Austevoll Seafood ASA (Z85.HA) Earnings Call Transcript & Summary

That is a pleasure for me to invite you to Austevoll Seafood third quarter financial presentation. I will first take you through the highlights of the quarter. Thereafter, I will go in more details of our performance in the quarter in the different segments we are operating in, and also give some insights in the quarter to come as well. Britt Kathrine Drivenes will take you more in detail through the financial figures. And I will end this session by giving our view on the different markets we are operating in. So starting up, I would say, third quarter, I think it's 3 main topic, which I want to raise in terms of our performance in third quarter. In general, I would say we are delivering a weaker quarter in all segments. And it's mainly -- the main driver behind that is, I would say, we have had some biological challenges in Leroy as a consequences of high sea temperatures, and also a higher sea lice pressure, also combined with much lower salmon spot prices in the quarter. And also when it comes to our pelagic activity, main reason for the weaker result is also pressure in margins, in particular in the fish and marine oil products, which are taking our result both down in South America and also in the North Atlantic. So our revenue in third quarter is just north of NOK 10 billion, and EBITDA of NOK 652 million and an EBIT of NOK 73 million. And if you include 50% of the EBITDA of Pelagia, our EBITDA is in total just south of NOK 800 million, whereas Leroy delivering approximately NOK 500 million and the Pelagic segment is approximately NOK 300 million. If you look to year-to-date in 2025, NOK 29.9 billion in revenue, NOK 3.9 billion in EBITDA and an EBIT approximately NOK 2250 million. We have a strong balance sheet, NOK 52 billion, equity ratio of 53% and a net interest-bearing debt of NOK 8.5 billion. Austevoll Seafood is all about volumes and also what margins we are able to create based on the volumes we are running through our systems. And in this quarter, and I would say also this year in particular in pelagic, we have had pressure on margins on our -- in our fishmeal and fish oil segments, mainly due to, I would say, fish oil prices has been going further down than we expected. This year, we are aiming to fish on our own fishing vessels a volume of 450,000 tonnes. We are processing in our fishmeal and human consumption pelagic factories a volume of NOK 1.9 billion. Whitefish, we are handling 80,000 tonnes on our fleet and plant, and are aiming to slaughter 219,000 tonnes of salmon in 2025. Starting up with pelagic, going to South America and Peru. We were expecting that we would receive the final quota late last night, but I think that's delayed for today. So we have to comment on the situation as we know today. Normally, there is a research in front of every season, which was also the case this year. Research started up in mid-September ended, end October, and they didn't detect that much fish in the North-Centre area as expected. And they did a new, I would say, small research called what we are calling Eureka, where both the industry and the scientist vessels are going in to see if the condition has improved, and establish our temporarily quota of 500,000 tonnes. And based on the experience they had for the first 3 days with test fishing, and also the first 5 days to 6 days with catches and production, we are expecting that they will settle a new quota. And we have to wait to see what the final quota will be for the second season. And in our case, on volume-wise, we are guiding on a volume of 1.2 million tonne quota or fishery in November and December, and we have to see if the quota will be at that level or a bit higher than that. So still remains to see the final quota. And of course, since Peru is one of the largest producer of fishmeal and fish oil the size of the quota will also have an impact on fishmeal and fish oil prices going into the new year. In Chile, I would say we had had a good year. Third quarter, a bit less volume this quarter versus third quarter 2024. Fish started spawning earlier, and we have to wait to take the remaining of the quota in November and December period. Have approximately 33,000 tonnes to catch. And hopefully, we are able to do that by end of the year. I would say we have had lower prices both on fish oil, fishmeal and on frozen products in the quarter, but it also is impacting the result from FoodCorp. But we also see that prices on frozen and prices on fishmeal is also recovering now into fourth quarter. So if you are able to catch the remaining quota, I think Chile will deliver a good year also in 2025, as they did in 2024. When it comes to next year's quota, the recommendation from the organization settling the quota has a range between 5.7% and 15% increase. And there is a change in the law changing the distribution from the industry vessel to the artisanal vessels from 90% to 70% to the industry. So artisanal vessel are getting a higher