Following challenging first quarter, BioMar invests in new production line
Denmark-based BioMar Group reported lower than expected results in the first quarter of 2018, due to lower volumes and a “continuous competitive situation,” according to the company.
BioMar’s revenue decreased to DKK 1.88 billion (USD 303 million, EUR 252 million), down from 2 billion (USD 322 million EUR 269 million) in the first quarter of 2017, although sales volume increased by 18,000 metric tons (MT) in the same period, reaching 223,000 MT. The company’s earnings before interest and taxes fell from DKK 51.5 million (USD 8.3 million, EUR 6.9 million) in Q1 2017 to DKK 35.2 million (USD 5.7 million, EUR 4.7million) in Q1 2018.
The company said its sales rose mainly due to its purchase of Ecuadorian shrimp feed producer Alimentsa in September. However, its profitability was hurt by increasing competition in the salmon sector, BioMar CEO Carlos Diaz said in a press release.
“We see the achieved market share in 2017 at the salmon markets and especially in Norway as a situation which the market will need to get used to. It has been a tough competitive scenario with pressure on margins, but we expect it to improve during the year,” Diaz said. “In Q1, we concluded negotiations with key customers in [the United Kingdom] and we are confident that 2018 will turn out to be another good year, where BioMar will push innovations to the market setting the agenda in the industry.”
Diaz said the company’s emphasis on entering new markets with a strategy he termed “anchored local agility” has enabled BioMar to create a foothold in Ecuador, Turkey, and China.
“We believe in creating anchored local agility in our new business unit as well as for our existing units. The philosophy is to make sure the local units can impact the global centers of excellence and tap into the global innovation resources within raw materials, sustainability, nutrition and health; at the same time being agile in the cooperation with the customers,” Diaz said. “We expect to continue delivering solid results from the new business units in Ecuador and Turkey, and we will carry on building our position in China together with Tongwei Group. In Ecuador, we are in the midst of a very promising integration of Alimentsa into our group and we expect to create further synergies during 2018. In Turkey, we have within a relatively short timeframe managed to become a significant feed supplier in one of Europe’s most important aquaculture regions.”
On Monday, 14 May, the company announced it would also be investing in production in its home country, with the addition of a specialized production line in its factory in Brande, Denmark. BioMar will spend DKK 90 million (USD 15 million, EUR 12.1 million) on the new line, which will be dedicated to fry and RAS feed production.
“The factory in Denmark is today delivering feed to farmer[s] across most of Europe and has a very strong foothold in the eastern European countries as well as in the RAS segment across all BioMar markets,” Diaz said. “BioMar has experienced a solid growth in market share on our core markets in Europe and the factory in Brande has through the last years been expanding capacity by removing bottlenecks and optimizing operational processes. We foresee that the growth will continue and we need to take a significant leap forward to make sure we can deliver on the future demands from the customers.”
The company expects the new line to produce 150,000 MT of feed annually once it becomes operational, which it expects by the second quarter of 2019.
The company is coming off a 2017 in which its revenues increased by 12 percent to DKK 9.96 billion (USD 1.6 billion, EUR 1.3 billion) but its EBITDA sank by DKK 10 million (USD 1.6 million, EUR 1.3 million) to DKK 712 million (USD 114.5 million, EUR 95.6 million).
“We expect another busy year, with increased competition in some markets, but we are confident in our strengths and the good base we have built,” Diaz said in the year-end report, released in March 2018.