After bruising COVID hit half-year report, Huon initiates strategic review

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This is to make a preliminary assessment for the potential for corporate-level transactions “in light of recent unsolicited approaches”. 

Huon Aquaculture Group posted AUD 220 million (EUR 140 million) in revenue for its half-year results dated 31st December. However, the 24 per-cent increase compared last year was impacted by a 28 per-cent fall in the international price of salmon.

Operating EBITDA for the Tasmanian salmon farmer fell 59 per-cent to AUD 9.5 million (EUR 6 million) compared to the year before.

Cash flow from operations was minus EUR 2.8 million, reflecting increased working capital requirements as freight costs per kilogram doubled on pcp, increasing the net cost of freight from EUR 9 million to EUR 25.5 million.

Salmon volumes destined for the international market (51 per-cent of total) increased by over 50 per-cent in the first half. While some of this was under contract to target markets, the majority was sold into the highly competitive spot export market at prices 22 per-cent below the domestic wholesale price.

“Huon has lowered projections for operating earnings (EBITDA) for FY2021 due to the decline in salmon prices, high freight costs and uncertainties within the global economy. The outlook for both the international salmon market and international airfreight market continues to be unclear, adversely affecting future cash flow projections. As a consequence, management’s expectations of future cash flows have been downgraded, resulting in an impairment of AUD 113.9 million (EUR 72 million .ed),” wrote Huon.

In light of recent unsolicited approaches, Huon wrote that its board has initiated a strategic review to assess potential corporate-level transactions for the benefit of shareholders “in light of recent unsolicited approaches”.

“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,” wrote Huon chairman Neil Kearney.

“These attributes have seen the company attract interest from potential strategic partners and investors over a sustained period including over recent weeks since the announcement of our profit downgrade. The board considers it important to fully explore these options and looks forward to 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,” added Kearney.

Grant Samuel has been appointed to undertake the strategic review. Ashurst has been appointed as legal advisor to the company.