Earnings Transcript for AUSS.OL - Q4 Fiscal Year 2023

Arne Møgster: And it's a pleasure for me to welcome you to Austevoll's Seafood’s Fourth Quarter Presentation. I would first start by giving you the highlights of the quarter; thereafter, I will take you through the different segments in the group, telling you about the performance and a bit about the status so far this year and from fourth quarter. And Britt Kathrine Drivenes, will take you through more in detail the numbers and then I will end setting by giving our view on the different markets we are operating within. So starting up, I would say that we have had a year marked by obviously, quite good performance of the companies in the North Atlantic in particular on Pelagic. Chile has been performing well. I would say that Austral, Peruvian anchoveta has been marked by an El Niño period, which has made the figures this year tremendously different from last year. I will come back to that later. And we have also have various biological challenges in particular in the West Coast of Norway in the salmon farming. I will come back to that as well. But all in all this quarter, we are delivering a revenue of NOK 8.7 billion and operational EBITDA more or less on the same level as last year on NOK 1.2 billion and an operational EBIT of NOK 804 million including 50% of the EBITDA from Pelagia, you can see that – all in all, the numbers is more or less similar from last quarter – fourth quarter last year. Total EBITDA of NOK 1.4 billion, whereof NOK 1.2 billion is coming from Lerøy and approximately NOK 230 million is coming from our Pelagic operation. I will come back to that later. Looking at the full year, revenue close to NOK 34 billion, up from NOK 31 billion; and operational EBITDA down with approximately NOK 800 million and it's more or less explained by the different performance from our company in Peru Austevoll from 2022 to 2023. Operational EBIT NOK 3.6 billion, total assets of 53. Net interest-bearing up of NOK 6.7 billion and an equity ratio down from 59 to 51, explained a lot by the implementation of the resource taxed. Looking into the result you can see – and including 50% share of Pelagia, you can see that the EBITDA from salmon whitefish more or less on the same level as last year. And the difference is again from Austevoll, explaining the reduction from 2022 to 2023 of NOK 800 million, total EBITDA from the Pelagic activity on NOK 1.3 billion in total. Now looking into our operational overview. Our companies and our activity is dependent on volume. And last year in 2023 we had a lower volume through our group, mainly explained again by Peru. We caught on our own vessel on our own quota of approximately 250,000 tonnes. Next year we are expecting an increase of 170,000 tonnes being close to 430,000 tonnes of owned fish. Last year, we were processing in our Pelagic factories, approximately 1.7 million tonnes in Chile, Peru and in the North Atlantic. Next year we hope to increase that with 200,000 tonnes. We also had a record year in terms of catch on our 10 trollers 76,000 tonnes, less caught compensated by redfish and also saithe, and where in addition to our own catch producing approximately 20,000 tonnes in our whitefish factories. Salmon volume in 2023 was 180,000 tonnes, aiming to increase that to 200,000 tonnes in 2024. Then looking into the different segments, starting up with Peru, and looking at the biomass and also, the quotas going forward and looking into the past. As I told you at the start, it's been a challenging, I would say, fishing situation in Peru due to the El Niño period we have had, I would say, throughout the whole year. Normally, in Peru, there is two seasons a year. The first season in 2023 failed due to warm waters. Second season in 2023, they estimated a biomass of 7.1 million tonnes, which is in line with the historical average the last three years. So, the fish is not disappearing. The distribution of the fish is consists of smaller fish and it's more spread than normal. So, the quota was set at 1.68 million tonne, which was 23% of the total biomass, which normally is a low volume, but it's explained with the El Niño period we had and also that it was a lot of juveniles in the schools of Chile [ph], which make it very challenging. So, of the quota of just below 1.7 million tonnes, 76% were caught. And it's been a challenging, I would say, fishing season. There are a lot of close on due to the inclusion of juveniles in the fishing zones. We caught 86,000 tonnes approximately 72% of our quota and it's down from 110,000 tonnes in 2022. Purchase more or less the same level at 36,000 tonne and our content of high-quality fishmeal was 64% versus 61% the season before. Combined fishmeal and oil yield more or less on the same level as same period last year, 24.1%. And it's fair to say that fishmeal was extremely low during, I would say, both season in 2023. In terms of the expectation for next year, we are increasing our volume expectation, mainly due to the weather forecast is improving. And we are estimating in our papers approximately 2 million tonnes first quota and maybe 2 million tonne second quote. And of course it depends on the research inmates doing now starting up the 18th of February and we are expecting that the quota will be set at the beginning of April. Positive news. In terms of the El Nino is that it's expecting to be coming out to neutral down in April when the catches, is supposed to start. So we are expecting a better