Norway Pelagic increases Shetland Catch ownership

Pelagic fish processing company Norway Pelagic (OSE: NPEL) is working through a difficult year and expected diminishing supply of raw material next year. It has today announced that its ownership in Shetland Catch, the largest pelagic factory of its kind in Europe with a capacity of 1000 tons/day, will double to 50% via a 3 million pound share issue. Shetland Catch has been in the news this year over illegally landed fish which led to a massive profit payback and a fine.

Austevoll Seafood satisfied with Q1 2012 and remains bullish on the long-term potential

Integrated fishing industry company Austevoll Seafood ASA (OSE: AUSS) is happy with the start of the year. Total fish catch and purchase of 355 000 tonnes, with around two thirds of that from Norway. Operating income was just below 3 billion NOK. Comparable increase in turnover is around 17%. Austevoll Fisk group merger into associated company Norway Pelagic (OSE: NPEL) affected comparisons. EBIT of 270 million is down from 486 million, including 50 million in shutdown costs and 33 million in impairment. Lower salmon prices affected that. Profit before tax came in at 315 million NOK (vs. 525 million). EPS excluding fair value adjustments is 0.67 NOK and reported EPS 0.86 NOK.

Anchovy catches in Peru were on lower during Q1. The new quota for Centre-NOrth was set at 2.7 million MT and the season started on May 2nd. Yields and production have been good at the start, with 25% of the company quota now caught. Jack Mackerel quota has already been caught, and Austevoll had its share of it (26,000 tonnes). Fishing season in Peru started later than last year, which will have some impact for Q2.

In Chile the company made some arrangements where it leased some licenses to get more production in its factories, particularly frozen products, to utilize economies of scale. Horse mackerel fisheries have delivered good catches in Q1 and the group already caught two thirds of its share of the total quota of 315,000 tonnes.

The lower sand eel quota affects fishmeal production volumes in Norway. Consolidated company Leroy Seafood ASA now has over 11% of Norwegian seafood export value. It is the second largest salmon producer in the world. Salmon spot price was down 34.6% on the year while harvest volumes were strong. The group is positive about salmon price outlook going forward. Equity ratio remains strong at 49%. The company is proposing a dividend of 1 NOK per share. It is scheduled to trade ex-dividend from May 25th. Austevoll Seafood expects strong markets going forward.

Price correction, suspended MSC certificate hurting Norway Pelagic

The world leader in processing pelagic fish catches for human consumption also started noticing the effects of a wider decline in fish meat prices worldwide. Norway Pelagic (OSE: NPEL) managed to just deliver positive accounts for Q1 2012, which was significantly worse than last year. Margins on mackerel but also herring were down as fish prices have corrected. Strong Norwegian krone also weighed on the result.

The company also said there will be no dividend this year. Austevoll Fisk AS consolidation led to some more debt being carried, somewhat eroding the still strong financial position and increasing interest expenses. More capital is also needed to keep products in stock for the low season, which the company hopes will show in Q2 earnings. Furthermore, the company foresees the need for more consolidation in the industry.

Due to unilateral action by Iceland and Faroe Islands, who are struggling with their economies, to increase their mackerel catches immensely in the ongoing mackerel war, Marine Stewardship Council has now suspended SPPO North East Atlantic mackerel fishery MSC certification. Fish caught after 30th of March 2012 cannot be sold with such a certificate. If no corrective actions are taken before June 29 2012, the certificate will be withdrawn completely.

Icelandic and Faroe mackerel has supplied more price sensitive geographies. For herring there is more left to be caught vs. last year due to the increase of North Sea Herring quota. The herring catches so far have been NVG herring from the north. Margins on North Sea Herring tend to be higher as it is better suited for filleting and matjes. Capelin quota has been nearly fully caught on Q2 and its margins have been solid. Blue whiting fisheries also seem to be delivering.

