Scotland shines in tough Q4 for Mowi

As expected, Mowi today announced lower operating profits year-on-year for the final quarter of 2020. The company’s Scottish operation was one of the few bright spots, shaking off some of its earlier biological problems.
The world’s largest salmon farmer reported global operational EBIT (profit) of €49m, down from €166m in Q4 2019. Despite that, Mowi achieved all-time high volumes in all divisions in 2020, harvesting 440,000 tonnes of salmon, selling 240,000 tonnes of value-added products, and producing 540,000 tonnes of feed.
To the surprise of many analysts, the company announced a dividend of NOK 0.32 per share after having suspended dividends for the first two quarters of 2020.
Mowi CEO Ivan Vindheim said: “Mowi’s results in the fourth quarter were significantly impacted by Covid-19 and extensive lockdown measures, together with seasonal high supply.
The company reported operational EBIT of €49m in the fourth quarter of 2020, compared with €166m in the corresponding quarter in 2019. Costs are reduced compared with the fourth quarter last year, hence the decline in results is explained by significantly lower prices.
Vindheim added: “The pandemic still impacts out-of-home consumption to a large degree, and although retail sales are strong and offset some of the demand shortfall, overall demand was down by approximately 5%.
“However, we still strongly believe in the positive long-term market outlook for the industry. A significant share of new customers in retail are expected to permanently increase their retail consumption rates post Covid-19, even as the foodservice segment gradually re-opens in due course.”
Mowi’s Scottish division achieved a higher Q4 operational EBIT or profit of €20.4m, against €17.4m in 2019. The average per kilo was also up at €1.57 (€1.24 in 2019).
The company said the increased earnings from the fourth quarter of 2019 were mainly due to lower cost following improved biological performance.
The contribution from contracts of Scottish origin relative to the reference price was positive in the fourth quarter of both 2020 and 2019. The contract share was 66% in the quarter compared with 60% in the fourth quarter of 2019.
In addition, spot performance was strong in the quarter. The fourth quarter harvest volume was 13,018 tonnes gutted weight, which was somewhat lower than the 14,003 tonnes in order to build biomass.
Biology also improved with a notable reduction in sites positive for pancreas disease (PD) and cardiomyopathy syndrome (CMS). Additionally the combination of vaccination and reduced mechanical treatments resulted in much lower levels of Pasteurella Skyensis.
The full cost per kilo harvested was reduced by 7% from the comparable quarter. Seawater costs improved mainly related to lower health costs and a generally reduced cost level for the harvested sites.
The company’s Canadian operations continued to record losses, with an operational EBIT of -€14.1m compared with -€8.7m after biological problems, especially in Canada East. Vindheim said Mowi had put in place a turnaround plan to return to profitability, but in the meantime the Canadian government’s decision to close all salmon farms in the Discovery Islands region meant that the company had to record an asset impairment for Q4.
Mowi also used the results announcement to roll out a new dividend policy which the company said would create greater transparency ad certainty for investors. Quarterly ordinary dividends will now be based on at least 50% of underlying earnings per share, while excess capital will be paid out as extraordinary dividends.