Earnings call transcript: Proximar Seafood’s Q1 2025 results show strong growth

Proximar Seafood reported a significant increase in revenue for the first quarter of 2025, with earnings results highlighting a robust performance in the Japanese salmon market. According to InvestingPro analysis, the company’s overall financial health score remains WEAK, with particular challenges in profitability and cash flow metrics. Proximar’s stock saw a slight increase of 0.59% following the announcement, reflecting cautious optimism among investors despite these underlying challenges. InvestingPro identifies several key factors affecting the company’s performance, with 10+ additional insights available to subscribers.

Key Takeaways

• Revenue for Q1 2025 was approximately nine times higher than the previous quarter.
• The company reported a net loss of 58.5 million NOK after tax.
• Proximar’s stock price increased by 0.59% following the earnings call.
• The company harvested 322 tons of salmon, with a 99.5% superior-grade quality.
• Proximar plans to fully utilize its production facility by 2027.

Company Performance

Proximar Seafood demonstrated significant revenue growth in Q1 2025 compared to the previous quarter, driven by strong demand in the Japanese market. The company’s unique local production model in Japan provides a competitive advantage, particularly in transportation costs. Despite a net loss, Proximar’s operational metrics, such as a high survival rate and premium pricing for larger fish, underscore its strong competitive position.

Financial Highlights

• Revenue: Approximately nine times higher than the previous quarter.
• Adjusted EBITDA: -13.2 million NOK.
• Net Loss: 56.3 million NOK before tax, 58.5 million NOK after tax.
• Total Assets: Approximately 1.6 billion SEK, with 89% in long-term fixed assets.
• Equity: Approximately 325 million NOK.

Earnings vs. Forecast

The earnings call did not provide specific EPS and revenue forecasts, but the substantial revenue increase and operational improvements were notable. The company’s strategic focus on high-quality production and market expansion contributed positively to its financial performance.

Market Reaction

Proximar’s stock price increased by 0.59% following the earnings release. The stock’s movement reflects investor confidence in the company’s growth trajectory, despite the reported net loss. With a beta of -0.61, the stock typically moves inversely to the market, offering potential diversification benefits. Trading at $0.33, the stock sits between its 52-week range of $0.27 to $0.42, with InvestingPro analysis suggesting the stock is currently fairly valued based on our proprietary Fair Value model.

Outlook & Guidance

Looking ahead, Proximar plans to produce between 3,000 and 3,500 tons of salmon in 2025, with approximately 750 tons expected in the first half. Analysts tracked by InvestingPro project impressive revenue growth of 99.61% for FY2025, though they don’t anticipate profitability this year. The company anticipates EBITDA improvements, with expectations to break even in Q2. Full facility utilization is targeted for 2027, with gradual production recovery expected in the second half of 2025. Get access to detailed growth projections and expert analysis through our comprehensive Pro Research Reports.

Executive Commentary

CEO Joakim Nielsen expressed confidence in the company’s long-term prospects, stating, "The long-term fundamentals look very strong and encouraging." He also highlighted the strong demand and price achievements, emphasizing, "The demand is strong, and we see good price achievement."

Risks and Challenges

• Delayed biofilter repairs, expected to complete in June, could impact production.
• The company’s net loss highlights ongoing financial pressures.
• Market competition and potential supply chain disruptions remain concerns.
• The need to address working capital requirements could affect liquidity.

Q&A

During the earnings call, analysts inquired about Proximar’s focus on domestic food production in Japan and the ongoing insurance claim for biofilter repairs. Executives confirmed efforts to address working capital needs and emphasized the company’s strong market position and operational resilience.

Full transcript - Proximar Seafood AS (PROXI) Q1 2025:

Ulrich Stan Willemsen, CFO, Proximar Seafood: A very good Friday morning to you all and welcome to the presentation of the First quarter twenty twenty five for Proximar Seafood. The presentation will be given by CEO Joakim Nielsen in Japan and myself, CFO Ulrich Stan Willemsen in Norway. We start by addressing the highlights of the quarter before giving you an update on the sales and marketing efforts. We will then share the status of the production, followed by revisiting our business case and going through the financial summary. Finally, we will share our outlook for 2025 before summing up.

