"Russian aquaculture" (MCX: AQUA) — management company of the group of companies of the same name. The group includes fish farms and factories for growing smolt - young fish weighing up to 150 grams.
About company
In group affiliation 36 fish farming sites. Most of the industrial facilities are located in the Murmansk region and on lakes in the Republic of Karelia, but two smolt plants are in Norway. In addition, there are two management companies in Norway.
The structure of the group of companies PJSC "Russian Aquaculture"
| Company | Functions | Ownership or percentage of voting shares |
|---|---|---|
| PJSC "Russian Aquaculture" | Management Company | — |
| Aquaculture LLC | Doesn't work | one hundred percent |
| LLC "Russian Sea - Aquaculture" | Fish farming | one hundred percent |
| Oyrralaks AS | Management Company | one hundred percent |
| Villa Smolt AS | Fish farming | one hundred percent |
| Oldenselskapene AS | Management Company | one hundred percent |
| Olden Oppdrettsanlegg AS | Fish farming | one hundred percent |
| LLC "Murmanrybprom" | Processing | forty percent |
| LLC "Three streams" | Rentals | forty percent |
Group of companies - Russian-Norwegian. This distinguishes Russian Aquaculture from other Russian fish companies, including those specializing in artificial fish farming. The main products of the company are salmon fish - the choice of the Murmansk region and Norway for business is due to the fact, that the coastal zones of the sea in these places are ideal for the life of salmon.
Despite, that most of the production capacity is located beyond the Arctic Circle, the warm current of the Gulf Stream saves water from hypothermia, which can kill fish. The section of ocean waters in the Murmansk region is the only zone in Russia, where there is a warm current. In the Pacific, even in Primorye, located on the same latitude as Sochi, no warm currents, therefore, there is a great risk of hypothermia of the water in winter.
The main shareholder of the company is Maxim Vorobyov, brother of the governor of the Moscow region. The second major shareholder is the management company Svinyin and Partners. Despite the low liquidity of the company's shares on the Moscow Exchange, Investor interest in them has recently increased due to the sufficient stability of financial indicators during the corona crisis, and also in connection with, that this is the only fish breeding enterprise, whose shares are publicly traded on a stock exchange.
What he earns
The profile of the company is exclusively the cultivation of red fish by artificial means. Russian Aquaculture products are represented by Atlantic salmon and sea trout, which are grown in fish farms in the bays of the Barents Sea, rainbow trout from the lakes of Karelia and red caviar.
Related products are fish oil and silage, that is, protein raw materials for the manufacture of animal feed, - accounts for a very small share of the company's revenue.
To date, the group of companies has refused to import products from Norway and supply products from the Far East, although business ties with Norway remain. Now she specializes only in raw materials. Production volume as of 2020 year was 15,5 thousands of tons of gutted fish with a head.
Revenue structure, million rubles
| 2019 | 2020 | Share in 2019 | Share in 2020 | |
|---|---|---|---|---|
| Salmon sale | 5 445,7 | 4 919,8 | 61,90% | 59,02% |
| Trout sale | 3 311,8 | 3 311,5 | 37,64% | 39,73% |
| Sale of red caviar | 20,7 | 74, 9 | 0,24% | 0,90% |
| Sale of other products | 19,3 | 29,5 | 0,23% | 0,35% |
| Total | 8 798,3 | 8 335,9 |
For 2020 year the company increased sales of Atlantic salmon, while sales of sea trout and rainbow trout fell somewhat, and sales of red caviar and related products fell significantly. This can be associated with a decrease in imports of Atlantic salmon to Russia in 2020 year due to the coronavirus and the corresponding price increase.
At the same time, trout production in Russia by other medium-sized companies is growing, its market is less dependent on imports. In particular, in North Ossetia 2020 trout production increased by 45%. For trout, the competitive environment for Russian Aquaculture is less favorable, than the Atlantic salmon market.
The group of companies operates mainly in the domestic market, but there are trial deliveries of products to Japan. Despite, that in many other regions there is strong competition, against the background of other global salmon producers, Russian Aquaculture looks prosperous and is among the top ten largest companies in the sector.
Little of, PJSC Russian Aquaculture ranks second among the world's largest salmon producers in terms of EBIT — earnings before interest and taxes.
The only domestic competitor, farmed Atlantic salmon, - Russian Salmon Company. In the Russian salmon market, the share of Russian Aquaculture products is 14%. Imports are the main competition., which is dropping.
