Earnings call transcript: Nordic Aqua sees positive EBITDA in Q1 2025

Nordic Aqua Partners reported a marginally positive operating EBITDA of €75,000 in Q1 2025, marking a noteworthy development for the company. Despite a loss after tax of €4.3 million and trailing twelve-month EBITDA of -$17.48 million, the company experienced a 2.05% increase in stock price, closing at €79.6, up from the previous close of €78. The company resumed commercial sales and harvested 99 tonnes of salmon, taking advantage of the 33% growth in the Chinese salmon import market. InvestingPro analysis reveals an impressive gross profit margin of 80.45%, suggesting strong operational efficiency despite current challenges.

Key Takeaways

• Nordic Aqua reported a marginally positive operating EBITDA of €75,000.
• The company resumed commercial sales in Q1 2025.
• Stock price increased by 2.05% post-earnings report.
• The Chinese salmon import market grew by 33% year-on-year.
• A new production strategy focuses on 7-kilo live weight fish.

Company Performance

Nordic Aqua Partners demonstrated resilience in Q1 2025 by returning to commercial sales and reporting a marginally positive operating EBITDA of €75,000. The company continued its strategic focus on the Chinese market, where salmon imports have grown significantly. Despite a loss after tax of €4.3 million, Nordic Aqua’s operational adjustments, including a shift to larger fish production, are aligned with market preferences and are expected to bolster future performance.

Financial Highlights

• Total sales revenue: €2.3 million
• Released cost from stock: €1.7 million (€5.99 per kilo)
• Operating EBIT: -€1.4 million
• Cash at quarter-end: €10 million
• Total assets: €53 million
• Equity ratio: 53% (€81.6 million)

Market Reaction

Following the earnings announcement, Nordic Aqua’s stock price rose by 2.05%, reflecting investor optimism about the company’s operational improvements and market strategies. The stock is currently trading at €79.6, closer to its 52-week low of €70 than its high of €178. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, with technical indicators suggesting oversold conditions. The stock’s negative beta of -0.13 indicates it often moves contrary to broader market trends, potentially offering diversification benefits. Get access to 10+ additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Outlook & Guidance

Nordic Aqua has set an ambitious harvest target of 3,000 tons for 2025. The ongoing construction of its stage two facility is on track, with expectations to support future growth. Additionally, the company is exploring a potential stage three development to increase capacity to 20,000 tons. A secured €13 million short-term credit facility and ongoing negotiations for long-term financing with the Bank of China are set to support these expansion efforts. InvestingPro data shows a healthy current ratio of 3.0 and projects 3.29% revenue growth for FY2025, though analysts note the company’s rapid cash burn rate as a key consideration. Dive deeper into Nordic Aqua’s financial health and growth prospects with InvestingPro’s comprehensive research reports, available for 1,400+ top stocks.

Executive Commentary

"We are back with harvesting very good fish," said Werner Johan Senn, Managing Director, highlighting the company’s successful return to commercial operations. Andreas Torrid, China Managing Director, noted, "The Chinese market for the future looks very positive," emphasizing the strategic importance of the region. CFO Tom Johan Elstrand confirmed financial stability, stating, "We have secured funding through a short-term credit facility."

Risks and Challenges

• Pricing challenges with larger fish could impact profitability.
• Cooling costs in hot climate regions may increase operational expenses.
• Market adaptation and production strategy changes require careful management.
• Dependence on the Chinese market exposes the company to geopolitical risks.
• Securing long-term financing remains a critical need for expansion plans.

Q&A

During the earnings call, analysts inquired about the pricing challenges associated with larger fish and the impact of cooling costs in hot climates. Executives clarified the company’s production strategy and market adaptation efforts, reassuring stakeholders about their approach to addressing these operational challenges.

