FY21 was a “turbulent” year for Huon Aquaculture chair Neil Kearney said at today's AGM. Operational performance exceeded expectations but COVID-19’s impact on the global salmon market played a major role in Huon recording a $128 million loss, including $80 million in write-downs.
Managing director and CEO Peter Bender said it was “particularly difficult” to see the investments and gains made over the past five years on the farm and in processing facilities be “undermined by COVID-19’s impact on the balance sheet through the fall in salmon prices, and the savage increase in freight costs as a result of the closure of our international borders.”
Two-thirds of FY21 production was for export and wholesale markets, the two markets most affected by attempts to contain the spread of the pandemic. “We knew we were facing an enormous challenge,” Kearney said.
The non-cash impairments were impacted by a $16 million decrease in the Fair Value Adjustment due to a decrease of value in biological assets over the year.
Revenue was up 20 per cent on FY20 due to a 39 per cent increase in harvest volumes but was impacted by an average 10 per cent fall in salmon prices. The company lost $47 million in revenue due to the fall in salmon prices.
“The lower pricing environment resulted in a 65 per cent fall in operating EBITDA from $47.3 million to $16.7 million,” Kearney said.
Freight costs doubled due to COVID-19 due to increased volumes and high unit costs. Pandemic related impacts accounted for two-thirds, $22 million, in freight.
Bender said: “When you are exporting 44 per cent of your production in this environment, there is little if any margin to be made even after lowering our cost of production by 25 per cent to $9.65 per kilogram over the past three years.”
Kearney said: “It would be true to say that Huon has been disproportionately impacted by COVID-19 compared to many of its peers due to the coincidence of the arrival of the pandemic in early 2020 with a ramp up production that had been two years in the making.
“This in turn was only possible due to the culmination in 2020 of a five-year capital investment programme that was designed to modernise Huon’s infrastructure and substantially boost its production capacity.
“However, despite what has transpired over the past 18 months, there is no question that Huon is now best positioned to meet the expected growth in demand for salmon over the next five to ten years because of its commitment to that strategy,” he said.
JBS takeover bid
As Huon Aquaculture shareholders prepare to vote on JBS Australia’s acquisition of the business, Dr Andrew Forrest announced his private investment vehicle Tattarang would not support the sale.
Earlier this week the Foreign Investment Review Board approved the acquisition.
When JBS announced its 100 per cent takeover bid in August, Tattarang responded by more than doubling its stake in Huon to 18.5 per cent, effectively blocking the sale. JBS countered with a parallel offer, saying it would accept 50.1 per cent.
Forrest called on JBS to commit to key animal welfare including No Pain, No Fear (NPNF) and environmental standards.
“My message to these massive protein producers remains clear: your animals deserve NPNF in their life cycle, and your customers expect you to change the management of your business to accommodate this. Only a clear commitment by JBS S.A in respect to its global operations would give Tattarang sufficient confidence to reconsider its position.”
JBS countered, saying it “unequivocally” supported NPNF across its global operations and was committed to the “highest standards of fish health and sustainable farming practices, from water management to animal welfare, net zero emissions and stocking densities”.
Forrest also announced scoping and feasibility studies were already underway for developing Tattarang’s own land-based finfish production facility. The project is anticipated to cost more than $100 million.
“I didn’t invest in Huon to create a rival takeover position. I invested in Huon because I believed they wanted to be leaders in truly sustainable salmon farming. But the industry change I want to achieve goes beyond just one company, in one jurisdiction. We invested to bring the true impacts of nearshore farming to policy makers’ attention, to bring the credentials of certification arrangements into review, and for the real standards of animal welfare practices to be highlighted,” Forrest said.