10 world's largest salmon producers
| Company | Catch volume in 2019 G., thousand. tons |
|---|---|
| Says | 422,00 |
| Cermaq | 162,00 |
| Salmar | 153,00 |
| New Aquachile | 141,00 |
| Leroy Seafood | 128,00 |
| Grieg Seafood | 83,00 |
| Cooke Aquaculture | 80,00 |
| Salmon Multiexport | 77,00 |
| Australis Seafood | 53,00 |
| Russian Aquaculture | 20,00 |
Catch volume in 2019 G., thousand. tons
10 world's largest salmon producers by EBIT
| Company | EBIT, € per kg |
|---|---|
| Says Ireland | 3,52 |
| Russian Aquaculture | 2,80 |
| SalMar Central Norway | 2,68 |
| SalMar Northern Norway | 2,30 |
| Mowi Faroes | 2,20 |
| Bakkafrost | 1,84 |
| Grieg Rogaland | 1,72 |
| NRS | 1,57 |
| Mowi Norway | 1,34 |
| Mowi Group | 1,10 |
EBIT, € per kg
Company perspectives
Business expansion to the Far East. The group of companies plans to expand in Primorye and, maybe, business diversification. These are rather contradictory facts..
Diversification of production through the cultivation of invertebrates in the Barents Sea is very likely to lead to an increase in shares. Do Mussel Cultivation, oyster, scallops and trepangs, the cost is much lower, than artificially farmed salmon fish, Less initial plantation investment required. But this is a less marginal business.. Therefore, one should not expect a strong positive impact on the financial performance of the group of companies.
But the idea to grow salmon in the Far East looks quite adventurous. Despite, that the selected site was assessed by the experts as suitable, has always been considered, that the region is not suitable for marine aquaculture due to the lack of warm currents and convenient bays. So far, the issue of cage breeding of salmonids in the Far East is being solved only in theory.. Only fry are bred there, then release them into the ocean.
This is a new type of business for Russian Aquaculture, which requires new specialists, investment in boats. Moreover, the company enters the Far East in a new competitive environment: only in the Sakhalin region exists 61 fish hatchery.
Restrictions on salmon imports to Russia and their impact on the company's shares. On the one side, the foreign trade situation is developing in favor of "Russian aquaculture". Back in February 2020 Rosselkhoznadzor imposed a temporary embargo on supplies of aquacultured Atlantic salmon from six aquaculture firms in Chile and on supplies of similar products from Bakkafrost from the Faroe Islands. The reason is, that harmful bacteria and antibiotics were found in Chilean and Faroese salmon.
In the Russian market, imports of Atlantic salmon are represented only by products from these two countries.. Therefore, the total volume of products on the market decreased against the backdrop of, that the production of Atlantic salmon in Chile decreased by 14%. Truth, the reduction in imports applies only to Atlantic salmon, and imports of two other types of red fish - coho salmon and trout, vice versa, a record high.
And given the growth in the catch of wild Pacific salmon in Russia, the situation can be described as dual: if the reduction in imports has an impact on market conditions, where Russian Aquaculture works, it won't happen right away. Truth, can be predicted, that the supply of Atlantic salmon from Chile will decrease even more, since there is evidence, that Chile is re-exporting unsanctioned Norwegian products.
Prospects for aquaculture in Russia and foreign experience. So far, Russian Aquaculture, along with the smaller company Russian Salmon, are the only companies in Russia, which artificially raise Atlantic salmon, and generally sea salmon fish.
Fish factories, who raise young Pacific salmon, and then released into the natural environment, - does not count, because they don't use full cycle. Freshwater salmon farming experience, for example trout, in Russia, there have been since tsarist times - and now a fairly large number of fish farms are engaged in trout breeding: only works in Karelia 56 companies.
But Russian aquaculture is represented mainly by carp farms, that dominate this market. Marine species of salmon - a novelty for Russian aquaculture, because in Russia there are no such conditions, how, for example, in Norway with its warm sea and fjords. In addition, Norway has been developing marine salmon aquaculture for decades. The Soviet legacy was decimated by the "dashing nineties", when the fish farms closed one by one.
Despite, that in Russia, after the end of the crisis of the nineties, many companies were opened to grow like fish, as well as invertebrates, Russian aquaculture lags far behind similar industries in such countries, like Norway, Egypt is the world leader in tilapia breeding in virtually any ditches, Vietnam, Ecuador, Chile, Faroe islands. Therefore, the competitive environment for PJSC "Russian Aquaculture", considering his plans to diversify products, will remain favorable for a long time.
Risks
Connection with Norwegian business. Absolutely all smolt, absolutely all equipment and absolutely all feed are purchased in Norway. That, that the Norwegian smolts are owned by the group itself, does not eliminate the risk, that in the event of new sanctions, business will be destroyed. To all other, there is a currency risk: the mentioned products are purchased for dollars and Norwegian krones.
The company's management is considering the possibility of transferring smolt production facilities to Russia and building its own feed production plant. Ideas to build these plants were expressed by top managers of the company back in 2015 year, but bankruptcy prevented. IN 2021 In 1999, Ilya Sosnov, General Director of the company, announced plans to build a smolt plant on the Kola Peninsula with a capacity of 10 thousand cubic meters, while the capacity of the Norwegian plant Villa Smolt is 3 thousand cubic meters. But if the construction plans are confirmed, company shares can renew their maximum.
