Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aker BioMarine ASA (STU:1PG, Financial) reported $94 million in revenue and $29 million in EBITDA for the quarter, reflecting strong financial performance.
- The Human Health ingredient segment saw a 22% growth, driven by robust demand for krill oil and other products.
- The company achieved a 13% increase in harvesting, producing over 20,000 tons of product.
- Aker BioMarine ASA (STU:1PG) secured its third health claim approval in the Korean market, enhancing its product credibility.
- The sale of the feed ingredient business for $590 million is expected to result in an extraordinary dividend payout between NOK35 and NOK45 per share.
Negative Points
- The consumer health product segment experienced a relatively weak quarter due to inventory adjustments on the retail side.
- Gross margins for the continued business dropped from 40% to 33%, impacted by a broader product portfolio with lower margins.
- The emerging business segment reported a negative $7 million EBITDA, highlighting the need for cost discipline and growth to reach breakeven.
- Corporate overhead costs remain high at $12 million to $13 million, necessitating a review and adjustment to align with the remaining business size.
- The Human Health ingredient segment experienced volatile margins due to customer mix and lower Superba krill oil prices.
Q & A Highlights
Q: How much of the sale of Superba came from South Korea this quarter? Can you say anything about the split per country this quarter?
A: We had zero sales in Korea this quarter. However, excluding Korea, we saw a 30% growth across other markets, including the US, Europe, and China.
Q: The margin for human health is quite volatile. Could you comment on why that is and the dynamics of that?
A: Pricing for Human Health ingredients is stable, but there are significant differences in pricing between markets. This causes average pricing to fluctuate quarterly. Margins should normally be between 50% and 60%, but were lower this quarter due to a less favorable customer mix.
Q: Can you comment on the terms in the offtake agreement between feed and human ingredients?
A: It's a long-term agreement ensuring raw material needs for human health. Human health ingredients will pay $3,500 for raw materials, and the byproduct will be sold back to feed ingredients at $2,000. The agreement is mutually exclusive.
Q: How does the inventory situation for feed ingredients look like today relative to a normalized situation?
A: We will adjust for any excess inventory above what feed ingredients need to deliver on its plan for the year. If we meet our plan, it will be a substantial amount.
Q: How much of the corporate cost belongs to feed, human, and emerging business on a stand-alone basis?
A: We estimate $5.6 million annually will follow the feed segment. The remaining $12 million to $13 million will be reviewed for adjustments.
Q: Can you comment on the potential for cutting SG&A costs in the remaining operations?
A: It's too early to provide specifics. We will review and address this in the fall.
Q: How do you see the market outlook for HHI in general and Superba in particular across its main markets?
A: The outlook for Superba is very positive with underlying growth of 30%. We have a strong sales, science, and marketing team driving demand through our partners.
Q: Can you provide more details on the financial impact of the feed ingredient sale?
A: The transaction valued the feed ingredient business at $590 million. We will distribute any excess cash as an extraordinary dividend between NOK35 and NOK45 per share. The transaction is expected to close in the third quarter.
Q: What are the main drivers behind the 22% growth in the Human Health ingredient segment?
A: The growth is driven by the underlying krill oil business and new product launches. Excluding Korea, the growth in other markets is 30%.
Q: How is the consumer health product segment performing?
A: The segment had a weak quarter due to inventory adjustments by retailers. However, sales out of retail stores are performing well, and we expect the situation to normalize in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