Full transcript - Nordic Aqua Partners As (NOAP) Q1 2025:

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: Good morning, everyone. Welcome to Nordic Aqua Presentation of First Quarter twenty twenty five. Today, to present, we have, from, China, Andreas Torrid, Managing Director of, the company in China CFO, Tom Johan Elstrand from our Rosslau office. And, myself, Rachna Johan Senn, I sit at the the facility in Gauteng. So the first quarter in twenty twenty five has been a good quarter for the company.

We are back. We have been out of sales during quarters Q3 and Q4 of twenty twenty four due to issues we had with Jasmin. But in first quarter this year, we came back. And we not only came back, we came back with very big fish to harvest and also a good price achievement and good production. In the picture that you can see here in the front, we can see the facility that it was as it is in the stage one and also some construction from stage two, and there are solar panels now on all the roof.

So we are producing, from the solar panels, nearly five megawatts, into the energy consumption of very green energy. We start with highlights. Andreas will come in and talk about markets. I will come back to say about operations and project. CFO, Tom, will take financials, and then we end up with a summary.

So if we go to the highlights, like I mentioned in the introduction, we are back with harvesting very good fish. We have been harvesting 6.2 kilo head on gutted, which is equivalent to 7.5 kilo live weight. So fantastic achievement, we think of ourselves. And this has given us the courage that we have changed the production strategy now so that we say that in the future, we will base the production on seven kilo live weight fish. But, of course, there will be some adaptions.

We have a lot of fish in front of us that we cannot grow all of them up to seven kilos, so there will be a period before we enter into this new strategy. The price achievement and market was very good also in the quarter. We have been able to control adjustment, and operations in general have also been very good. And we have secured funding through a short term credit facility, which also the CFO will come back. But first, I will give the word to Andreas on the market.

Please, Andreas.

Andreas Torrid, Managing Director in China, Nordic Aqua: Thank you, Werner, Ragnar. Yes, we resumed the commercial sales in Q1. We had Q1, reception at the market reentry, which happened in

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: February,

Andreas Torrid, Managing Director in China, Nordic Aqua: and we had a solid price achievement in the quarter. Our distribution of our Nordic Care Atlantic went to our established customers who are then working towards, end channels such as food service being an important one as well as into retail. Our superior share of our Atlantic salmon was of an impressive 99%. And as Rangna mentioned, we are very proud to be able to harvest in the quarter a 6.2 kilo hog salmon made in our fantastic facilities in Gauteng in China, which is then equivalent to 7.5 kilo live weight. And if you look at the graph that we have on the side here, we can see that in last year, in the quarter two when we were in the market, we had an average rate around 4.5 kilos.

We have now done quite an achievement in bringing that up to about six kilos. The average size the average sales price, rather in the quarter was EUR 9.03 per kilo. And we have also benchmarked that sales price a bit to give a context. In Q2 twenty twenty four, we had then the price which was around the same level with a different market back then, but we were then at the 6% above the then what we call back then the Nasdaq index price, which is the export price out of Norway. However, if you look at this quarter, and it’s very important to highlight that the most of our sales came in March, which the market was also then, on a downward trend, But we were 24% above the average that Sitagri index during those weeks were in the market.

So we have benchmarked our prices week for week from mid February to March also on the different weight classes. So we are where we want to be, where we perhaps can do even better. But at least being able to bring it up to the 6.2 kilo hog size is obviously an advantage in a market like China, and we were happy with the 100 or 200 tonnes we sold in the quarter. Leading up to the reentry, we had some thorough marketing testing. We had the consumers doing blind tests among different types of Atlantic salmon for freshness, for flavor, for, texture, quality aspects of a salmon that we know the Chinese consumer care about.

In addition, we did a small scale test through a local market up in Northeast China through wholesales, in order to also see what the reception was. And all these came back very good, and that made us very confident and confirmed that we were ready for the reentry in the middle of middle of February, and we also then distributed in both foodservice and retail. And we still believe and is getting more even compelling, the value proposition we can bring by being a Norwegian company that has basically now producing this 6.2 kilo hog that we did in the in the quarter in the in the local market as something that is attractive, especially for the freshness where we know that the consumers value freshness. It’s something where we are, different from other types of choices Atlantic salmon that is imported, and we know that is something, our customers also appreciate. We also have a very strong, food safety or safety profile in in the sense that we have a controlled environment.

