Thursday 28th February 2019
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New Zealand's aquaculture industry is not getting the support it needs from a government that says it wants to switch to forms of farming that have less impact on the environment, New Zealand King Salmon says.
"The government says it wants things to be more green - agriculture, aquaculture - and say they want to address climate change," chief executive Grant Rosewarne told BusinessDesk.
"Well, we're desperate around climate change. It's already happening to us and we need that support. So far, we're not getting it."
Rosewarne was speaking after the company announced a reduced half-year net profit because high sea temperatures last summer caused a high death rate among its farmed king salmon in the Marlborough Sounds.
"We think we represent everything this new government is asking for from an industry, but we are disproportionately affected by climate change."
The company has been waiting since before the change of government for a decision on its application to move several Marlborough Sounds farms to sites with higher tidal flows. Within 10 years, it hopes to be farming fish in deep water at offshore sites.
It is currently testing sea conditions at 13 sites from Cook Strait to Stewart Island. The first data from a site six kilometres north of Port Gore, in Cook Strait, was "encouraging", Rosewarne said.
In the six months to Dec. 31, the company achieved similar revenue to the prior comparable period at $87.7 million, thanks to improved pricing and a favourable exchange rate.
But increased costs and lower fish volumes, both caused by the higher-than-usual fish deaths in the 2017/18 summer, saw net profit after tax pinned back to $15.1 million, compared to $15.7 million in the first half of the 2018 financial year.
Sea temperatures so far this year have been "slightly above longer-term averages, but below temperatures recorded during the FY18 summer," the company said in presentation slides lodged with the NZX. It noted that February and March are critical months for fish survival rates and there will be an update to the market "at the conclusion of summer".
Sales volumes in the New Zealand market - representing 48 percent of the company's total revenues - were down 17 percent on the first half of 2018. Revenue was down only 6 percent, with the increasing availability of imported Atlantic salmon - the most commonly bred fish globally - underpinning growing New Zealand consumption of salmon generally, the company said.
Salmon sold in all markets totalled 3,824 tonnes, down 13 percent from the first half of the 2018 financial year. "Increasing demand, improved pricing mix, export markets expansion and a favourable exchange rate," helped maintain revenue near year-earlier levels, the company said.
Operating earnings before interest, tax, depreciation and amortisation were $17.3 million, compared with $19.5 million in the earlier half.
The company announced a fully imputed interim dividend of 2 cents per share.
King Salmon's experiment with 'Ora King Tyee' - a very large breed of salmon that the company has been seeking to foster a market for - is a commercially positive concept but "scalability has yet to be proven".
Rosewarne said international chefs loved working with Tyee. Consumers had also proven they would pay a premium for such a large fish and the company believed there was a global market of perhaps 1,500 tonnes a year for Tyee.
However, the fish took longer to grow, meaning the company could not pursue the opportunity until it had more sea-space, which is proving its largest headache.
North America - the firm's second-largest market by revenue at 33 percent - showed a 1 percent increase in sales volume against the previous comparable period, at 1,173 tonnes. "Sales for the six-month period set new value and volume records."
Sales to the Japanese market dived from 310 tonnes in the first half of the previous year to 117 tonnes in the year under review.
Australian sales fell to 291 tonnes from 349 tonnes, while sales in Europe and Asia, excluding Japan, showed growth.
Across all export markets, the firm's New Zealand dollar price per kilogram of salmon rose from $21.70 to $23.49 between the two periods.
The company expects the production dip caused by the ongoing impact of the high 2017/18 mortality rates to hold total full-year production to around 8,000 tonnes, unchanged from 2017/18.
However, it is forecasting a 9,500-tonne harvest by the year to June 2021 as fish stocks replenish and the company slowly ramps up higher-flow sites where it does have permission to operate.
Directors reaffirmed previous operating earnings guidance for the 2019 financial year of between $25 million and $28.5 million.
King Salmon shares last traded at $2.17 and have risen about 9 percent in the past year.
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