New Zealand King Salmon Investments Limited Analysis

Overview

New Zealand King Salmon is the world's largest aquaculture producer of King salmon, supplying salmon under three key brands: Ora King, Regal and Southern Ocean. We own and operate eight seafarms in the Marlborough Sounds, harvesting and processing more than 7,000 MT of King salmon a year.

Three new sea farms consented in 2014 are expected to enable the company to approximately double annual production over time. NZ King Salmon controls all elements of the value chain from breeding and growing to harvesting and processing, and we have been selling salmon to consumers and chefs for more than 30 years.

The New Zealand salmon farming industry has been recognised as a global leader in sustainable seafood following New Zealand's 'Best Choice' accreditation in 2015 in the Monterey Bay Aquarium's globally respected consumer guide Seafood Watch.

NZ King Salmon listed on the New Zealand and Australian Stock Exchanges in October 2016.

Performance

The following information was extracted from New Zealand King Salmon Investments Limited's half year results, released on 24 September 2024:

New Zealand King Salmon Investments Ltd (NZX & ASX: NZK) reports its financial performance for the six-month period ended 31 July 2024 (1HY25).

Key points include:

• 1HY25 net profit for the year of $6.0 million, compared to a net profit of $10.6 million in 1HY24.
• 1HY25 pro-forma EBITDA of $13.5 million, compared to an EBITDA of $10.7 million in 1HY24.
• Sales volumes increased from 3,023MT in 1HY24 to 3,178 MT in 1HY25 (an increase of 5%).
• Revenues increased from $91.6 million in 1HY24 to $101.7 million in 1HY25 (an increase of 11%).
• The mortality cost increased from $7.8 million in 1HY24 to $8.5 in 1HY25.
• Earnings guidance range of pro-forma EBITDA has been revised to $26 million - $30 million (original guidance range of $26 million - $32 million provided to market in March 2024).

New Zealand King Salmon Chair, Mark Dewdney, said: “The half year result for the period ended July 2024 is underpinned by the continued steady performance of our new fish farming approach. This gives us further confidence that we will be able to deliver strong aquaculture outcomes again this summer. Sales have held up well across all markets and channels, despite global cost-of-living pressures. We are happy with our solid first half result.”

New Zealand King Salmon Chief Executive Officer, Carl Carrington, said: “Looking forward, we are revising our full year harvest downwards to 6,800MT due to elevated levels of early runting (fish failing to adapt to seawater). Our aquaculture team is working closely with experts to address this challenge. Initial trials of mitigants are looking promising, and we are assessing options for pilot trials of freshwater Recirculated Aquaculture Systems (RAS) which we believe may also improve fish outcomes when adapting to seawater.”

Regarding sales, Carrington noted: “We are making steady progress in developing our presence in China. We are focused on establishing a premium position for our Regal brand in this market through partnering with premium customers across multi-channels. Market support is positive, and King salmon is recognised by customers for its premium taste, texture and presentation. Quality distribution is growing on a trajectory consistent with building the value proposition ahead of volume. Patience and consistency are required to lay the right foundations for the longer term.”