Our 'A-' issuer and 'BBB+' issue ratings on SalMar ASA (SalMar) are unchanged following the publication of its third-quarter results.
Higher volume guidance
Earnings were close to our expectations, due to strong volumes and despite higher costs, and our EBITDA forecast for 2021 seems achievable. The higher costs were due to biological issues in central Norway, high harvesting costs in northern Norway and increased logistical costs for value-added processing (VAP). The InnovaNor processing plant is starting up in the fourth quarter of 2021 and will provide more efficient logistics for harvesting and processing in northern Norway. The higher logistical costs for VAP relate to global shipping disruptions caused by the pandemic, and we expect the situation to normalise during 2022.
SalMar raised its harvested volume guidance by 3,000 tonnes for 2021 to 169,000 tonnes, but reduced its guidance for the Scottish Sea Farms joint venture by 3,000 tonnes to 33,000 tonnes. The company estimates a harvest of 12,000 tonnes in Iceland in 2021. SalMar expects volumes to increase in 2022; by 3.6% in Norway, 33% in Iceland and by 39% in Scotland.
Investments
SalMar has made NOK 2bn in capital investments so far this year, which is higher than our full-year estimate of NOK 1.7bn. However, net debt is still below our full-year estimate. During the third quarter, SalMar gained new capacity for NOK 323m (net) by acquiring Nekton Havbruk and Refsnes Laks, and made other investments in the value chain amounting to NOK 645m. In the third quarter, SalMar also announced a joint venture with Aker (33.4%), creating SalMar Aker Ocean, to realise the potential in offshore farming. Initial investments are planned as soon as approval by the relevant authorities is obtained.
Figure 1. SalMar key credit metrics, 2018–2021e
| NOKm | 2018 | 2019 | 2020 | 2021e | LTM to Sep. 21 |
|---|---|---|---|---|---|
| Total revenue | 11,301 | 12,202 | 12,912 | 13,558 | 13,420 |
| NCR-adj. EBITDA | 4,191 | 4,041 | 3,820 | 4,006 | 3,268 |
| NCR-adj. net debt | 1,542 | 3,532 | 5,826 | 6,575 | 5,943 |
| Total assets | 15,136 | 17,986 | 21,998 | 22.856 | 27,255 |
| NCR-adj. net debt/EBITDA (x) | 0.4 | 0.9 | 1.5 | 1.6 | 1.8 |
| NCR-adj. EBITDA/net interest (x) | 26.5 | 19.2 | 27.4 | 23.8 | 21.5 |
| NCR-adjusted FFO/net debt (%) | 221.2 | 91.7 | 53.5 | 48.0 | 86.6 |
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