condition to catch in Peru going forward compared with what we saw last year. Operation in Chile, we had by the last 15 days in December, we were catching 18,000 tonnes. This was a volume we were purchasing from third party fishermen and caught it with their own vessel by the end of the year. And all in all, we more or less caught the same volume in 2023 as we did in 2022. I would say looking at the graph on the right-hand side, you can see that we have had a steady increase since the bottom in 2011 and are surpassing 800,000 tonnes of total quota in Chile now as an industry. And if you include what we are expecting to purchase and catch with our own vessel for next year, we are aiming to catch -- and produce over 100,000 tonnes during 2024. So I would say, it's a quite good development in Chile, the last few years in terms of both the biomass and also our operation. Looking at the North Atlantic Pelagia quotas, you can see that, it's been quite stable, total quota in the North Atlantic since 2019 until 2024. It's a variation between the species, but all in all, in North Atlantic, quota has been just above 3.5 million tonne. And this is the basis for our activity in Pelagia. The blue whiting season starting up North Sea hovering is up from last year and we are also considerable volume up in the Barents Sea capeline, where we're going to catch a total quota of 200,000 tonnes this year. And then is micro quota down and NGV herring is down by 24% and the Icelandic capelin season seems not to be open this year. And that makes the foundation for Pelagia. Pelagia now is a quite large company holding I would say the whole value chain in the specter of producing fishmeal fish oil producing human consumption products [indiscernible] macro and also sophisticated high-concentrate Omega-3 product. And the aim of Pelagia is to create value out of the raw material we have available. And I would say, it has had a quite good development. Looking at the intake of raw materials for this quarter compared with last quarter is a lower volume and mainly explained by a higher intake in 2022 of the NVG herring. All in all, 2023 fishing for fishmeal and fish oil has been just below 1 million tonnes and it's been a very good year for this segment in the group. Also, looking into the direct human consumption in the quarter. The focus has been on Atlantic macro and also the herring. I would say that, also started good during first quarter this year, a bit higher volume in fourth quarter compared with fourth quarter '22. And all in all, we received a volume which were partly lower than 2022. All in all, we're delivering revenue of 4.2 in fourth quarter. The operational EBITDA is down by NOK 200 million. And we have an operational EBITDA of 440. Lower income from fishmeal and the human consumption activity, but in terms of the Health division is delivering a bit better than last year. Also, looking into full year. Another good year for Pelagia, 1.7 million tonnes and -- NOK 1.7 million in EBITDA and NOK 1.3 million in EBIT more or less on the same level as 2022. When it comes to our salmon and whitefish activity, it's fair to say that we are not 100% satisfied with the performance in particular in the West Coast, have had biological challenges related to jellyfish and also some ISA outbreak and in the end of the year we were also attacked by some jellyfish which increased the mortality more than expected by the end of the year. But all-in-all EBIT of NOK 165 million down from NOK 822 million last year. Slaughter volume 47,000 tonnes whereof 12,000 tonnes is coming from Lerøy Aurora 20,000 tonnes from Lerøy Midt and also approximately from 15,000 tonnes from Lerøy Sjøtroll. Spot price is up NOK 4 quarter-on-quarter and approximately NOK 9 comparing with same quarter last year. Also cost is up -- feed cost up approximately NOK 6 from fourth quarter to 2022. If you look at EBIT per kilo is of course a variation between the different regions, all-in-all on the value chain NOK 16.4. It's up from last year divided by approximately NOK 21 per kilo in Lerøy Aurora, NOK 26 per kilo in Lerøy Midt and just below NOK 1 per kilo in Lerøy Sjotroll. We have done a lot of measures to improve the biological I would say performance in our farming activity and it goes to the whole value chain from genetics and to the raw, to the smalt and also we are looking into shielded production technology and also looking at in how we are treating the sea lice. All of this is going to hopefully bring us to the volume we are supposed to produce based on the AB we are having in the group. Not satisfied with the performance in 2023. Aiming to produce approximately 175,000 tonnes in Norway in 2024, and we're also happy to see that it seems like the challenges we have had in Scotland the latest five quarter to six quarter are now showing improvement into the first quarter. When it comes to the wild catch it's fair to say that we have more or less caught the same volume in fourth quarter. Last quota which is the most profitable as a consequence that the quota has gone down. We have been -- it's the third year the quota has been decreasing now and has been partly compensated the increase of prices. But during fourth quarter this year I would say that price achievement were 11% down comparing with the same quarter last year. So it's been a challenging -- more challenging situation for both our factories for whitefish and also our fishing vessels during whitefish. Now I give the floor to Britt.

