New Zealand King Salmon's 1HY25 Financial Results: A Mixed Bag
NZK (NZK) Share Update September 2024 Monday 23rd
New Zealand King Salmon Reports Mixed Financial Results for 1HY25
New Zealand King Salmon Investments Limited has released its financial results for the first half of the fiscal year 2025, showing a mixed performance with both positive and negative aspects.
Instant Summary:
- 1HY25 net profit after tax of $6.0m, down from $10.6m in 1HY24.
- Pro-forma EBITDA of $13.5m, up from $10.7m in 1HY24.
- Revenue of $102 million, with 3,362 metric tonnes harvested.
- Balance sheet remains strong with net cash on hand of $32.5m.
- Pro-forma EBITDA guidance range of $26m to $30m for FY25.
Financial Performance Overview
New Zealand King Salmon Investments Limited (NZKS) reported a net profit after tax of $6.0 million for the first half of the fiscal year 2025 (1HY25), a significant drop from the $10.6 million recorded in the same period last year (1HY24). This decline was primarily due to non-cash adjustments related to biological assets and inventory, which resulted in a loss of $3.6 million compared to a gain of $4.1 million in 1HY24.
The company's preferred performance measure, pro-forma EBITDA, showed a positive trend with a profit of $13.5 million, up from $10.7 million in the previous year. This improvement was driven by increased revenue and effective cost management.
Operational Highlights
NZKS harvested 3,362 metric tonnes of salmon during 1HY25, generating a revenue of $102 million. The company continues to focus on optimizing earnings to increase the self-funding component of its Blue Endeavour project. Significant investments in research and development aim to improve fish health outcomes, including vaccine development and thermotolerance work.
The balance sheet remains robust with net cash on hand of $32.5 million. The company forecasts capital expenditures of approximately $14 million for FY25, excluding the Blue Endeavour pilot, which is estimated at $9.6 million.
Blue Endeavour Project
NZKS is making steady progress on its Blue Endeavour project. Baseline monitoring is underway, and the open ocean infrastructure has been ordered with expected delivery in January 2025. A pilot service vessel is under construction and expected to be delivered by September 2025. The fish for the pilot farm are currently being grown out at NZKS' first feeding facility.
Sales and Market Performance
Despite a generally weak global consumer demand landscape, NZKS' premium products have shown resilience. New Zealand sales have grown in the retail channel, while North American demand continues to perform well. The Japanese market saw a slight reduction in volume due to increased prices, but this volume has been redistributed to other markets. The company sees growth opportunities in China and steady performance in the Australian and European markets.
Fish Performance and Sustainability
The second summer of the adapted farming strategy resulted in lower summer mortality, repeating the positive biological performance shown in the previous summer. NZKS continues to invest in R&D, including the construction of a new trial pen at the Ruakaka site. The company also focuses on sustainability, with the operationalization of an ensilage plant that improves circularity by utilizing organic waste streams for biogas and organic fertilizer production.
The mixed financial results reflect both the challenges and opportunities faced by NZKS. The decrease in net profit may concern some investors, but the improvement in pro-forma EBITDA and strong balance sheet are positive indicators. The ongoing investments in R&D and the Blue Endeavour project could drive long-term growth and profitability.
Investor Reaction:
Analysts are likely to have mixed reactions to the results. The decline in net profit may raise concerns, but the strong pro-forma EBITDA and robust balance sheet provide a positive outlook. The company's strategic focus on R&D and sustainability could also be seen as a long-term positive.
Conclusion:
Investors should closely monitor NZKS' progress on the Blue Endeavour project and its ongoing R&D efforts. The company's ability to navigate market challenges and capitalize on growth opportunities will be key to its future success. Stay informed and consider the potential long-term benefits of holding or investing in NZKS.