percentage of the quota. So if it's 5% to 6% increase, our volume for next year will be around 68,000 tonnes. And if it's 15% increase, the volume will be 74,000 tonnes. In the North Atlantic, we have seen reduction in raw material availability, both for '25 and also the recommendation for '26 is further down on raw material in the North Atlantic. And it's, I would say, particularly marked by a reduction of 70% of mackerel and 40% of blue whiting, and also 30% on North Sea herring, which is taking the volume further down from 25%, which also has been under the average for the latest 10 years. So I would say the conditions for our pelagic plants in the North Atlantic is going to be more challenging in terms of securing raw material, than it was in 2025, and we have to adapt for that situation. If you look into the performance in terms of volumes to the plant in 2025, it's more or less on the same level as we had in 2024. But as I said, the marine protein and oil segments are delivering considerably lower margins due to the reduction in prices on particularly marine oils. And if the blue whiting quota is set on a level which is recommended, there will be, I would say, less raw material in for this segment in 2026. Human consumption as well, less mackerel quota into '25 reflect -- and also the North Sea quota reflect -- North Sea herring quota reflect also the volumes we had in the quarter 86,000 tonnes versus 120,000 tonnes. Going into the end of the year, we are aiming to produce approximately 100,000 tonnes of volume more. And I would say it's been -- the season has been conducted in a good way, also considering the high purchase prices on particularly mackerel. Again, the situation is the same, the reduction in North Sea quota and the reduction in mackerel quota will affect the capacity usage on Pelagia for 2026. And if you look into the result of Pelagia, you can see that the EBITDA in the quarter is considerably lower. We are doing -- delivering a lower result in the FEED segment -- in the FOOD segment in the quarter due to less activity and better on the HEALTH segment. If you look at the year-to-date result, I would say the reduction in EBITDA can be explained by less contribution from the fishmeal and fish oil segments of Pelagia. Otherwise, HEALTH and FOOD is delivering slightly better than they did in the first 9 months. Then to salmon and whitefish, and I would say, looking into Leroy in the quarter, they have had 4 quarters now in a row, where cost has been reduced and enter into the third quarter with more challenging biological situation, mainly due to high temperatures, record high temperatures in -- outside the Norwegian coast, and also, as a consequence, a much higher sea lice pressure, and also yes, with a higher sea lice pressure, which also reduced the growth in the period, and also increased a bit the mortality when you're doing sea lice treatments. So EBIT from Farming segment is negative with NOK 300 million. And of course, that's also a consequence that price achievement has been considerably lower in the quarter versus same quarter last year. It's been compensating by a better performance both on the whitefish segments, they've done a very good quarter based on the raw material they have had available. And also, we have a record high quarter when it comes to the VAP sales and distribution, where we are delivering an EBIT almost doubling from same quarter last year. It's also pleasant to look at volumes we have been driving through in Leroy this quarter, up 15% versus same quarter last year. And of course, it's a pretty when you're not earning that much money based on the volume we have. Spot prices down NOK 8 year-on-year on the quarter and the EBIT per kilo is NOK 1.70, which is delivering -- splitted between the region, Leroy Aurora NOK 9.50 and Leroy Midt, negative NOK 3 per kilo, and Leroy Sjotroll is negative NOK 1.5 per kilo, which is a better performance, in particular, in Leroy Sjotroll versus the same quarter last year. Looking at volumes, we are maintaining our guidance on 195,000 tonnes. It's up from 170,000 tonnes in 2024. And for our guidance in 2026, we are guiding on the same volumes that we are having in 2025 in Norway, and a bit up in Scottish Seafarm to 22,500 tonnes. Good performance, I would say, on the wild catch segment of Leroy. So despite quota is down by 32% on the main species on cod, a bit down on haddock, we are delivering better financial result in the first 9 months and also for the quarter. And as a consequence of, I would say, a focus -- well-focused production on the land-based activity. It's challenging to produce when raw material is reducing and raw material prices is increasing. On the other hand, I would say that on the fleet side, the reduction in quota is well compensated and overcompensated by the increase of prices. Cod prices in the quarter is up with 27% versus same quarter last year, haddock prices up with 68% and saithe prices up with approximately 58%. So now I give the floor to Britt.

