King Salmon record profit, but heat is on
A RECORD $15.7 million firsthalf profit for King Salmon has been soured by a secondhalf profit warning, as sea temperatures well above average are expected to adversely affect salmon survival rates.
Revenue for the half to December increased from $63.6 million to $87.6 million, earnings before interest and tax rose from $16.1 million to $24.3 million and aftertax profit was up from $8.7 million to $15.7 million.
However, King Salmon has estimated secondhalf profitability is expected to be about $13 million to $14.5 million lower than the $15.7 million result — a range of $1.2 million$2.7 million.
This would be due to lower sales volumes, a deacceleration of harvesting, increased fish mortality and increasing feed costs, the company said.
King Salmon shares, up 46% on a year ago, eased down 4% on yesterday’s news, trading at about $1.91.
King Salmon’s chairman, John Ryder, said favourable growing conditions and strong demand for its premium King salmon products enabled the company to deliver additional volumes.
However, he cautioned the situation for secondhalf trading had become more challenging.
‘‘The extraordinarily hot summer has impacted the survival rates of our King salmon, and this will be a principal factor behind an anticipated reduction in profits for the second half,’’ Mr Ryder warned.
King Salmon sales were up 29%, to 4392 tonnes, 2294 tonnes being sold in New Zealand, up 13%, and a 70% gain in North American markets, where tonnage rose to 1158 tonnes.
Average prices per kilogram rose from $18.70 a year ago to $20.
King Salmon’s biomass at the end of December was up 9%,
with a total 6684 tonnes of salmon in its pens.
The company’s aquaculture team was actively preparing the salmon farms in anticipation of the warmer summer months, which this year have had wellaboveaverage water temperatures.
‘‘Our recently commissioned higherflow sites have lessened the impact of the sustained heat, although, like many other farmers on land and in the sea, we have had associated performance and survival challenges,’’ Mr Ryder said.
He said because of the temperature issue, he expected growth in sales volumes would be affected during the secondhalf trading, and into fullyear 2019.
King Salmon would update the market in detail after summer was over, he said.
‘‘Including an update on our progress towards a longterm solution to combat the risk of increasing sea temperatures,’’ he said.
For the half, King Salmon increased its cash and equivalents from $10.6 million to $15.5 million on a year ago, and borrowings from the BNZ are unchanged, at $10 million drawn from a $30 million facility.
A fortnight ago, King Salmon said it would continue to push for more of its salmon farms in the Marlborough Sounds to be moved, following a report by an independent panel recommending to the Government that three of the six farms be relocated, The New Zealand Herald reported.
The independent panel released the report to the previous National government in July 2017, following public hearings in April and May last year.
Fisheries Minister Stuart Nash said he was ‘‘some months’’ away from making a decision, and released the report to enable the people and groups who made submissions to study it while he considered the next step.
Mr Ryder said yesterday: ‘‘The panel recognised the ‘distinct environmental advantages’ of higherflow sites, as well as the positive social and economic outcomes.’’