And with that, I’d like to hand it over to Joakim in Yokohama. Joakim?

Joakim Nielsen, CEO, Proximar Seafood: Thank you, Oluka, and good morning. Through the first quarter, Prozkumar harvested on a weekly basis in total three twenty two tons HOG for the first three months. We continue to see impressive 99.5% Superior graded fish, which is outstanding and very encouraging as we now look forward. The average harvest weight was 3.1 kilograms HOG, which is below our target. And the average weight is impacted by the restricted feeding regime and suboptimal production conditions as communicated previously following the biofilter incidents in the fourth quarter of twenty twenty four.

As we’re now harvesting fish below standard market size, this is also impacting the average price achievement negatively. And due to this, our average price achievement was 97 per kilogram for the first quarter. But it’s also important to mention that if we look at the market size fish, which is above three kilograms HOG, we continue to see strong price achievement, averaging 118 per kilogram. It’s also a great pride that we can find Fuji Atlantic salmon at several high end restaurants and hotels in Japan and now also in Taiwan, which is very valuable for our branding and sales strategy going forward. When it comes to finance, we secured additional working capital financing during the first quarter, addressing the requirements communicated in our fourth quarter report in February.

Unfortunately, the repair works of the biofilters are some weeks behind schedule and are expected to be finished in a few weeks from now, meaning that we, in June, will finally be bringing the facility back to full utilization. The reduced feeding in our grow out impacts the biomass growth negatively, which should have been higher if full feeding was permitted. However, we are on track when considering the number of fish looking at the harvest this year and for 2026, and we keep inserting batches on a monthly basis, and we still continue with a high number of eggs compared to our production plan to have adequate buffer. At the end of the quarter, we were 63 employees, meaning that we are more or less fully staffed. And as I’ve said before, our team is doing a fantastic job and are highly dedicated to deliver on our targets going forward.

The Japanese market consumption of Atlantic salmon remains stable, although we have seen some variations following the sharp price increases in the past years, but we are now also seeing that demand is coming back. And we also expect the long term demand growth to continue going forward. Although the prices for Atlantic salmon have come down, the transportation cost to Japan remains stable, demonstrating the strong competitive advantage of Proximar’s business model by producing locally here in Japan. We also see this in our sales and price achievement, confirming one of the most important aspects of Proximar’s business model. As said, the average price achievement is impacted by the share of smaller fish.

When we look at the three kilogram and above, we are receiving premium prices at levels around NOK 180 per kilogram, which is net price to Proximar, and the demand is far above what we can deliver at present. This makes us optimistic when looking forward, when we now can stabilize our production and get back on track in terms of harvest sizes. The average price achievement for all fish is impacted by the large share of smaller fish dragging the average price achievement down to approximately NOK100 per kilogram. The average harvest weight so far is 2.8 kilograms HOG, which is well below our production plan, but for the reason of reduced feeding. And this is also why we are confident that we will get back to our targets.

We’re now in a situation where we need to free up space to avoid impact on later batches and production. So we therefore also need to keep harvesting. So postponing harvest to gain extra weight is not a good long term solution as we see it now. Until last week, we have harvested approximately four fifty tons HOG since starting our first harvest in September 2024, and we keep continue to see 99.5% superior grade, which is really outstanding. When it comes to the sharp price drop for the market of Atlantic salmon that we’ve seen recently, this is primarily affecting us when looking at the fish below three kilograms.

Looking at the market size fish, we see continuous stable prices in the market. During the quarter, we have been harvesting weekly and we’ll continue doing so through 2025 with increasing volumes from June and onwards. In terms of demand, here in the Japanese market, our supply is now the bottleneck. And despite this, we’ve also made our first exports to Taiwan in March, not for the reason of low demand in Japan, but to build the brand and demand for the future outside of Japan, which is also in line with our strategy. It was therefore a major milestone to have the first export contract in place in to the Taiwanese market in March, also proving the interest for our fish and natur activity outside of Japan.