Thank you. As normal, we start with this table, summing up the raw material intake in the quarter. And as Arne has already mentioned, there has been a seasonal lower operation in both Chile and Peru in the quarter. The important season for food or consumer products in North Atlantic started in Q3. There has been intake of North Sea herring, and also the mackerel season started in August. As you can see for salmon, there has been slaughtered a substantially higher volume in third quarter this year compared with same quarter last year. Key figures have already been mentioned, but I will short sum up. And all these figures include 50% share of Pelagia. There has been an increase in the revenue in the quarter, and that can be contributed to Leroy. They have slaughtered a substantially higher volume of salmon in the quarter compared to the same quarter last year. And also, there has been a very good operation in the VAP sale and distribution segment with increased volumes also from that part. Earnings in third quarter are substantially down. And as Arne has already mentioned, this is mostly attributed to the farming segment. There has been lower prices for salmon and trout and also increased costs due to higher sea temperatures and sea lice pressure. In Peru, the first -- the end of the first fishing season was quite challenging with challenging catch situation, and also, of course, lower utilization of the plants. And that combined with lower prices for fishmeal and oil has also given lower earnings from that part. And in Pelagia here in the North Atlantic, pressure on marine or decreasing prices on marine oil have also given lower earnings for that part. I will start on the line income from associated as we have been through the key figures above that line. And Arne has already taken you through the results for Pelagia, which is a large company -- associated company. So I will shortly comment on the other large company in this associated company, Scottish Sea Farms. They have, of course, as we have here in Norway, been affected by the lower salmon prices. But they have also slaughtered substantially lower volume of salmon in third quarter this year compared with same quarter last year, down 40%. So EBIT, including income from associated companies are NOK 73 million, down from NOK 802 million. Then I would like to comment on the fair value adjustment related to biological assets. This is a noncash line, but it's an accounting principle. But it's quite large numbers, and it's positive this quarter with almost NOK 950 million, same quarter last year was negative with NOK 629 million. And this, of course, impact our total figures. So the operating profit, including the fair value adjustment is NOK 954 million in third quarter this year, up from NOK 127 million in same quarter last year. And net profit is NOK 529 million, up from NOK 168 million in same quarter last year. I would recommend to look into Leroy's Q3 presentation on the webcast to get more details, I will shortly sum up the key drivers in this quarter, and that is, of course, the slaughtered volumes of salmon and trout 59,000 tonnes, up 15% compared to same quarter last year. And this is driven by a strong biological performance leading up to Q3. We have had a more challenging biological development in Q3, with -- as I mentioned, higher seawater temperatures and sea lice pressure. And that has, of course, impacted cost. Prices are down, spot prices are down NOK 8 compared to the same quarter last year. And the contract share in Q3 has been 24%. Looking into the VAP sale and distribution, they have continued a very positive development and have a record quarter, and this is based on a very good utilization of the capacity, but also high sales volumes. Wild catch, the catch volumes are in line with same quarter last year. There has been a substantially lower quotas in '25 compared with '24, but there has also been an increase in prices, which has compensated for the decrease in quotas. For the onshore industry within this segment, of course, it's quite challenging with lower raw material available, and also high raw material prices. But they have been doing a good job, and also delivering on the same level as last year. Looking -- going over to South America, and starting with Peru, seasonal low operation in the quarter. First fishing season ended 23rd of July. As mentioned, a challenging end of the season with daily catch rate, which slowed significantly in June and July. As you can see, the prices for the finished products is down, fishmeal down 6%, fish oil down 56%. And we are entering into fourth quarter with very low inventory volumes. The revenue in the quarter is NOK 825 million, EBITDA of NOK 144 million and an EBIT of NOK 85 million. And of course, lower compared to same quarter last year. But in total, first fishing season this year has been down in earnings compared to same season last year. And as mentioned, higher cost for the operation, but also lower prices. Also in Chile, we have had a seasonal lower operation and the main season for horse mackerel ended in mid-August. We have approximately 33,000 tonnes to be left to be caught in Q4. Fish oil prices for the finished products are also down, fishmeal down 20%, fish oil 49% and frozen 8%. Revenue in the quarter, NOK 368 million, an EBITDA of NOK 35 million and an EBIT of NOK 22 million. And lower prices have, of course, put pressure on our margins. Kobbevik og Furuholmen, they have slaughtered just below 1,100 tonnes in the quarter, which is down 37% compared to same quarter last year. The company sells all its salmon in the spot market and of course, affected by the lower prices for fish -- for salmon. What we can say is also that there is an increase in cost due to slaughtering from high-cost sites. So the EBIT there was negative with minus NOK 12 million compared to minus NOK 16 million in the same quarter last year. Br. Birkeland, the 2 snow crab vessels, they finalized their quotas in April. So the vessels has been laid up since then, and they have been doing necessary maintenance to be ready for the next season starting in 2026. EBIT is minus NOK 17 million and in line with the same quarter last year. Looking at the statement of financial positions. The total assets is just below NOK 52 billion. The net interest-bearing debt is NOK 8.4 billion, and there is an equity ratio of 53% by the end of September 2025. To comment some of the lines, tangible fixed assets increased, and that is based on investment in among others shielding technology, but we also have in the second quarter bought 2 secondhand vessels, one for Peru and one for Chile. As you can see, there is also a sharp reduction in this fair value adjustment related to biomass, both comparing to 30th of September last year, but also by the end of 2024. And there is a positive quarter-on-quarter development in working capital, which I will comment more on when we look into the cash flow. As you can see here, there is a cash flow from operating activities of NOK 1.5 billion. And the positive development in working capital is both in Leroy, but also in the South American operation. Cash from investing activities is minus NOK 445 million and from financing activities minus NOK 878 million. And this gives a net change in cash in third quarter of positive of NOK 231 million. And we end the quarter with a cash position of close to NOK 4.7 billion. And I give the floor to you, Arne.

