Congrats to all who followed and topped up over the past month!
Just read on Undercurrent News that although Chilean export volume of salmon dropped 11% year on year in October, their returns actually increased due to much higher pricing. The same higher pricing for Chilean, Norwegian and Scottish salmon would've had profound upside pressure on salmon prices in Australia
I strongly believe that Tassal's volume sold through exports and domestic wholesale channels have increased substantially following their decision to manage sales mix actively to take advantage of better margins in the wholesale and export markets. Domestic retail volumes would be flat to a slight decrease in terms of volume.
Thus overall, the total volume of salmon sold would have grown about 4 to 5 thousand tonnes HOG. Together with international pricing that is up on average 45% vs. 1H2016, these two combined effects would drive earnings growth in 1H2017 and indeed for the medium term. Revenue would increase by up to AUD 90 million in FY17.
Tassal is also focusing on increasing feed conversion rates and getting fish to an average 5 kg HOG which is best practice in terms of optimising price and amount of feed used. In turn this increases operating margins and EBITDA.
Furthermore, with the past rainy winter and a less warmer summer to come (as confirmed by the CSIRO), live biomass would have grown faster contributing to a boost to the SGARA adjustment which is an accounting rule to adjust for the fair value on live salmon inventory using forward curves.
FY2017 will provide a nice surprise to the upside vs. average analyst estimates for an EPS of 28 cents
