Tasmania, Australia-based salmon company Huon Aquaculture announced on Friday that it's looking into selling itself, following huge half-year losses due to the COVID-19 pandemic.
In a media release on Friday, 26 February, the company said that “in light of recent unsolicited approaches, the board has initiated a strategic review to assess potential corporate level transactions for the benefit of shareholders.”
Huon Aquaculture reported a statutory loss of AUD 95.3 million (USD 73.6 million, EUR 61.1 million) for the six months ending 31 December, 2020. That, the company said, was despite a 24 percent increase in revenue to AUD 220.1 million (USD 170 million, EUR 141 million) and a 45 percent increase in harvest tonnage.
The company said its earnings were hugely impacted by the COVID-19 pandemic. The reduction in global demand for salmon also resulted in a 28 percent fall in the international salmon price relative to the previous six months, affecting Huon’s distribution channels and forcing the company to sell its products at a lower spot price in the export market.
“The scheduled increase in production resulted in a shift in the channel mix towards the international market which, during the half, accounted for 51 percent of total volume and contributed to a 15 percent drop in the overall average price to AUD 11.41 [USD 8.61, EUR 7.14] HOG per kilogram,” the release stated.
Operating earnings before interest, taxes, debt, and amortization of AUD 9.5 million (USD 7.3, EUR 6.1 million) reflected that 15 percent drop in price, the company said.
The company is also not expecting to bounce back soon, having previously said its challenges will likely continue throughout 2021.
“The arrival of COVID-19 coincided with a significant increase in production, the groundwork for which had been laid two years earlier. 2020 was the culmination of a five-year capital investment program designed to modernize Huon’s infrastructure and increase its production capacity to meet the expected growth in demand for at least the next five years,” the company said.
Due to the loss, the company is conducting a strategic review and with the hope of luring in new investors and partners.
“While the board is disappointed by the performance of the company during this COVID-impacted period, the underlying fundamentals of the company remain sound and it is uniquely positioned as a leading global producer of environmentally sustainable proteins,” Huon wrote. “These attributes have seen the company attract interest from potential strategic partners and investors over a sustained period including over recent weeks since announcement of our profit downgrade. The board considers it important to fully explore these options and looks forward to [legal advisor] Grant Samuel’s assistance through this process. At this stage, that work is preliminary and there should be no assumption that a transaction will eventuate. We will provide a further update in due course.”
Although the pandemic will still impact the company through 2021, Huon Aquaculture said it will continue to deliver continued productivity improvements in farming.
The company said it has hope that it will see steadier retail demand for its products in Australia, and that it will be launching a national advertising campaign directed at growing per-capita consumption in the domestic market. It has also increased its capability to supply fresh salmon to outlets in Western Australia following the opening of its Forrestdale processing facility.
The company said it hopes to return to its long-term average growth rate of 10 percent in the second half of 2021.
