What was "strong activity despite challenging market" for AKVA Group in the Q1 2023 results presentation, has become "acceptable activity level and profitability in sea-based but challenging post-smolt market in Norway" in Q3. However, the most striking of its latest results presentation was the announcement of a rightsizing process involving some 50 jobs due to changing market conditions.
According to Knut Nesse, CEO of AKVA Group, the rightsizing process, with a target annual cost savings of NOK 45 million (EUR 3.76 million / USD 4.03 million), will be carried out in Q4 "to adapt the organization to the current and expected activity level." The company said the Norwegian resource rent tax on aquaculture is having a negative impact on its activity.
AKVA Group's revenue in Q3 was NOK 817 million (EUR 68.38 million / USD 73.33 million), this is a decrease of 3% compared to Q3 2022. EBITDA on the other hand, increased from NOK 25 million (EUR 2.09 million / USD 2.24 million) in Q3 2022 to NOK 78 million (EUR 6.53 million / USD 7 million) Q3 2023.
Meanwhile, order intake was NOK 600 million (EUR 50.22 million / USD 53.86 million), and the order backlog - which at the close of Q2 set a record - reached NOK 2.6 billion (EUR 217.64 million / USD 233.41 million) at the end of September.
"The activity in the first three quarters of 2023 were somewhat higher compared to last year," acknowledged AKVA Group. "Overall, the order intake was sound with the award of RAS contract for Nordic Aqua Partners (EUR 40 million) and the post-smolt contract for Cermaq Norway (minimum EUR 60 million) as the largest contracts," it continued.
Nevertheless, it appears that this "acceptable activity level and profitability" in the sea-based segment was not enough to cover the results of the "challenging post smolt market in Norway," and the final result felt short of expectations.
"The introduction of the resource tax has a negative impact on the activity level both in land-based and parts of the sea-based business, and the market outlook is challenging and uncertain. Profitability is continuing to improve compared to last year but is still below expectations," the company said.
"The land-based business segment is still impacted by a high cost base compared to current activity level and by lower profitability in parts of the project portfolio. The profitability in the sea-based business segment is acceptable with a healthy product mix supported by the commercial breakthrough of deep farming concepts," AKVA Group added.
The company concluded by announcing that, due to this change in market conditions, a rightsizing process will be carried out during the fourth quarter, with an annual cost savings target of NOK 45 million (EUR 3.76 million / USD 4.03 million) to adapt the organization to the current and planned level of activity.
"We are conducting a rightsizing of the organization in Q4 after introduction of the resource tax in the Norwegian market," AKVA Group's CEO, Knut Nesse, stated during the result presentation. According to the company after the arrival of the so-called salmon tax in Norway, the market has been slow both for land-based and parts of the sea-based business.
"As a group, I believe we have, in particular towards our own employees, we have shown patience. We have continued to invest in all the three businesses and we have also maintained the capacity in terms of number of people and believe that the market will improve," Nesse said.
"However, it's no time to waste anymore. So, we are now taking corrective measures to ensure profitability and profitable operations going forward both for land-based and also for the part of sea-based which is affected," he continued.
This process, part of which has already taken place, will be carried out during Q4, said the AKVA Group CEO. The reduction will be of approximately 50 jobs. "It will basically be 20-25 based on natural departure, meaning that people are leaving and we are not refilling, and there will likely be 25 layoffs," he explained.
"The annual cost saving is estimated to be 45 million and the layoff cost is calculated to be approximately 10 million, and that will be charged to the P&L in Q4, and this cost-saving effect of the Opex effect of 45 million, that will have a full effect in 2024," Knut Nesse concluded.
Based on the results, the measures taken, and the expectation that salmon prices will remain strong due to reduced supply, AKVA Group is confident of improving its results.
Even so, the aquaculture supplier company also announced that, due to the change in market conditions, the company will revise its medium-term financial targets during the fourth quarter.
AKVA Group is a technology and service partner to the aquaculture industry worldwide, supplying everything from individual components to complete installations, both for sea farming and land-based aquaculture. With a track record of more than 40 years, the company has 1,410 employees, offices in 11 countries, and a total turnover of NOK 3.4 billion in 2022. AKVA Group ASA is listed on Oslo Børs.