Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stabilized production with plans to achieve full utilization of Phase 1.
- Low mortality rates, indicating good farming conditions.
- Record harvest volume of 2,400 tons HOG in the first half of 2024.
- Operational improvements leading to better biomass distribution and fish size.
- Plans to increase production capacity and achieve cash-positive operations by the end of 2025.
Negative Points
- Financial situation remains challenging with lower-than-expected sales prices.
- High costs of goods sold, still affected by low production volume and poor feed conversion rates.
- Negative EBITDA of USD40 million and a net loss of USD52 million for the first half of 2024.
- Need for additional capital to improve capacity and cover operational costs.
- Significant investment required for Phase 2 completion, estimated between USD350 million and USD400 million.
Q & A Highlights
Q: Can you provide an update on the operational performance and key milestones achieved in the first half of 2024?
A: Pedro Courard, CEO: We have stabilized our production and are starting to achieve full utilization of Phase 1 while preparing for Phase 2. We harvested 2,400 tons HOG of fish, a record volume, and expect similar levels in the second half with better prices. We have also implemented several operational improvements, including new chillers and preventive maintenance protocols, resulting in low mortality rates and better biomass distribution.
Q: What are the financial highlights and challenges faced in the first half of 2024?
A: Gunnar Aasbo-Skinderhaug, CFO: Despite good biological performance, the financial situation is challenging. We had a revenue of USD11 million but an EBITDA of negative USD40 million and a net loss of USD52 million. The main issues were smaller fish sizes and lower-than-expected sales prices, which impacted cash flow and borrowing capacity. We need additional capital to address these challenges.
Q: What are the plans for Phase 2 and the expected financial impact?
A: Gunnar Aasbo-Skinderhaug, CFO: Phase 2 is designed based on lessons from Phase 1 and will significantly increase our capacity. We estimate the total CapEx for Phase 2 to be between USD350 million and USD400 million. Once fully operational, Phase 1 and 2 combined are expected to generate an EBITDA of USD125 million annually.
Q: How do you plan to finance the additional capital required for Phase 1 and Phase 2?
A: Gunnar Aasbo-Skinderhaug, CFO: We plan to cover the USD94 million needed for Phase 1 through three main sources: amending existing debt facilities, a subscription rights issue of up to USD60 million, and a convertible loan of at least USD20 million. Warrants will also be issued for future Phase 2 financing.
Q: What are the key operational improvements planned for the second half of 2024?
A: Pedro Courard, CEO: We plan to increase our feeding capacity by investing in oxygen and ozone distribution systems, water flow improvements, and degasser and skimmer capacity. These investments will help us move from 23 tons per day of feeding to 33 tons per day, aiming for an annualized harvest volume of 8,000 tons HOG by the end of 2025.
Q: What are the expected outcomes of the proof-of-concept stage?
A: Pedro Courard, CEO: The proof-of-concept stage aims to demonstrate stable production with key metrics such as average fish weight above 3 kilos HOG, a biological feed conversion rate below 1.3, and at least 80% of harvest in superior grade. We expect to achieve this by the end of 2024.
Q: How do you plan to address the current financial challenges and improve cash flow?
A: Gunnar Aasbo-Skinderhaug, CFO: We are taking measures to reduce the number of fish and improve the farm's capacity by removing bottlenecks. This requires both capital for CapEx items and operational activities. We also plan to amend our existing debt facilities and raise additional capital through a subscription rights issue and a convertible loan.
Q: What are the long-term strategic goals for Atlantic Sapphire?
A: Pedro Courard, CEO: Our long-term goals include achieving cash flow positive operations by increasing production to 8,000 tons HOG by the end of 2025 and completing Phase 2 by the first quarter of 2025. We aim to become a unique supplier in the United States with a focus on sustainable and efficient land-based salmon farming.
Q: How do you plan to leverage the lessons learned from Phase 1 for Phase 2?
A: Gunnar Aasbo-Skinderhaug, CFO: Phase 2 design incorporates all the improvements and lessons learned from Phase 1. We will use extensive vendor experience and enrollments to ensure a more efficient and scalable operation. This will enable us to achieve significant economies of scale and improve overall profitability.
Q: What are the key market trends and drivers for Atlantic Sapphire's growth?
A: Pedro Courard, CEO: The demand for salmon continues to increase while traditional farming faces production limitations due to climate change, sanitary challenges, and regulatory pressures. Atlantic Sapphire is well-positioned to fill this gap with our advanced land-based farming technology, offering fresher products and lower costs by eliminating air freight from Norway and Chile.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
