After a difficult period due mainly to high mortalities, New Zealand King Salmon's (NZKS) performance is improving. In its results presentation for the 12 months ended January 31, 2023 (FY23), the company reported a net profit of NZD 1.9 million, compared with a net loss of NZD 73.2 million in the previous year. Although this report still includes fish mortality from last summer, after introducing new farming strategies, the company is already achieving positive results. This is demonstrated by its reduction in mortality expenses from NZD 13.5 million to 2 million in the current summer period (December 1 – March 22).
After declaring a 42% mortality rate for farmed salmon in its 2022 report – animal rights activists called it "an animal welfare disaster" -, New Zealand King Salmon's stock fell as much as 45%. But, as mentioned above, at the close of FY23 the company is finally in the black, recovering from the heavy losses suffered last year, although it still faces some difficulties.
Although it was above the original market guidance of a loss of between NZD 8 and 12 million, the New Zealand King Salmon's FY23 pro-forma EBITDA was a loss of NZD 4.4 million, compared to a profit of NZD 6.7 million in FY22. In addition, sales volumes decreased by 24% (from 7,672 MT in FY22 to 5,837 MT in FY23), and revenues were also down by 4%, from NZD 174.5 million in FY22 to 167.1 million in FY23.
Despite this, NZKS Chairman, John Ryder, was satisfied. "I am pleased to say that after a particularly difficult period, our results have improved", he stated. "This is due to several changes we have made across the business, including the excellent work done by our aquaculture team in executing our new farming strategies over summer".
As Ryder pointed out, the implementation of new farming strategies by the aquaculture team has significantly improved results. "The company's balance date of 31 January results in summer spanning across two financial year ends. The increase in mortality expense on FY22 is attributable to the mortality event which occurred during the previous summer. We are now seeing the benefit of our new farming strategies in the current summer period (1 December – 22 March) with mortality reducing from $13.5m to $2m, which is a significant improvement on the same period last year", he explained. As a result, summer 2022/23 mortality is the lowest in the last 6 years (see chart below).
Increased water temperature was the main reason for the mortality problems suffered by New Zealand King Salmon. Therefore, as its Chairman explains, as a complementary strategy, they have implemented a seasonal harvest, where they harvest smaller fish as additional volume before the summer months. "Towards the end of FY23, we successfully completed the first seasonal harvest from Ruakaka farm in the Queen Charlotte Sound, resulting in an approximate increase of 750 tonnes of biomass", he said.
This new seasonal harvest concept exceeded initial expectations, providing 750 MT of salmon compared to the 500 expected, resulting in an overall increase in harvest from 5,750 to 6,000 MT. Meanwhile, although slightly higher than its initial forecast, mortality improved in the second half of the year (NZD 22.3 million in H1 vs. NZD 3.6 million in H2).
In the reset of NZKS business carried out, three of the four 3 active Pelorus farms have been fallowed as planned. In addition, also as scheduled, the Waiauf freshwater hatchery was mothballed but, although not planned, was finally sold at the end of January 2023. These proceeds were received in the current financial year (FY2024) and are therefore not included in the company's net investments in FY23 which, after an initial pause of non-core investments, were ultimately NZD 5.2 million.
However, the company acknowledges that headcount is below target and resourcing remains difficult despite a significant reduction in overhead costs. "First and foremost we have focused on the health of our fish and the right sizing of the business. We are making good progress and we acknowledge we have much more work to do", explained Acting CEO, Graeme Tregidga. "We also received news that our Blue Endeavour resource consent application to farm in the open ocean (7km north of Cape Lambert, in Cook Strait) had been approved by commissioners. We had two appeals that the company hopes to mediate to a successful conclusion", he added.
"The key lesson in facing adversity is how you react to it. The Board and leadership team have made significant changes to our operations that give us confidence for the future", said New Zealand King Salmon Chairman, John Ryder. For the 2024 financial year, the Board provides pro-forma EBITDA guidance in a range of NZD 21 and 25 million.
New Zealand King Salmon is the world's largest aquaculture producer of the premium King salmon species. The company has been farming, processing, and selling King salmon to consumers for more than 30 years. It operates under four key brands: Ōra King, Regal, Southern Ocean, and Omega Plus, as well as the New Zealand King Salmon label.
