The Tassal Group Limited (ASX: TGR) share price has rocketed more than 9% today following the release of its half-year results for the 6 months to December 2019 (1H20).
At the time of writing, Tassal shares are going for $4.50 a piece.
What did Tassal announce?
Tassal has today announced 1H20 revenue of $274.49 million, which represents a drop of 15.8% on the prior corresponding period (pcp).
Statutory net profit after tax (NPAT) was up 24.3% to $40.82 million, while operating cash flow was down 48.6% to $40.97 million. Tassal ended the period with cash held of $15.33 million, which was down from $17.81 million in 1H19.
This cash flow was in line with expectations and reflected the decision to leave the salmon in the water longer to grow (and therefore feed more). This resulted in lower overall sales revenue (through targeting a reduction in sales for the lower value export and less profitable domestic sales), however, the tactic is set to underpin strong harvest and sales in 2H20 and FY21.
Salmon
Tassal's 1H20 strategy was to grow operating earnings before interest, tax, depreciation and amortisation (EBITDA) $/kg while driving harvest and sales in 2H20 to deliver expected earnings growth in FY20 and beyond.
Tassal posted a 15.5% increase in its salmon operating EBITDA $/Kg (Pre AASB 16) to $3.44/kg. An average harvest size increase per hog of 4.8kg was seen, 2.1% larger than 1H19. Tassal also reported a 15.5% increase in live fish over the prior corresponding period (pcp).
Total salmon sales were down 14.4%, with domestic salmon sales increasing 0.6% and export sales decreasing 45.9%. Export sales make up 20.3% of Tassal's total sales.
Prawns
Tassal confirmed its prawn biomass harvest is on track to deliver targeted circa 2,400 tonnes in 2H20 for FY20. The group advised its prawn earnings for 2H20 are effectively represented as a self generating and regenerating asset value of $15.4 million, as this stock is planned to be harvested and sold before 30 June 2020. The company is targeting an EBITDA $/Kg of $6.00/kg in FY20 in the prawns business.
Also noted was an increase in prawn biomass over the pcp of 498.9% to 557 tonnes.
Dividend
Tassal announced no change to its interim dividend, declaring a dividend of 9 cents per share, franked at 25%, to be paid on Tuesday 31 March.
Tassal's 2H20 outlook
Tassal expects positive market dynamics for both salmon and prawns to continue, with strong pricing and favourable competitive positioning for prawns in the short to medium term.
The group's salmon biomass growth is currently exceeding expectations, which should support optimised pricing to provide increasing operating EBITDA $/kg. Tassal also notes a transitioning of supply for the continuation of more sales into the domestic market.
Further investment in both salmon and prawn operations is set to continue to underpin long-term growth with a total capital expenditure, including the acquisition of Exmoor Station, of $156 million expected in FY20.
