Tight cost control inflated Mowi’s Q2 earnings

May be the start of a new trend, according to investment banks Pareto Securities and Sparebank1 Markets.

On Wednesday morning, Mowi presented its quarterly trading update, which shows how harvest volumes and operating results developed in the recently concluded second quarter. And the result was far better than what the analysts had expected and estimated in advance.

“This is driven by marginally higher harvest volumes (+1%), but more importantly stronger margins. Especially the EBIT/kg in Chile and Ireland came in stronger than expected, while the margin in Norway was on the weak side as contribution from consumer products still seems to be limited,” Pareto’s analysts Carl-Emil Kjølås Johannessen and Gard Aarvik wrote in an update to their customers.

The duo believes the trend will continue.

“We expect further operational improvements for the company in H2, but will probably increase 2020e with ~2% due to the stronger Q2 even lower H2 cost especially in Chile. We expect consensus estimates to increase somewhat more as our 2020e currently is ~20% above consensus,” they wrote.

Pareto Securities has a Buy recommendation, target price NOK 205 on Mowi.

Also Sparebank1 Markets were impressed by the Mowi Q2 figures.

“Looking into the regional performance, it comes to light that all regions except Norway beat expectations. Norway was quite weak with an EBIT/kg of EUR1.05, 18% below median consensus of EUR1.28 and worse than the lowest consensus estimate of EUR1.18 in the Infront poll. Consensus expected very weak results from Chile and Canada due to low price in the US and probably little cost improvement. However, Mowi surprised on the upside and reported an EBIT/kg in Canada and Chile of EUR-0.65 and EUR0.80 vs consensus at EUR-0.9 and EUR0.22, respectively,” analyst Christopher Robin Vinter wrote in a report.

“We find the weak results in Norway a bit concerning since costs in the region has been on an increasing trend. We believe the key focus of the 2Q report should be how the cost level in the different regions are developing. However, results for all other regions was strong likely driven by a combination of price and costs, and a might mark the beginning of a positive trend. We do not expect to make any changes to our long term estimates following the trading update,” he added.

Sparebank1 Markets also has a Buy recommendation and a price target at NOK 205 on Mowi.

The Mowi stock price rose 5.6 percent just after the opening of the trade at the Oslo Stock Exchange Wednesday morning.


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