“With Mowi, the worst case scenario seems to have already been priced in.”
The European Commission has indicated that several Norwegian salmon producers, including Cermaq, Grieg Seafood, Bremnes, Lerøy, Mowi, and SalMar, may face fines up to 10 percent of their turnover for allegedly violating EU competition rules.
The fines could amount to a total of NOK 13 billion, following a notice from the Commission that sent shares on the Oslo Stock Exchange tumbling.
The salmon producers are accused of colluding to distort competition in the market for spot sales of Norwegian farmed Atlantic salmon in the EU between 2011 and 2019.
Following the news of the European Commision’s findings, share prices for Grieg Seafood, Lerøy, Mowi and SalMar immediately plunged between 4 and 6 on Thursday. This means that stock market values of NOK 13.3 billion ($1.3 billion) were wiped out, i.e. roughly the same values as the estimate of the fine, according to Norwegian financial newspaper Finansavisen.
The affected companies, with listed entities including Grieg Seafood, Lerøy, Mowi, and SalMar, have disputed the allegations, emphasizing their belief in no breach of competition rules. Mowi highlighted that the Statement of Objections from the Commission is not a final decision but the preliminary view following inspections in February 2019.
Nils Olav Furre Thommesen of Fearnley Securities has provided insights on the implications and expected outcomes of the fines.
“It is unclear whether the fine should be calculated on the basis of the turnover in 2019 or 2023. If we start from the turnover for 2023, it amounts to 6 per cent of Mowi’s market value, 4 per cent for SalMar, 11 per cent for Lerøy and 10 per cent for Grieg’s market value,” said Thommesen.
For Lerøy, the case is a little more complicated since they have a lot of downstream activities and production of other species with lower margins that inflate the top line, according to the analyst.
“With Mowi, the worst case scenario seems to have already been priced in, while Lerøy and Grieg appear to be the hardest hit in terms of screening,” said Thommesen.
Asked whether this will contribute to increased uncertainty among salmon investors, the analyst said, “The question now is whether there will be more accusations from other authorities. In the US, there have been two cases, one of which was closed by the Department of Justice, and the other resulted in a civil lawsuit in which the entire industry settled for $85 million. So there have been several cases, or the same case in several jurisdictions, two of which have already been concluded. If there are no more charges, and this is the last one, it could mean that the case is finally over.”