Britt Kathrine Drivenes: Thank you, Arne. As usual we start with this table, summing up the raw material intake in the quarter, compared with same quarter in 2022 and also the raw material intake for the full year 2023. And to the right you can also see our estimates for raw material volumes in 2024. However, in Peru this is of course subject to the quotas for each season and subject to cruises and recommendation to the Peruvian government. Arne has gone through the key figures, so I will not repeat too much. What I can say is that we -- the operational EBIT in fourth quarter came in at NOK 804 million more or less in line with NOK 794 million in Q4 2022. I will comment on the income from Joint Venture and associated on the next slide. So to sum-up fourth quarter the net profit was NOK 767 million, up from NOK 405 million. You can see on the box below that the biomass adjustment had quite a big impact on the net result. In Q4 2023, it was positive at NOK 250 million. In Q4 2022, it was negative with NOK 210 million. Earnings per share in the quarter, was NOK 2.1 up from NOK 1.3. However, if we adjust for the biomass adjustment the earnings per share, was NOK 1.6 down from NOK 1.8. Norskott Havbruk and Pelagia are the, two largest Joint Venture in the group. And they are reported separately. We are glad to see that there is a substantial increase in earnings in Norskott Havbruk in fourth quarter 2023, compared with fourth quarter 2022. The company has had a really challenging -- well, I would say from the autumn of 2022, and the whole 2023 and you can see that also in the full year result from the company. And Pelagia, have had a very good year also in 2023 and more or less in line with 2022 a little bit down in fourth quarter compared with fourth quarter in 2022, but for the full year more or less in line. So income from joint venture and associates in the fourth quarter was NOK 111 million down from NOK 140 million for the full year substantially down total NOK 279 million and as you can see impacted by the challenging year in Norskott Havbruk. 2022 the income was NOK 483 million. We also now released our preliminary 2023 figures. And I would like to highlight the turnover and operational EBITDA. And in these figures we have included our 50% share of Pelagia group. And you can see we have increased our revenue from a little bit less than NOK 37 billion up to over NOK 40 billion. And the increase, are coming from Lerøy Seafood Group -- most from Lerøy Seafood Group and also some from Pelagia. And here you can actually see the big impact of that we didn't have a first fishing season in Peru in 2023 and also that El Niño impacted the catch in the south zone of Peru. So we had a decrease in revenue from the -- from Sjøtroll Group of almost NOK 1.6 billion in 2023 compared with 2022. Looking at the operational EBITDA that was NOK 6.9 billion in 2022 and decreased to NOK 6.1 billion in 2023. And again, you can see this is explained by the reduction in the earnings in Sjotroll, which totaled almost up to NOK 850 million in 2023 compared with 2022. Operational EBIT for the full year came in at NOK 3.6 billion, down from NOK 4.8 billion, and again, explained by the challenging year in Peru. We have had an increased interest rate level in 2023, compared with higher net interest-bearing debt that has given us higher net finance cost in 2023 that was minus 592, up from minus 307 in 2022. Profit before tax and fair value adjustment came in at NOK 2.7 billion, or almost NOK 2.8 billion, down from NOK 4.2 billion. And then we come to the tax cost, which we usually don't talk too much about. But in 2023, we have actually talked about tax almost the full year, because the Norwegian government implemented resource rent tax in May in 2023 with the effect from 1st of January 2023. And as you can see, our total tax cost 1.9 is this estimated resource rent tax on aquaculture. This of course impacts our net results. So the net result in 2023 came in at NOK 344 million substantially down from NOK 4.3 billion in 2022. And again, the biomass adjustment that was quite limited in 2023 only NOK 77 million. But of course, the result -- net result in 2022 was impacted by the positive biomass adjustment of almost NOK 1.2 billion. The main driver for Leroy is of course, slaughtered volume of salmon and trout and also the catch volume of whitefish. There has been a decrease of 11% of the slaughtered volume in fourth quarter 2023 compared with the same quarter in 2022. The EBIT per kilo ex wildcatch came in at NOK 16.4 up from NOK 15.6 