Atlantic Sapphire can make a profit - but must spend $94m to do it
In the first half of 2024, the Florida land-based salmon farmer harvested 2,395 tonnes, with an average weight of only 1.4 kg. The company reports that it will take action to increase the weight of the fish. But to unleash its potential, it has to find and spend big bucks.
In a second quarter announcement, Atlantic Sapphire lists the following key events for the first half of 2024:
- Stable farming conditions with stable water temperatures and water quality
- Low mortality rates and good biological performance
- Harvest of 2,395 tonnes (head on gutted) with an average size of 1.4 kg HOG
- Net biomass increase of 2,750 tonnes
- The company has identified bottlenecks in the water treatment system, as well as unforeseen downtime, which has limited feed volume
- Reduced sales prices due to sales of sexually mature fish in Q1 and small fish in Q2
As announced in July 11, 2024, the company has experienced low average harvest weight as a result of lower-than-anticipated mortality leading to there being too many fish in the tanks for the current feeding capacity.
The company writes that several measures have been taken to increase harvest weight.
In the short term, the company has reduced the number of fish to allow the remaining fish to grow to a larger slaughter weight. In the medium term, the company has initiated measures to remove bottlenecks to increase the feeding capacity in the plant.
Raising at least $60m
“As a consequence of low revenues in the first half and the need to improve performance in the facility through activities to remove bottlenecks and build up feeding capacity, the company needs additional funding,” it writes.
Arctic Securities AS and DNB Markets, part of DNB Bank ASA, are engaged as facilitators in connection with an upcoming capital raise consisting of a fully guaranteed rights issue of up to US $60 million (£46m) and a convertible loan of at least $20m, aimed at Condire Management LP and potentially Nordlaks Holding AS.
The board of Atlantic Sapphire ASA therefore decided on Tuesday that the issue will be given with preferential rights for existing shareholders. Certain existing shareholders, including Nordlaks Holding AS, Condire Management and Strawberry Capital AS, and other external investors have already subscribed to the NOK equivalent of $60m of the Rights Issue. Furthermore, certain existing shareholders, including Nordlaks and Condire Management AS, have committed in advance to use their subscription rights to subscribe for their pro-rata share.
In profit by Q4 2025
The net proceeds from the issue, together with existing cash
on the balance sheet, an existing revolving credit facility, the amendments to
the existing debt facility and the convertible loan - in total summarised at $94m
- are considered to be sufficient to fund investments and operations to achieve
positive EBITDA, currently estimated for Q4 2025, for phase 1 of Atlantic
Sapphire’s Bluehouse in Homestead, Miami/Dade County.
The company estimates that an optimised phase 1 will deliver 8,250-8,750 tonnes of HOG salmon in annual harvest at an EBITDA of $1.5-2.0 per kg.
At the same time, the company writes that phase 2 is expected to increase annual harvest volumes up to a total of 25,000 tonnes of HOG salmon with a target EBITDA of around $5 per kg.
