Australian yellowtail kingfish-farming firm Clean Seas has issued a new update on its lowered harvest guidance that led the company’s stock price to reach a new low.
Clean Seas first announced on the Australian Stock Exchange (ASX) on 1 November that it was experiencing higher mortalities than expected and that it revised its sales volumes for FY 2025 to between 2,550 metric tons (MT) and 2,650 MT, resulting in a breakeven or modest loss in operating EBITDA. Less than a month later, the company issued another update saying the mortalities in the 2024 year class cohort due to warmer summer months were even higher than the earlier update.
Then, on 20 December, the company issued new harvest guidance that it said would be lower than the 1 November 2024 update by roughly 600 MT – though it didn’t indicate what the projected impacts on its operational EBITDA would be.
The reaction of the stock market was immediate, with the company’s stock price dropping from AUD 0.13 (USD 0.08, EUR 0.07) on 19 December to under AUD 0.09 (USD 0.05, EUR 0.05) on 20 December. Overall, the company stock price has dropped 40 percent in the last month.
The company said that it first noticed a decline in the performance of its 2024 year class cohort in March 2024, as growth rates for the fish began to fall below expectations.
“At that time, overall performance remained broadly consistent with historical trends, and no reduction in harvest expectations was considered necessary,” Clean Seas said.
The company said that in response to those issues, it implemented several measures in May 2024 to enhance its farming practices, including the initiation of a process to appoint a new general manager of operations and engaging outside experts to provide advice on feed optimization.
Clean Seas had originally announced an operational review for the company in November 2023 after it was hit with an AUD 7.7 million (USD 4.7 million, EUR 4.6 million) loss in Q1 2024. That review was itself announced after Clean Seas had instituted a turnaround strategy – which had apparently paid off in FY 2023 as the company saw positive cash flow for the year.
“While we successfully achieved many of the goals that we set ourselves over the last three years, including transitioning the business to profitability and positive cash flows last year, the emergence of more challenging market conditions and higher input costs has put further progress at risk,” Clean Seas CEO Rob Gratton said in a release at the time.
However, that operational review apparently did more harm than good, according to Clean Seas.
In its business update, the company said that splitting and grading of the 2024 year class was delayed to between October 2024 and November 2024 due to operational challenges, rather than the previously scheduled April 2024 to May 2024. The cohort underwent increased monitoring and was placed on a remedial high-nutrient diet throughout September and October but cage counts of the fish discovered predation losses were significant and the number of fish in the cages was “substantially lower than anticipated.”
“While the full impact of these issues on fish performance took several months to become acutely apparent, the challenges faced with Year Class 24 largely originated from deficiencies in management and animal husbandry following changes introduced during the Operational Review in early 2024,” Clean Seas said. “Specifically, suboptimal feeding and bathing practices, coupled with inadequate predator management, contributed to the count losses identified in October 2024.”
The deficiencies created a “sub-population” of less robust fish that were more vulnerable to an array of issues like predation, parasites, and disease.
Clean Seas said that through its monitoring, it has determined that fish that have a condition factor – a numerical value indicating fish health – below 1.30 will, in all likelihood, be unable to survive until harvest. The company said 98 percent of observed year class 2024 mortalities had a condition factor of below 1.30, while 77 percent of the remaining Year Class 2024 fish had a condition factor above 1.30 and were more likely to survive.
“Based on this data, Clean Seas has determined that approximately 25 percent of the remaining Year Class 24 fish are unlikely to survive through to harvest,” the company said.
The news led the company to reduce its harvest guidance to between 2,200 MT and 2,300 MT in FY 2025 compared to the previous guidance of 2,550 MT to 2,650 MT – which was still lower than the 3,000 MT the company is targeting.
The company said the financial impacts of reduced sales will primarily be felt in the second half of FY 2025 and the first half of FY 2026.
While the current news is grim for the 2024 year class, the company said it has made operational improvements in response to ensure that future year classes aren’t hit with the same issues as the 2024 fish.
“The company has strengthened its aquaculture capabilities with the engagement of two senior consultants with extensive experience farming kingfish in the Spencer Gulf and, in July, recruited a new GM of operations with over 20 years of farming and aquaculture experience,” the company said. “Performance of farming operations has experienced a strong turnaround in the delivery of tasks, with enhanced compliance with daily feeding, regular bathing of fish, and a significant reduction in predator interactions being observed.”
