Mowi's profits plunge during first quarter, after "perfect storm" of biological problems in Norway

The salmon farming company is undertaking a smolt vaccination program in an effort to improve future fish health, after experiencing what CEO Ivan Vindheim calls "a rather challenging quarter".
Mowi CEO Ivan Vindheim, pictured at the North Atlantic Seafood Forum in March 2024.

Mowi CEO Ivan Vindheim, pictured at the North Atlantic Seafood Forum in March 2024.

Photo: NASF 2024.

"We landed on our feet after what I think it's fair to say it will go down in history as one of our more challenging quarters," Mowi CEO Ivan Vindheim said, presenting the salmon farming giant's Q1 2024 results this morning.

Mowi's profits took a significant plunge during the first quarter of 2024, with the Norwegian salmon farming giant blaming biology as the main reason behind the drop.

Mowi achieved an operational EBIT of EUR 200.5 million and a financial EBIT of EUR 238.9 million during the first quarterly - but, despite the big numbers, this represents a hefty drop compared with its operating profit of 322 million euros in Q1 2023.

The key culprit behind the decline in profits was the high prevalence of winter sores experienced by salmon in Mowi's Norwegian operations, Vindheim said. This, compounded by an unusually cold winter accompanied by an influx of string jellyfish, led to a higher than normal share of lower quality "production grade" fish, as well as reducing harvest volumes by 5% compared with Q1 2023.

A "tough" winter season in Norway, beset by biological and environmental challenges

Vindheim said the company had been unprepared for what he described as a "perfect storm" of factors affecting the Norwegian farming segment this winter, noting the "much tougher environmental conditions than what we are used to in this region."

Mowi is taking action on the problem of winter sores, Vindheim said, by mounting a smolt vaccination program utilizing an improved formula, which the company says is yielding promising early results.

"We strongly believe things will be much better next year," he stated.

Mowi also expects improved biological conditions in Q2, alongside a gradual reduction in costs.

Global farming costs and performance

Despite seasonally low volumes, Mowi's blended farming cost was EUR 6.05 per kg. The company reported that feed prices and stock costs were reduced in comparison with Q4 2023, thanks to Peru's strong anchovy catch. However, elevated mortality from winter sores and jellyfish raised overall costs in Norway.

Outside of Norway, Mowi's farming KPIs improved. Harvest volumes in Scotland and the Faroe Islands rose by 3% and 23% respectively, while North America saw a 43% volume increase.

However, Chile's harvest decreased by 16%, affected by feed consumption and biomass growth challenges.

Consumer products strong in Europe, but US market "challenging"

Mowi's Consumer Products segment reported an operational EBIT of EUR 24.4 million, with strong retail volumes in Europe partly offset by a challenging US market.

Meanwhile, Mowi's Feed division contributed EUR 5.7 million in operational EBITDA on record-high volumes.

Outlook for 2024 and beyond

Improved biological conditions in Norway during the second quarter have positioned the company for reduced farming costs in the second half of the year. Nevertheless, seasonal factors and the lingering effects of winter sores will likely continue to impact results in the second quarter.

The company notes that demand for European salmon remains robust, with strong pricing trends, while the American market is currently sluggish. However, Mowi anticipates a recovery in the US salmon market as demand returns to normal levels.

On the supply side, growth is expected to remain limited. Virtually no increase is forecast in 2024, and supply will only see modest expansion in subsequent years.

Despite these challenges, Mowi has maintained its harvest volume guidance at 500,000 GWT for 2024. This projection represents a 5.3% growth over the previous year, supported by record-high biomass levels at the end of the first quarter.

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