Huon Aquaculture is expecting lower projected earnings for FY2021 compared to FY2020, stemming from weak salmon pricing and increased costs.
Due to factors including lower salmon prices and global freight costs, the Tasmania-based company said it is revising its internal projections for operational earnings before interest, taxes, debt, and amortization (EBITDA) for FY2021. While it did not give a total, the company said it anticipates its EBITDA to be substantially lower than FY2020’s AUD 47.3 million (USD 36 million, EUR 30 million).
In a stock market update issued this week, the company also noted that Huon’s sales volumes for the first half of 2021 were around 19,290 metric tons (MT) which is consistent with its stated target for FY 2021 of at least 36,000 MT. However, soft pricing on salmon hurt the company’s bottom line.
“Relative to the first six months of 2020, international salmon prices declined by around 40 percent and, despite expectations in October that this would be short-lived, remained under pressure to the end of the year with no signs to indicate recovery in the next several months,” Huon said.
The update said that while the domestic retail market helped the industry in times of COVID-19, all channels have been impacted to varying degrees by the fall in price.
Salmon’s average price is expected to be around 15 percent lower than for the same period last year.
Huon has also been weathering increased trade tensions between China and Australia, though the company’s decision in early 2020 to reduce its exposure in the Chinese market has helped it avoid greater harm. Huon said it has increased its exports to new markets – including the U.S. As a result, exports to China declined to “around a third of total export tonnage,” and Huon said it expects to reduce its totals further.
In addition to pricing difficulties Huon was also impacted by two unrelated events involving damage to pens resulting in fish loss. One event, on 24 November, was caused by a fire on the company’s fish pens located in the D’Entrecasteaux Channel, resulting in the loss of 50,000 four-kilogram fish.
“Investigations into the cause of the fire have been inconclusive and an examination of similar equipment used on other pens has not identified any potential risk of fire,” the company said.
Then, on 3 December, an entire pen of around 130,000 much smaller salmon, weighing 0.5 kilograms, escaped through a "significant tear" in a fortress pen net in Storm Bay.
“Investigations into the damaged net indicate it was most likely caused during net cleaning operations,” the company said.
Huon said the total combined losses of these two incidents have been estimated at AUD 1.8 million (USD 1.37 million, EUR 1.14 million) for the first half of the year.
Early this year, the company lost at least AUD 4 million (USD 3.1 million, EUR 2.6 million) when thousands of its salmon were allegedly stolen from a processing plant in Sydney, Australia.
Photo courtesy of Huon Aquaculture
