New Zealand King Salmon Announces 1HY25 Financial Results
NZK (NZK) Share Update September 2024 Monday 23rd
New Zealand King Salmon Reports Mixed Financial Results for 1HY25
New Zealand King Salmon Investments Ltd (NZX & ASX: NZK) has announced its financial performance for the six-month period ending 31 July 2024, revealing a mix of positive and negative results.
Instant Summary:
- 1HY25 net profit of $6.0 million, down from $10.6 million in 1HY24.
- 1HY25 pro-forma EBITDA of $13.5 million, up from $10.7 million in 1HY24.
- Sales volumes increased by 5%, from 3,023MT in 1HY24 to 3,178MT in 1HY25.
- Revenues increased by 11%, from $91.6 million in 1HY24 to $101.7 million in 1HY25.
- Mortality costs rose from $7.8 million in 1HY24 to $8.5 million in 1HY25.
- Revised pro-forma EBITDA guidance range of $26 million - $30 million.
Financial Performance Overview
New Zealand King Salmon Investments Ltd reported a net profit of $6.0 million for the first half of the fiscal year 2025 (1HY25), a significant decrease from the $10.6 million net profit recorded in the same period last year (1HY24). Despite the drop in net profit, the company saw an increase in pro-forma EBITDA, which rose to $13.5 million from $10.7 million in 1HY24.
Sales and Revenue Growth
The company experienced a 5% increase in sales volumes, with sales rising from 3,023 metric tons (MT) in 1HY24 to 3,178 MT in 1HY25. This growth in sales volume contributed to an 11% increase in revenues, which went up from $91.6 million in 1HY24 to $101.7 million in 1HY25.
Challenges and Costs
Despite these positive trends, the company faced higher costs, particularly in fish mortality, which increased from $7.8 million in 1HY24 to $8.5 million in 1HY25. This rise in costs has impacted the company's profitability.
Future Outlook
New Zealand King Salmon has revised its earnings guidance for the full year, now expecting a pro-forma EBITDA in the range of $26 million to $30 million, down from the original guidance of $26 million to $32 million provided in March 2024. The company is also adjusting its full-year harvest expectations downward to 6,800MT due to elevated levels of early runting, where fish fail to adapt to seawater.
Strategic Initiatives
The company is taking steps to address these challenges. Initial trials of mitigants show promise, and New Zealand King Salmon is exploring options for pilot trials of freshwater Recirculated Aquaculture Systems (RAS) to improve fish outcomes when adapting to seawater. Additionally, the company is making progress in developing its presence in China, focusing on establishing a premium position for its Regal brand through partnerships with premium customers across multiple channels.
Blue Endeavour Project
Planning for the pilot trial of the Blue Endeavour project is well underway. The company has ordered two pens and associated mooring infrastructure, which will grow up to 500MT at the Blue Endeavour site. The first fish for this pilot farm are currently growing at the Tentburn facility and are expected to be relocated to the nursery farm in Pelorus Sounds around April 2025, and then to Blue Endeavour around October 2025.
The mixed financial results are likely to have a varied impact on New Zealand King Salmon's stock. The increase in revenues and pro-forma EBITDA is a positive sign, indicating strong sales performance. However, the decrease in net profit and rising costs, particularly in fish mortality, could raise concerns among investors. The revised earnings guidance and lowered harvest expectations may also impact investor sentiment.
Investor Reaction:
Analysts are likely to have mixed reactions to the announcement. While the increase in revenues and pro-forma EBITDA is encouraging, the decrease in net profit and rising costs could be seen as red flags. The company's strategic initiatives, such as the Blue Endeavour project and expansion in China, may provide some reassurance to investors about its long-term growth prospects.
Conclusion:
Investors should closely monitor New Zealand King Salmon's progress in addressing the challenges it faces, particularly in fish mortality and early runting. The company's strategic initiatives and revised earnings guidance will be key factors to watch in the coming months. Staying informed about the company's developments will be crucial for making well-informed investment decisions.