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We have adjusted our estimates to reflect latest developments in the salmon price and our latest thinking on Mowi''s price achievement; specifically, for Q1, we factor in meaningful discounts related to widespread downgrades to production grade salmon in Norway (due to winter wounds / jellyfish issues) and weaker salmon price development in Americas vs. Europe. We have also updated our operating costs and FX assumptions. Note that our target price remains unchanged, with our earnings downgrades largely offset by recent weakening of NOK vs. EUR.
Mowi ASA Mowi ASA
Feedback from our London roadshow We spent some time with Mowi''s CFO Kristian Ellingsen in London. Overall, Mowi came across as upbeat on its outlook for the salmon industry in the near to medium term. Global supply-demand balance continues to look favourable for the coming years Mowi expects the global supply to grow by c.2% p.a. in the next couple of years, with the risk in 2024, if anything, skewed to the downside. Looking further ahead, Mowi believes that biology, license limitations and likely reduced investment (due to the Norwegian salmon tax and the European antitrust investigation) will likely result in relatively limited global supply growth in the coming 5 years. As for demand, in Mowi''s view, the recent salmon price strength against the backdrop of consumers coming under economic pressure is testament to underlying demand strength. Mowi also reminded us that salmon is still a relatively niche product (c.1% of global land-based animal proteins). The risk on the Norwegian resource rent tax appears limited from here Mowi came across as confident that its work on tax optimisation has a solid base, and we don''t see a material risk for changes to either the headline 25% rate or Mowi''s c.40% estimated share of operations (which translates into an effective tax rate on the Norwegian operations of c.10% and potentially slightly lower than that in the initial 5 years due to certain deductions). Mowi believes it has a very good case against the European Commission antitrust allegations Mowi reaffirmed its intention to continue to refute the antitrust allegations (it believes it has a very good case). As a reminder, the maximum fine could amount to 10% of global prior-year revenues (i.e. c.EUR0.6bn on the basis of FY24e sales if the decision is made in 2025); we note that the EU antitrust allegations rarely result in maximum punitive actions. See within for more colour
We keep our '24-'25 estimates largely unchanged. Another record year in the making amid strong outlook. '24e P/E at 11x, a 15% discount to peers and 7-8% yield: BUY.
What happened in Q4/23What have we done to our estimates?Triggers ahead
Summary of FY23 results With Q423 preliminary operational EBIT, EBIT/kg by source of origin, and harvest volumes released in January, today''s announcement was all about the outlook. On this front, we note that Mowi reiterated its FY24 harvest guidance at 500K tonnes and kept its global industry supply growth expectation broadly unchanged at ~2% (at mid-point) for 2024. Mowi also mentioned ''a good start to the new year''. Additionally, we note that quarterly dividend came in materially ahead of consensus expectations. News Mowi expects low global salmon supply growth of ~2% for 2024 and, if anything, sees supply risks as skewed to the downside. Earnings We slightly adjust our estimates following the release of FY23 results and updated outlook from management. Our EPS estimates increase by c.2% in FY24e/25e/26e. Investment thesis We continue to view the salmon supply-demand balance as favourable and Mowi''s valuation as very undemanding. Rating and target price We maintain our Outperform rating, and our target price moves to NOK240 from NOK235 before. 15 questions for management What has been, in your view, the major driver behind the salmon price weakness in Americas in 2023, and what does the US demand currently look like in both retail and foodservice?
MOWI CapEx guidance EUR300m (Arctic EUR394m)2024 harvest guidance 500,000 tonnes (previous 500,000t) of which Norway 305,000 tonnes (previous 305,000t)Dividend per share at NOK1.9 (Arctic NOK1.4)Farming EBIT of EUR115m (Arctic EUR116m) of which Norway EUR113m (Arctic EUR114m)
Expecting clean Q4 EBIT of EUR 203m, as pre-announced. '24e EBIT slightly down on lower volumes from soft biology. Sector top-pick at '24e P/E of ~12x (5Y-avg. 16x): BUY.
