Our 'A-' long-term issuer rating on Norwegian fish farmer SalMar ASA is unchanged following a NOK 2.7bn share issue announced by the company today.
Fresh equity will enable major investment
The equity issue, which follows a NOK 3.5bn green bond issue earlier in the year, will enable SalMar to pursue several attractive growth and investment opportunities across its value chain. These include purchases of salmon production licences and company acquisitions, as well as organic investments in smolt production, coastal farming operations, harvesting, and processing. We believe that the bond and equity issues make it more likely that at least 50% of Salmar's investments in large-scale offshore farming will be kept on the company's books. Capital spending on the company's first open ocean farm is estimated at NOK 2.3bn, while spending on additional farms is estimated at NOK 1.5-2.0bn per unit.
In our view, the new equity issue strengthens SalMar's balance sheet, underscores the company's ability to access the capital markets, and demonstrates the continuing support of its main shareholder, Kverva Industrier AS, which took up NOK 300m of the new share issue (although its ownership stake fell slightly to 50.8% from 52.5%).
In our view, the new equity allows SalMar to increase its investments by as much as NOK 3bn (to a total of NOK 7.2bn) over the next three years without material deterioration of its credit metrics from our previous projections (see Figure 1). For further details of our assumptions, see our rating report from 7 April 2021.
Figure 1. SalMar credit metrics before and after the equity issue
2020 | 2021e | 2022e | 2023e | |
NCR-adjusted debt/EBITDA (x) | ||||
Previous projections | 1.5 | 1.6 | 1.5 | 1.4 |
Revised projections | 1.0 | 0.9 | 0.9 | |
NCR-adjusted EBITDA/interest (x) | ||||
Previous projections | 27.4 | 23.8 | 25.5 | 25.4 |
Revised projections | 20.5 | 20.2 | 21.7 | |
NCR-adjusted FFO/debt (%) | ||||
Previous projections | 53.5 | 48.0 | 53.1 | 55.1 |
Revised projections | 53.5 | 79.6 | 83.9 | |
Based on NCR estimates and company data. e–estimate. FFO–funds from operations. All metrics adjusted in line with NCR methodology | ||||
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