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Nordic Aqua Partners reported a challenging Q4 2023, with a significant operating loss and reduced production. Despite these setbacks, the company is optimistic about future growth, bolstered by technological improvements and a strategic partnership with the Bank of China. The stock price showed a slight decline, reflecting investor caution amid the mixed results. According to InvestingPro data, the company’s financial health score is currently rated as WEAK, with particularly concerning metrics in profitability and cash flow management.
Key Takeaways
- Nordic Aqua reported a revenue of €1.6 million, primarily from downgraded fish sales.
- The company faced an operating EBIT loss of €5.1 million.
- Strategic improvements and a cooperation agreement with the Bank of China aim to support future growth.
- The salmon market in China shows robust demand, benefiting Nordic Aqua’s strategic positioning.
- Planned expansions and technological upgrades are expected to enhance production capacity.
Company Performance
Nordic Aqua’s Q4 2023 results highlighted ongoing challenges, with a revenue of €1.6 million from downgraded fish sales and an operating EBIT loss of €5.1 million. The company resumed commercial harvesting in February 2024, focusing on premium quality fish. InvestingPro analysis reveals the company’s last twelve months EBITDA stands at -$14.45 million, with analysts not anticipating profitability this year. Despite reduced production due to previous challenges, Nordic Aqua is optimistic about its future, supported by its strategic positioning in the Chinese market and technological advancements. For deeper insights into Nordic Aqua’s financial health and future prospects, investors can access comprehensive analysis through InvestingPro’s detailed research reports.
Financial Highlights
- Revenue: €1.6 million from downgraded fish sales
- EBITDA: -€4.4 million
- Operating EBIT: -€5.1 million
- Loss for the period: €1.8 million
- Equity Ratio: 55%
- Biomass at year-end: €16.7 million
Market Reaction
Nordic Aqua’s stock price declined by 1.14% following the earnings release. While the stock has shown strong returns over the past three months according to InvestingPro, current trading metrics suggest it may be overvalued relative to its Fair Value. The stock’s beta of -0.13 indicates it often moves contrary to market trends, potentially offering diversification benefits. With a market capitalization of $167.34 million and a debt-to-equity ratio of 0.87, the company maintains a moderate leverage position despite its operational challenges.
Outlook & Guidance
Nordic Aqua is focused on expanding its production capacity, with plans to increase output from 4,000 to 8,000 tonnes. The first harvest from this expansion is expected in Q3 2026. While the company’s revenue showed significant growth, InvestingPro identifies rapid cash burn as a key concern. The company is also considering a stage three expansion to 20,000 tonnes. In the near term, a limited harvest of around 100 tonnes is expected in Q1 2025, with steady-state production anticipated from June 2025. Investors seeking detailed analysis of Nordic Aqua’s expansion plans and financial projections can access comprehensive research reports through InvestingPro’s platform.
Executive Commentary
"We are back with adjustment-free fish in harvest now in February," said Ragnar, CEO, highlighting the company’s return to premium product offerings. Andreas, Managing Director, emphasized the company’s competitive edge, stating, "We have an unparalleled freshness that is documented with being able to supply to the biggest salmon market in China in Shanghai for around five hours." This focus on freshness and quality positions Nordic Aqua favorably in the growing Chinese salmon market.
Risks and Challenges
- Supply Chain Issues: Potential disruptions could impact production timelines.
- Market Saturation: Increasing competition in the salmon market may pressure prices.
- Macroeconomic Pressures: Economic fluctuations could affect consumer demand in key markets.
- Regulatory Changes: New regulations in China could impact operations and costs.
- Environmental Factors: Changes in environmental conditions could affect fish health and production.
Q&A
During the earnings call, analysts inquired about potential taste issues in the current harvest, which the company confirmed were non-existent. Questions also focused on the financial implications of the Bank of China partnership and the strategic benefits of the company’s premium product positioning in the Chinese market.
Full transcript - Nordic Aqua Partners As (NOAP) Q4 2024:
Ragnar, CEO, Nordic Ark: Good morning everyone. Now we’re going to present the Nordic Ark Q4. To present today, we have from China myself, Ragnar, CEO and Andreas, MD in China and also from Oslo, Tom, CFO. The main news today is that after combating the adjustment for two quarters in Q3 and Q4, we’re finally back now with harvest in February, this first quarter with excellent seven kilo fish of premium quality. So that’s very good news.
Today we’re going through some highlights. I’ll take you through operations and projects, then Andreas will come in and let you know about sales and market. Tom will present the financials and then I’ll just come back briefly with a summary. So if we look at the top headline for highlights, it’s that we are back with commercial harvest in mid February. The biology for the quarter has again been very good in all batches, excellent fish out.
