Value is believed to have nearly tripled after the state sale – E24

Value is believed to have nearly tripled after the state sale - E24

Cermaq earned NOK 1.2 billion from its Norway operations last year. The value of the giant salmon has likely exceeded 30 billion, according to analysts.

Exciting months: Cermaq and Executive Vice President Knut Ellekjær.

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We have had a very challenging year in many ways, says Knut Elkjeer.

He leads the Norwegian operations of Cermaq, the world’s fourth largest producer of farmed salmon.

The group’s facilities in Nordland and Finnmark increased production by four per cent to a record 73,000 tonnes of salmon last year.

However, sales volumes fell by 11 percent to NOK 4.1 billion, after logistical problems and the closure of restaurants around the world, which severely affected salmon prices at times.

Despite the lower revenue, the company generated a nearly flat operating profit of NOK 1.4 billion, after several successful actions to reduce costs and improve fish health.

– We made it through, and we are of course very happy, in large part due to the wonderful efforts of our staff during a difficult period, says Ellekjær.

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The market is completely gone

In addition to Norway, Cermaq produces salmon in Chile and Canada, and has 3,000 employees.

The company was previously listed on the Oslo Stock Exchange and majority owned by the Norwegian state, but was sold to Japanese industrial giant Mitsubishi for NOK 8.9 billion in 2014. Including interest-bearing debt, which was NOK 2.1 billion at the beginning of 2014, what It is called the company’s value (EV) of 11 billion.

Subsequently, salmon prices rose sharply, so the development of value was an adventure for the Japanese, despite challenges and weak profitability in Chile and Canada, as described by former CEO Jair Molvik in an interview with E24 in early October.

With 61 licenses in Norway, no other OTC breeders have more in this country. This has an implied market value of NOK 18.3 billion based on recent transactions, according to DNB Markets figures.

At the same time, Norway accounted for only 41 percent of the group’s harvest of 176 thousand tons last year. Lower profitability in Chile and Canada makes these companies much less valuable than the Norwegian company, according to analyst Carl-Emil Kjølaas Johannessen at Pareto Securities.

Sees Increasing Values: Pareto Analyst Karl Emil Keulas Johansen.

Based on pricing of comparable companies on the stock exchange, the company’s 12.3 billion NOK value is considered “fair” to foreign businesses. This gives a total estimate of $30.6 billion for current Cermaq, nearly three times what Mitsubishi originally paid for.

It was clearly a positive acquisition, says Johansen.

The group presents skewed fiscal years, and the figures for Cermaq in Norway are based on the period from March 31, 2020 to April 1, 2021. The financial figures for the group as a whole remain unclear.

The Norwegian company sells 85 percent of its production to the European market.

– When Europe was closed during the pandemic, the markets associated with restaurants and hotels completely disappeared. At the same time, salmon sales increased in stores, people cooked more food at home, and suddenly we met new target groups, says Ellekjær.

Cermaq Norway has developed its own brand which means that all of their salmon are produced north of the Arctic Circle.

We sell this salmon to strategic partners in many markets, and this has helped provide us with stable deliveries in a sometimes challenging market, says Ellekjær.

The value leap: Seven years after Japan’s Mitsubishi acquired $8.9 billion, Cermaq’s Norwegian business alone is worth more than 18 billion kroner, based on recent transactions.

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The next few months will be exciting

Before Ellekjær joined Cermaq in 2016, he worked for 30 years at brand giant Orkla.

The question that concerns the salmon industry is whether the changes in consumption observed during the pandemic will continue into the future.

In other words, if more people want to pick salmon from the refrigerator than before, while the restaurant market is back to normal.

In this case, it would mean a permanent increase in demand for a product that has already become significantly more expensive in recent years, as a result of production growth that has not been able to keep pace with the steadily increasing demand globally.

– I think the effect will be lasting. Changing people’s buying behavior is not easy, but Corona has forced people to think differently in terms of eating habits. Once you get this mix of both new buying groups and increased shopping pace, says Ellekjær, it will surprise me if this new demand drops quickly again.

The export price of fresh farmed Norwegian salmon was NOK 55.31 per kilo in week 40, up 11 percent from the same period a year earlier, according to Statistics Norway.

On the Fish Pool Exchange, futures contracts for salmon for delivery in the fourth quarter are trading at NOK 60.8, at a price level of over NOK 66 for December delivery.

We look at the market situation positively in the future. Futures prices are showing expectations, and they look much brighter than they have been in a long time. Elkeger says the next few months will be exciting.

In the past five years, Cermaq has increased its production volume in Norway by 35 percent.

– 97 percent of profits have been reinvested in Norwegian Cermaq, nearly six billion kroner over the past six years. We have long-term owners who support our growth ambitions, says Ellekjær.

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