Strong order intake of NOK 1,840 million led AKVA to close Q2 2023 with a record order backlog of NOK 2,900 million. Of these, the recently awarded RAS contract for Nordic Aqua Partners and the post-smolt contract for Cermaq Norway are the highlights. However, despite the record high activity and improved profitability, the company acknowledges that it is still below expectations. "Even though is good, we were hoping for more," acknowledged CEO Knut Nesse during the presentation of the results.
The leading aquaculture technology and services provider thus continues the trend set by its results for the first quarter of this year. Then, it reported strong activity, with revenues reaching NOK 874 million, an increase of 3 % over the same period last year. However, profitability in Q1 also failed to meet the group's expectations.
"The activity in the first two quarters of 2023 were high and above last year," summarizes AKVA in its statement on its Q2 results. "Overall, the order intake was sound with the newly awarded 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."
However, in questions from journalists following the presentation of the results, Knut Nesse acknowledged that, even though it is good, they were hoping for more. The AKVA Group CEO said that the company has several post-smolt contracts on the table that the farmers are still reviewing, although he is convinced that they will be signed soon. He also said that even when they are not negative about the future, they are "a little disappointed" that they were not able to get them signed.
In the same vein, AKVA claimed that profitability continues to improve compared to previous quarters, but is still below expectations. "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 profit margins in this part of the project portfolio were written down significantly in Q2 and Q3 2022 mainly due to cost inflations and will run at a lower profit margin until completion end of Q3 2023," they explain. Revenue for the second quarter in this segment was NOK 174 million.
By turn, profitability in the Sea-Based Business (SBT) segment was positively impacted by the product mix and commercial breakthrough of deepwater farming concepts during this quarter. SBT revenues for Q2 2023 ended at NOK 733 million. Regarding the Digital (DI) segment, the company said in the presentation that it is on track to achieve major new milestones with its digital solutions and reported revenues of NOK 33 million.
In total, in the second quarter of 2023, AKVA Group delivered revenues of NOK 940 million, an increase of 4% compared to the same period of 2022 when revenues were NOK 907 million. EBITDA increased from NOK 3 million in Q2 2022 to NOK 86 million this year. Despite this, the company has decided not to pay any dividends in the second half of 2023.
In addition to the important contracts with Nordic Aqua Partners and Cermaq Norway, the company also wanted to highlight the commercial breakthrough in Q2 of the deepwater farming concepts with sales of NOK 150 million. However, being the sea-based technology segment the one that generates the most revenue for the company, AKVA acknowledges that the resource tax approved in Norway and finally set at 25% also affects them.
"AKVA's current products and services within Sea-Based and Digital in Norway are supporting core activity and minor implications are expected on activity level," they said. "For the post-smolt market in Norway the resource tax will most likely have a negative impact on activity level on short and medium term."
Nevertheless, in the face of the tax, the company assures that its position is to "continue to invest in all three innovation agendas," this is Sea-Based, Land-Based and Digital. "No measures will be taken in the short term to reduce the current overcapacity in Land-Based business area," they stated. "The situation will be gradually improved when the projects for NOAP (phase II) and Cermaq Norway start in H2 2023 combined with promising market outlook internationally."
Aware that the implications of the introduction of the new resource tax are uncertain, this commitment to investing in innovation has an international vocation. "There is also a post-smolt market outside of Norway," said CEO Knut Nesse near the end of today's presentation. Although they believe that investment will return to Norway, AKVA's CEO does not seem to want to wait for that to happen.
All in all, and despite that "even though is good, we were hoping for more," the company looks to the future with optimism. "The order backlog and financial position remains sound and forms a good foundation to execute the organic growth strategy," says AKVA group in its Q2 2023 results.
"Salmon prices are expected to remain strong driven by reduced supply," the company also adds to justify its confidence in the future. Recently, in its Global Aquaculture Update 2H 2023, Rabobank also highlighted that the European salmon industry is currently the most profitable aquaculture industry in the world and that, even with lower salmon prices in 2H 2023, it will still perform strongly.
Coming to a conclusion, AKVA said it is targeting a minimum revenue of NOK 4,000 million and an EBIT of 6-8% by 2024. To achieve this, the group will continue to invest and improve its solutions, both in maritime, digital, and land-based technology.
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 1,394 employees, offices in 11 countries, and a total turnover of NOK 3.4 billion in 2022. AKVA group ASA is listed on Oslo Børs.