We do not use any antibiotics and so on. That is also a very strong advantage. In addition to a sustainability profile, we are not obviously reliant on air freight of our salmon, and we are, also obviously having a lower, c o two footprint in that regard. And perhaps even more importantly, our way of being agile, being able to adapt to the local market, create unique customer bonds, being in China for China, and also taking part of this growing megatrends of a Chinese consumer being, more receptive, choosing more what is produced in China, and they value this for safety and for quality. And we think that is a trend which is gonna continue to to grow, and we think that is also where we are very well positioned.

In addition to the overall policy framework for China being more self reliant and focused on food security, we can also play a role in that. So overall, we feel we have a compelling value position to grow our Nordic pure Atlantic even further in the local market in foodservice retail. And the Chinese market is now on a really big role. We see that in Q1 this year, there was a whopping 33% year on year increase of imported Atlantic salmon, which is a new record. And and to some extent, the Chinese market is now starting to really, begin in a way.

And we see the drivers being within food service, but also within retail, within the ecommerce landscape, as well as in smaller cities in China, where the adoption of salmon as well as the frequency, we we believe, are increasing. So the growth of the Chinese market, for the future looks very positive, and we think we are in the in the right place at the right time to to to take, to grow further in the market. Furthermore, it’s also market it’s obviously, many different origins want to, have a part of this, and, we have Norway being a market leader, which has, had a very strong year in China, so far. They actually, in q one, increased their market share of 77%. There was a little bit of a quite significant drop from Chile.

But you have all the origins competing in the Chinese market, and they also see the opportunity in this dynamic and growing market at the moment. Lastly, we try to look at categorize the imports of salmon into what we call the European origin, which typically is the Norwegian Faroe and Scottish. These are usually, origins which provide larger fish in China, Six plus, which is sort of been the most sought after, size for the Atlantic salmon against the Chilean and Australian. And what we see from this this graph is that and what also I’ve said earlier that the prices went down, especially in the March, that was also what we saw was the month where we had the most volumes into the market. But on the overall picture, we see that the preference for larger salmon, six plus, will continue to grow, and that’s why we also, as, as Ranga mentioned, have revised our production strategy accordingly to to accommodate to the Chinese market in the best way possible.

Thank you, Rangna.

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: Thank you. And then we will say a few words also about biological production. It’s been very strong again now. I mean, we have continuously had very low mortalities in all batches, which can be shown also on the graph ranging from, yeah, up to 3.5% down to 1.7% for the first batches. The production, we we can say that production has regained again now because when we were having adjustment issues and not able to harvest in q four, especially, had to take the production down and took also down the biomass down as can be seen below.

But now we are ramping up again, and we have had a good production or just over 900 tons. And mainly, it was in March that we really could start accelerating again after the initiatives that were taken against from earlier times. So we went out of the mark out out of the quarter with the 2,800 tons in in biomass. And as I mentioned, we we have changed our production strategy now that we will go for growing larger fish. We can see that it has been a challenge, believed to be a challenge in land based farms to grow large fish.

Main issues have been discussed to be lack of growth and also maturation. But during the time that we were out with adjustment from the market, we we grew the fish to a bigger size, and we could see that our systems worked very well-to-do that. And therefore, we we have now decided to change the production strategy. So during this during second quarter, there there will not be an increase, and it will start gradually in q three. But then from q four and onwards, we will we will see more and more of the large fish that we also see now in in q one that we will come back on those.

But to to start with, we we we need to have all the fish that we have in front of us harvested before we really can implement the new strategy. And as Andreas mentioned us, this is believed to be a benefit also for the market side. Of course, there has been quite much big fish in the market during the first quarter now. But as we have seen in history, there have always been periods where there has been much higher large fish. And during those periods, they are not being superiorly priced, but in average, over time, it has shown that it will and it will come again, we believe.

