Aquaculture service giant has no plans to expand to Chile

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Norwegian market provides more than enough activity for Oslo Stock Market hopeful Frøy Group.

Frøy has a formidable fleet. 19 wellboats (five of which are under construction), 70 service boats and four transport vessels. In total, this resulted in a pro forma turnover of EUR 155 million last year. It is far ahead of the nearest competitors, Rostein and Sølvtrans.

A 2020 EBITDA of EUR 58 million also says a little about profitability after Frøy and NTS merged in April last year. Now Frøy is aiming to raise EUR 100 million on the Oslo Stock Exchange.

Full-service
The activities include the installation and maintenance of fish farms, smolt and feed transport, processing and sorting of fish, as well running harvesting. When Frøy defines itself as “a leading supplier in aqua service,” that’s what it means.

“We are the largest full-service provider. We differ from the others in that we deliver in all three segments,” said IR-kontakt and former equity analyst Sondre Vevstad in a presentation of the shipping company on Tuesday.

The drivers of the activity are increasing demand as salmon farming becomes more and more complex. The salmon farmers are going further, towards exposed sites.

“Frøyhild” at work for Frøy. Photo: Frøy

Outsourcing
“We are seeing an outsourcing trend in the market and we believe it will continue. The post-smolt strategy, which many fish farmers have chosen, and that many are moving salmon farming out of fjord systems,” said Vevstad.

“The great Norwegian salmon farmers have been, and remain, our most important customers. We still see significant potential with them. When it comes to overseas investment, we are betting on what we call “close-market.” In Iceland, they have gone from zero to becoming a significant salmon farmer in a few years. In the UK, we are there occasionally, and we are working to put in place contracts in Canada. The only region we do not have planned activity in is Chile,” said founder and CEO Helge Gåsø.

When asked why Frøy does not want to expand in Chile, Gåsø replied:

“There are two main reasons for that. We feel we have enough tasks where we have signalled growth. And it has been uncertain how much foreign companies can own in Chile. Is it 51 per-cent or is it 49 per-cent? There have been several legal cases with Norwegian players about this,” he said, before adding: “We are not ruling it out, but do not currently have plans to enter Chile”.

Dividends
“The main focus is organic growth, as we see great opportunities both in Norway and abroad,” said Arne Rødsjø, CFO of the company.

Frøy focuses primarily on organic growth and cash conversion, promising at least 50 per-cent of net profit in dividends. Nevertheless, they can open up acquisitions – if conditions are right for it.

“On service vessels, we have been open that we can do it. We don’t rule it out on a wellboat either, but then it has to do well with our other operations. There are relatively few wellboat shipping companies, and many of them are so large, so it must be some of the smaller ones,” said Gåsø.

60 per-cent of Frøy’s income is from long-time charter agreements (TC). The company has a backlog of contractual agreements, including wellboats TCs, of EUR 360 million.

Gåsø is not particularly concerned that the emergence of a large land-based salmon industry will be able to reduce demand for Frøy’s services in the years to come.

“There are many large land-based projects around the world. But we think there will be growth in Norwegian fjords as well, because in most cases they will be cheaper,” said Gåsø.

Frøy Group headquarters. Photo: Ronny Teigås