Jasmine has been handled through Q3 and Q4. The harvest that we are at now is a premium seven kilo fish at scale with no signs of maturations. Going forward, as you can see in the picture also, we are progressing with, with the phase two construction. So what you can see here is on the with the roof, you can see that that’s the facility stage one and where we can see the steel bars. And going forward, up to the right is the new facility, which will match the existing facility of another 4,000 tonnes annual production.
Production reconstruction is going on on Chegghol. And in the Q4, we completed the private placement of just around €30,000,000 Just going briefly through operations. We resumed harvest, as I mentioned. We had adjustment to start with in July and had issues through Q3 and Q4, and now we’re back. We did implement a series of measures.
As you can see also in some of the pictures here, we have added technology, protein skimmers, vacuum UV, ozonation, adjusted how we ran our biofilters, added additional water capacity. Recently, we have active carbon to combat adjustment and also we have done some modification on the largest RAS systems that we have in RAS seven and RAS eight. The CapEx of adjustment for both Phase one and two encounters EUR 19,000,000, mostly in Phase two as you will have come to present later. So we are finally dead, as we said, we have combated the adjustment, and we are back with adjustment free fish in the harvest now in February. Look at the biology.
We had no harvest in Q4, but then we started now in Q1. Mortality has been very low throughout all of our production batches. From smalt up to harvest, accumulated mortality of less than three percent in all batches, and that’s percentages of Lambda’s fish. We had we have been up in Q1 to Q3 of last year of around 1,000 tonnes in production. In Q4, production was less since we were not harvesting fish.
So we, on purpose took down the production, but now we’re back and producing for me again. As I mentioned initially, we have harvested seven kilo fish, excellent quality, no maturation. So that’s what we consider ourselves, we have a very good achievement. The expectations for the full year of 2025 is between 3,500, three thousand seven hundred tonnes harvest. Just briefly also mentioned the stage two project, the project to take us from 4,000 tonnes to 8,000 tonnes in harvest.
It’s going as planned. And the first eggs we put in Q3 last year, September. And then we expect the first harvest to be two years later, so Q3 twenty twenty six. So that’s when we can see the full effect from the 8,000 tonnes production. Technical installations in the building that you can see below started in January.
Estimated CapEx for stage two is EUR 77,000,000, including the EUR 14,000,000 that I mentioned just before also with improvement CapEx for Jasmine and New Water additions. Then to sum up the timeline of the build out that we had here at Gaotang in China. We started with stage one facility to construct Q3 twenty twenty one, first harvest Q2 last year. We could say a very successful project in many ways. Production or construction went as planned and also production went as planned two years, as we said, from harvest to first from eggs to first harvest.
So everything went according to changeable with the stage one, at least until we got the adjustment in July, which we see that we have we’re out of now in Q1 this year. For stage two, we started construction last or in Q3 twenty twenty three and we had the first egg input in Q3 last year. For the stage three taking us from 8,000 up to 20,000 tonnes, We still have that within our project but the exact start of the construction is not decided yet. It will be decided during 2025. Now I’ll continue to give the word to our Managing Director in China, Andreas.
Please.
Andreas, Managing Director in China, Nordic Ark: Thank you, Rangan. As Rangan mentioned, we are very excited about resuming commercial harvest and sales now in this quarter. We have a highly motivated sales team. They’re operating in a fast growing Chinese market. We are also receiving very good customer feedback on the fish we are supplying.
In addition, we are also in China for China. We are operating, producing here, selling here, and that is in a place we feel comfortable at given a global setting of uncertainty with regards to tariffs and trade. I will give some highlights and also some information on the market in my part of the presentation. First of all, I want to emphasize that in Q4, although we were handling geospin topics, we were still very much active in the market. We participated at China Fisheries and Seafood Expo in Qingdao, One of the biggest one in China, with an on booth connecting with customers.
We participated at the China International Import Expo in Shanghai in November where we had a chance to interact with further customers and prospects. We had a way of increasing our corporate image. We also signed some agreement in addition to also showing more to the Chinese market and stakeholders the uniqueness of our pioneering project of being the Atlantic scaled up salmon producer with raw systems in China. And we also saw the opportunity to be part of Norway’s commitment toward China in working more on the green shift where we are also a good example. We generated more than almost 600 news reports, which also underlines the general interest in the market for what we are doing here.
As mentioned already, we have market acceptance confirmed by resuming commercial sales. We are now pursuing the customer relationships that we have built up to strengthen them even further. We are also developing into new areas into the market. And overall, we feel very comfortable where we are given the quality and also the unique opportunities when it comes to the Chinese market. In addition, how are we gonna do this?
