Atlantic Sapphire undershooting biomass targets

Atlantic Sapphire issued a trading update that said it will miss its expected biomass targets due to warm water – an update that caused its stock to drop by 19 percent in a matter of days.

The company, in an update posted to the Oslo Børs, said that it currently has lower standing biomass than expected due to “elevated farming temperatures” which have worsened the water quality at its Miami, Florida, U.S.A.-based recirculating aquaculture system farm. Standing biomass at the end of July 2023 was around 2,700 metric ton (MT), which the company said will result in a lower biomass gain and revenue in H2 2023 compared to what it previously estimated.

During June and July, Miami had a record-breaking 46 days straight of heat index temperatures reaching more than 100 degrees Fahrenheit every afternoon – shattering the previous record of 32 days set in 2020, the Miami Herald reported. The city is experiencing the hottest year since the start of weather records, NBC news reported.

The company said that it plans to install more water chillers to ensure sufficient capacity for the facility at peak cooling demand.

“The company expects the temperature issue to be solved in Q3 2023,” Atlantic Sapphire said.

The announcement caused the company’s stock to drop from NOK 6.06 (USD 0.59, EUR 0.54) at close on 7 August to NOK 4.96 (USD 0.49, EUR 0.44) at close on 8 August, a drop of just over 18 percent. The stock, as of 9 August, sits at NOK 4.90 (USD 0.48 EUR 0.43).

The installation of additional chillers comes after the company previously called out, in its FY 2022 update, a new chiller system as an “important operational improvement in 2022.”

“The commissioning of a new chiller system, the so-called ‘chiller bank,’ which decreases operational risk, achieves significant financial savings, and allows us to maintain lower and more stable water temperatures,” the company said in its FY 2022 update.

That installation was apparently inadequate to deal with the record-breaking heatwave in Miami.

In its H1 2023 trading update, the company added that it harvested 400 MT of head-on, gutted salmon in the three months ending 30 June, which was in line with the latest guidance it issued in April 2023. The company is estimating the revenue for H1 2023 will reach USD 8 million (EUR 7.2 million), while its adjusted earnings before interest, taxes, depreciation and amortization – pre fair value adjustment on biological assets – will be a loss of USD 34 million (EUR 30 million). The company said the USD 34 million loss is “in line with our expectations.”

Atlantic Sapphire Chief Sales and Marketing Officer Damien Claire. told SeafoodSource in early 2023 the company's focus for the year would be building up biomass and reaching full “steady-state” production in its phase-one facility. In 2021, the company said that it expected to harvest 10,000 MT of salmon annually once it reached steady-state production.

Since that time, however, it has continued to struggle – after already experiencing multiple setbacks during construction. Then, in 2022 – which it described as “challenging” in its FY 2022 results – its RAS farm in Denmark was hit by a mortality incident just before it burnt down in September.

Despite the challenges, the company finalized a NOK 595 million (then USD 56 million, EUR 51 million) private placement in April, which it said could be utilized for the phase-two expansion.

The company added in its H1 trading update it will issue an operational update on 24 August, 2023.  

Photo courtesy of Atlantic Sapphire