Best in class, but still below expectations

SalMar’s Q1 results were lower than estimated by the analysts covering the company.

The preliminary estimates from the investment banks were an operating profit of €89 million in the first three months of the year. The current phase shows a result of €6.7 million below this.

“Compared to rest of the industry, operational EBIT per kg is still strong at NOK 22.7/kg and NOK 24.6/kg for the Norwegian operations, but when the expectations are NOK 2-3/kg higher, the quarter will be consider a disappointment from a market perspective”, Tore A. Tønseth, analyst at Sparebank1 Markets wrote in an update Wednesday morning.

“The lower EBIT this quarter is driven down by higher cost in both region regions. In North, SALM has been harvesting at ISA restricted zones which have lifted cost related to wellboat and harvesting. In Central Norway, the generation harvested this quarter has struggled with weak biological performance.”

However, Tønseth also see positive signs in the report.

“On the positive side, SALM sees lower cost in the second quarter. The problematic generation in Central Norway is harvested out in the start of the second quarter, and cost in North is also expected to come down. SALM also maintains its full year volume forecast of 145kt or 155kt including Arnarlax.”

Sparebank1 Markets has a Neutral recommendation at SalMar, with a price target at NOK 445.

“We expect to cut our 2019 EBIT with 3-5% after this report. 2020 is less affected,” Tønseth wrote.

Pareto Securities was far above consensus’ estimates for the quarter, with an EBIT of €96 million – 13.5 million above the reality.

“Higher than expected cost in both Region Mid and Region North due to biological issues is the main reason for the weaker result. Stronger than expected contribution from Arnarlax offset some of the weaker Norwegian results,” analyst Carl-Emil Kjølås-Johannessen wrote in an update.

“Despite a somewhat disappointing quarter, the all-inclusive farming margin of NOK 22.7/kg, is the strongest among the listed salmon farmers. SALM reiterate its volume guidance of 155k tonnes for the year and expect cost to come down in Q2, we therefore expect to make more limited estimate changes on our Q2-Q4 estimates. In total, we expect 2019e to be reduced with ~6%. We have a Buy recommendation, TP NOK 455 on SALM.”

SalMar’s stock price falls five per cent, to NOK 385, just after the opening trades at the Oslo Stock Exchange Wednesday morning.


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