Presentations at 7th North Atlantic Seafood Conference

7th North Atlantic Seafood Conference has been ongoing in Oslo from 6-8th of March. The event is the largest seafood conference in the world. Several companies have released their presentations held mainly in the pareto seafood finance and investor seminar portion of the event today. The companies are listed below with a link to the presentation if available:

Marine Harvest (OSE: MHG)
Lerøy Seafood (OSE: LSG)
Cermaq (OSE: CEQ)
Aker Seafoods (OSE: AKS)

Bakkafrost (OSE: BAKKA)
Sølvtrans(OSE: STRANS)
Salmar (OSE: SALM)
Austevoll Seafood (OSE: AUSS)

Norway Pelagic (OSE: NPEL)
Morpol (OSE: MORPOL)
Norway Royal Salmon (OSE: NRS)
Fish Pool

Akva Group (OSE: AKVA)
China Haikui
Grieg Seafood (OSE: GSF)
High Liner Foods (TSE: HLF)
The Scottish Salmon Company (OSE: SSC)

In company spesific news, Cermaq reported its quarterly earnings today. Fourth quarter operating revenues were almost 3.3 billion NOK (+3%) and EBIT pre fair value 300 million (-50%). Full year numbers were still at record levels of 11.6 and 1.3 billion. Reported EPS was 8.5 NOK and the board proposes a dividend of 4.63 NOK a share. Mainstream Norway unit has already committed a sizeable portion of its 2012 salmon harvest through Fish Pool at 27 NOK/kg FCA Oslo.

Austevoll Seafood urges patience

Austevoll Seafood ASA (OSE: AUSS) had revenues of 2.6 billion NOK in Q4 2011. The net profit was fown to 75 million (EPS of 0.24 NOK) from over 600 million a year ago. Full-year sales came in at 12.1 billion, EBITDA at 2 billion and EPS 1.82 (2010: 6.03). The Board proposes a dividend cut of one third to 1 NOK a share.

Raw material volumes supplied for consumption in Chile and Peru were extremely low. The second anchoveta fishing season in Peru has now ended and was very positive. Austevoll has 7% of anchovy quota centre-north in Peru. Fourth quarter is seasonally strong in Norway. Jack mackerel global quota is down again for 2012 to 250 000 tonnes (315 000). The company sees the jack mackerel fishery recovering in Peru.

The group as a whole harvest over 500,000 tonnes of pelagic fish and over 150,000 tonnes of salmon and its 55 processing plants handle nearly 1.5 million tonnes of pelagic fish annually. It has its own worldwide wholesale network and also produces fishmeal and fish oil.

Second largest salmon producer in the world Lerøy Seafood Group ASA (OSE: LSG) is a consolidated company where Austevoll owns 76.72% of the shares. Is also reported its earnings today. The company felt that the achieved result is positive in light of the difficult conditions. Annual turnover was 9.2 billion NOK, operating profit was 597 million and EPS 15.13 NOK a share. A dividend cut of 30% to 7 NOK a share (382 million in total) is suggested

Associated company Norway Pelagic ASA (OSE: NPEL, 43.3%) reported yesterday speaking of strong price increases and positive margins for herring products. It said fish consumption is not really affected by financial uncertainty. Estimated pro-forma annual net income taking into accounts merged operations of Austevoll Fisk AS as well as Emy fish AS and Brødr Myhre AS contribution was 4.24 billion NOK and EBITDA 215 million.

Norway Pelagic normally makes its dividend decisions towards the summer as at this point as the high activity season is drawing to a close its cash is typically tied into working capital and in wages paid. During the low processing activity season it is then recouping those tied up checkels.

Norwegian pelagic quotas for 2012 are as follows:

Mackerel: 187 000 tonnes (+2% vs 2010, Iceland & Faroe agreement lacking)
North Sea Herring: 117 000 (+112%)
Norwegian Spring Spawning Herring (NVG Herring) : 508 000 tonnes (-13%)
Blue Whiting: 125 000 (+443%)
Capelin: 270 000 (-12%, including swap with Iceland, excluding summer catch)
Horse Mackerel: 93 000 (-1%)
Sand Eel: to be agreed in May
Pout: No catches

Austevoll Seafood feels it is a strong company with an excellent position as a diversified player within the global seafood industry. It stresses the need to think long-term when taking part in this industry. It aims to grow even further within the segments where is already active.

Fishmeal price correction is over in the company’s view with prices stabilized around 1,100 USD in Peru. Hog and aqua feed industry demand from China was strong in Q4. Consumption is expected to increase further in China in 2012 as fishmeal vs. soymeal price ratio favours fishmeal at the moment. Austevoll predicts an increase of around 180,000 MT in 2012. Much of the Peruvian exports go to China.

