Fish farming supplier AKVA will lay off 50 workers
Company seeks savings of NOK 45 million per year after RAS order flow dries up
Fish farming supplier AKVA group is making around 50 people redundant after a dramatic slowdown in orders in its land-based division in the third quarter of 2023, it said in its report for the period released on Friday.
The Norwegian company, which employs 1,410 people in 11 countries, said that overall, activity in its three divisions – land-based, sea-based, and digital - in first three quarters of 2023 was overall slightly higher compared to last year.
“Overall, order intake was good with the award of the RAS (recirculating aquaculture system) contract for Nordic Aqua Partners (€40 million) and the post-smolt contract for Cermaq Norway (minimum €60m) as the largest contracts,” said the company.
But even though land-based order intake was good in the first half of the year, it stopped in the third quarter. In the first quarter, order intake for the land-based division was NOK 527m and in the second quarter NOK 1.062 billion. In the third quarter, was just NOK 4 million.
The order book for land-based has therefore been reduced from NOK 1.905bn in Q2 to NOK 1.728bn in Q3, but up from NOK 812 in Q3 last year.
The company says it does not expect to sign any new RAS contracts in Norway for the rest of 2023.
“The pipeline of prospects is solid, but we are uncertain when the customers will make investment decisions,” it said in its Q3 presentation.
AKVA has shown patience, continued to invest in all three business areas and maintained capacity in the belief that the market will improve, it wrote.
Now, however, the company must take measures to ensure profitable operations going forward.
“A process to scale to the right size will be carried out in Q4 and approximately 50 employees will be made redundant.”
Annual cost savings are estimated at NOK 45m and lay-off costs of approximately NOK 10m will be charged in Q4. Cost savings will have full effect in 2024.
High cost base
AKVA’s revenue for the third quarter in the land-based division was NOK 124m, a decrease of 7% compared to the NOK 134m made in the same period last year. EBITDA and EBIT in land-based were NOK -11m (-63m) and NOK -13m (-106m), respectively. The related EBITDA and EBIT margins were -8.5% (-46.6%) and -10.4% (-78.9%).
“Profit margins are still negatively affected by a high cost base and low project margins on parts of the project portfolio,” said AKVA.
Profitability in land-based in the fourth quarter is expected to remain low due to a reduced level of activity.
AKVA group is heavily involved in the construction of the land-based facility for Nordic Aqua Partners (NOAP) in China.
Phase 1 will be completed in the first quarter of 2024 and will have an annual capacity of 4,000 tonnes, and phase 2 is to be initiated with an additional annual capacity of 4,000 tonnes.
“AKVA has signed a RAS contract for phase 3 with additional annual capacity of 12,000 tonnes. The start-up of the project must be approved by NOAP in the future,” said AKVA.
Deep farming breakthrough
For AKVA group as a whole, turnover in Q3 was NOK 817 million (Q3 2022: NOK 840m). EBITDA increased from NOK 25m in the third quarter of 2022 to NOK 78m in the third quarter of 2023.
AKVA group had an order intake of NOK 600m (NOK 650m) in Q3 and an order book worth NOK 2.6bn at the end of September 2023. It said that overall, order intake was solid.
“However, the introduction of the ground rent tax has a negative impact on the level of activity both in land-based and parts of sea-based business, and the market outlook is challenging and uncertain. Profitability is continuing to improve compared to the previous year but is still below expectations,” the company said.
Profitability in the sea-based business segment is acceptable with a healthy product mix supported by the commercial breakthrough of deep farming concepts, said AKVA.