Scottish Salmon Company announces growth driven by higher volume and sales

Aslak Berge

The Scottish Salmon Company’s share price has risen 16 per cent this year, putting it ahead of the competition.

In a financial update after the end of the first quarter, the company stated that it has achieved an EBIT before fair value adjustment of biomass of GBP 15.3 million. This corresponds to a slight decrease from the same period last year.

Net operating revenues in the quarter amounted to GBP 53.5 million after a harvest volume of 8,725 tonnes of salmon.

Chart: Infront

During the first quarter, the Scots opened an upgraded harvest plant in the south of the region and investedthe freshwater plants, added the update. Location optimization in Loch Fyne resulted in increased production of 1,600 tonnes of salmon, which will be harvested early in 2021.

Re-guided volume for 2019 is increased to 33,000 tonnes due to strong biological performance in Q1, with forecast organic growth of around 7% and a target production volume in excess of 45,000 tonnes by 2025.

In a separate stock exchange announcement on Monday night, the company stated that CFO Fiona Larkin will leave the company on October 1 for a job outside the seafood industry.

Yesterday, the SSC emailed SalmonBusiness with confirmation that it had salmon mortalities due to an algae bloom.

In a financial bulletin sent yesterday evening, SpareBank 1 Markets’ salmon analyst Tore Tønseth reiterated a BUY option on the salmon farmer.

“The Scottish Salmon Company (SSC) continues to deliver strong results. SSC beats our operational EBIT forecast with 37% (40% vs. consensus) in the first quarter, primarily driven up by lower cost (-5%, +15% EBIT impact) and more volume (19%). SSC also upgrades its 2019 volume forecast with 4.8% due to good biological performance. Operational EBIT ended at GBP 1.76/kg or NOK 19.7/kg, in line with first quarter 2018 – but this is without the 20-30 pence help related to change in accounting practice,” he wrote.

“The SSC share has doubled in value since we initiate coverage with a Buy recommendation a year ago, but there should be more potential here. We have lifted our 2019 EPS with 10% after this report, where approx. half of it is related to more volume and the rest is lower production cost. Based on our updated estimates the SSC share trades at 7.3x P/E 2019 (salmon price @ NOK 60.5/kg) and an EV/kg at only 107x. As a comparison, most Norwegian peers are in the P/E 10-15x range and with an EV/kg 2-3x higher. We lift our target to NOK 24 (20) and reiterate our Buy recommendation. Our target implies a P/E of 9.7x 2019,” he concluded.


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