Fish oil prices are stable with good demand. Long-term Atlantic salmon demand should benefit from lower prices but in the short-term challenges remain. Pelagic fish prices should remain firm going forward. Investors are reacting quickly and the stock has slid by 5 below 25 NOK%

Another round of mackerel negotiations end in failure

Icelandic news outlet IceNews writes that negotiations to solve a fish quota dispute held in Reykjavik this week have failed. The Partiers with Iceland and Faroe Island on the other side of the table and EU and Norway on the other were trying to mediate what is known as a mackerel war.

The mackerel dispute has been going on for a couple years as Iceland and Faroe Island unilaterally hiked their annual catch from a miniscule amount to 130 000-150 000 tonnes each. EU and Norway quotas have lately been somewhat higher than that. The new quotas were supposed to be agreed after this meeting.

Iceland and Faroe Island argue that since the mackerel migration patterns are changing due to warmer climate conditions, they are entitled to a larger share of the quota. The economic troubles of the small islands have also played a role in the unilateral increase as Nordic mackerel demand and prices have been very strong for the last couple of years.

Norway Pelagic ASA (OSE: NPEL) says that the current catch level is not sustainable and that the dispute is putting the MSC certification in jeopardy. It has said that if the over catching does not stop, it will put the currently healthy North East Atlantic mackerel stock at risk within a few years. It has consequently not purchased any mackerel from Icelandic or Faroe fleet.

EU fisheries commissioner Maria Damanaki blamed Iceland and Faroe Island for not even trying to reach a solution. Swedish newspaper Dagens Industri says that this issue may cause major problems for Iceland’s EU membership negotiations.

Domstein closes Måloy whitefish fillet factory

Domstein ASA’s (OSE: DOM) is discontinuing its whitefish fillet production in Måloy. The factory has an annual turnover of over 150 million NOK and employs around 90 people; 86 of them will receive their notice. Espersen A/S is taking over cod fillet production and is moving it to its factories in Poland and Lithuania. For this Domstein will be compensated 21,6 million NOK in total.

Domstein and Brødrene Larsen Eftf. AS have signed an LOI on saithe fillet production transfer to Larsen’s Kalvåg factory in Norway. Other parts of the production will be moved to Domstein’s own factory in Kungshamn, Sweden. In total Domstein expects reduced turnover of about 70 million NOK annually and similar reduction in balance sheet, strengthened working capital and liquidity position and a one-off gain of 10 million NOK in 2012 accounts from these measures.

Domstein family, which founded Domstein ASA in 1925, still owns 50% of the company. The company is active in various activities within fishing industry primarily in Norway and Sweden. It also owns 50% of Norway's largest autoline fishing company Ervik Havfiske AS. Ervik Havfiske has 12 modern longliners, which do all their fish catching by hook and line.

Espersen A/S is a a world leader in processing of frozen fish block and frozen fillets. The company focuses on white fish like cod, haddock, Alaska pollock and saithe. Domstein has factories in its home country of Denmark but also in Koszalin, Poland, Klaipeda, Lithuania and Qingdao, China.

Brødrene Larsen Eftf is also a family business with long traditions. It has in recent years invested heavily in renovation of facilities and has made a production facility acquisition as well. It has thus grown into an important player in cod slaughter. That is rather seasonal work so the company is happy to diversify into more round-the-year saithe processing, which had already been becoming more important.

Domstein’s property holdings in Norway are organised into a real estate company called Domstein Eiendom AS. Domstein’s head office in Måløy lies is co-localized with Norway Pelagic ASA’s (OSE: NPEL) head office. Norway Pelagic also has a production facility in Måloy but NPEL has been investing into its operations in Måloy as of late with the building of a new cold storage just last year and extensive modernization in recent years.

Domstein felt that in order to stay competitive it needs to make such a move as its production facilities are in Norway and Sweden alone. Domstein said the situation has been grim for years and it saw no possibility to make whitefish production profitable in Måloy facility. This should tell something about the current profitability challenges whitefish processing factories in Norway face. Domstein has long been focusing on attaining highest environmental standards and the two companies aim to develop a brand called “Domstein Sustainable Seafood”together. Domstein will market and sell Espersen’s products in Norway and Sweden. Domstein’s share has climbed 1% in today’s trading.