Our 'A-' issuer rating on SalMar ASA (SalMar) is unchanged following the publication of its results for the first half of 2021.
Strong results despite negative contribution from Sales and Industry division
SalMar's second-quarter results were broadly in line with our expectations and the company is well underway to reaching our expected EBITDA of NOK 4bn for 2021. We note that the company's volume guidance for the second half (103,500 tonnes) is 41% higher than the volume harvested in the first. Moreover, costs per kg harvested are likely to come down on the basis of a stronger biological performance by the second-quarter 2020 generation of salmon compared with that of the third-quarter 2019 generation, which accounted for 41% of the harvest in Norway in the second quarter of 2021.
SalMar reported operational EBIT of 18.05 NOK per kg in the second quarter (NOK 18.4 per kg in Norway and NOK 12.2 per kg in Iceland). This was NOK 3.5 per kg lower than in the corresponding period of 2020, despite a NOK 5.5 per kg rise in salmon prices to NOK 63.3 per kg over the same period. The weaker profitability is explained by a negative contribution from the Sales and Industry division due to fixed price contracts at low prices (28% of volumes) and start-up costs. The farming operations in central and northern Norway reported operational EBIT of NOK 24.8 per kg and NOK 26.0 per kg respectively in the second quarter. SalMar's operational performance compares favourably with that of competitors such as Mowi ASA (NOK 16.7 per kg in Norway and NOK 12.8 per kg globally) and Lerøy Seafood Group ASA (NOK 15.9 per kg). The UK operations of Norskott Havbruk AS, a joint venture with Lerøy Seafood, reported operational EBIT of NOK 10.5 per kg.
SalMar has entered into a joint venture partnership with Aker ASA to develop its offshore farming operations, which we see as positive. SalMar and Aker will own 66.6% and 33.4%, respectively, in the new company, SalMar Aker Ocean AS, with Aker contributing up to NOK 1.65m in cash in three tranches.
In addition, SalMar has made an offer to acquire all of the outstanding shares in Norway Royal Salmon ASA (see SalMar makes bid for Norway Royal Salmon, 20 Aug. 2021).
Improved performance likely in second half
As of 30 Jun. 2021, SalMar's NCR-adjusted net debt/EBITDA remained solid at 1.7x, compared with our expectation of 1.6x for fiscal 2021, while NCR-adjusted EBITDA/net interest was 23.1x compared with our projection of 23.8x for the full year. We do not adjust our estimates at this point as we expect the company's credit metrics to reflect greater profitability.
Figure 1. SalMar key credit metrics, 2018-June 2021
|
NOKm |
2018 |
2019 |
2020 |
LTM to June 2021 |
|
Total revenue |
11,301 |
12,202 |
12,912 |
12,331 |
|
NCR-adjusted EBITDA |
4,191 |
4,041 |
3,820 |
3,176 |
|
NCR-adjusted net debt |
1,542 |
3,532 |
5,826 |
5,406 |
|
Total assets |
15,136 |
17,986 |
21,998 |
23,913 |
|
NCR-adjusted debt/EBITDA (x) |
0.4 |
0.9 |
1.5 |
1.7 |
|
NCR-adjusted EBITDA/interest (x) |
26.5 |
19.2 |
27.4 |
23.1 |
|
NCR-adjusted FFO/debt (%) |
221.2 |
91.7 |
53.5 |
40.4 |
|
Based on company data. All metrics adjusted in line with NCR methodology. LTM–last 12 months. FFO-funds from operations. |
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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