Then I will end this presentation by giving a view on the different markets we are operating in, starting up with the fishmeal market and looking at the production so far this year. And as you can see, the volume is up by 15% among the largest producer of fishmeal by week 42. Prices has -- I would say, since September started to increase. And today, prices -- or before the season in Peru prices was close to $1,900 per tonne on Super Prime and approximately $1,550 on Standard fishmeal. Still China remains as the main destination, but we are also seeing increasing demand from Europe and Ecuador to the aquaculture industry. And there has been some forward sales in front of the season in Peru. And I would say that depending on the quota set now and the development of the fishery, you can also see a developing month in fishmeal and also fish oil prices. Chinese market, main driver behind the increase of fishmeal prices from Peru, and it's mainly related to -- they had a quite reduced domestic production in China, and increased demand and also prices. Stock level, I would say, is more or less on the same level as the average the last 5 years, but lower than the season -- or the same period last year, and it's a good sentiment on fishmeal prices at the moment. Fish oil, up 9.3%, driven by volume from Chile, in particular this first 42 weeks. Prices is down $2,400 per tonne, a premium to omega-3 prices for human grade with approximately $1,000, but I would say that, again, you will not see -- it's a wait-and-see development in fish oil prices at the time being in Peru. You have to see what the final yield be, what the final quota will be and how the fishery is developing before, I would say, you would see the direction of fish oil prices going forward. Salmon, fantastic production of salmon, a global growth of approximately 10% in 2025, has had an impact on price achievement. But going into 2026, you can see that there is not any expectation for further growth on a global level and not in Norway, if you look at Kontali's latest estimate. And the expectation from the rest of the year in November, December is that it's going to be a negative growth compared with the same 2 last month in -- of the year. So all in all, up to October, an increase of 14% and we are expecting that a reduced volume going in for the remaining 2 months, and also into first half year next year. And it has been challenging when we have had prices on -- just north of NOK 50 per kilo in terms of being salmon farmers. And hopefully, we will see better prices now in the last months that we are experience, and also in the beginning of the quarter. Market is strong. The consumption has been 6% up in EU, 17% up in other markets, mainly driven by demand from Southeast Asia, and also 10% up in the U.S. market. So summing up, I would say, after 4 quarters now with a reduction in cost, we have met some challenges, more sea lice treatment and higher cost levels in third quarter and also into fourth quarter. And it's also worth mentioning that we are expecting lower cost in 2026 compared to what we have seen in 2025. Whitefish quotas is continuously down. Our expectation now is that the reduction in the negative growth in cod quotas maybe will turn in '26 and that we will see maybe an increase in '27. South America, again, we were expecting to have the information yesterday, was not published and looking forward now to start catching again, and are excited in terms of what the final quota will be and how the fishery will be developed. And it's fair to say that we are entering into 2026 with a higher fishmeal prices than we had in the beginning of 2025. Jack mackerel quota for ourselves on our own keel is going to be a bit down versus what we have this year, and that's mainly due to the redistribution of the quota from the industry to the artisanal vessel. But also, hopefully, we are expecting a better price development in all our products in 2026 versus 2025. When it comes to our activity in the North Atlantic, we are expecting a challenging situation in terms of utilization in our factories, when quota on important species is down on blue whiting, North Sea herring and mackerel for next year. But hopefully, also, we are expecting other development in prices, in particularly for marine oil and on the experience what we have done in 2025, when it comes to pressure on margins. So that was all, and thank you.