Pareto Securities increases SSC estimate by 20% after extraordinary quarterly results

Beat estimates and increased volume guiding.

“The Scottish Salmon Company just reported its best ever financial quarter with record high margins/kg and total EBIT. SSC harvested 8.6k tonnes in Q2, achieving a margin of GBP 2.3/kg (NOK 25.4/kg) giving an EBIT adj. of GBP 20.1m – all well above our estimate,” wrote Pareto analyst Carl-Emil Kjølås Johannessen in a email to their customers.

While several of its competitors have struggled with a warm summer, growth, lice and disease, SSC increased production expectations for the year as a whole.

“The company states that higher harvest weights, improved operational efficiency and increased product diversification combined with biological improvements helped yield the strong result in the quarter. In the report, SSC also increase its volume guiding for 2018 to 28k tonnes from previous 26.5k tonnes,” said Kjølås Johannessen.

His earnings estimates rose sharply after today’s report.

“After the highly impressive report, we expect to increase our estimates by around 20% for the current year and also to make positive estimate revisions longer term. We have a BUY recommendation with a TP of NOK 15 (EUR 1.5) for SSC.”

Tore A. Tønseth from competitors, Sparebank1 Markets, noted that operating profit was 82-86 percent higher than expected.

“The good results are primarily boosted by much higher volumes, SSC harvested 8.6kt (gw) in the quarter, 59% higher than our 5.4kt estimate, but underlying EBIT/kg is still very good at GBP 2.33 (NOK 25.3), 14% above our GBP 2.04 forecast – driven up by lower than expected cost and slightly better prices,”he commented.

“Our 2018 EBIT estimate have to be increased with around 10% after this report. SSC sees 6% more volume and the second quarter results were 14% better on EBIT/kg level. We will review our NOK 15 target price and is likely to reiterate our Buy recommendation.»


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