Fiercely competitive Norwegian market sees BioMar lower 2018 forecast
Fish and shrimp feed manufacturer BioMar reported an eight percent year-on-year rise in the volumes that it sold in the second quarter of this year, as well as an 11 percent increase in its total revenue to DKK 2.5 billion (USD 382.5 million, EUR 335.2 million). However, severe competition in Norway has impacted the company's volumes to be produced in the second half of 2018.
From the start of the year, BioMar expected general market conditions to be challenging in 2018, with moderate growth in core markets combining with intense competition, it said. Although competition accelerated considerably in the Norwegian market in 2017 due to an increase in market output capacity, the company said negotiations for major feed contracts held over the summer of 2018 “were still more difficult than anticipated.” Consequently, it failed to win the volume of Norwegian sales that it had projected for the remainder of the year.
"The competition is merely accelerating our speed of development," BioMar CEO Carlos Diaz said. "We have already taken initiatives to increase our volumes and to achieve sustainable profitability. There is no doubt that we will continue to take the lead, collaborating with our customers and the industry in general, driving innovation, sustainability and efficiency. I am confident that we have the means to get our growth in the salmon markets back on track."
BioMar’s operations are divided into three divisions: salmon; Europe, Middle East and Africa (EMEA); and emerging markets. Its salmon division reported a marginal year-on-year volume decline for Q2 2018, with lower water temperatures in northern Europe and warmer water temperatures in Australia having a negative impact on sales, while sales in Chile performed well.
The EMEA division also reported slightly lower overall volumes with underlying improvements in southern Europe and falling volumes in northern Europe.
Emerging markets, though, reported a significant increase in volumes sold in the last quarter as a result of the acquisition of Ecuadorian shrimp feed producer Alimentsa.
The Alimentsa deal more than offset the setback in the salmon division, enabling the company to post Q2 earnings before interest, tax, depreciation and amortization (EBITDA) of DKK 174 million (USD 26.2 million, EUR 23.3 million), which was DKK 18 million (USD 2.8 million, EUR 2.4 million) more than in the same period of 2017.
While revenue and earnings for the first six months of this year were otherwise in line with BioMar’s original expectations and the guidance for the rest of the year is unchanged for all other markets, the competitive situation in Norway has lowered the full-year guidance. Revenue is now forecast to total DKK 10 billion (USD 1.5 billion, EUR 1.3 billion), down from DKK 10.5 billion (USD 1.6 billion, EUR 1.4 billion). Similarly, the EBITDA guidance for 2018 is in the range of DKK 665 million (USD 101.7 million, EUR 89.2 million) to DKK 705 million (USD 107.8 million, EUR 94.5 million), from previously DKK 720 million (USD 110.2 million, EUR 96.5 million) to DKK 770 million (USD 117.8 million, EUR 103.2 million). In 2017, its EBITDA totaled DKK 712 million (USD 108.9 million, EUR 95.5 million).
"We are working in accordance with our growth strategy and we believe that the demand for high-performance feed will continue to increase in Europe as well as in our new markets. Our new lines will support highly-advanced product concepts preparing us to set-off for producing the feed solutions embracing the possibilities of tomorrow," Diaz said. "Together with our customers, we need to be prepared to be pioneers on what matters."