NZ King Salmon pins hopes on Blue Endeavour after return to profit

NZ King Salmon plans to expand its operations with a venture in the Cook Strait.

NZ King Salmon Investments (NZKS) is pinning its hopes on an ambitious plan to build a fish farm in the open and fast moving-waters of Cook Strait, which would more than double its production if it goes ahead.

The salmon farmer said a sharp turnaround in its second half allowed it to eke out an annual $1.9 million net profit after reporting an almost crippling $73.2m loss in 2022.

The South Island company’s earnings before interest, tax, depreciation and amortisation (ebitda) came in at a loss of $4.4m for the year to January 31, compared with an ebitda profit of $6.7m in 2022.

The operating loss was better than its original market guidance of an $8m to $12m ebitda loss.

NZKS had a poor first half that was beset with fish mortalities after an unusually warm summer.

The business rebounded in the second half but only after it decided to fallow three farms in Pelorus Sound due to warmer water temperatures.

Looking ahead, NZKS said its ebitda guidance for the current year was $21m to $25m.

The company’s ambition is to significantly grow fish volumes through its planned open ocean Blue Endeavour farm in Cook Strait - 7km from Cape Lambert.

The global focus on offshore fish farming has seen significant technological advances in recent years, the company said.

Acting chief executive Graeme Tregidga told the Herald that Blue Endeavour was potentially a game-changer.

NZKS’ production is normally around 6500 to 7000 tonnes of salmon a year, and Blue Endeavour could boost that by about 10,000 tonnes.

However, that would take a while - probably until around 2030 - to achieve.

The project would start with a pilot farm which would require different equipment from its existing, sheltered, farms.

The pilot would last about two years, after which NZKS would add two pens a year.

Tregidga said the biggest challenge for aquaculture was finding new water space.

“Inshore has less attraction because of the other activities that take place there,” he said.

The high water flow in the strait was important.

Temperature wise, the site off Cape Lambert is about around the middle of the range of NZKS’ other sites.

NZKS farms king salmon in Pelorus and Queen Charlotte Sounds in the Marlborough Sounds, as well as Tory Channel.

In recent years, the two sounds have recorded water temperatures consistently above the optimum range for salmon farming.

In comparison, Tory Channel is exposed to southerly swells, has strong tidal currents, consistently colder water and has always been a haven for farming salmon during warmer months.

According to the National Institute of Water and Atmospheric Research (Niwa), 2022 was the hottest year on record in New Zealand, driven by another La Nina event.

This resulted in extremely high fish mortalities throughout January, February and March.

Tregidga said the first half had been challenging.

“That [fallowing] had the impact of downsizing the volume. We had to right-size the business to that new volume,” he said.

Tregidga was “hesitant” to put the company’s patchy performance down to climate change but said the fallowing of farms was due to the warmer water.

“If you put that down to climate change, then it has indeed been the catalyst to make those tough calls and to make adjustments to counter that.”

Blue Endeavour was granted environmental consent in November. Two appeals were subsequently lodged, and mediation began in March with the parties involved.

In its result, NZKS said salmon sales fell by 24 per cent to 5837 tonnes and revenue dropped by 4 per cent to $167.1m.

The harvest this year is expected to improve to around 6600 tonnes, it said.

“A key lesson when facing adversity is how you react to it,” the company said in today’s result.

The company last year raised $60.1m from the market to restructure its balance sheet – repaying all bank debt on a net basis.

NZKS said its sales model continued to improve throughout the financial year.

Its shares traded at 21c, little changed.