Huon warns of likely earnings hit in 2021

Australian salmon farmer Huon Aquaculture has warned of a likely fall in earnings for 2021, despite increased production in the first half of its financial year.
In a stock market statement, Huon said its sales volumes for H1 2021 were around 19,290 tonnes, consistent with its stated target of 36,000 tonnes or more for the full year.
The company said, however, that increased production had meant its sales were increasingly weighted to the export market, with around 40% by volume being sold into the export spot market, where prices are ;lower than the domestic market in Australia.
Relative to the first six months of 2020, international salmon prices fell by around 40% compared with the first half of 2020, Huon said. The company estimates that the average price for its fish will be 15% lower than for the same period in its 2020 financial year.
The price fall, together with increased freight costs and global economic uncertainty, have meant that Huon’s internal projections for earnings have been revised downwards and its expected EBITDA (operational earnings) are likely to be “substantially lower” than last year’s A$47.3m.
Huon is also reducing its exposure to the Chinese market, following ongoing tensions between Australia and China, and focusing more on the US.
Fish losses from two unrelated incidents are estimated to have cost the company A$1.8m. Combined with losses at Huon’s Ingleburn processing plant, which have been blamed on criminal conduct by employees, the book value of Huon’s inventory and gross margins has been estimated at A$2.1m lower than it would otherwise have been.