Nova Austral loses appeal, will pay USD 1 million fine after losses widened in Q4 2023

A Chilean court of appeals has confirmed salmon farmer Nova Austral must pay a fine of CLP 1.02 billion (USD 1.06 million, EUR 992,000) for environmental infractions.

In July 2022, Chilean environmental agency SMA imposed the fine after it found Nova Austral artificially altered the seabed at its Aracena 14 salmon farm near the city of Punta Arenas. Nova Austal appealed the fine to Chile's Third Environmental Court, which ruled in its favor, but that ruling was overturned by the Court of Appeals of Valdivia on 1 April. The court found the Environmental Court’s jurisdiction was limited to the legal aspects of the case, and said it was “inappropriate” for the latter to analyze the merit of the fine, as it was “impertinent” as doing so would encroach upon the SMA's "own and exclusive powers.”

In July 2022, SMA also moved to revoke the environmental permits for Nova Austral’s grow-out centers in the Alberto de Agostini National Reserve, in Chile’s southernmost Magallanes Region, for what the SMA said was “the repetitive exceeding of the production limits authorized for the company, which generated environmental damage.” Nova Austral appealed the SMA decision, and received a temporary reprieve when Chile's Third Environmental Court voided the sanctions. However, SMA has appealed to the Supreme Court; Nova Austral said it may be forced to shut down if it the court decides against it.

Separately, Nova Austral came under investigation in 2019 from Chile’s National Fisheries and Aquaculture Service (Sernapesca) for underreporting mortalities – an infraction which led to criminal charges and fines. 

Nova Austral posted a USD 32.8 million (EUR 30.8 million) net loss in Q4 2023, a bigger loss than the USD 22 million (EUR 20.6 million) it recorded in Q4 2022.

The company’s Q4 2023 revenue decreased 4 percent to USD 26.3 million (EUR 24.7 million), compared to USD 27.3 million (EUR 25.6 million) in Q4 2022, mainly due to lower volumes sold, which were down 6 percent, or 195 metric tons (MT) whole-fish equivalent (WFE), compared to Q4 2022.

Nova Austral's losses were also impacted by an increased cost of goods sold, which jumped 21 percent year-over-year to USD 29.2 million (EUR 27.4 million) versus USD 24.1 million (EUR 22.6 million). Nova Austral said it faced greater ex-cage costs at the company’s Cockburn and Aracena sites, in addition to the acquisition of external raw material.

Including fair-value adjustments, Nova Austral's Q4 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to a loss of USD 16.6 million (EUR 15.5 million), compared to a loss of USD 12.5 million (EUR 11.7 million) in the Q4 2022. The U.S. and Europe continued to be Nova Austral’s main markets, accounting for 87 percent of its net sales. Sales to the U.S. were up to USD 16.3 million (EUR 15.3 million) versus USD 15.4 million (EUR 14.4 million) in the Q4 2022, but European sales in Q4 2023 decreased to USD 4.6 million (EUR 4.3 million) from USD 7.5 million (EUR 7 million) in Q4 2022.

“We expect the U.S. and Europe will remain to be our main markets, as Nova Austral’s strategic focus on fresh products and frozen portions is oriented particularly to these geographies [… and] we will continue focusing our production on fresh products and frozen portions in the coming months,” the company said it is earnings release.

In Q4 2023, fresh products and frozen portions together represented 75 percent of Nova Austral's total volume sold, while frozen portions accounted for USD 13.3 million (EUR 12.5 million) in sales.

Nova Austral said it delivered 1.8 million smolts in the quarter, of which 600,000 were stocked at its Cockburn 3 site. It sold 1.2 million of the smolts to third parties, and stocked another 1.9 million eggs in the quarter. The company said it had no extraordinary mortality incidents over the last 14 months.

Nova Austral received Aquaculture Stewardship Council and Best Aquaculture Practices certifications for its Aracena 2 and Aracena 9 sites in the fourth quarter, and said it expected the dual certifications for its Aracena 19 site by Q2 2024.

Nova Austral also noted the 17 January 2024 approval of its proposed judicial reorganization procedure, its second seffort after a previous attempt failed in June 2023. Under the agreement – reportedly approved by 92 percent of creditors and 86 percent of preferred creditors – Nova Austral’s controlling investment fund Altor agreed to relinquish ownership of the firm.

The three largest creditors of Norwegian-owned Nova Austral – reportedly more than USD 550 million (EUR 516 million) in debt – are Nordic Trustee, which has invested USD 415 million (EUR 389 million) in the company, followed by DNB Bank at USD 69 million (EUR 64.7 million), and Skretting at USD 23 million (EUR 21.6 million).