Earnings call transcript: Atlantic Sapphire’s Q4 2024 revenue surge and expansion plans

Atlantic Sapphire (TICKER:BLUE), with a market capitalization of $563.6 million, reported significant revenue growth in 2024 compared to the previous year, driven by increased harvest volumes and operational improvements. The company is progressing with its Phase Two expansion, aiming to enhance its position in the premium fish market. The stock has shown remarkable momentum, delivering an 80.5% return over the past year, despite recent price volatility. According to InvestingPro analysis, the company faces some financial health challenges, with 20+ additional insights available to subscribers.

Key Takeaways

• Revenue growth driven by increased harvest volumes in 2024.
• $73 million impairment write-down of fixed assets.
• Ongoing Phase Two expansion in final engineering stages.
• Targeting profitability in the medium term.
• Stock price decreased by 0.22% post-announcement.

Company Performance

Atlantic Sapphire reported a substantial increase in revenues for 2024, attributed to a significant rise in harvest volumes, which reached 4,365 tonnes compared to 1,545 tonnes in 2023. The company also achieved a biomass gain of 5,500 tonnes. These improvements highlight Atlantic Sapphire’s ongoing efforts to optimize its operations and strengthen its market position in land-based salmon farming.

Financial Highlights

• Revenue: Increased significantly year-over-year.
• Harvest volume: 4,365 tonnes in 2024 (vs. 1,545 tonnes in 2023).
• Biomass gain: 5,500 tonnes in 2024.
• Impairment write-down: $73 million on fixed assets.
• Year-end cash position: $29.4 million operating cash + $15.2 million restricted cash.
• Net interest-bearing debt: $32.7 million.
• Capital raised: $95 million through two rounds.

Outlook & Guidance

Atlantic Sapphire is targeting breakeven in the short term and profitability in the medium term. While InvestingPro analysts anticipate sales growth this year, they don’t expect profitability in the immediate term. The company is focused on increasing harvest volume and average fish weight, with Phase Two expansion currently in the final engineering stages. Atlantic Sapphire anticipates further EBITDA improvement and is prepared to adapt to changing tariff environments affecting salmon and feed imports.

Executive Commentary

Pedro Kurar, CEO, emphasized the company’s focus on optimizing operations: "Today, we are in the stage of optimizing phase one by maximizing harvest biomass at high average weight." Gunnar Sinderenberg, CFO, added, "We are expecting projects to be executed and also harvest volume to increase."

Risks and Challenges

• Tariff impacts: Facing 10-20% tariffs on non-Canadian salmon and feed imports.
• Market competition: Increasing competition in the premium fish market.
• Operational risks: Potential challenges in scaling operations during Phase Two expansion.
• Financial risks: Managing net interest-bearing debt and capital expenditures.
• Environmental factors: Maintaining stable water temperatures and low mortality rates.

Atlantic Sapphire’s strategic focus on operational efficiency and market expansion positions it well for future growth, despite current challenges in the market environment.

Full transcript - Atlantic Sapphire As (ASA) Q4 2024:

Pedro Kurar, CEO, Atlantic Sapphire: Good

Gunnar Sinderenberg, CFO, Atlantic Sapphire: afternoon, Europe, Asia. Good morning, America. Welcome to the Atlantic Sapphire presentation after publishing the annual report for 2024. My name is Gunnar Sinderenberg, and I’m the CFO of the company. I’m currently in Oslo.

With me, I have Pedro Kurar, who is the CEO of the company, currently in Miami. I hope the technology works with us being on separate locations, but we believe it should. Together, we will present the company updates. And after the presentation, we will open for a Q and A session. In the Q and A session, please ask your questions in the chat, and please identify yourself with the full name and company.

I will hand the word over to Pedro, who will start the presentation.

Pedro Kurar, CEO, Atlantic Sapphire: Thank you very much, Gunnar. Thank you all of the attendees in this annual report meeting. So let us go to the presentation. I will start presenting our operational performance. As it’s possible to see on the left side of the slide, our mortality has been very low, showing also a reduction tendency in last quarters.

Our current mortality level is much lower than traditional farming, meaning we have been able to give excellent farming condition to our fish, which is extremely important when talking about a RAST facility. One important parameter related with this performance has been the control of temperature. Learning from our past experiences, we had been farming for one and a half years at the targeted levels. That means around four degrees Celsius. During the last three quarters, the main milestone was, firstly, a very successful well maintenance process that allow us to increase the water intake into our system, and in consequence, the water flow.

