Difficult market conditions in Chile and Ecuador resulting from the coronavirus pandemic caused BioMar’s revenues and earnings to sink in the fourth quarter of 2020 despite higher volumes being sold in the salmon division overall.
Earnings before interest, taxes, depreciation, and amortization (EBITDA), was down 11 percent in the quarter to DKK 266 million (€35.8 million/$42.7 million), and despite volume sales increasing by 5 percent, revenue fell by 3 percent to DKK 3 billion (€403.4 million/$481.2 million) mostly due to foreign exchange developments.
For the full year, BioMar managed to slightly increase EBITDA 0.6 percent to DKK 972 million (€130.7 million/$155.9 million) with 2020 revenue climbing 4 percent to DKK 11,649 million (€1.6 billion/$1.9 billion).
The moderate improvement was driven by increased volume sales – up 7 percent over the year -- and a number of cost cuts, said BioMar.
However, these were partially offset by unfavorable foreign exchange developments compared with 2019, and additional costs related to the coronavirus pandemic, such as testing, cleaning, extra production shifts and support provided to local communities in affected areas.
Overall, exchange rate developments had a negative effect on revenue of more than DKK 400 million (€53.8 million/$64.2 million) over the year, said the group.
Salmon lifts operations
Both for the fourth quarter and for the year as a whole, the increase in volume sales was attributable mainly to the group’s salmon division -- with the exception of Chile, where the coronavirus situation led to sluggish demand.
New product offerings, an agile adaption to the changing market situation and a new production facility in Australia laid the foundation for a strong development of the salmon business, said the group.
Despite demand for farmed fish and shrimp progressing well in most markets, the coronavirus pandemic disrupted the usual sales channels creating a volatile market, and a resulting volatile pricing, BioMar said.
So far, though, the coronavirus pandemic has only had a limited impact on the company's overall volume sales.
However, there have been shifts in geographical sales, as fish farmers in certain markets have reduced feed volumes, while in others, sales of more advanced feed products have declined and have been replaced by more standard products.
The markets in Chile and Ecuador are currently subject to the most uncertainty, said BioMar, as fish farmers are seeing the coronavirus pandemic having a very significant impact on their sales, especially to the hotel, restaurant and catering (HORECA) segment.
Bullish for 2021
Although the effects of the various ongoing vaccination program are still unclear, BioMar’s guidance assumes that primary market conditions will gradually normalize in 2021.
Therefore the company expects an increase in volume sales driven in part by gradual normalization, and in part by the effects of the strategic investments the group has made in recent years.
BioMar expects to generate full-year 2021 revenue of about DKK 12 billion (€1.6 billion/$1.9 billion), although changes in raw materials prices and foreign exchange rates may impact this.
Earnings may also be affected by foreign exchange developments, but based on the current outlook, BioMar expects to generate EBITDA in the range of DKK 950 million (€127.8 million/$152.4 million) to DKK 1,020 million (€137.2 million/$163.6 million) in 2021.
Associates and joint ventures are expected to contribute a total share of profit of approximately DKK 40 million (€5.4 million/$6.4 million) in 2021.
The improvement relative to 2020 is largely attributable to Salmones Austral, and subject to a significant degree of normalization of salmon prices in Chile.
“We are leaving 2020 with a very strong position in the salmon feed markets,” said Carlos Diaz, CEO BioMar Group.
In the European markets outside salmon and in the shrimp feed markets, BioMar and its customers have been impacted significantly by a challenged HORECA sector.
“Despite the circumstances, we have realized an acceptable year in our EMEA division as well as in our shrimp feed producing countries,” said Diaz.
“We have been able to keep our people safe and in good health, and we have continued to develop our products and grow the business.”
Since last spring, BioMar has opened factories in Australia and China, and launched a new extruded feed production line in Ecuador.
Most recently in 2021, the group signed a deal to acquire a shrimp feed business unit in Vietnam.
“Looking back at 2020, it has been both challenging and rewarding,” said Diaz.
“Navigating through this crisis has not been a cheap task. We have saved money on travelling while taking significant costs to keep the employees safe and support our local communities, but to us people always come first.”