5bn and secured NOK 3bn in additional green financing.
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