Summary of Pareto Securities' investor seminars at the 19th annual North Atlantic Seafood Forum

Our CEO, Christian Jomaas, opened the conference's investor seminar by highlighting the importance of the seafood sector for Norway and Norwegian capital markets.

The Oslo Stock Exchange Seafood Index is back at the levels before the resource tax was introduced. The seafood sector has grown 20x in the last 20 years, and the Oslo Stock Exchange has become the largest seafood stock exchange in the world, with seafood now making up 8% of the market cap.

Seafood is Norway's second-largest export industry and has a significant positive impact on society. In 2022, the Norwegian seafood industry contributed NOK 17 billion in total taxes. The industry keeps and will continue to keep lights on along the coasts through more than 100,000 seafood jobs.

The market balance for salmon is looking tighter and tighter, with low supply growth and the demand showing signs of resilience despite historically high salmon prices, our seafood equity analyst Sander Lie said in his presentation.
 
We expect spot prices to stay at high levels in the coming years. New technologies will play an increasingly important role moving forward. However, the volumes will not be sufficient to move the market balance quite yet. Earnings for conventional farmers are set to remain healthy, and we expect an uptick across most companies.
 
Challenging conditions across key regions have further raised awareness towards biology, fish welfare, and sustainability, which are high on the agenda for all of the presenting companies. The worst political turbulence has likely been left behind, with even more clarity around taxes expected in the coming quarters. With this backdrop, we see signs of a more positive sentiment in the sector.

Optimistic entering 2024

All the listed conventional farmers presented at the conference and at our investor seminars. For the Norwegian names, biology and fish welfare remain a top priority entering the new year, and we note some more optimism than in a while. Higher-quality smolt and new technologies are among initiatives that will improve metrics across the most challenging regions, but they will likely become more visible for the generation harvested out in 2025.

In Chile, farmers still see some risk towards short-term volumes following the summer season and algae blooms, while growth conditions in the Faroe Islands and the UK appear better than in a while. In Iceland, we see improving conditions for the West coast following the sea-lice pressure late last year, while performance in the Eastern coast is promising.

Salmon prices remain at high levels, while price realization will vary between the names dependent on harvesting and regional profiles. In the short term, we expect to still see large differences across operational results for the conventional farmers, but we generally argue for an uplift in earnings across the majority of the names into 2024.

Bakkafrost, Grieg Seafood, Ice Fish Farm, Icelandic Salmon, Lerøy Seafood Group, MOWI, Multiexport Foods, Måsøval, Salmar, and Salmones Camanchaca presented at the conference.

Several names closing in on “proof-of-concept”

Land-based salmon farming are currently approaching a turning point, with several companies now either closing in on steady state for the initial phases or first harvest. 2024 will thus mark a year where we get to see some more data points and operational metrics supportive of the overall land-based story.

Some of the companies are also funded for further expansion and the focus have rather shifted from stretched balance sheets towards production. With pressure on biology in the past quarters for the conventional farmers and growth limited through licenses for the mature markets, we argue that we might see a shift in the sentiment entering the new year.

Attending land-based companies at our conference included Andfjord Salmon, Atlantic Sapphire, First Water, Gigante Salmon, GeoSalmo, Laxey, Nordic Aquafarms, Nordic Aqua Partners, Proximar, Salmon Evolution and The Kingfish Company.

Significant potential, but volumes are still a bit further out in time

Offshore farming is still in an early stage globally, but Salmar Aker Ocean has harvested out some batches following its inception. Datapoints so far are supportive for offshore farming to become an important addition to the industry. In Norway, however, political incentives are not in place following the resource tax, and we argue that the projects will evolve, but likely in other regions. We see a significant growth potential for offshore farming, but still expect the game-changing volumes further out in time.

Both of the leading offshore farming companies, Salmar Aker Ocean and Utror, presented at our conference this year.

Apart from salmon farming and new technologies, the remainder of the value chain was well covered at the conference, including genetics, feed producers, processors and distributors.

Among the companies were Austevoll Seafood, AKVA Group, Aker BioMarine, Benchmark Holdings, New England Seafood, Nordic Halibut, Norcod, Hofseth Biocare, Stolt Sea Farm and Stingray Marine Solutions.