Of course, we are also continuing to to build out stage two, and the build out of stage two is going according to schedule. You can see some some some pictures here on how it’s going. So we are building four new RAS systems, four new holes. And we put in the eggs last year in q three, and we are on schedule to start harvesting from these batches in q three next year. So the development has been very good.

And as we have said over the past quarters, the total CapEx for stage two is 77,000,000. And we mentioned also when we had issues with adjustment that around 14 of these 77,000,000 are related to improvement CapEx or you could say, combatting adjustment CapEx. So the timeline remains the same that we have had. Of course, stage one is finished. We are building now on stage two and first harvest, as I said, next year.

And then we also have a third stage. So from stage one until we will be able to harvest 8,000 tons when they are both completed. And the stage three, we can take the production up to 20,000 tons, and we will announce specifics about the the stage three during second half this year. So please, Tom, we come now to the financial section.

Tom Johan Elstrand, CFO, Nordic Aqua: Thank you, Ona. In what, has been basically half a quarter of commercial harvesting and and sales and with volumes ramping up through the second half of the quarter into particularly into February and March, we achieved sales revenue of €2,300,000 during the quarter. The released cost from stock was 1,700,000.0, equivalent to €5.99 per kilo. The operating EBITDA, which is, EBITDA adjusted for, fair value, adjustments, came in marginally positive at 75,000, and the operating EBIT at minus 1,400,000.0. The profit and or loss rather for the period, after tax was 4,300,000.0 almost.

Whereof, 2,300,000.0 is unrealized currency loss in consolidating the Chinese entity into euro. Investments, in, predominantly stage two during the quarter was 4,900,000.0, and biomass, 19.7, including 2,200,000.0 in fair value adjustments. Cash at the end of quarter was €10,000,000, and total assets, 53, with an equity ratio of 53% or equivalent to €81,600,000. And as Andreas and Arnagh has mentioned, the harvest volume was 99 tonnes, I don’t get it, plus 99 tonnes of the noncore markets. On the CapEx and funding side, the CapEx cost at two remains at 77,000,000 as previously guided, whereof 22,000,000 has accrued at the end of q one.

On the funding side, we have signed this cooperation agreement with Bank of China, and, also, that would cost the Bank of China expected to participate. This will refinance stage one, and it will finance stage two and also later stage three as well as there’s a working capital facility included in in that agreement. The financing is subject to credit approval, and we are working on the first part of that being working capital facility stage one and stage two. The process is on track, but with five weeks left of q two, we think it’s prudent to say that we expect credit approval to be completed in second half. When the second half, we cannot say at at this point in time.

We are in constant dialogue with Bank of China, and we are optimistic. And as I said, the, process is on track. We also think we are to be prudent, we also have established the short term credit facility of €13,000,000, subsequent to the end of the quarter. It was just before the Easter, which will give us the necessary runway to that until credit from the long term facility can can be drawn. Thank

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: you. Thank you. And before we go to the summary and outlook, I just mentioned that it is possible to raise questions or comments in the dialogue box. And please write them as soon as possible because there is a delay, so of one to two minutes so we can read them before we we end the presentation. But to to sum up, we we we are very happy with the the quarter as we are resuming sales now after being out of the market for two quarters.

And we are also very good very well satisfied with the market reentry and price achievement that we that we met. Of course, as Andreas mentioned, we we will work further to have even better price achievements going forward. We adapted to Jasmine. We have harvested 200 tonnes on a very high average weight. And you can say that biology has been very good as it has been all the time, but the large sizes that we have has given us the comfort to go up on production average size.

And I think that’s a very high quality brand also for for the company being able to achieve that. We have, as Tom mentioned, secured funding, bridge funding, and we have guided previously also that the harvest during 2025 should reach 3,000 tons. We took it somewhat down when we said that we were going to produce the larger fish because the fish being big but not fully harvestable size at the new measures will not be harvest this year but next year. And if we look at the project development, stage two is is on schedule for the first harvest q ’3 next year. So with this, we would like to conclude the presentation.

