Huon seeks to raise A$68m as profit falls and debt rises

It also intends to raise A$4m with a non-underwritten share purchase plan for eligible shareholders.

The move coincides with the announcement of the company’s results for in 2020 financial year (FY2020), which ran from July 1, 2019 to June 30, 2020.

More fish, less profit

Huon increased revenue by 21% to A$339.9m on the back of a 36% increase in harvest volume to 25,566 tonnes, but net profit after tax fell to A$4.9m from A$9.5m in FY2019.

“The advent of Covid-19 necessitated a slowdown in the harvest with more fish being kept in the water longer, shifting some of the planned harvest tonnage into FY2021,” said Huon in a press release.

“In the short term this has resulted in a reduction in operating cash flow and additional working capital costs. This has been funded by increased borrowings, increasing gearing to 53% from 42% at the half year.

Strengthening liquidity

“As the impact of Covid-19 on markets and pricing during FY2021 continues to remain highly uncertain, and in recognition of the higher than planned gearing levels in place at this time, an equity raising of up to A$68 million is being announced.

“Proceeds will be used to reduce net debt and strengthen the balance sheet and liquidity position, ensuring the business is well placed to meet the capital requirements of the Group for at least the next 12 months, based on conservative assumptions.”

Huon said that an ongoing focus in the first half of FY2020 on building biomass and the completion of infrastructure projects meant debt levels had remained high.

The company has negotiated greater debt flexibility with its banking partners, and scheduled debt repayments in Q4 of A$5m have also been postponed.

Covid-19

Huon said that after the equity raising, pro forma liquidity (cash and cash equivalents and undrawn bank facilities) will increase to approximately A$90m from A$26m on 30 June, 2020, and gearing to approximately 32% from 53%.

It said financial performance in FY2020 was affected by the significant disruption of two of its main channels to market, wholesale and export, as a number of measures were implemented by the state and federal governments in March 2020 to contain the spread of the Covid-19.

“The increased fish size and volumes available for harvest in Q4, with the commencement of the 19 Year Class harvest, should have delivered high returns,” reported Huon.

“Following the outbreak of the pandemic international prices that lifted in December and January entered another period of volatility and Huon’s strong position in food services supply was a disadvantage in the domestic market as consumers moved their purchases into retail.”

The company’s supply into domestic retail and retail fish shops increased, along with e-commerce channels, but did not compensate for the loss of food services volume.

Average weight up 0.5kg

At the cage edge, FY2020 heralded the beginning of a new growth phase following completion of a two-year infrastructure investment programme, said Huon.

“The 19 Year Class salmon is the first to benefit from the suite of changes that have been put in place along the length of the entire production chain – from the hatcheries to the Whale Point Salmon Nursery; the increased security provided by the fortress pens and more efficient bathing with custom-designed wellboats; centrally controlled feeding from purpose-built barges; and the POMV (Pilchard Orthomyxovirus) vaccine and new biosecurity protocols that put fish in the right farming areas at the right time to minimise the biological risk,” said the company.

“The average fish harvest weight for the year was 5.04kg, the best in a decade and well above the average over that period of 4.53kg. The strong performance of the 19 Year Class salmon combined with the delayed harvest is expected to deliver an average HOG weight in FY2021 in excess of 5.3kg.

Production cost fell by 11% in FY2020 to A$10.46/HOG kg and is expected to fall by at least another 9% to under A$9.50/HOG kg in FY2021.

The requirement to slow the harvest of the 19 Year Class salmon during the fourth quarter of FY2020, will likely result in the harvest volume for FY2021 increasing by around 40% to at least 36,000 tonnes.