Newly proposed tax on salmon farming met with open arms by analysts

Katrina Poulsen

Pareto Securities and Carnegie analysts welcome the newly proposed lower tax than earlier proposed on salmon farming in Norway. 

In the National Budget for 2021 to be published today, the Norwegian government proposes to introduce a production tax on salmon farming from 2021 (to be paid in 2022) and onward.

“This is significantly better than the 40% suggested in the tax proposal from last year and also lower than the 5% we have included in our estimates from 2022 (not 2021). We will revert with updates on company Pareto Securities,” writes Pareto Securities to their costumers in a mail.

Carnegie are also positive:

“Highly positive in our view as the fish farming industry (and we) have been fearing the implementation of an up to 40% resource rent tax ahead of the Covid-19 outbreak. With our estimates already reflecting NOK 0.35/kg production tax from 2021, estimates are marginally tweaked upwards. The final suggestion coincides with the industry suggestion and must be viewed as a victory for the industry as the alternative was far worse. Hence, political risk related to the Norwegian fish farming names undoubtedly lower now as the final suggestion is on the table,” writes analyst Lars Konrad Johnsen in an Carnegie update.

Carnegie estimates and explains which impact this will have:

“The NOK 0.40/kg production fee translates into ~1% higher tax given the current industry production cost of ~NOK 40/kg.”

Pareto Securities estimate the proposal will have the following impact:

“The tax rate is suggested to NOK 0.4/kg, which will provide around NOK 500 million( EUR 45 million) in yearly tax income. With EBIT/kg margin of around NOK 15-20/kg as we have seen the last year this equals an extra tax of around 2-3%.”

Read also: Norway’s Aquaculture Tax Committee proposes a 40 per cent rate for extraordinary tax for aquaculture

Tuesday morning the salmon stocks were off to a great start on the stock exchange. NTS og NRS lead the way with three per cent increase, followed by Salmar with 2,6 per cent, Mowi at 2,3 per cent and Lerøy with 1,7 per cent increase.

Both Carnegie and Pareto Securities will update their estimates on company level after the new proposal.

“We will revert with updates on company level, but compared to our estimates this will be slightly positive for companies with the largest operations in Norway, such as NRS, SALM, NTS and LSG, but also MOWI and GSF will benefit as they have most of their production in Norway,” writes Pareto Securities.

“We will up our production tax expectations from NOK 0.35/kg to NOK 0.40/kg with marginal changes in timing of payments from a cash flow perspective. From a risk/reward point of view, we believe the suggestion is positive for our covered names as it removes a lot of the associated risk in the sector. As such, we see the suggestion positive versus worst-case market expectations, and believe the Norwegian fish farming names should trade up on the news despite final suggestion being marginally higher than our current expectations,” writes Carnegie analyst.


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