Reported Q4'23 EBIT +4% vs cons (+8% vs ABGSCe), driven by positive margins in Norway, as volumes were lower than expected. A positive trading update and positive read into cons '24e EBIT
We expect clean EBIT of EUR 188m, 16% below FactSet cons. Biological issues continue across regions, hurting volumes and costs but suggest a tighter market. Concerns reflected in the share - BUY
Best ideas are; AKRBP, MOWI, STB, 2020, BONH, DOFG, ENTRA, ELMRA and KOMPL
MOWI MOWI STB STB AKRBP AKERBP 2020 BON BONHR DOFG EVC ENTRA EVC ENTRA TRDA ELMRA KOMP KOMPL
We keep our '23-24 estimates largely unchanged. MOWI's value chain integration proving its worth. Running out of reasons not to BUY, TP NOK 231 (229).
Summary of Q323 results While Mowi''s FY24 harvest outlook came in slightly below Visible Alpha consensus expectations (by c.1%), Mowi has reduced its global salmon supply growth outlook for 2023 and expects modest industry growth (+2-3%) for 2024, which should be supportive for the salmon supply-demand balance. We also note that Mowi has updated its Norwegian salmon tax rate estimate to ~10% for Mowi Norway across the value-chain (we estimate that under previous assumptions, it was ~15%). News Mowi expects that the global salmon supply-demand set-up (with relatively limited supply growth) will continue being favourable in the coming years. Earnings We increase our EPS estimates by c.11%/3%/2% in FY23e/24e/25e, largely as a function of revised assumptions for salmon tax, harvest volumes, salmon prices, input costs, and FX. Investment thesis We see upside risk to the salmon price on the back of the likely favourable salmon supply-demand balance in both the near and medium term. Rating and target price We maintain our Outperform rating, and our target price moves to NOK235 from NOK230 before. 15 questions for management Can you please shed some colour on the key differences in treatment of the Norwegian salmon tax under your current and previous assumptions?
Headlines were pre-announced and the quarterly DPS of NOK 1.5 was slightly above our estimate. On a group level, 2023 volumes were kept unchanged and 2024 volumes were roughly in-line with our assumption. Costs trended slightly higher Q/Q and are expected to level off going forward. We have raised costs slightly in this update but this has been more than offset by a milder resource tax assumption, resulting in positive estimate revisions of ~3%. We continue to favour Mowi in the sector and stick to our Buy recommendation while raising our TP to NOK 220 (215).
Headlines known, quarterly DPS of NOK 1.50 (Arctic: NOK 1.35, Cons.: 1.79)2023 volumes unchanged at 484'tBlended farming cost expected to be relatively stable in Q4/232024 volume guidance of 500't (Arctic: 497’t, Cons.: 502’t)Increases LT NIBD target to EUR 1.7bn (old: EUR 1.4bn)Estimated effective resource tax of ~10% across the value-chain
Expecting clean Q3 EBIT of EUR 203m, as pre-announced. We keep our '23e-'24e EBIT relatively unchanged. Sector top-pick at '24e P/E of ~11x (5Y-avg. 16x): BUY.
Reported Q3'23 EBIT -11% vs cons (-13% vs ABGSCe), driven mostly by weaker margins in most regions ex. Norway, as well as slightly lower volumes. In all, a somewhat negative trading update with expected est. changes to cons' FY'23e EBIT in a range of 2-5%
Q3 operational EBIT of ~EUR 203m (Arctic: EUR 224m, Cons.: EUR 229m)Strong CP, volumes 2’t below, weaker margins in all regions except NorwayNIBD of EUR 1,705m (Arctic : EUR 1,698m)Full Q3 report due 8 November
The Q3 trading update is expected around 16 October and we forecast an operational EBIT of EUR 224m (previously EUR 225m) – 4% below consensus. Our earnings revision follows slightly lower Norwegian prices in EUR/kg, offset by higher prices in BC. We have only fine-tuned our Q3 estimates in this preview and kept price assumptions unchanged from Q4/23 onwards. A key concern going into H2 has been retailers' ability to absorb significantly higher volumes, however, demand is so far satisfactory. We still see limited supply growth going forward, supported by low harvest weights in Norway. We stick to Buy and our NOK 215 TP.
We expect a clean Q3 EBIT of EUR 232m, 1% below FactSet cons. Looking beyond Q3, we are now less concerned by the short-term supply growth potential, which coupled with an improving sentiment and an attractive valuation makes us remain BUYers of MOWI.