We’ve always planned to develop export of some volumes to build demand, especially when considering future growth, but also to diversify and build robustness. Also, I’m proud to say that Fuji Atlantic salmon is now being served under Osaka Expo by Sushiro, one of the big sushi chains here in Japan. As we have shown in many of our previous presentations, Proxima and Fuji Atlantic salmon is getting strong attention in Japan, which is part of our sales and marketing strategy. The media exposure has continued, and we are just recently on nationwide broadcast in Japan. And we also received very strong interest at the event in Taiwan, marking the first sales, with more than 100 guests from the high end Horeca market and 30 media channels participating, including national TV.

And we will, going forward, also continue to build our visibility in the market, attracting consumer awareness and demand for Fuji Atlantic salmon. Touching upon production, we continue to see stable conditions and good water quality in the facility. The survival rate is also well above 98%, which also confirms the system performance. And the issues we are facing in terms of lower growth and consequently harvest volumes are directly related to the lower feeding, which also makes us encouraged looking forward as we now get back to full feeding capacity in June with all models in operation. And we are therefore also expecting growth rates to pick up accordingly.

What we’ve seen from our production is that the fish grows according to plan when the feeding is provided as planned. Therefore, we also expect growth to pick up and gradually get back to our target harvest weights. Although ideally, we should perhaps postpone or harvest by a month or so to reverse the trend. However, the bottleneck is now the capacity in the system. We will therefore be required to continue harvesting below ideal harvest weight to free up space and capacity for the next batches, also to secure future targets.

But to the extent possible, we will hold as many fish back. But again, we have a capacity constraint, which is part of what we have to take into consideration going forward. There’s no doubt that the biofilters has set us back in 2025 and will impact the volumes this year, but we also see that we will gradually be improving through second half of twenty twenty five. We have approximately 1,000,000 fish for harvest in 2026. And it’s also therefore important that we optimize to reach our targets for the next year.

Having said that, we have approximately the same number scheduled for harvest this year. But again, for 2025, the average harvest weights will be below the production plan. We are receiving compensation for the repairs of the biofilters from insurance. And we have also started the process to claim for business interruption and losses related to these events. I will now hand over the word to Ulkesian to touch upon the market prices in Japan and also the financials.

Ulrich Stan Willemsen, CFO, Proximar Seafood: Thank you, Joakim. Many of you have seen this slide before where we assess the updated cost picture for an importer of Atlantic salmon into Japan. This is important, as this cost picture represents a benchmark for the prices that can be expected for Proximar when selling our Fuji Atlantic salmon in Japan. There are three components to this: the actual import price, associated import tax, and finally local handling charges. This benchmark has been consistently above NOK 110 per kilo over the last three years, as can be seen in this graph.

The prices have remained solid also so far in 2025, albeit easing somewhat throughout the quarter. Now let’s move over to looking at the financial figures. And then let me start by saying that we still report on a relatively simple format since we have modest harvesting still. We therefore don’t report any figures per kilo yet, but we plan to do so later in 2025 as the company ramps up its harvesting and sales. Then looking at the P and L, we had revenues of about million in the quarter, almost nine times higher than the last quarter when we initiated our sales.

When correcting for fair value, the adjusted EBITDA in the quarter was minus 13,200,000.0. The majority of the net financials of CHF 17,500,000.0 related to interest expenses. And we are then in total reporting a loss of 56,300,000.0 before tax in the quarter and SEK58.5 million after tax. These figures are then unadjusted. Looking at the balance sheet, we held assets of approximately SEK1.6 billion, where 89% were fixed long term assets.

The equity stood at just under NOK $325,000,000. Almost all of the liabilities are now current and process is ongoing for refinancing. Adding on to the additional working capital that was secured in the first quarter that Joakim has already mentioned, We have also secured another SEK22 million for the same purpose now in April. Then let’s move over to the outlook for 2025. We remain optimistic about what will be our first full year of operations with equipment installation completed.

The long term outlook remains intact, demonstrated by good fish health and strong price achievement. When it comes to the insurance case following the biofilter incidents, we are now starting to receive payouts for the repair costs in April and expect full cost recovery less the deductible money. We are now proceeding to another relevant part of our insurance, being the business interruption insurance. This is where we will claim for compensation for the operational losses that Proximar has had following the biofilter incidents. We will report progress on this as we move along.