Also, we made major adjustment to our stocks to be able to fulfill feeding demand according to our feeding capacities. This adjustment process ended in January 25 is the main reason behind the increase in harvest average weights. It’s important also to mention that during the the the end of twenty four, we start an overhauling process, consisting in making a full refurbishment of all of our production units and having as a goal improving efficiency and stability, key to our future ambitions. During ’25, we are considering increasing our filter and skimmer’s capacities as well as increasing even more our water intake. This plan, together with improving with together with improving stability and a cost cutting program, will permit us reaching the mass max potential for phase one, establishing as well a solid base for phase two future expansion.

From q three twenty four, we had been systematically improving our feeding capacity in terms of tons of feed per day. As you know, feeding capacity is a key parameter in RAS system because it defines production capacities. Once we finish executing our main improvement projects, our medium term ambition is being in the level of 33 tons of feed per day. Together with the increase in feeding capacity, we also have increased our harvest. It’s important to mention that while total harvest is relevant, we have also improved a lot our harvest average weight.

Except for q four twenty four quarter, when we made a programmed well main maintenance, net biomass gain has been stable. In term of harvest, in q three twenty four, we finished the harvest of mature fish, explaining the low harvest average weight. In January 25, we finished the biomass adjustment to be able to feed a society our stocks. As consequence, during the last two quarters, we have seen a systematic increase in our average weight at a decent harvest volume. Our plan is continue increasing both harvest and harvest average weight.

During ’24, price were affected by low average weight. However, from last quarter twenty four onwards, and as we have been improving our harvest weight, we have also got access to premium prices. From QC twenty four, we have been systematically increasing our price achievement achievement online with our target of $12 per kilowatt to be reached in the medium term. Price achievement has also been supported by improving our internal filleting capacities as well as filleting yields. Today, % of our fillet production is processed in our facility in Florida.

In June 24, we finished what we call industrialization and systemization of our operation, founded in the knowledge won during previous phases. Today, we are in the stage of optimizing phase one by maximizing harvest biomass at high average weight to improve even more our prices. This process, together with our cost cutting plan, will be the basis to be breakeven in the short term and profitable in the medium term. With this solid base, our ambitions are put in phase two, where together with the operational excellence we must be able to develop, we should maximize our profitability. Phase two is under the final step of engineering, expecting target contraction in the medium term.

Thank you very much. Now our CFO, Gunnar, will explain a little more deeper about the figure financial figures.

Gunnar Sinderenberg, CFO, Atlantic Sapphire: Thank you, Pedro. We have a significant increase in revenues in 2024 compared to 2023. It is driven by the volume harvest, which were 4,365 tonnes in 2024 compared to fifteen forty five tonnes in 2023. Also, the biomass gain increased significantly from ’23 to ’24 to reach 5,500 tonnes in 2024. Low harvest weight gave low sales price, but it increased throughout the year.

Consistent price achievement has been realized on premium fish. And with the increased harvest size and quality throughout the year, the share of premium fish has increased throughout 2024. Biologically, the year has shown good performance with stable operating condition, low mortalities, improved growth per batch, stable water temperature and stable water quality, as Pedro also mentioned. We did record an impairment write down of fixed assets in 2024 of 73,000,000. The main driver for the write down is that the expected cost of completing Phase two, consider inflation since the project was triggered, has increased.

The production volume is unchanged, so increased investment amount leads to an impairment in 2024. As mentioned, revenue increased significantly as the result of harvest volume. Year over year increase in cost is also driven by volume. The cost per kilogram is lower as a result of a larger volume to distribute fixed costs on. SG and A cost increases year over year, primarily driven by the transition of management as well as increased insurance costs.

Going forward, EBITDA is expected to further approach breakeven. It’s driven by increased sales price, which again is driven by fish size and quality. It’s also driven by increased biomass gain and harvest volumes. On maintenance, as Pedro mentioned, we are doing a system overhauling, catching up on backlog of maintenance. This is expected to reduce the need for unplanned maintenance going forward and shifting maintenance work from corrective to preventive maintenance and thus also reducing the level of maintenance required and cost of maintenance.

On the chillers, we continue to use a temporary chiller solution for Phase one, and we will use that solution until a permanent chiller solution for Phase one and two combined is commissioned, which is when Phase two is built. With a commissioned long term solution, we will significantly reduce the chiller cost as both chiller lease and operating costs for chillers will be reduced. On the balance sheet, we see that the end the year ends with $29,400,000 in operating cash plus another $15,200,000 in restricted cash deposits linked to the loan agreement that we have with our main bank. CapEx during 2024 was $8,800,000 mainly related to Phase one upgrade projects, which Pedro also mentioned. The non current assets reduced from $295,000,000 in 2023 to $217,000,000 at the end of twenty twenty four.