Headlines were pre-announced and the quarterly DPS of NOK 2.0 was slightly below our estimate. 2023 volumes were kept unchanged and a relatively stable cost trend in H2 is expected. Farming Norway fell somewhat short of our forecast and we have raised costs further in this update, resulting in ~5% lower estimates during 2023-25. The Q2 resource tax effect was in line with our assumption, and the company highlights that the figure is conservative. We stick to Buy while lowering our TP to NOK 215 (225).
We keep our '23-24 estimates fairly unchanged. Capitalises on a diversified setup. Approaching the inflection point: BUY, TP NOK 224.
Summary of Q223 results With Q223 preliminary operational EBIT, EBIT/kg by source of origin, and harvest volumes released in July, today''s announcement was all about the outlook. On this front, we note that Mowi has maintained its FY harvest outlook guidance unchanged, while expectation for global supply growth in 2023 was slightly reduced to +0.6% from +1.2% before, with Mowi additionally commenting that modest supply growth of +3% is expected for both H223 and the next 12 months. News Mowi expects relatively limited salmon supply growth in the medium term which should be supportive of salmon prices, and it is ''impressed'' by how robust salmon demand has been so far. Earnings We reduce our EPS estimates by c.2% in FY23e/24e/25e. Investment thesis We believe that the salmon demand-supply balance is likely to favourably develop over the near- and mid-term as a result of resilient demand and the Norwegian tax likely negatively impacting supply and see upside risk to the salmon price. Rating and target price We maintain our Outperform rating, and our target price moves to NOK230 from NOK225 before. 15 questions for management As things stand now, what are your harvest volume expectations in 2024? Do you expect to grow in-line with the overall industry or to gain market share?
Headlines known, quarterly DPS of NOK 2.0 (Arctic: NOK 2.15, Cons.: 2.24)2023 volumes unchanged at 484't with no regional changesBlended farming cost expected to be relatively stable in H2Cash flow guidance increased by EUR 205m, mainly due to WC
Expecting clean Q2 EBIT of EUR 300m, as pre-announced. Our '23e-'24e EBIT down 3-5% on higher cost assumptions. Our sector top-pick at '23/24e P/E of ~11x (5Y-avg. 16x): BUY.
Reported Q2'23 EBIT +2% vs cons (+3% vs ABGSCe), driven by higher volumes (+2% vs cons, +3% vs ABGSCe), with margins in line. In all, a fairly neutral trading update with limited expected est. changes to cons
Q2 operational EBIT of ~EUR 300m (Arctic: EUR 268m, Cons.: EUR 288m)Harvest volumes 3.0’t above expectations, strong CPNIBD of EUR 1,665m (Arctic : EUR 1,552m), supports NOK 1.9 DPSFull Q2 report due 23 August
Mowi shares (and salmon prices) have been remarkably weak of late Despite the positive newsflow on the Norwegian salmon tax front in May (reduction to 25% from 35%), Mowi shares have declined c.16% in the past 2 months (European Staples declined by c.6%). As often is the case, salmon prices have likely been the major share price driver: the Norwegian salmon price has declined by c.36% since the Easter seasonal peak in March. With this report, we explore whether recent salmon price weakness may be masking anything beyond usual seasonality. At first sight, salmon price weakness is worse than usual seasonality would suggest Our analysis of more than two decades of salmon pricing data suggests that, on average, the Norwegian salmon price saw sequential increases of LSD-MSD in April-May; against this backdrop, sequential declines of -6.1% and -6.3% this April and May understandably appear unnerving at first sight. However, one needs to keep in mind that the salmon price was unusually strong in Q123 We note that 2023 saw the strongest Q1 salmon price development in 20 years (ex. Covid), likely largely due to limited supply: prices grew by c.44% between Dec-22 and Mar-23 vs. median historical Q1 growth of c.13%. Thus, from an overall H1 perspective, we don''t observe unusual salmon price weakness: prices grew by c.14% between Dec-22 and Jun-23, broadly in-line with historical H1 trend. Consensus salmon price expectations look reasonable In our view, consensus has rightly been anticipating some normalisation in salmon prices post the unusually strong Q123: FY23e/24e VA consensus salmon price expectations don''t appear overly optimistic to us (EUR8.2/8.0 per kg vs. BNPPE at 8.4/8.0; note that Mar-23 peak saw c.EUR11.5/kg). Fears around salmon prices are overdone; we reiterate our Outperform rating Coupling the above observations with our expectation of a relatively tight salmon market in the near-term (c.1% growth in FY23e) and medium-term (Norwegian tax likely...