in Q4 2022. The contract share was 22%. Cost level in second half of 2023 is significantly below the first half of 2023. However, this on inflation brings year-on-year cost increase and only the feed cost has increased by NOK 6 alone. Whitefish volumes are a little bit below same quarter in 2022 12,500 tonnes down from 13,100 tonnes and this is subject to the reduction in the cod quota. Prices decreased by the end of the year and in total down 11% compared to Q4 2022. Revenue in fourth quarter of NOK 8.2 billion, operational EBITDA just below NOK 1.2 billion and operational EBIT of NOK 765 million. We were of course very glad that there was opened a second season in Peru in October. And the raw material intake in fourth quarter came in at 95,000 tonnes a little bit below the 103,000 tonnes in same quarter 2022. The sales volumes are more or less in line with Q4 2022. However, the fishmeal prices are up 18%. The production from second season in 2023 will be mostly be sold in 2024. The revenue in the quarter was NOK 161 million, operational EBIT at 0 and operational EBIT -- EBITDA at 0 and an operational EBIT of minus NOK 44 million. And the company goes into 2024, with an inventory of fishmeal and fish oil of 16,400 tonnes. FoodCorp they have their main season in first half of the year. However, as mentioned in our last quarterly presentation, they went into an agreement to buy additional 19,500 tonnes of horse macro quota from third party. The company caught -- started catching this quota in December and caught 18,000 tonnes before the year end. And most of the raw material went in for production of fishmeal and fish oil and the products will be sold in 2024. So, as normal, the fourth quarter is not giving positive results. There is a revenue of NOK 88 million, and operational EBITDA of minus NOK 69 million and operational EBIT of minus NOK 82 million. However, looking at the full year 2023 FoodCorp has had yet another good year with good earnings and operational EBIT came in at NOK 176 million, a little bit up from NOK 162 million in 2022. Br. Birkeland Farming is located on the West Coast of Norway. They have slaughtered 2200 tonnes of salmon in the fourth quarter, and that is down 30% compared to Q4 2022. The EBIT per kilo came in at NOK 20.3 down from NOK 25.8 in same quarter 2022. There was a -- the revenue in the quarter is impacting by an attack of Yalifish that caused some mortality in the quarter. The company has had a very good 2023. They have slaughtered a lower volume 7,400 tonnes but the EBIT came in at NOK 36 compared to NOK 35 in 2022. The two Pelagic fishing vessels have been in operation in fourth quarter. They have taken -- they have caught their remaining quotas of macro and herring. The price achievement has been good and up from 2022. Looking at the snow crab operation that fishery was stopped 1st of April, because the total Norwegian quota of snow crab was caught at that time. So those vessel has not been in operation since April. The price achievement for snow crab starting to decrease in 2022. This continued into 2023. And -- so this operation has been really challenging over time and given negative results. The revenue in Q4 for the company was NOK 113 million the operational EBITDA was NOK 39 million and the operational EBIT came in at NOK 24 million. Looking at our statement of financial position. The total assets are close to NOK 53 billion up from NOK 48 billion by the end of 2022. We have done investment in tangible fixed assets among others for almost NOK 2 billion in 2023. So of course tangible fixed assets has increased. We have been touching into this inflation trend. That has given us higher prices for our products. But of course, it has also given higher cost on all our input factors in the production. So that means, the biologic asset in sea have a higher cost and also we have higher receivables. And also, our cash position has increased compared to end of 2022. The net interest-bearing debt by the end of the year is NOK 6.7 billion, up from NOK 5.1 billion in 2022, and the increase comes from Leroy Seafood Group, which has built up working capital, and also a substantial increase in Sjotroll Group in Peru, because of a very difficult year for that operation. The equity came in at NOK 27 billion with an equity ratio of 51%. Looking at the cash flow, we take the full year. The cash from operating activities came in at NOK 3.2 billion. And as I mentioned we are -- we have built working capital also in -- by the end of 2023 or in 2023. Tax payable taxes are more or less