Why Did New Zealand King Salmon Post a $20.8M Loss This Half?

Interim Financial Performance

New Zealand King Salmon Investments Limited (NZK) has reported a challenging first half for the 2025 fiscal year, posting a net loss of NZD 20.845 million compared to a profit of NZD 6.006 million in the same period last year. Revenue for the six months ended 31 July 2025 declined modestly to NZD 94.471 million from NZD 101.735 million, reflecting a slight contraction in sales across its premium salmon product lines.

The loss was primarily driven by a substantial fair value loss on biological assets, amounting to NZD 17.199 million, alongside higher cost of goods sold which rose to NZD 89.986 million. These factors outweighed gross profit, which fell to a negative NZD 12.714 million from a positive NZD 21.601 million in the prior period.

Biological Asset Valuation and Operational Challenges

NZK’s biological assets, representing the live salmon stock, are valued using a discounted cash flow model that incorporates unobservable inputs such as biomass volume, growth rates, mortality, and feed costs. The company highlighted that biomass mortality and climate-related risks, including elevated water temperatures, have adversely impacted the fair value of these assets. The estimated closing biomass live weight decreased to 3,058 tonnes from 3,820 tonnes a year earlier, reflecting these operational pressures.

The company’s sensitivity analysis underscores the volatility of its profit before tax relative to fluctuations in sales price, harvest volume, and feed costs. For instance, a 10% change in sales price could swing pre-tax profit by over NZD 19 million, illustrating the inherent risks in salmon farming economics.

Cash Flow and Balance Sheet Highlights

Despite the loss, NZK’s operating cash flow improved to NZD 19.645 million, up from NZD 16.204 million in the previous comparable period, supported by disciplined working capital management. The company ended the period with cash and cash equivalents of NZD 57.354 million, providing a solid liquidity position.

On the balance sheet, total assets stood at NZD 225.446 million, with net assets of NZD 183.565 million. The company’s borrowings decreased to NZD 2.358 million in current interest-bearing loans, reflecting ongoing debt management efforts.

Strategic Property Acquisition

In a notable strategic move, NZK announced the unconditional purchase of a commercial property for NZD 8.14 million, expected to settle by early October 2025. This acquisition will be funded from existing cash reserves and signals the company’s intent to invest in infrastructure to support its operations or growth initiatives.

Market and Operational Outlook

NZK continues to operate across multiple markets including New Zealand, North America, Australia, China, Japan, and Europe, with a diversified brand portfolio. However, the interim results highlight the ongoing challenges posed by biological asset valuation uncertainties and environmental risks. The company has not declared a dividend for this period, reflecting a cautious approach amid these headwinds.

Looking ahead, the company’s ability to manage biological risks, optimize harvest volumes, and control feed costs will be critical to restoring profitability. The recent property purchase may also play a role in enhancing operational efficiencies or expanding capacity.