The Q2 trading update is expected around 14 July and we forecast an operational EBIT of EUR 268m – 11% below consensus. Our earnings revision follows slightly lower Norwegian prices in EUR/kg and higher American price spreads. We have kept price assumptions unchanged from Q3/23 onwards and lowered the tax rate to 25%, leaving estimates up by ~8%. Although estimates are up, we stick to our NOK 230 TP for now as the seasonal price pressure represents estimate uncertainty. That said, we still find the sector attractive longer term and stick to Buy.
Mowi delivered results in-line with its trading update and the proposed DPS of NOK 2.0 was slightly above expectations. Costs were also higher and we have revised estimates slightly lower (~3%). Based on Mowi’s conservative estimates, we believe there is downside risk to our effective resource tax assumption. We continue to find good risk-reward in Mowi as the share currently trades at a 2024 P/E of 12x with a 8% FCF yield. We stick to Buy while lowering our TP to NOK 230 (235).
Summary of Q123 results With Q123 preliminary operational EBIT, EBIT/kg by source of origin, and harvest volumes released in April, today''s announcement was all about the outlook. On this front, we note that while Mowi''s FY harvest outlook was maintained, its expectation for the global industry growth this year has been reduced to c.+1% from c.+2% before. Elsewhere, we note that Mowi has for the first time provided its provisional salmon tax calculation: for Q123, salmon tax would have amounted to EUR57m (reflected in Mowi''s underlying EPS). News Mowi commented that Q223 has started off well, with limited supply growth and good demand so far, adding that salmon normally fares well in challenging economic times. Earnings We reduce our FY23e EPS by c.2% and increase FY24e/FY25e EPS by c.1%. Investment thesis We believe that the salmon demand-supply balance is likely to favourably develop over the near- and mid-term as a result of surprisingly resilient demand and the Norwegian tax likely negatively impacting supply, and now see upside risk to the salmon price. Rating and target price We maintain our Outperform rating. Our target price moves to NOK225 from NOK220 before. 15 questions for management You mentioned that Q223 has started off well with good demand so far. Elevated salmon prices aside (which is partly a function of limited supply), what indicators in both retail and foodservice channels in your major markets suggest that demand is holding up well?
Headlines known, quarterly DPS of NOK 2.0 (Arctic: NOK 1.9, Cons.: 1.76)Q1/23 resource tax effect in-line with our estimate2023 volumes unchanged at 484't, cash flow guidance increased by EUR 70m3-5% downside risk to consensus but remains a top pick
Q1 operational EBIT of ~EUR 322m (Arctic: EUR 295m, Cons.: EUR 290m)Harvest volumes 4.5’t above expectations, strong CPNIBD of EUR 1,640m (Arctic : EUR 1,652m), supports NOK 1.9 DPSFull Q1 report due 10 May
We expect Mowi to release its Q4 trading update around ~16 January and we expect an operational EBIT of EUR 230m (old: EUR 229m) vs consensus at USD 232m. The AFISH acquisition will lead to debt levels above Mowi’s target but high salmon prices should support a pay-out ratio of a minimum 50% in our view. We stick to Buy while raising our TP to NOK 195 (175), reflecting a 2024 P/E of 16x with a 6% FCF yield.
