September 4, 2020
Huon Aquaculture takes hit despite growth in revenue
Huon Aquaculture Group's profit dropped by 32% due to COVID-19 restrictions that disrupted the company's wholesale and export markets.
The salmon grower company, which is based in Tasmania, Australia, has sold AU$68 million (US$50 million) worth of new shares to help it guard against the risk of high debt levels, as pandemic restrictions crimp its most valuable markets.
Despite harvesting almost a third more salmon and growing revenue by 21% last financial year, the company's statutory net profit after tax dropped by to AU$4.9 million (US$3.6 million).
In its announcement to shareholders, Huon Aquaculture Group said government COVID-19 restrictions had significantly disrupted two of its main channels to market.
Sam Baker from Shadforth Financial Group said Huon Aquaculture sold a higher proportion of its salmon overseas and to restaurants than its rival Tassal.
"Huon's got a high dependency on both the wholesale and export salmon markets, and with the COVID-19 restrictions in recent months those parts of their sale cycle have been impacted," said Sam.
"Their retail business only makes up about 30% of their total sales and that has probably been more robust through the supermarket network over this COVID-19 period."
Late last month, Huon Aquaculture issued 21.3 million new shares priced at AU$3 (US$2.18) to raise approximately AU$68 million (US$50 million).
Baker said the aquaculture company had fairly high levels of debt, which increased by 21% last financial year.
"It appears as if what Huon has done is try to raise this money to defend their balance sheet and reduce debt in case the COVID-19 impacts continue for the company, so it certainly is a defensive move by the company," he said.
"There is no doubt there is uncertainty around Huon's earnings in this current COVID-19 environment, particularly around their product and sales channels, so a continuation of COVID-19 would cause some issues for Huon.", Sam added.
Matthew Nicholas, a butcher in Geeveston, Tasmania, sells Huon Aquaculture salmon in his shops and counts many of the company's employees as customers.
He said both Huon Aquaculture and Tassal were very important for the area's economy.
"I imagine there are probably 1,200 employees between the two companies. They do need to be fed at different times and their boats are great supporters of our business as well," Nicholas said.
"They've gone through a massive expansion in the last two years ... and they are the backbone of the Huon Valley, Huon Aquaculture and Tassal.
"If they were both gone, it would be a very sad economic place." Nicholas said.
- ABC News