Mowi (MW) is out with its Q4 20 earnings today. We view the report as slightly credit negative on the back of the weak earnings. Key take-aways:
Q4 20 revenues declined 10% y/y to EUR1bn, owing to lower spot prices. While retail demand grew c. 20% in 2020, the shortfall in foodservice demand resulted in an estimated net decline in demand of c. 5%.
Operational EBITDA declined 55% y/y to EUR94m, below Bloomberg consensus estimates of EUR132m. Positively, the company has completed a cost savings programme, with annual savings of EUR35m (7% of 2020 EBITDA). We note that the soft earnings were warned in January.
Capex was in line with previous quarters, and free cash flow reached positive EUR52m – the strongest since 2016. Note that the sale of DESS Aquaculture was made in January this year, with expected proceeds of EUR115m. Year-end cash measured EUR100m.
Net debt remained stable q/q and NIBD/EBITDA (adj.) inched up from 2.0x to 2.4x on lower earnings.
Record-high harvest volumes of 127k gwt in Q4 20, a 9% y/y growth. Norway accounted for 60% of 2020 harvest, while Chile and Scotland accounted for 15% and 12%, respectively. Canada volumes are guided to decline by 10-12k gwt from next year, on the back of the government’s decision to phase out salmon farming in British Columbia. The reduction is roughly 2.5% of 2020 volumes.
Mowi makes some slight changes to its dividend policy. While it sticks to a long-term target for net debt, the dividend payments shall going forward equate to at least 50% of underlying EPS, as opposed to the old 75% of annual free cash flow after commitments. Overall, we view the updated policy as credit neutral. It will resume dividend payments in Q1, paying 50% of Q4 EPS.
