Charles Høstlund, CEO of Norway Royal Salmon.

Triploid welfare called into question

Concerns over the welfare of triploid salmon have caused the Norwegian Food Safety Authority to once more delay the issue of production licences to Norway Royal Salmon (NRS). 

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The announcement was made on Friday, and means that the Norwegian producer will not be able to make the most of the green licences it was awarded in 2014.

The decision by the FSA, and the fact that it will stunt the NRS’s projected production growth has caused Nordea analyst Kolbjørn Giskeødegård to cut his estimates for 2017-18, slashing his target price to NOK 106 (125) and downgrading the share to Hold (Buy).

As the analyst explains: “The basis for the expected strong growth was being able to put triploid salmon into the sea in 2016 and onwards, but the Food Safety Authority will not allow this. Consequently, we need to take into the account the risk of substantially lower volume growth in 2017-18. Friday's decision has been appealed to the Fisheries Department.”

Nevertheless, Giskeødegård continues: “The Q1 report shows that the company is the second-best salmon farmer on the stock exchange at only NOK 2 per kilo below the best company in terms of EBIT per kilo (NOK 25.5 for the best in Q1). It has good cost control and good timing on its sales operations in H1 (low contract share).”