Well, for some of you, this is a known material, but we feel we have a compelling market, which we call a value proposition to the market. We have an unparalleled freshness that is documented with being able to supply to the biggest salmon market in China in Shanghai for around five hours. We also have a very strong food safety profile of our production. This is a testament to the technology and the management of how we run our farm. We have a ninety nine percent superior grade.
We have had in general less than two percent mortality, which are very strong numbers in addition to no antibiotics. This is something that is also highly valid in the local market. In addition, we focus on sustainability. Being here gives gives us close proximity to the market. We are not reliant on air transport in addition to being agile, being able to seize upon opportunities in the market, building those strong customer relationships, seeing new opportunities, and also being able to adapt ourselves to to how the dynamics of the Chinese market work in terms of, supply and demand.
And we will use this to develop further into the food service, which we know is the dominant sector in China with the focus on big fish, as well as the dynamic growing retail section both with e commerce and also traditional retail. If you take just a broader view on the market, we see that China had another record year last year in terms of import volume, almost 93,000 metric tons of fresh Atlantic salmon. Hog, this is a 15.6 increase year on year. Every month saw a record import volume except for April. This is also showing that the trajectory of the market is picking up since 2019, whereas here the corona years had quite a big impact.
In addition, we also see that the focus from the market is also to develop those pockets where we can see growth happening. And it’s very encouraging to also see that the volumes of the Chinese market is quite consistent throughout the years. Throughout the year, we have a top of 9,200 tons and the lowest month was 6,700. I would like to add that we see the trend now moving into 2025. If you look at the Norwegian export numbers, from the first eight weeks, they’re up 65% year on year.
So it is really a big demand now in the Chinese market, and that’s something we are very excited about by being here and being able to produce and offer the product we have. Quick view at the breakdown of the different origins here and we can see that in China it has a little bit of uniqueness in the sense that all the salmon producing countries are trying to or are exporting to this market. Norway is a market leader, steady around 46% in 2024, a little bit down for 2023. There was a strong year for farrowing and Scottish salmon last year. But it is a market where you have all that basically China salmon producing countries competing here.
Finally, if you look at the imports Atlantic salmon to China throughout the years here, and we are trying to look at, okay, what are the import prices? I mean, divided into the European side, which is basically Norwegian, Faroe, Scottish compared to the Chilean and Australian ones. There is an premium, if you will. There’s a higher price, input price for the European side. They are able to provide bigger salmon.
In addition, we also see that when it comes to the food service sector, there’s also preference for some of these European Norwegian sizes and also origin. And that is also a testament to Norway’s strong performance that they are not only the biggest country when it comes to market share, but they also command some of the higher prices into this China, should we call it traditional big fish market. So with that, I’m summing up the sensor market part to say again, we are back in business here in China. We have an excited and motivated team. We see great opportunities in taking part of this growth that is happening in the market, and we are also very much looking forward to the rest of the year and beyond by providing our premium quality Nordic Pure Atlantic salmon into the exciting Chinese market.
And with that, I will hand over to CFO, Tom Wiecken.
Tom Wiecken, CFO, Nordic Ark: Thank you, Andreas. And, good morning, all. I would say that 2024 was a very active year and fourth quarter was no exception. We had one transaction in equity capital market. We had a transaction and milestones in a debt capital markets both in short term facility and long term facility, which I’ll comment later.
And, the CapEx budgets that we established for the capital raise remains valid and intact today and OpEx has been managed to reflect our activity level and for a cost efficient production going forward I’m not forgetting that we signed a corporation agreement with bank of china in China in November And we signed the rental agreement and enabling a further expansion in stage three up to 20,000 tons the two financial statements are, of course, in a separate report and also, extracts attached here too to this presentation, but some key takeaways. The revenue of €1,600,000 reflects sale of downgraded fish during the quarter. And in the operating expenses, we have included 2,300,000.0, which has been expensed as cost related to unutilized production capacity, cost that would otherwise be capitalized. Rauner commented earlier that we had planned and voluntarily reduced our production in fourth quarter. So, that is why.
Hence, our EBITDA was minus €4,400,000, operating EBIT minus 5.1 and the loss for the period, 1,800,000.
Ragnar, CEO, Nordic Ark: On the
Tom Wiecken, CFO, Nordic Ark: balance sheet and cash flows, you will see that investments of €1,200,000 in the quarter and cash from financing, 23,800,000.0. You’ll also see an increase in the right of use assets and the debt, like, leasing debt, which reflects the extended leasing period of stage one up to thirty plus years. The biomass for the end of the year was 16,700,000.0 including the fair value adjustments of 2.7 and equity ratio of 55%. So on the CapEx and funding, it’s been mentioned stage two as previously announced during Q4 ’70 ’7 million including the 14,000,000 in improvement CapEx and on the funding we repaid the short term facility of 5,800,000.0 in October. We successfully completed the private placement of close to €30,000,000 which will together with the planned debt financing complete the finance of stage two.
