NZ King Salmon lifts first-half profit 81% but warns of a lower second half

New Zealand King Salmon [NZX:NZK] lifted first-half net profit 81% and says that reflects strong global demand coupled with a boost in production volumes but warns of challenging times ahead.

The king salmon farmer reported a $15.7 million net profit for the six months ended December, up from $8.7m in the same six months last year.

Earnings before interest, tax, depreciation and amortisation (ebitda) was 169% ahead of the year-earlier six months on a pro forma basis that eliminates fair value gains and losses on the value of its fish.

The volume of fish gilled and gutted sold rose 29% to 4392 metric tonnes and average selling prices rose, mainly due to sales of the Ora King brand rising 22%.

“The company experienced strong demand for its premium king salmon products over the six month period,” chairman John Ryder says.

“Favourable growing conditions during the 2017 financial year allowed us to deliver additional volume to satisfy the demand. However, the situation has now become more challenging,” Mr Ryder says.

“The extraordinarily hot summer has impacted the survival rates of our king salmon and this will be a principal factor behind an anticipated reduction in profits for the second half.

“We remain positive about the longer-term prospects for our company.”

Managing director Grant Rosewarne says the higher prices reflect both the increased Ora King sales and “our focus on the right mix of product and customer. A nationwide advertising campaign for Regal coupled with new product launches also positions us well for future sales of our premium-branded retail products.”

Increasing sea temperatures
The company’s aquaculture team has been actively preparing for the summer but water temperatures have been well above average.

“Our recently commissioned higher-flow sites have lessened the impact of the sustained heat although, like many other farmers on land and in the sea, we have had associated performance and survival challenges,” Mr Rosewarne says.

“We’ll report in more detail once the summer period is over, as we did last year, including an update on our progress towards a long-term solution to combat the risk of increasing sea temperatures.”

New Zealand King Salmon will pay a fully imputed final dividend of 2c a share.

King Salmon shares last traded at $1.99 and have gained 47 percent in the past 12 months.