Investment bank Kepler Cheuvreux is slashing in half its target price for shares of land-based salmon producer Atlantic Sapphire, and downgrading its harvest volume expectations.
The bank cut its price target for Atlantic Sapphire shares from NOK 60 (€6.10/$7.10) to NOK 30 (€3.10/$3.60).
In an update on Wednesday morning, Kepler Cheuvreux said it now expects that the company will harvest 70,000 metric tons of salmon in 2030, against an earlier estimate of 200,000 metric tons.
Christian Nordby, an analyst at Kepler Cheuvreux, is estimating the company will have a capital need of $178 million (€153.1 million) in 2022.
Nordby believes the company needs the cash infusion to complete the construction of Phase 2 of its facility in Miami. Although some of this can be financed with debt, he believes that the company must also raise fresh equity.
"We recommend that you do not buy the share until fresh money is in place," he said.
Norby believes that the issue will come soon. "The company is probably in discussion with the banks about how much equity it needs to draw on its credit facility. During the next six months, something can happen, but the company can only build more slowly , which makes it difficult to estimate accurately."
Even though Atlantic Sapphire has a credit facility, a larger share issue might be carried out, Nordby said.
At the time of writing on Wednesday morning, the Atlantic Sapphire share price had fallen aroundover 8 percent to levels around NOK 33.25 (€3.50/$4) per share.
Below expectations
Earlier this week, IntraFish reported Atlantic Sapphire's "Bluehouse" farmed Atlantic salmon performed below expectations in a recently concluded US retail promotion, which was the largest ever for land-based salmon of any kind.
The marketing effort followed the news of another US retailer dropping Atlantic Sapphire from its stores. The 474-store, $10 billion (€8.3 billion) supermarket chain Giant Eagle stopped carrying the fish a couple months ago, Rich Castle, seafood director for the Pennsylvania-based retailer told IntraFish.
Atlantic Sapphire has seen a string of troubles over the past year.
Just last month, a devastating fire destroyed Atlantic Sapphire's land-based salmon farming facilities in Denmark.
The cause of the fire is currently unknown, but all fish biomass in the Danish facility was lost, and executives said they were uncertain if they would rebuild.
Earlier this year, the company estimated its target production at the facility was 2,400 metric tons annually.
Atlantic Sapphire executives worked to calm the markets after the fire immediately caused a crash in the company's stock, which trades on the Oslo stock exchange, knocking almost NOK 1 billion (€98.6 million/$116 million) off its value overnight following the fire.
“The market has spoken, and it shows there is a complete lack of confidence in the management team at the moment,” Alexander Aukner, an analyst at DNB Markets, told IntraFish following the fire.
“There have been way too many incidents, too close together, and it doesn’t seem like they have control.”
So far this year the company's share price has dropped more than 70 percent as it faced a series of crises.
The fire came just a few months after the company lost 17 percent of its fish in its Danish facility because of a mass die-off.
The company is planning for lower-than-expected harvests from the Miami facility next year.
Executives said in August before the fire that destroyed the Danish facility that half of 3,000 metric tons of fish it planned to harvest in the second half of this year will be pushed into next year