And then we signed, last but not least, the cooperation agreement with Bank of China. So, you can see in the picture to the right there. This agreement comprised refinancing of stage one and financing of stage two. Both of these elements are expected to have credit approval during q2 and then at a later stage we’ll address stage three which is also included in the agreement. Yeah, so that’s all from me, handing back to Ramla.
Ragnar, CEO, Nordic Ark: Thank you, Tom. Just before we go to the summary, I will just remind everyone that if you have any comments or questions, you’re welcome to write them into the box where you can do this on TLC. And then, just to sum up, we can say that biology has been good, continuously good throughout the project. We have handled the Q4 in Q4, we handled just an issue in Q3 and Q4, but it led also to no commercial harvest in the second half of last year. We have now resumed harvest in February.
The big and big quality fish. Stage two is going as planned. We completed in Q4 the private placement, but we’re in Europe. And we expect the harvest this year to be between 3,500, three thousand seven hundred tons. So with this, we complete our presentation.
And, as I mentioned, you’re welcome to raise any comments or questions that you should have. Thank you.
Tom Wiecken, CFO, Nordic Ark: And and I have, I have the questions, here. So so, I will, I will read them, so you can participate in answering. We have one question and the first one is, could you give guidance on the Q1 harvest? What harvest profile should we expect in 2025?
Ragnar, CEO, Nordic Ark: Yes. For the first quarter, there will be limited harvest. We start with lower volumes. And then we should expect that we are going closer to normal harvest volumes in Q2. The exact numbers, we don’t ever see exactly what they will be, but they will be considerably lower than than the time going forward.
I would say, some some hundred tons maybe, around that.
Tom Wiecken, CFO, Nordic Ark: And then, do you have any remaining geosmin issue in the 2,232 tonnes standing biomass?
Ragnar, CEO, Nordic Ark: Yes, of course. As long as we are producing on land in the RAS system, there will always be every RAS system in the world has adjustment, but it is under detectable levels when we have purchased the fish and sold through the market. So there’s absolutely no taste of geosmin in our fish that we’re sending out. We have tested it now during two weeks before we started commercial harvesting and there has been absolutely no comment on any taste issues. On the contrary, very good quality.
Tom Wiecken, CFO, Nordic Ark: And then, one I think I can answer myself and that is how much debt is currently committed for remaining phase two capex? And on that, I’ll say that, we, as I said, we have signed the agreement with Bank of China. It is subject to credit approval for stage one and stage two, expected to be in during q2. We have, of course, we are in quite detailed discussions with them and I believe we have a good overview. We haven’t published any figures yet but the gearing is north of 60%, so more than 60% gearing in various tranches.
Yeah, and and then the same and then can you comment on your harvest profile 2025? I guess that is perhaps so I don’t know if you would like to add anything.
Ragnar, CEO, Nordic Ark: Maybe you have something like that. Yes. But we can say that the harvest profile is that during first quarter, there will be somewhat limited harvesting and then from June and going forward there will be at least harvest as a steady state would indicate with the 4,000 tonnes production.
Tom Wiecken, CFO, Nordic Ark: And then we have a question on sales. Can you comment on your price achievement for the first weeks after resuming sales? Should we compare to European or Chilean Australian import?
Andreas, Managing Director in China, Nordic Ark: I think, as Rangna mentioned, we did a very good preparatory work when we now reentered the market in February. We had tasting panels with dozens of consumers. We also had small trials into wholesale market, which all came back with a green light and that gave us a lot of confidence when we reentered and reengaged with prior customers and also attracting new, some new customers along that process. And I think what is important for us to highlight is that we are selling high quality premium Atlantic salmon into the market. And in terms of how we are doing in price achievement, obviously in details, well, that will come back when we do the Q1 report.
But we are satisfied with the reentry being a high quality premium product and we will continue to work hard to even strengthen our position and continue building the brand of Nordic Pure Atlantic in the market. But so far, so good.
Tom Wiecken, CFO, Nordic Ark: Yeah.
Ragnar, CEO, Nordic Ark: Does that complete the list of questions or comments that you have had, Tom?
Tom Wiecken, CFO, Nordic Ark: So far, yes. So, I think, it has been some time now to even with the delay, there has been some time to submit the questions. So, perhaps we are approaching
Ragnar, CEO, Nordic Ark: a close. Sometimes we have seen the delay, so maybe we could just wait for a few seconds more, then then we can go. Okay. Doesn’t seem like there are any more comments. So I’d just like to thank everyone for joining.
Thank you from us all. Thank you.
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