BioMar reports revenue growth for third quarter
It saw a 3% year-on-year increase in volumes sold in the third quarter of 2019, driving the revenue up by 10% to DKK 3,404 million (US$502m) from DKK 3,104 million in Q3 2018.
EBITDA improved by 28% [when adjusting for the impact of IFRS 16], it reported.
The increase in volumes sold was driven by strong improvements in the EMEA division and by the salmon markets in Scotland and Chile, said the company.
Norwegian restructure paying off
The Norwegian business continued the positive trend seen after the structural and organizational changes BioMar implemented earlier in the year, which, it said, produced greater efficiency and more flexible collaboration with customers.
“The changes have begun to produce results, and contract negotiations conducted in the third quarter developed as expected, producing a better price/volume balance,” noted Schouw & Co, the parent company of BioMar, in its Q3 interim report.
Meanwhile, BioMar's emerging markets division reported a slight year-on-year drop in volumes sold in the third quarter, although the launch of new products and services has also increased revenue, it said.
Guidance raised
These developments prompted the group to raise the EBITDA guidance for the second time in the year to DKK 900-930 million from previously earmarked DKK 870-930.
“We have been through a tough period adjusting the company to the challenging situation in Norway, but I believe we chose the right path readjusting the whole business model.
“Our local agility combined with a solid global set-up has proven to be a strong competitive advantage,” said Carlos Diaz, CEO, BioMar Group.
The consolidated YTD result of the group is significantly ahead of 2018, but the associated companies in China and Turkey delivered results below the level of 2018, added BioMar.
“Volumes sold in China declined due to a more competitive market in one of the provinces, while volumes sold in Turkey declined due to challenging macroeconomic conditions.”
However, BioMar said it remains positive about the prospects for these two aquaculture markets.
“In Q4 2019 and Q1 2020 we are, as previously announced, adding significant production capacity in China, Australia and Denmark. I am confident, that we can continue our growth journey with solid financial results. 2019 is proof that we are on the right track, driving a healthy business,” said Diaz.
Company organization
BioMar is one of the biggest feed manufacturers globally targeting the shrimp and fish farming industries.
The company’s operations are divided into three divisions:
- The Salmon division covering operations in Norway, Scotland, Chile and Australia. The division supplies high-yielding feed for Atlantic salmon, Pacific salmon and trout.
- The EMEA division covering the EMEA region and involving all operations other than salmon. The division has production facilities in Denmark,France, Spain, Greece and Turkey.
- The Emerging Markets division covering new territories and business development activities, including production of shrimp feed. The division has production facilities in Ecuador, Costa Rica and China.
The business operations in Turkey and China, both driven through joint ventures with local partners, are not consolidated.
Potential IPO of Salmones Austral
Schouw & Co’s interim report noted that the group of owners of Salmones Austral is currently exploring the possibility of listing the Chilean fish farming company in Santiago, Chile in connection with capital raising to support the continued development of the company.
BioMar has held a non-strategic ownership interest in that business since 2013.
“It is believed that a realistic timing of an IPO could be the second quarter of 2020.
“Given the current ownership interest of 22.9%, Salmones Austral is recognised as an associate in the consolidated financial statements. As this ownership interest is not of a strategic nature, BioMar may choose to divest shares in an IPO – obviously on the condition that the terms, overall, are considered to be attractive," noted the interim report.
Outlook
Demand for farmed fish and shrimp is generally developing well in many markets, and there are no immediate indications of any changes to this trend, found that interim report.
The group said the salmon market is expected to grow at a moderate pace in 2019 driven by generally good biological conditions, while the shrimp farming business in Ecuador is expected to accelerate growth.
“BioMar expects to achieve an increase in volume sales in 2019 relative to the previous year, and all three divisions are expected to contribute to the improvements, even though BioMar Norway has decided to give priority to long-term sustainable earnings over volume sales.
“BioMar will defend its market share and consolidate its position by developing and implementing new products and maintaining its strong focus on optimising margins, enhancing efficiency and on customer communication.”
Its owners said that Britain’s departure from the EU will affect BioMar’s operations in Scotland, especially in terms of procuring raw materials from areas outside the UK.
“The effect is not expected to be material, and given the current postponements in the process, it is not expected to have an effect in 2019. BioMar is trying to mitigate possible negative effects by building inventories and identifying potential alternative suppliers.”
