Benchmark’s profits sink as pandemic hits demand

Aquaculture and biotechnology group Benchmark (BMK) suffered a decline of almost a third in its adjusted cash profits as the Covid-19 blow to the hospitality industry reduced global demand for shrimp and, by extension, Benchmark’s nutrition solutions. On a statutory basis, amortisation and impairment charges kept the group in a loss-making position, although the £11m operating loss is an improvement from £46m in 2019.

Benchmark’s advanced nutrition business relies on the shrimp market for most of its revenue. Yet lockdown restrictions squeezed the food services industry, which is responsible for over 60 per cent of global shrimp demand. The group was also hit by pandemic disruption to major shrimp producing countries such as India. Aside from Covid-19, there is an ongoing supply glut of Artemia shrimp that has spurred higher price competition. 

That contrasts the genetics business where adjusted cash profits jumped by more than two-fifths to £14.4m. With Norway losing its disease-free rating for infectious salmon anaemia, there was higher demand from Scotland for Benchmark’s Icelandic salmon eggs.

Net debt has more than halved versus a year earlier to £38m thanks to £39m received from business disposals and £42m from a placing and open offer in February. That equity raise will fund the launch of a new sea lice treatment and specific pathogen resistant shrimp.

New products should help Benchmark further tap into long-term structural growth trends such as the need for more disease resistant food supplies and rising demand for protein. However, in the nearer-term, the shrimp market will remain depressed until Covid-19 passes and hospitality services recover. Hold.  

Last IC View: Hold, 43.5p, 20 Dec 2019