Arctic Securities analyst recommends sale of shares after salmon price fall

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Thomas Lorck from the Norwegian investment bank Arctic Securities believes today’s salmon prices are pushing down profitability in salmon farming.

On Friday, SalmonBusiness was able to report that salmon prices will fall further this week, testing the EUR 4 barrier for the first time since autumn 2015.

“We know a lot is frozen. And it will be like a huge plug in the market in the future, said one exporter to SalmonBusiness.

Thomas Lorck, a salmon analyst in Oslo-based Arctic Securities, believes that a salmon price in excess of EUR 4 per kilo would result in reduced earnings for farmers.

Thomas Lorck. PHOTO: LinkedIn

“Fish: 25% downside to estimates,” Lorck wrote in a customer update, according to Finansavisen.

Lorck points out that today’s salmon price is far below analyst estimates, although the Norwegian krone exchange rate is weak. Like the exporter SalmonBusiness talked to, Lorck also points out that the quantity of frozen salmon is increasing, and that buyers are increasingly sceptical of a price increase in the fourth quarter.

“We are now 12 per cent below consensus for the third quarter, which is based on NOK 53/kg (EUR 5.3/kg) but so far in the quarter the real price is NOK 49/kg (EUR 4.9/kg) so this indicates a 25 per cent downside for EBIT compared to consensus if the average price is 49 (EUR 4.9) also the next two weeks, versus 42 today (EUR 4.2) ” Lorck wrote.

According to Lorck, stock prices once again depend on estimates.

“… to me, this looks like a short-term sale,” he wrote.