EPS of $6.50 increased by 201.3% from previous year
Gross margin of 23.9%
Net income of 858.00M
""We know that we produce one of the most sustainable proteins you can put on your plate. The future for us as a company and for the entire aquaculture industry are very positive."" - Frode Arntsen
SalMar ASA (SALM.OL) Q2 2024 Financial Results Analysis: Navigating Through Challenges with Sustainable Growth Potential
Executive Summary
SalMar ASA (SALM.OL) reported substantial financial results for Q2 2024 despite facing biological challenges and fluctuating price realizations due to jellyfish issues and winter source effects. The company achieved a revenue of NOK 5.84 billion, reflecting a year-over-year decline of 0.97% and a quarter-over-quarter decrease of 10.94%. Management's focus on sustainability positioned SalMar as one of the top 500 sustainable companies globally, further emphasizing the potential for growth in aquaculture as global demand for healthy proteins increases. The operational EBIT was NOK 1.39 billion with an EBITDA margin of 31.1%, although results in various regions highlighted mixed results due to biological challenges hindering harvest volumes and operational efficiency. With a cautious outlook intact, the company's strategy focuses on enhancing local processing capacity and optimizing operational practices to capitalize on untapped potential in their existing licenses.
Key Performance Indicators
Revenue
5.84B
QoQ: -10.94% | YoY:-0.97%
Gross Profit
1.39B
23.86% margin
QoQ: -2.04% | YoY:-60.52%
Operating Income
1.66B
QoQ: 2.54% | YoY:0.98%
Net Income
858.00M
QoQ: 4.51% | YoY:201.66%
EPS
6.50
QoQ: 4.33% | YoY:201.25%
Revenue Trend
Margin Analysis
Key Insights
YoY Change: -0.97%
- QoQ Change: -10.94%
2. **Gross Profit**: NOK 1.39 billion
- YoY Change: -60.52%
- QoQ Change: -2.04%
3. **Operating Income**: NOK 1.66 billion (Operating Income Ratio: 28.37%)
4. **Net Income**: NOK 858 million (Net Income Ratio: 14.70%)
- YoY Change: +201.66%
- QoQ Change: +4.51%
5. **EPS**: NOK 6.50
### Ratios
**Current Ratio**: 1.81
**Debt-to-Equity Ratio**: 1.14
**Interest Coverage**: 6.65
**Net Debt**: NOK 18.65 billion
Financial Highlights
### Financial Performance Metrics
1. Revenue: NOK 5.84 billion
- YoY Change: -0.97%
- QoQ Change: -10.94%
2. Gross Profit: NOK 1.39 billion
- YoY Change: -60.52%
- QoQ Change: -2.04%
3. Operating Income: NOK 1.66 billion (Operating Income Ratio: 28.37%)
4. Net Income: NOK 858 million (Net Income Ratio: 14.70%)
- YoY Change: +201.66%
- QoQ Change: +4.51%
5. EPS: NOK 6.50
### Ratios
- Current Ratio: 1.81
- Debt-to-Equity Ratio: 1.14
- Interest Coverage: 6.65
- Net Debt: NOK 18.65 billion
- Dividend Payout: NOK 4.64 billion (NOK 35 per share)
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.84B
-0.97%
-10.94%
Gross Profit
1.39B
-60.52%
-2.04%
Operating Income
1.66B
0.98%
2.54%
Net Income
858.00M
201.66%
4.51%
EPS
6.50
201.25%
4.33%
Key Financial Ratios
currentRatio
1.81
grossProfitMargin
23.9%
operatingProfitMargin
28.4%
netProfitMargin
14.7%
returnOnAssets
1.62%
returnOnEquity
5.09%
debtEquityRatio
1.14
operatingCashFlowPerShare
$9.05
freeCashFlowPerShare
$4.27
dividendPayoutRatio
541%
priceToBookRatio
4.34
priceEarningsRatio
21.31
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Key Management Insights
- Frode Arntsen, CEO: "We were ranked as one of the world's 500 most sustainable companies in 2024. As long as we manage this responsibility, we are an industry with internal potential."
- Ulrik Steinvik, CFO: "These biological challenges have led to higher relative cost levels than we expect of ourselves. However, the underlying cost level is assuringly lower and subject to further reduction."
### Themes:
- Sustainability Focus: The company aims to enhance its sustainable practices, vital for operational efficiency and creating goodwill in the market.
- Operational Review: Efforts to increase processing capacity and handle higher volumes achieved good results despite external challenges, focusing on the long-term operational health of SalMar.
- Market Conditions Response: A significant reduction in harvest volumes was primarily due to biological challenges which affected the company’s price achievement.
"We know that we produce one of the most sustainable proteins you can put on your plate. The future for us as a company and for the entire aquaculture industry are very positive."
— Frode Arntsen
"We have seen a significant improvement in the biological situation in Scotland across all regions in 2024 compared to '23, which has led to better results for harvested fish during the period."
— Ulrik Steinvik
Forward Guidance
Looking ahead, SalMar maintains its guidance for 2024 with expectations of stronger performance in the latter half of the year as the biological conditions improve. The current quarter's operations are impacted by ongoing biological management, particularly in Northern Norway where jellyfish and lice challenges persist, and management expects harvest volumes to stabilize. However, the recognition of new license approvals in Iceland provides optimism for growth potential, indicating a proactive management approach to navigate industry challenges. Investors should closely monitor recovery in harvest volumes and cost management in respective regions to gauge future performance.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SALM.OL Focus
23.86%
28.40%
5.09%
21.31%
MOWI.OL
40.60%
27.90%
0.99%
55.49%
LSG.OL
11.30%
14.30%
3.51%
9.89%
BAKKA.OL
40.00%
-4.33%
-1.04%
-46.78%
GSF.OL
20.60%
-89.90%
-12.80%
-2.53%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment outlook for SalMar is cautiously optimistic, driven by its efforts to integrate sustainability into operations while managing biological challenges. The significant growth potential arising from new licenses and operational adjustments aligns with increasing global seafood demand. Investors should monitor ongoing operational recovery, positive movements in price realization, and the company’s ability to adapt its supply chain to achieve profitability benchmarks going forward.
Key Investment Factors
Growth Potential
SalMar's sustainable practices and new licenses in Iceland suggest robust growth potential in aquaculture as demand for sustainable protein increases globally. The establishment of Salmon Living Lab enhances research capabilities leading to innovation in fish farming techniques.
Profitability Risk
Biological challenges, primarily from jellyfish and low temperature effects, continue to impact production volumes negatively. The company's ability to navigate these issues determines resilience in cash flows and earnings. Over-reliance on the spot price for sales may expose SalMar to market volatility.
Financial Position
SalMar holds a considerable net interest-bearing debt of NOK 18.65 billion but maintains a healthy equity ratio of 38%, providing a buffer to pursue growth opportunities while managing financial obligations.
SWOT Analysis
Strengths
Strong recognition as a sustainable company
Robust aquaculture operational framework
Diverse geographical harvesting locations
Weaknesses
Current biological challenges impacting harvest volumes
High dependence on contract pricing with variable spot prices
Opportunities
New licensing opportunities for growth, particularly in Iceland
Potential customer expansion due to increased worldwide demand for salmon