Estimates slashed: “The share is traded at a significant premium against comparable companies”

Aslak Berge

Bakkafrost takes a pounding. 

The Faroese fish farming company presented the figures for the third quarter this morning – and they were far below expectations. Major biological challenges, increased mortality and inflated costs ate up most of the results.

Read also: ”A horrible quarter”: Bakkafrost shares tumble

At the same time, the company downgraded the volume guidance for Scotland to 30,000 from 40,000 tonnes for 2021 due to exceptionally high mortality during the quarter.

Downside risk
“In Scotland, we see high mortality in the quarter especially at three places that were affected by PD, AGD and micro-jellyfish,” said CEO Regin Jacobsen, according to TDN Direkt, during today’s quarterly presentation, and at the same time pointed out that 4,000 tons of fish were lost because of these problems.

At half past one on Tuesday, the share price is down 13 per cent.

Arctic Securities believes that there is downside risk in consensus going forward.

”Based on the volume guidance for 2021-2022 and higher costs in Scotland, we see 10-20 per cent downside risk to consensus. The share is traded at a significant premium against comparable companies and we prefer other names in the sector,” wrote Arctic Securities.

In an update from Pareto Securities, the investment bank wrote that they expect to downgrade the estimates for 2021 by about 25 per cent due to the weak third quarter and weaker guiding for the fourth quarter, while they expect that the estimates for 2022 will come down by 5-7 per cent on due to weaker earnings in Scotland.

Long-term history
Sparebank 1 Markets wrote in an update on Tuesday that they consider the quarterly report to be weak overall, and see somewhat lower estimates going forward based on a disappointing volume guide for Scotland and at the same time point to the company’s highlights of risk for biological challenges in Scotland in the third quarter and coming years.

“At the same time, all other things being equal, the long-term history of Bakkafrost will probably not change that much today, as we believe investments in larger smolts will increase harvest volumes in the Faroe Islands and improve operational results in Scotland,” wrote Sparebank 1 Markets.


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