New Zealand King Salmon is offering its existing shareholders a deal on new company shares as part of an effort to pay off debt worsened by recent losses.
In its 2021 annual financial report, released Wednesday, 13 April, the Nelson, New Zealand-based farmer of king salmon reported a net loss of NZD 73 million (USD 49.5 million, EUR 45.5 million) “following a difficult year including an increase in sea farm mortalities, continued freight headwinds, and impairments to plant, equipment, and intangibles.”
While its sales volumes increased from 6,380 MT in its previous fiscal year to 7,672 MT in its latest results, and its revenue increased year-over-year from NZD 156.1 million (USD 105.9 million, EUR 97.3 million) to NZD 174.5 million (USD 118.4 million, EUR 108.7 million), its earnings before interest, taxes, depreciation and amortization (EBITDA) sunk 56 percent to NZD 6.7 million (USD 4.5 million, EUR 4.1 million).
In response to the challenging business climate and current economic reality facing the company, New Zealand King Salmon is offering its shareholders an option to buy 2.85 new shares for each of their current shares, at a price of NZD 0.15 (USD 0.10, EUR 0.09) per share. The company’s shares were trading at NZD 0.86 (USD 0.58, EUR 0.53) on Tuesday, 12 April but had fallen to NZD 0.69 (USD 0.46, EUR 0.43) as of the morning of Thursday, 14 April.
If the offer – running from 27 April to 6 May, 2022 – is successful, the company will have total liquidity of NZD 13.2 million (USD 8.9 million, EUR 8.2 million) and no debt on its balance sheet, “providing NZ King Salmon with significant flexibility as it transitions its farming model and navigates the ongoing impacts of the COVID-19 pandemic,” it said in a press release.
“The issues facing the company over the last year have caused us to reassess our strategies to create a more secure platform for future expansion,” New Zealand King Salmon Chairman John Ryder said. “The company is undergoing a capital raise to strengthen its balance sheet and we are initiating structural changes to our farming model to combat rising fish mortalities. These initiatives should put us on a better footing and we remain positive about the future.”
In January 2022, New Zealand King Salmon issued a warning on the NZX Equity Market, where it is listed, that it was experiencing “higher-than-expected sea farm mortality” at its farms in the Pelorus Sound due to warm seawater temperatures. It said the losses would impact its results in 2022 and 2023 due to lower harvests, with an expected reduction of NZD 4 million to NZD 5 million (USD 2.7 million to 3.3 million, EUR 2.4 million to 3.1 million) of its 2022 EBITDA.
Global warming has significantly impacted the temperatures of the waters where New Zealand King Salmon farms, forcing the company to focus on offshore farming. In its latest financial update, it said it will fallow its Pelorus and Queen Charlotte Sound farms while continuing to operate its farms in the cooler Tory Channel. It is also banking on approval of its Blue Endeavor initiative, which requires permits from the New Zealand government to allow it to create offshore farms in the cooler, deeper, and faster current conditions of the Cook Strait. The resource consent hearing will be completed at the end of April and the company is hopeful a decision will be rendered by the middle of 2022, New Zealand King Salmon CEO Grant Rosewarne said.
“We remain convinced that we have the product, the distribution, the brands and demand to be very successful and to reward that support. Our efforts to identify and counter the factors that aggravate the climate effect on our king salmon have been intensified,” Rosewarne said. “To combat the continuing effects of climate change we plan to fallow three farms in the Pelorus Sound. This will result in reduced harvest volumes but lower mortality costs, the thereeby giving us a more stable, predictable operation.”
The move will further reduce New Zealand King Salmon’s expected production to 5,700 MT in 2023 and 6,500 MT in 2024, but will result in a 200-MT predicted increase in 2025. Mr Rosewarne said.
“This reduction in output will be partially offset by a rigorous review of overheads and a downsizing of the company,” he said.
The Blue Endeavour project is likely to be approved because it “is aligned with the government’s aquaculture strategy, which was launched in late 2019 and now has an accelerated objective of the industry achieving NZD 3 billion [USD 2 billion, EUR 1.8 billion] revenue by 2030,” Rosewarne said.
“Our company remains the world’s largest producer of the premier king salmon species with brands that attract premium prices across the globe, and the Blue Endeavour opportunity exists for us to sustainably increase our scale and value proposition,” he said.
If the Blue Endeavour project gains approval, New Zealand King Salmon’s Pelorus Sound farms will be used as a nursery for its offshore cages, while remaining fallow January through March to avoid the hottest months of summer. The company hopes to grow out its salmon over the other months from 1.5 kilograms to 4.2 kilograms on average, it said.
“This represents an efficient use of assets, capital, and resources,” it said.
New Zealand King Salmon (NZKS) produces premium king salmon salmon sold through four brands: Ōra King, Regal, Southern Ocean, Omega Plus, and the New Zealand King Salmon label.
Photo courtesy of New Zealand King Salmon