I’d like to thank you very much for participating. And, Tom, you are responsible for following if any comments or or, questions arise. Okay. And

Tom Johan Elstrand, CFO, Nordic Aqua: Yeah. Yeah. Yes, Olna. Thank you. We have a couple of questions already, so I’ll I’ll start, by reading those.

Perhaps first one, maybe to you. I don’t know. I don’t know. Don’t don’t Yeah. Anyway, the China premium for Norwegian fish is now negative.

How have you experienced the same trend so far in q two, particularly with the harvest of smaller fish again? And could you provide some color into how you think about farming cost in q two and second half compared to q one?

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: Jason, do you ask?

Andreas Torrid, Managing Director in China, Nordic Aqua: I can answer the the first part of that question. I think we have now come come into to q two market, and it’s correct as the person who posted the question that we’ve seen an unusual situation that came in Q1 in terms of the large volumes of six plus, which led to, in some cases, if you look at prices from Norway, that the six plus was even below smaller sizes. And we saw that in the in the in the Chinese market. There was also quite a lot of a lot of supply. When it comes to the the q two development, I don’t think it’s appropriate to to comment too much on that at this stage.

Other than that, we are actively developing the market with our customers. As Rangna said, we are also implementing our new production strategy, which over time will bring us up to this 7.5 live weight sorry, the seven y seven kilo live weight. And I think in that process, we will obviously have some some other a wide variety of sizes, and and we are working with our customers to see how we can, at the best way, market these products and also get a premium if that is when such is possible. You have to remember that towards the Chinese market, usually, the the smaller sizes, three to four, four to five, there’s not much of historically been that on Norwegian origin. That has been Chilean and Tasmanian origin mainly.

So we are in we are sort of in a field of origins, which are which is gathered around those those two also when it comes to the positioning at the moment. But we’re gonna work hard to improve our, positioning and and and, make our value proposition even more compelling. I think it was on the cost there, Ranga. Perhaps you can comment a bit on that.

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: Yeah. I mean, the cost in in in farming is so that, first, you produce the fish, so you have a cost to stock, and that is very related to the volume that you are producing. And the fish that we have been harvesting during Q1 has mainly been produced last half of last year when we did not have a high production. This year, we will ramp up and have some higher production numbers. But of course, during that period, we also took an adjustment on our cost on stock levels in Q4.

But going forward, we expect that production will be higher than it has been through the first quarter. And therefore, we expect costs to come down, but we have not given any guidance on exact numbers on that. So I will not comment on that.

Tom Johan Elstrand, CFO, Nordic Aqua: Thank you. New question. Your production facility is situated in a hot climate region. How are you handling the warm water, and how is this influencing production cost?

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: Of course, when we need to cool the system, it will affect, the cost, but not as much as if we had to fly the fish into this market. There will be some extra kilowatts used. As we could see also, we have green energy now on the roof, and we also have windmills close by and a good solar park next to us. So we are able to source much of the energy as green energy, but still, of course, there’s a cost related to it. And we expect that the cost of of of cooling is significant.

I don’t have the number right in front of me of the cost, but it is a significant cost that we have on, on on cooling, of course.

Tom Johan Elstrand, CFO, Nordic Aqua: Thank you. That is, all questions we we had in. It has been a couple of minutes, and it’s there are no more questions since we started the questions at q and a session, I guess. And so so I don’t know if you should bring it to a close. I’ll leave that to you, Hana.

Werner/Rachna Johan Senn, Managing Director/Presenter, Nordic Aqua: Yes. I mean, we just thank you again for for attending. And if you have any any any questions, please you’re also welcome to to take contact after the presentation. If you sent in some questions before we we could answer them since the delay is here, we will try to follow, up on on on email to those questions. I will just thank you very much for attending.

Thank you.

Tom Johan Elstrand, CFO, Nordic Aqua: Thank you. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.