in line with 2022, the -- NOK739 million in 2023 a little bit down from NOK775 million in 2022. Cash from investing activities came in at NOK1.5 billion. As I mentioned, we have invested in CapEx close to NOK2 billion. And we have also received some dividends and that is -- most of that is coming from Pelagia. Cash from financing activities is minus NOK551 million and both Lerøy Seafood Group and Sjøtroll Seafood has issued new bond loans in the first half of 2023. Lerøy Seafood has issued a bond of NOK1.5 billion and Sjøtroll Seafood issued new bonds of NOK850 million. We started the year with a cash position of NOK4.3 billion and we ended the year with a cash position of almost NOK5.5 billion. And as mentioned to the right here, the Board will recommend to the Annual Shareholders Meeting in 2024, a dividend of NOK4.5 per share.

Arne Møgster: Then I will end this session by giving our view on the different markets we are operating within. And starting off with the fishmeal market. Normally Peru is by far the dominant producer and you can see here it's a reduction of more than 51% in 2023 versus 2022. I would say although quota was a bit lower in Peru last season, I would say it's -- we are satisfied that we were able to catch 76% of the quota, if you look at the parameters of the fish and the temperatures. What's quite interesting to see also is that prices has been -- the gap between high-quality and low-quality meal has been increasing, and of course pushing us to produce more super prime and prime going forward. More or less all the meal is sold and waiting for the next season. Then looking at the main market China, I would say China is more or less at the same stock level this year than it was last year 176,000 tonnes. You can also see that prices is higher than what they are selling in Peru also stimulating to more trade and ending up with some macro pictures on the Chinese import approximately 1.6 million tonnes in 2023, a 10% decrease compared with 2022. And you can see that the participation of Peru is lower now than it was 2022. Same development in fish oil. All-in-all down 20%. Peru is down 85%. So, 14,000 tonnes in Peru produced in whole 2023 versus just below 100,000 tonnes in 2022. And 2022 was also not a high production year. Prices very high in Peru based on the fish oil in Peru and it's more driven by the lack of supply than the demand. Looking into salmon. The expectation for 2024 is an increase of 2.3%. Europe is up at 4.8%, yet to of course to be seen if this will happening. And at least I would say that this expected growth will stimulate also good prices also for 2024. Looking at the price development. You can see that the first two quarters of the year prices remains very high. And you can see the two last quarter, it stabilized also on a lower level. And it seems like this has been stabilized in the last two to three years where you are having variation in price from first half to second half. And also again looking at the demand, when production is coming down I would say that the overseas market has been taking their shares of the production on behalf of EU customers. So all in all, I would say we are not satisfied with the performance we have delivered in the salmon company during 2024, but have done a lot of measures to improve and it's coming from the genetic selection or improving our procedures on our hatchery lower temperature in our small facilities, new farming technology and also changing how we are de-licing the lice in open ocean. So I think some of our measurement should bring us a bit closer to our targets which we initiated 1.5 years ago to approximately 205000 tonnes in 2025. Challenging for the whitefish caught down with 30%, headed down with 20%. I think it's going to be difficult that is going to be compensated by higher prices and it's going to be a higher competition to process and purchase this fish in the whitefish factories. When it comes to South America, we – hopefully, we're aiming to put back the El Niño starting up the new season with normal temperature and we are of course excited what the quota will be and also what the final catches will be from the first season. But it seems like we will have neutral conditions now, after I would say two seasons now with very challenging conditions. In Chile, increase of quota of 15%, which is again following the same path that has been doing the last five years. Also expecting a good raw material for Pelagia more or less on the same level as we had in 2023. So that was all. Thank you for following.

End of Q&A: