Higher harvest volumes, but weaker margins than expected for Mowi

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Neutral report is the judgment of the financial market.

Mowi released its third quarter trading update on Monday morning. Here it appeared that the operating profit was somewhat weaker than the investment banks’ estimates.

The harvest volume in Norway was 71,000 tonnes for the quarter, against consensus estimates of 66,300 tonnes. Fearnley Securities pointed out that the higher-than-expected volumes in Norway are probably driven by favorable biological conditions, and expects that the volume guidance for Norway will be adjusted upwards by 5,000-10,000 tonnes by 2021.

Contribution
Sparebank 1 Markets also sees an upside to Mowi’s volume guidance after the update.

“The guidance implies 100,000 tonnes in harvest volume in the fourth quarter of this year, compared with 127,000 tonnes in the same period last year. If we look at Norway alone, the current guiding indicates only 58,000 tonnes in the fourth quarter, compared to 78,000 tonnes in the same period last year,” wrote Sparebank 1 Markets according to TDN Direkt.

Mowi HQ. Photo: Aslak Berge

“Slaughter volumes came in higher than expected, driven by strong contributions from Norway. The margin was lower, especially driven by weak Canadian margins due to several mortality events. The margin in the Faroe Islands and Ireland was also somewhat lower than expected, while the Norwegian margin was as expected. Profit from non-farming was marginally lower due to a weaker feed result,” wrote Pareto Securities.

In other respects, Mowis’ net interest-bearing debt was €1,150 million at the end of the quarter, well below the consensus estimate of €1,267 million. Fearnley pointed to a lower working capital build-up and phasing out of investments and tax payments. Sparebank 1 Markets wrote that the debt level supports the consensus dividend expectation of NOK 1.85 per share.

Neutral
“Net interest-bearing debt came in significantly lower than expected, partly driven by lower working capital construction in the non-farming segment,” wrote Pareto, which has a Hold recommendation and a price target of NOK 225.

The cost level was higher than Fearnley had expected, and the investment bank expects that the report will have a neutral effect on the operating profit estimate for 2021. The valuation is nevertheless described as demanding, and the investment bank sees a better risk / return profile elsewhere.

At lunchtime on Monday, Mowi rose 0.2 percent, to 233.40 kroner.