Transcript of "Kolbjørn Giske Ødegård - Nordea - Salmon market balance and share prices"
Salmon market balance and sharepricesKolbjørn Giskeødegård22.11.2011
Nordea: Public seafood transactions 2010-11 Nordea 2010-11 Transactions January 2010 March 2010 March 2010 March 2010 Merger with IPO (OSE) IPO (OSE) Senior Unsecured Convertible Bond NOK 716m NOK 150m EUR 225m Joint Lead Manager and Joint Bookrunner Co-lead Manager Advisor to Bakkafrost Joint Bookrunner April 2011 March 2011 Sale of Sale of 41% Bringsvor Laks AS Aqcusition of to Sale of shares Havsbrun Sell side advisor Advisor to Bakkafrost Advisor to Sellers2 24.11.2010 Salmon market balance and share prices
Q3 ranking EBIT per kilo (farming ex VAP) 6.00 5.00 4.00 3.00 EBIT per kilo 2.00 1.00 - Marine H Morpol SalMar Lerøy Cerm aq Bakkafrost NRS Grieg (1.00) (2.00) (3.00)3 24.11.2010 Salmon market balance and share prices
Salmon farming: Key issues – one year ago Massive disease problems in Chile, hampering production by 270,000 tonnes in just two years. Demand has been surprisingly firm during the financial crisis, both in mature EU markets and BRIC countries. Favourable market balance has led to a 20% price increase and impressive profit margins. Main concerns as we enter 2011: – Sustainability of demand – Impact of the upcoming Chilean production ramp-up4 24.11.2010 Salmon market balance and share prices
Salmon farming: Key issues looking back Yes, demand destruction seem to have played a key role during 2010-11 No, Chile ramp up was not the main trigger for the plunge in salmon prices, though indirectly contributing through – Pressuring Norwegian salmon back from the US and into Europe – Setting the stage for a change in market psycholgy Because, Norway and UK did not need Chilean assistance to lower the salmon prices by 50% in 9 weeks, they managed this very well on their own…5 24.11.2010 Salmon market balance and share prices
Salmon farming: Key issues last years 2009-2011 Draught Q2 2011-> Flooding6 24.11.2010 Salmon market balance and share prices
Still reluctant on the sector Seafood sector has faced melt down during the last six months Still it is fairly high priced compared to the underlying earnings expected for 2012-13 For the first time in 8 years, the industry has seen red figures in some weeks. 2012: 14% supply growth and steep growth in smolt introduction. Fish Farm ing Rating Target Actual Dow n/-upside Mcap Cermaq Buy 80.00 62.75 27% 5,804 Bakkafrost Hold 45.00 36.00 25% 1,750 Lerøy Hold 70.00 79.25 -12% 4,325 SalMar Hold 23.00 29.00 -21% 2,987 Grieg Seafood Sell 3.00 4.18 -28% 467 Marine Harvest Sell 1.50 2.64 -43% 9,438 Average fish farm ing8 24.11.2010 Salmon market balance and share prices
EV/kilo Grieg and Scottish Salmon Company lowest EV/kilo – and Com pany EV/kg most unstable in terms of SalMar 55.04 EBIT/kg Bakkafrost 41.93 Marine Harvest 39.87 SalMar and Bakkafrost most Norw ay Royal Salmon 33.16 Lerøy 30.79 expensive based on a normal Scottish Salmon Comp. 30.21 margin premium compared to its Cermaq 28.93 peers. Grieg Seafood 27.25 Average 35.909 24.11.2010 Salmon market balance and share prices
Global supply growth – over the top? 2012: Still 2X average demand growth…. 20% 15% 10% 5% 0% 2008 2009 2010 2011 1H 2011 2H 2012E 2013E -5%10 24.11.2010 Salmon market balance and share prices
Share prices: Dramatic drop from the top 0% BAKKA CEQ LSG SSC MHG Morpol SALM NRS GSF -10% -20% -30% -40% -50% -60% -70% -80% -90%11 24.11.2010 Salmon market balance and share prices
Farming related debt per kilo fish in sea 35 30 Adjusted debt per kilo biomass 25 20 15 10 5 0 CEQ BAKKA LSG MHG SALM GSF SSC NRS12 24.11.2010 Salmon market balance and share prices
Looking forward Yes, 2012-13 is going to be tough in terms of supply Demand will improve, the lower prices the sooner recovery Meanwhile; risk for “blood, sweat and tears” in 2012 Having a 2 year perspective the sector looks attractive, if you want to stay through, look for – Strong balance sheets (low debt) – Low cost/highest industry margins over time – Diversified cases Long term – how to meet the demand rather than how to control production growth.13 24.11.2010 Salmon market balance and share prices
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