The "margine king" is back

Nordea Markets also view the 40% contract share as positive as it offers a downside protection to the lower salmon prices seen now from May on. They maintain their 2014 volume guidance and they also cut their net debt to NOK 1.5bn, mainly driven by a strong cash flow in the quarter. We expect a positive market reaction of 2-4% after this very positive report.

Fantastic farming performance in Norway

The operations in Northern Norway delivered a healthy NOK 21.05 EBIT margin in region North and NOK 19.35 in Central Norway. This is NOK 1 higher than our estimates in both regions, probably due to lower than expected cost in both regions. As expected, the sales/VAP division also delivered negative margins this quarter, this is normal when salmon prices (purchasing cost for the\is division) increases quicker than the product prices (fillets).

High contact share offering downside protection into 2H 2014

During the quarter, the company seems to have been very active entering into fixed price contracts, now guiding at 40% in Q2, up from 35% in Q1 and 25% in Q4. We expect that these contracts are entered into at prices above NOK 40 per kilo, hence offering a downside protection now as spot prices are dipping below NOK 40 and are expected to remain in the 30’s for the next 6 months (ref. FishPool forward prices and Nordea estimates).

Photo: Salmar owner, Gustav Witzøe