Headlines knonw2023 volumes (incl. Iceland) unchanged at 484'tSupportive cashModest estimates change
We expect a Q1 operational EBIT of EUR 295m – 18% above consensus. Our earnings revision follows higher spot prices for the quarter, supported by lower volumes from Norway, a high share of downgrades, and a weak NOK. We have only made changes to Q1 in this update and while the recent tax proposal (35%) represents downside risk, we see upside potential to prices. We stick to Buy and at current pricing with a 35% resource tax, Mowi trades at 2024 P/E of 13.7x
Salmon demand has proven to be rather resilient The main reason for our downgrade to Neutral back in Aug-2022 was our concern that demand for salmon may not fare well if consumer budgets come under pressure (keeping in mind salmon''s material exposure to Europe). These fears have not materialised: the YTD average Norwegian salmon price increase of c.16% YOY (in EUR terms) suggests that demand has been rather resilient. Somewhat less material, but China reopening should be a nice increment to salmon demand as well. Potential Norwegian salmon tax will likely further limit supply growth While the salmon market is particularly tight in Q123 (est. global supply decline of c.-2.7% YOY), supply growth is also expected to be relatively modest in Q223-Q423 (est. c.+3.7% YOY). More importantly, we suspect that the Norwegian salmon tax will likely result in lower growth from Norway in the medium term. Elsewhere, note political challenges to growth in Canada, Scottish lawmakers'' call for a halt to salmon farm expansion, and the Faroe Islands'' newly elected government''s proposal to raise the salmon turnover tax. We therefore reduce our mid-term global salmon supply growth expectation to c.+3% p.a. from c.+4% before. Resilient demand + more limited supply = upside to salmon prices We believe that the likely more favourable supply-demand balance poses upside risk to salmon prices: we increase our salmon price assumptions by c.5% (in EUR terms) in FY23e/24e/25e. We believe that a 40% salmon tax scenario is already priced in Reflecting on Mowi''s valuation, we estimate that the market factors in a headwind of ~EUR200m from the Norwegian salmon tax, roughly consistent with a 40% rate (see Tax attacks). We upgrade Mowi to Outperform, TP to NOK210 As a result of our more bullish salmon price assumptions, we increase our Mowi EPS estimates by c.8% in FY23e/24e/25e and upgrade our rating to Outperform; TP to NOK210 from NOK190 before.
Mowi reported results in-line with its trading update and the proposed DPS was NOK 1.7 – slightly above our NOK 1.6 estimate. 2023 volumes were kept unchanged and costs are expected to increase slightly in Q1. We lower our resource tax assumption to 25% (40%), as “significant” changes are needed to reach a broad-based settlement and that the government has said that it will listen to the public hearing process. We stick to Buy and raise our TP to NOK 210.
Summary of FY22 results With Q422 preliminary operational EBIT, EBIT/kg by source of origin, and harvest volumes released in January, today''s announcement was all about the outlook. On this front, we note that Mowi''s FY23 volume guidance of 484K tonnes now includes 15K tonnes from Iceland; before, outlook was for 470K tonnes ex. Iceland, i.e. there were no material changes to expectations for other regions. Turning to global supply, Mowi has slightly increased its industry volume outlook for FY23 (by c.1%). News Mowi appeared rather pleased with how salmon demand has fared in recent months; the near-term supply-demand balance also appears favourable with global supply expected to decline by -5% to 0% in Q123 (growth of 0% to +4% in 2023). Earnings We increase our EPS estimates by c.1% in FY23e and maintain them broadly unchanged in FY24e/25e. Investment thesis While salmon remains a structural growth story, in the near term Mowi''s share price will likely be largely driven by Norwegian tax newsflow; we believe that a fairly negative scenario on the tax front is already reflected in the shares. Rating and target price We maintain our Neutral rating. Our target price remains unchanged at NOK190. 15 questions for management While spot salmon prices have been rather strong YTD suggesting underlying demand strength, are there any countries where you noticed consumers downtrading from salmon to alternative animal proteins?
Headlines known, quarterly DPS of NOK 1.7 (Arctic: NOK 1.6) 2023 volumes (incl. Iceland) unchanged at 484’t Supportive cash flow guidance for 2023 Modest estimate changes expected
Q4 operational EBIT of ~EUR 239m (Arctic: EUR 230m, Cons.: EUR 229m) Harvest volumes 3.6’t above expectations, strong CP and feed NIBD of EUR 1,760m (Arctic : EUR 1,578m), deviation due to WC Full Q4 report due 15 February
Mowi reported Q3 results in-line with its trading update while the quarterly DPS of NOK 1.7 was slightly below our NOK 1.8 forecast. The 2022-23 volume guidance was supportive in our view as a greater share of volumes were tilted towards Norway at higher margins vs other regions. We have revised 2022-24 estimates up by 2-3% in this update. We stick to Buy while raising our TP to NOK 175 (170), reflecting a 2024 P/E of 16x.