Finally, we remain on track for fuel utilization of the facility in 2027. Now regarding expectations for 2025, we are guiding on production for the first half year of seven fifty tonnes approximately. And for the full year, we expect to harvest between 3,000 to 3,300 tonnes FOG. When it comes to the financials, we expect the EBITDA to improve throughout the year and expect the second quarter to come in around zero. We will give a full year guidance for the EBITDA in Q2 when we have some better visibility.

And with that, I’ll hand it back again to Joakim for the summary.

Joakim Nielsen, CEO, Proximar Seafood: Thank you, Olkessen. The short term challenges aside, which as described earlier, are related to the biofilters and feeding, the long term fundamentals look very strong and encouraging. We see good water quality and capacity in the facility and we’re therefore also confident looking ahead. The fish health and survival rates also confirm this and even more clearly evidenced by the ninety nine point five percent superior graded fish. The demand is strong, and we see good price achievement, demonstrating the key in Proximar’s business model, a significant cost advantage of local production.

With the grow out back to full utilization in a short time from now, we can finally also get back to normal production. Although it is not a quick fix to regain target harvest weights, we will gradually see this recovering through second half of this year. We have a lot of fish coming out in second half. We’re now also working to make sure that we are back on track for 2026 in terms of harvest sizes. We know the number of fish for harvest next year.

Now the focus is to get back on track, get the normal growth curves up as we have seen in the first batches. And with these words, I will conclude the presentation and we’ll open up for questions.

Ulrich Stan Willemsen, CFO, Proximar Seafood: Yes, hello. We have already received a question that I’ll put forward for Joachim. Do you believe that Japan and its consumers have further prioritized the focus for domestic food production in response to the recent shifts in the global trade environment?

Joakim Nielsen, CEO, Proximar Seafood: Yes. I think, generally speaking, this has become more and more focused from the authorities and also the Japanese consumers, we see that the world has become more fragile already since 2015. This has been important for us to or an important part of why we have been so positively received in Japan. And I think the last couple of years with COVID and also geopolitical situation and now also the tariff situation just puts increased the focus on self sufficiency, where Japan is on the lowest by the amongst the G7 nations. And for the consumers, that could be also one aspect.

But I think when we look at the consumers, the main consideration, which we receive in terms of feedback is the freshness of our product.

Ulrich Stan Willemsen, CFO, Proximar Seafood: Yes. Thank you very much. Another question regarding the insurance and then the part of the insurance, which relates to business interruption that was mentioned in the presentation. Could you explain how the claim for business interruption will look? Will you estimate the volume loss plus the loss from early harvesting and make the full claim for lost revenue from this?

How do you expect your insurance company to respond?

Joakim Nielsen, CEO, Proximar Seafood: I will not go into the details, but this is an ongoing discussion we have with the insurance company and our insurance broker. We have already discussed this previously. So far, we have been focusing on the repairs for claiming the cost of repairs. And as we proceed, we will now start also working together with the insurance company on the claims for a business interruption. And then we’ll have to see how that develops in terms of time schedule and also the amounts.

Ulrich Stan Willemsen, CFO, Proximar Seafood: Good. Then it’s the final question, at least so far. And just let me remind you that you can, of course, at any time send questions to us via email that we will answer you either after this call or later on. So the last question, Joakim, how is the liquidity and financing considering the delayed ramp up?

Joakim Nielsen, CEO, Proximar Seafood: As we mentioned in the our fourth quarter presentation, we had a working capital requirement, which we have addressed and successfully funded. And we are now heading into larger sales in the coming months. So that’s already addressed in terms of working capital.

Ulrich Stan Willemsen, CFO, Proximar Seafood: Okay. Then there were no further questions as far as we can see. So then let me remind you about our next reporting that will be the production update from the second quarter, which we will release in early July. And then we will have our second quarter presentation on the August 22. So with that, I think we can conclude.

Wish you all a good Friday and of course, happy National Day to you all tomorrow. Thank you for now and goodbye.

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