And the main explanation is the impairment of $73,000,000 On the debt side, we have net interest bearing debt, not including the restricted cash. So excluding the restricted cash, net interest bearing debt is USD 32,700,000.0. Our long term loan is USD 41,000,000 related to Phase one construction. In addition, we have a convertible loan of $20,000,000 that was raised in October. And we have a revolving credit facility, which we currently have not drawn anything on.

We have $17,400,000 available on the revolving credit facility. On the equity side, we have $202,800,000 in equity. It’s driven by capital raise in 2024 and also accumulated losses. In 2024, we raised first thirty five million dollars in the spring and then another $60,000,000 in the autumn. For financial segments, we have all main activities in The U.

S. Segment. The Danish segment is neglectable with minor activities in the P and L statement. We are, however, looking at opportunities to divest the Danish entity. And then other happening in 2025 is the introduction of tariffs in The U.

S. And at the moment, the tariff situation is somewhat unclear. It has changed frequently during 2025. We believe at the moment, the tariff situation for feed imports are that we have no tariffs on feed imported from Canada, but from all other imported sources of feed, there is 10% to 20% tariffs. There are no domestic salmon feed production in The U.

S. On the salmon side, we have the same tariffs as for feed. So Canadian salmon imported to The U. S. Is has zero tariffs, while other sources of salmon imports has from have from 10% to 20% tariffs.

There are only minor domestic production of salmon in The U. S. So Atlantic Safford, we are monitoring the situation closely and adapting our sourcing of feed and other ingredients from where it is financially beneficial at all times. At the moment, we buy the feed from Canadian suppliers. We will now switch to the Q and A session.

So please raise your questions in the chat. We have a question from Alex Alkne, DNB Markets. What do you expect the CapEx to be for 2025? And how much working capital buildup do you expect? We are not guiding on these KPIs.

So I’m not going into details on these things. We are expecting projects to be executed and also harvest volume to increase and also biomass to increase. And I’m not going to go into details on those KPIs. I do see a lot of anonymous questions. I’m going to disregard that.

So please enter your name and company if you want a question answered. We have one question from Espen Schirning. What is the main reason why head on gutted increases from 2.2 to 3.1 in March? I will leave that to you, Pedro, to comment on the increase in harvest waste weights. I assume from 2.2 is Dan referred to in January and 3.1 is March.

’2 point ’2 is not January, yes.

Pedro Kurar, CEO, Atlantic Sapphire: Thank you, Gunnar. Well, first, important is to mention that since we arrived to the company with Gunnar last year, our first main focus was increasing average weight. We were harvesting at a very low average weight during twenty fourth, and we made everything to increase our average weight. First, because we are able to achieve premium prices, but also because of the quality and the yield lean to fill it is improved as as we are able to increase the average weight. In January, we finished to make all the biomass adjustment to be able to feed a society our stock.

And as a consequence of that, from January to March, we increased systematically our average weight achieving 3.1 kilos hog in March, which is, by the way, the minimum average way we should have in the short term.

Gunnar Sinderenberg, CFO, Atlantic Sapphire: Can we also mention something about the developments beyond March. We are expecting that the average weight is increasing further from March levels. We’re not specifying the number or guiding on size, but it is expected to increase further from the March size. Then we have another question from the same person. What is the value of the Danish plant?

And by value, I can comment on the book value. This plant is written down to zero. So it has no or minimal value in our financial accounts in the balance sheet. There are no further questions on the Q and A. I will allow another few minutes for Q and A to come in, if there are anyone.

Does not seem to be any further questions. We are always open for receiving questions. So please contact us if you have any questions on investorrelationsatlanicsatphire dot com, and we will reply to the questions we can reply to. There is There is one question here from Ruchery of IntraFish. It says, will the Elsani invoice from Novomar be paid?

I have no further comments to that except that we are trying to get all invoices paid. With that, I think we will end this session. As I said, please, if you have any further questions, send us an e mail on investorrelations.@atlanticsapphire.com. Thank you all for attending this presentation and Q and A session. We will revert with Q first half reporting in August.

So thank you all for your attention.

Pedro Kurar, CEO, Atlantic Sapphire: Thank you very much.

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