Summary of Q322 results With Q322 preliminary operational EBIT, EBIT/kg by source of origin, and harvest volumes released in October, today''s announcement was all about the outlook. On this front, we note that while Mowi maintained its FY22 harvest volume guidance, its FY23 harvest volume expectation came in c.2% below consensus. Turning to global supply, Mowi expects limited growth of -1% to +3% in 2023. News Mowi commented that the Norwegian contract market for 2023 is effectively ''dead'' - the resource rent tax proposal applies NASDAQ price as tax settlement price, which makes contracting very difficult right now - contract prices often diverge from prevailing spot prices. Earnings We reduce our EPS estimates by c.3% in FY22e and increase them by c.1%/2% in FY23e/24e, largely as a result of updating our assumptions for salmon prices, feed costs, harvest volumes and FX, as well as incorporating the impact of the recently announced acquisition of a c.51% stake in Arctic Fish. Investment thesis While salmon is a structural growth story, in the near term it is effectively a call on the continued strength of European consumption, and that is not a call we want to make. Furthermore, uncertainty around the recently proposed salmon tax is likely to continue weighing on the shares. Rating and target price We maintain our Neutral rating. As a result of our estimates revisions, our target price moves to NOK160 from NOK155 before. 15 questions for management Assuming there is no incremental newsflow on the salmon tax front until 4th January 2023, how do you expect the challenged contract market environment in Norway to impact spot salmon prices?
Headlines known, quarterly DPS of NOK 1.70 (Arctic: NOK 1.80) 2022 volumes unchanged at 460’t, Norway offsetting Scotland/Chile Introduced 470’t for 2023 (Arctic: 478’t) but with positive mix Modest estimate changes expected
Q3 operational EBIT of ~EUR 240m (Arctic: EUR 204m, Cons.: EUR 222m) Strong Norwegian margins, CP and Feed NIBD of EUR 1,355m (Arctic : EUR 1,273m) Full Q3 report due 9 November
Norway has moved to introduce a 40% resource tax on salmon farming On 28th September, the Norwegian government proposed introducing a 40% resource tax on salmon and trout farming with effect from 2023. While this proposal is yet to pass (the consultations will end on 4th January 2023), we endeavour to estimate what its approval would mean for Mowi. We estimate an effective tax rate of c.28% and proceeds of c.NOK8.6bn in 2023 Our understanding (reflecting our recent conversations with Mowi) is that the tax will be applied to the part of farming value creation in sea and will allow for certain deductions. We thus estimate that the effective tax rate will be c.28% (vs. the headline 40%) and that 2023 proceeds from it could amount to c.NOK8.6bn, vs. the NOK3.65-3.8bn communicated in the government''s initial statement (there is no clarification yet from the ministry of finance on the assumptions behind its figure). Economic merits of the new levy are open to debate: today''s 2022 auction could be interesting Many Norwegian salmon farming majors have already cancelled production capacity purchases and put investment plans on hold. The merits of the new levy are thus, in our view, open to debate: while c.NOK8.6bn is a sizeable figure, will it offset the likely reduced ability and willingness to invest in the industry? For instance, the 2022 biomass auction was expected to generate c.NOK10bn; the auction will be held today and there now appears to be little enthusiasm for it from the industry. Our updated estimates suggest that a fairly negative scenario is already priced in We adjust our Mowi estimates to reflect a prudent scenario where the tax is approved in line with our aggregate c.NOK8.6bn estimate: we reduce our Mowi EPS by c.22%/21% in FY23e/24e; we also reduce our target EV/EBIT multiple to c.12x (from c.13x) to reflect likely reduced investor appetite for the salmon space (as flagged in our recent report, we see a risk that European demand...
We expect Mowi to release its Q3 trading update around 17 October, and we now expect an operational EBIT of EUR 204m (185) vs consensus at EUR 232m. We have implemented the proposed 40% resource tax proposal, resulting in ~20% lower EPS estimates from 2023 onwards. We stick to Buy as we still see healthy fundamentals but lower our TP to NOK 160, reflecting earnings revisions and increased uncertainty. Our TP implies a 2023 P/E of ~16x.
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