Salmon farming stocks get thumbs down

Aslak Berge

Sparebank1 Markets has downgraded the sector to ‘sell’.

“We believe the market underestimates the price impact of higher volumes. Prices this autumn are likely to remain low for a much longer period than Fishpool and consensus expect, and 2018 will be challenging with close to 8% global volume growth in a market not willing to accommodate more than 2-4% at current prices,” writes analyst Tore A. Tonseth in a sector update.

Knowing him, it is quite unusual to hear such a pessimistic prognosis.

More fish
“Don’t expect a quick recovery in prices this autumn – as happened in 2016. The harvest profile is likely to be very different due to better biological conditions in Norway. In addition to this, you have ~20% YoY ramp-up in Chile. Prices are likely to stay low for a longer period. The market and Fishpool expect a sharp recovery.”

Tonseth predicts a lot more fish in the market in the months to come.

“We have to go back 2014 to find a higher growth rate. Good biology and high smolt placements are the main reasons,” he writes, adding that the market underestimates the price impact of high volumes.

“We have lowered our 2018 EBIT estimates in the 10-20% range for most companies. All pure salmon farmers are downgraded to Sell (Neutral), Neutral maintained for NTS and we continue to have a Buy for AKVA,” he states,  but moderates this forecast by adding:

“We are still long-term bullish on the sector, and there is ‘only’ a 5-10% downside in our new targets, but the market tends to overreact to a change in price expectations, so we should not rule out a larger short-term correction.”


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