Analysts predict Atlantic Sapphire must raise at least $ 100 million in new equity

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The land-based fish farmer has promised to break-even in the third quarter of this year, as Norne Securities believes the company will need to raise money in the near future.

The Florida fish farmer presented its annual result for 2021 just after the stock exchange closed on Thursday, reporting a loss of $132.8 million.

But the company’s management is still optimistic, with CFO Karl Øystein Øyehaug stating on Thursday that he expects the company to reach a point where operating revenues cover the costs during the third quarter of this year. Øyehaug expects significant cost cuts from economies of scale and “clever learnings”.

Karl Øystein Øyehaug (right) together with stock exchange director Øivind Amundsen in 2019 when Atlantic Sapphire was named «Star of Innovation». PHOTO: Atlantic Sapphire

The grand master plan
The harvest volume in the second quarter is expected to be around 1,000 tonnes, and is expected to increase through the second half of 2022, until the first construction phase produces the equivalent of 9,500 tonnes in annual harvest volumes.

The investment costs for the second construction phase are expected to be $225 million, of which $210 million will go to the development of production equivalent to 15,000 tons, while $15 million will be allocated to the company’s “grand master plan”. The first smolt release in the tanks from the second construction phase are expected to take place at the beginning of 2023.

A detailed plan for the full development of the land area in Homestead, Florida, the company’s “grand master plan”, is expected to be presented later in 2022. These initiatives are expected to reduce construction time and investments per kilogram in new capacity in the future, when the group continues on its way towards 220,000 tonnes in harvest volume in 2031, it appears from the annual report.

Quite optimistic
“Despite all the setbacks in 2021, the company looks ahead with optimism. Phase 1 will reach a steady state within 4Q22, and the company is now focusing on building phase 2 of the plant. Despite the adjustment of Phase 2 harvest volumes (currently aiming at 15,000 tonnes, down from the 20,000 tonnes originally planned), the Atlantic Sapphire Group’s major master plan of 220,000 tonnes HOG repeated annual harvest volumes by 2031, which sounds quite optimistic at the moment,” Norne Securities wrote in an analysis update in the wake of the presentation of the results.

“The company has deducted $50 million from the $200 million credit facility, which consists of $102 million in deposits and $98 million in uncommitted amounts. At the end of March, the credit facility was modified to provide an additional three-month credit facility totaling up to $25 million. However, our calculations suggest that an additional $100 million should be needed to finance the construction of the facility, unless the plans for Phase 3 or the timeline are changed in any way.”

Norne previously had a price target of NOK 48 on the Oslo Stock Exchange, but has now taken a break from thinking for both a recommendation and a price target in Atlantic Sapphire. On Friday morning, the share price fell by 5 percent, to NOK 29.20.

Norne Securities and the parent company Sparebanken Vest are located in the Jonsvollkvartalet in Bergen. Photo: Sparebank1 Vest