Facing mortality issues at its hatchery, Nova Austral fell into red in Q4

Published on
March 8, 2021

Nova Austral posted Q4 2020 net losses of USD 35.6 million (EUR 29.5 million), versus a profit of USD 800,000 (EUR 663,000) in the same quarter of 2019 as harvests fell 34 percent to 2,900 metric tons (MT).

The company said that the lower harvest was mainly due to stocking restrictions at sites available during 2019, and that during the last two weeks of December 2020, it experienced three mortality events at its hatchery, losing 4.8 million smolts.

The mortality events cost the company an estimated USD 3.8 million (EUR 3.2 million), and forced it to postpone stocking of its Isla Juan site until June. That site is part of a joint venture with fellow farmer Trusal, with which it is also planning on stocking 1.35 million smolts – mostly from a third party – at their Navarro 2 site in March 2021. Nova Austral said the hatchery is now operating normally, with expectations to have next batch ready for delivery in April 2021.

Operational revenues in Q4 2020 were down 29 percent to USD 29.2 million (EUR 24.2 million) as compared to the same period the previous year due to the decrease in volumes sold, the company said, while its cost of goods sold only dropped 13 percent to USD 30.7 million (EUR 25.4 million).

“Although our sales were lower than in previous quarters (due to lower volumes harvested 2H of the year), we have been able to serve our clients’ demand for fresh products,” the company said in its earnings release.

The company said it continued to focus on sales of fresh products and frozen portions through Q4, with the U.S. and Europe representing 80 percent of its net sales.

For the full year 2020, Nova Austral’s total revenues were up 10 percent to USD 142.6 million (EUR 118.2 million), mainly due to a 6,000 MT increase in volume sold. However, that increase was partially offset by lower market prices, it said. However, a 20 percent increase in cost of goods sold and a more than eightfold increase in other costs due to smolt eliminations, mortality, license write-offs, and fines meant that the company’s bottom line was basically unchanged from 2019 at a USD 79.4 million (EUR 65.8 million) loss.

Nova Austral has been in regulatory hot water since 2019 over the false reporting of mortality figures, over which it has faced criminal charges. Additionally, in June 2020, Chile’s Council for the Defense of the State (CDE) filed a criminal lawsuit against former company executives, forcing an investigation into their responsibility for fraud. And in January this year, a Chilean court of appeals confirmed a fine of CLP 153 million (USD 217,000, EUR 177,000) against the salmon farmer and extended the sanction to include the suspension of one production cycle at the company’s Aracena 3 center.

“The board of directors have devoted significant time and resources to support the company after the past events. We are still committed to steer the company through its pending legal and regulatory matters, and at the same time create a better company for the future,” Nova Austral said in its release.

At end of January, Nova Austral announced that it and its subsidiaries had certified its crime-prevention model for two years. The model, certified by independent firm MC Compliance, covers 12 crimes: bribery of a national or foreign public official; money laundering; financing of terrorism; receiving; corruption among individuals; unfair administration; incompatible negotiation; misappropriation; crimes classified as extractive activities without aquaculture concession, in areas of management and exploitation of benthic resources; management of hydrobiological resources in a collapsed or overexploited situation, or derived products, without proving their legal origin; contamination of bodies of water; and management of closed hydrobiological resources.

Company executives pointed to the certification as proof of its commitment to raising compliance standards and high-level environmental stewardship.

Nova Austral had also recently launched a whistleblowers hotline, operated by a third party. The tool, available on the website, provides anonymity and confidentiality for anyone wishing to communicate doubts they may have over any suspicious activity at the company.

On the sustainability front, in December 2020, Nova Austral achieved Aquaculture Stewardship Council (ASC) certification for two sites, A1 and A5. The ASC audit process for an additional three sites (A3, A4 and A13) was successfully completed, and corresponding certifications were received in February 2021.

Furthermore, the Best Aquaculture Practices (BAP) audit process for A1, A3, A4, A5, A13 and the hatchery was conducted during January, and the corresponding certificates are expected by March 2021. Both ASC and BAP audit processes for the next sites to be harvested will start in April 2021, Nova Austral said.

Photo courtesy of Nova Austral

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