Måsøval's profits rocket in Q4 2023

Even the forced early harvest in its Farming West division did not dampen the strong increase in harvesting recorded by Måsøval, which, together with high salmon prices, led to these good results.
A harvest up over 57% on the same period last year and a 16% higher average selling price for salmon helped to rocket Måsøval revenues in Q4 2023 by 72% compared with the same quarter in 2022.

A harvest up over 57% on the same period last year and a 16% higher average selling price for salmon helped to rocket Måsøval revenues in Q4 2023 by 72% compared with the same quarter in 2022.

Photo: Sondre Marøy / Måsøval AS.

In January, Måsøval announced healthy Q4 results but rocketed may be a better adjective for them. A harvest up over 57% on the same period last year and a 16% higher average selling price for salmon helped to soar the Group's revenues by 72% over Q4 2022 to NOK 688 million (EUR 60 million - USD 65 million). The percentage increases to 154% growth in terms of operating EBIT.

In its fourth-quarter report, the Norwegian salmon farmer also reviews other relevant issues for the company at the end of 2023 and beginning of 2024, such as the effect of the salmon tax both on its results and on the reorganization of the company; the purchase of a harvesting facility from Mowi while another was sold to Ode; its fight against the Norwegian Government over a case of pancreas disease misdiagnosis; or the controversy following the irregularities detected in the sale of frozen salmon not suitable for human consumption in one of its subsidiaries.

Profits rocket, despite some difficulties

As mentioned above, Måsøval Group's operating income in Q4 2023 was NOK 688 million (EUR 60 million - USD 65 million), NOK 288 million (EUR 25 million - USD 27 million) more than in the same period in 2022. In percentage terms, this represents an increase of 72%. Operating EBIT, meanwhile, was NOK 112 million (EUR 9.7 million - USD 10.5 million), compared to NOK 44 million (EUR 3.8 million - USD 4.1 million) in the fourth quarter of last year, i.e. 154% higher.

This increase in revenue, the company said in its report, is attributable to both a higher harvest volume (7927 tons versus 5032 tons, up 57%) and higher average selling prices, which reached NOK 78.3 (EUR 6.83 - USD 7.38) per kg versus NOK 67.5 (EUR 5.88 - USD 6.36) last year. Lower farming costs in its Farming Mid division also helped.

Operationally, Q4 was a high harvest volume quarter for Måsøval's Farming Mid division, although it did not have the same results in its Farming West division. In the latter, the company decided to harvest salmon earlier than planned for fish health reasons. That harvest at a lower average weight had a negative financial effect, with a lower price and higher cost per kilo. As a result, while the operating EBIT of the Farming Mid division was up 87% compared to the same period in 2022, that of the Farming West division was -54%.

Regarding the outlook for 2024, the Group expects to achieve a harvest between 25700 and 26700 tons, of which 3200 tons are expected in the first quarter of 2024. More than 80% of the volume is expected to be achieved in the Farming Mid division. In addition, with the new co-location agreement with Frøya Laks AS, the potential in Måsøvals license portfolio exceeds 33000 tonnes.

Consequences of the salmon tax

In the fourth quarter, Måsøval continued the reorganization process it had initiated in September to adopt the new regulations following the introduction in Norway of an effective salmon tax rate of 25%. Since the tax only applies to salmon production at sea and not to the entire production cycle, the company decided to split the business into different parts with separate legal entities. The objective, according to the 3Q 2023 report was "to streamline both the management of the Group and public reporting."

"In September, a reorganisation was therefore decided whereby the parent company Måsøval AS becomes a holding company, all the Group’s licences are merged into one company, Måsøval Lisens AS and the farming operation of the Group in another company, Måsøval Drift AS," the report continued. The company's forecast then was for the reorganization to be completed by January 1, 2024 however, at the time of the Q4 results presentation, the conclusion of the process was still pending a ruling from the authorities confirming it can be completed with tax continuity.

Regarding the expense associated with salmon tax in 2023, according to Måsøval's report, in Q4 2023, total tax expenses amount to NOK -21 million (EUR 1.8 million - USD 1.9 million), of which the estimated resource rent tax amounts to NOK -11 million (EUR 0.9 million - USD 1 million). Nevertheless, the company also notes that this is still an estimate.

"Resource rent tax for the period is estimated based on our best understanding of adopted rules. The estimate is highly uncertain due to unclear rules and details still unresolved by the government that can affect tax calculation in 2023," Måsøval said in the report.

Other important events

In its earnings report, the company also reviewed some other events that occurred either at the end of 2023 or the start of 2024. Thus, Måsøval recalled that it won the lawsuit it filed against the State claiming compensation for losses suffered following a misdiagnosis of pancreas disease at one of its fish farms in 2019. However, the process continues, as the State appealed the judgment on February 2, 2024, to which Måsøval responded by filing a separate appeal in the case on February 5, 2024.

On the other hand, the company also reviewed its movements around its harvesting facilities. Early January, Måsøval confirmed that Mowi had accepted its bid to acquire its harvesting facility located at Ulvan in Hitra Municipality, a strategic move aiming to bolster harvesting operations and enhance harvesting capacity within the Group. According to the report, "final agreement and completion are subject to customary terms and conditions, but the parties aim to complete the transfer by early April 2024."

It also confirmed the recent sale of Western Seaproducts AS - Måsøval's Vartdal processing plant - to cod farmer Ode which we learned about a few days ago. In that announcement, both companies remarked the facility will now specialize in cod harvesting and processing. However, Måsøval's quarterly report gives a couple of details that were not previously revealed, such as that Måsøval has issued a seller's credit to the buyer with a maturity of 5 years, and that the buyer has committed not to harvest any salmon at the processing plant.

Finally, the report also refers to the controversy following irregularities detected in the sale of frozen salmon not suitable for human consumption in its subsidiary Pure Norwegian Seafood (PNS). Måsøval wanted to make it clear that, as a supplier to PNS, it did not make any profit or participate in any other gain related to these activities. Furthermore, it recalled PNS is financed autonomously, adding that the disclosed problems have no direct impact on Måsøval and have a marginal financial effect on the Group.

About Måsøval

Starting in 1973, Måsøval AS is an integrated producer of Atlantic salmon with more than 50 years of operational experience. Located in Central Norway in the region west of Trondheim, it has both significant farming operations at sea and in-house smolt production. Moreover, through its majority ownership in the processing and distribution company Pure Norwegian Seafood AS, Måsøval is processing and exporting high-quality Atlantic salmon to a global marketplace.

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