Bankruptcy precedent. IN 2015 salmon louse epidemic occurred in the company's fish farms in the Barents Sea. As a result, the company lost about 1 billion rubles: perished 20 thousand tons of fish, almost immediately one of the firms, part of a group of companies, started bankruptcy proceedings. There is an opinion, that the cause of the epidemic was the supply of infected fry from a smolt plant in Norway.
TO 2019 year, Russian Aquaculture managed not only to restore business, but also for the first half of that year to increase revenue in 16 once. At the same time, the company completely reoriented its business to its own production of salmon, since, shortly before the salmon louse epidemic, Russia, as part of the counter-sanctions regime, banned the import of Norwegian fish. At the same time, the permission to import fry from Norway was preserved, what helped the Russian Aquaculture business not to collapse completely.
This incident clearly demonstrates all the risks of the aquaculture business and the instability of income.. On the other hand, the quality of the company's management shows the fact, that after the epidemic 2017 In 1999, she bought smolt factories in Norway - obviously, to play it safe from the risks of supplying fry of unknown quality from foreign enterprises.
Business seasonality. If we analyze the financial performance of the company, their heterogeneity is striking even on a yearly scale. The company's quarterly figures are even more suspicious: the company itself explains this by the seasonal nature of the business and the lack of biomass growth in the winter.
Based on the results of the first half 2021 year, revenue increased by 28%. This seasonality is typical for the entire aquaculture business as a whole.. But it does not affect the dynamics of the company's shares.: they show stable growth, what can be associated with their purchase on positive news and investor optimism.
As already mentioned, one of the main factors, market-optimistic, — reduced imports of Atlantic salmon to Russia. But there are two more factors.: expansion of production capacities and implementation of the share buyback program. All this together supports the dynamics of the company's shares..
Financial indicators of "Russian Aquaculture"
| 2019 | 2020 | |
|---|---|---|
| Net profit margin | 0,015% | 29,32% |
| Asset turnover ratio | 0,01× | 0,01× |
| Return on assets | 0,01% | 29,21% |
| Return on equity | 0,96% | 0,76% |
Financial indicators of Russian Aquaculture in the first quarter
| 2020 | 2021 | |
|---|---|---|
| Net profit margin | 28,36% | 7,65% |
| Asset turnover ratio | 0× | 0× |
| Return on assets | 28,27% | 5,90% |
| Return on equity | 0,25% | 0,15% |
Results
The main driver of the growth of the company's financial performance is the recovery in demand for Atlantic salmon in Russia during the general economic recovery after the coronavirus. But it's not so simple here: Coronavirus in Russia is not defeated - moreover, new strains emerge, with negative economic consequences; the purchasing power of the population is not restored. Therefore forecasts, built by Russian Aquaculture last year, can be adjusted: at the time of their publication, no one assumed, that the situation will drag on.
Second moment, who can correct forecasts, — a significant increase in the catch of Pacific salmon in 2021 year. But in this case, one must take into account the fact, that the number of approaches of a number of fish of valuable red species to the Russian catch area has decreased this year - that is, there is a predatory catch. In addition, in a number of fishing zones of the Far East, there is a shortage of fishing vessels..
Due to these two factors, it is unlikely that the current momentum will be maintained - an increase in demand for aquacultured redfish should be expected.. And you need to take into account the fact, that Atlantic salmon is more valuable from a gastronomic point of view, than the massively caught wild red fish species in the Far East.
With a further decrease in salmon approaches in the region, an increase in the share of aquaculture red fish in the market can be expected.. Among aquaculture producers of Atlantic salmon, Russian Aquaculture has an almost monopoly position, and the proportion of trout, where the company faces significantly stronger competition, in its production is small.
But for the dynamics of the company's shares, as for most illiquid stocks, news and stock factors are of primary importance. Attention should be paid to, that Russian Aquaculture continues to buy back shares on the Moscow Exchange. It was planned, that the ransom ends 30 June 2021 of the year, but it was extended to 30 June 2022 of the year. So for the year, support for the rally of PJSC shares through buybacks is provided, if no events occur, similar to the bankruptcy of a company in 2015 year due to the epidemic factor. The risk of such events is reduced due to the possible transition to the cultivation of smolt in our own factories in the near future.. Well, certainly, expansion of production capacity and diversification of products also support the company's shares.
Despite significant risks, there is an opportunity in the medium term to expect a positive trend in the shares of PJSC "Russian Aquaculture". The long-term dynamics will already be influenced by a wide range of factors - primarily the restoration of the purchasing power of Russians and the reduction of existing risks by the company's management.
