Mowi ASA
OSE:MOWI
Earnings Call Analysis
Q3-2023 Analysis
Mowi ASA
Mowi has showcased robust growth, reaching all-time highs in operational revenue at EUR 1.36 billion and farming volumes of 135,000 tonnes, marking an increase of 4.3% year-over-year. The company also anticipates reaching a milestone harvest of 500,000 tonnes, celebrating a first in its 60-year history. However, they have encountered operational headwinds, with the third quarter's operational profit declining to EUR 203 million, influenced by lower seasonal prices. Mowi signals a stable realized banded farming cost for the upcoming fourth quarter, despite updating their resource rent tax estimate to roughly 10% for Norway, and adjusting their long-term debt target from EUR 1.4 billion to EUR 1.7 billion.
For the fifth consecutive year, Mowi has earned the title of the world's most sustainable animal protein producer. This is critical to their corporate identity and ties to their commitment to a stable dividend policy, marked by a quarterly distribution of NOK 1.50 per share, aligning with roughly 50% of their underlying earnings per share.
Despite a drop in operating profit from EUR 240 million last year to EUR 203 million this year, Mowi's overall cash flow is considered good, with net interest-bearing debt standing at EUR 1.71 billion. The underlying earnings per share was EUR 0.24, with an annualized return on capital employed at 15%. Specific regional operations, like those in Canada, suffered due to environmental challenges, affecting overall performance and margins.
Europe witnessed reasonable prices, partly due to Mowi's 9% increase above the reference price, despite pressure from increased volumes in the Americas. They benefitted from their contractual agreements, which contributed positively to their price achievements, with a total contract share of 24% within the quarter.
Mowi Norway experienced an operational profit shortfall due to currency effects, with real margins registering at EUR 2.15 per kilo rather than the EUR 2.56 per kilo if adjusted for currency fluctuations. Mowi Chile and Mowi Canada faced their own set of challenges, including lower prices and inflationary pressures in Chile, and environmental issues in Canada impacting their fourth-quarter outlooks. Meanwhile, in contrast, Mowi Faroes posted a strong margin of EUR 1.91 per kilo, with Ireland doing considerably better than the previous year, although Mowi Iceland struggled to break even.
The consumer products division celebrated a third-quarter operational profit of EUR 40 million, marking their best performance for this period to date, and showing a notable increase from EUR 30 million last year. This underscores the robust demand for Mowi's offerings beyond their core farming operations.
Mowi anticipates improved financial performance with higher volumes and efficient operations, expecting stable quarter-over-quarter prices for their Norwegian contracts. They foresee a global supply contraction for the year 2023 but maintain a guiding harvest volume of 484,000 tonnes for the same period, highlighting an industry-beating growth trajectory.
You don't have any saved screeners yet
Good morning, everyone, in the room and online, and welcome to the presentation of Mowi's third quarter results of 2023. My name is Ivan Vindheim, and I'm the CEO of Mowi. And with me today to present the financial figures and fundamentals, I have, as usual, our CFO, Kristian Ellingsen. Now after the presentation, Kim Dosvig [ will retail ] host our Q&A session, but also are following the presentation online, can submit your questions or comments in advance or as we go along by e-mail. Please refer to our website at mowi.com for necessary details. Disclaimer, I think we leave for self-study, then I think we are ready for the highlights of the quarter. It was another record-breaking quarter for Mowi in terms of top line and growth as both operational revenue of EUR 1.36 billion and farming volumes of 135,000 tonnes were all-time high. And speaking of growth, we maintain our volume guidance for this year of record high 484,000 tonnes, which is up from 464,000 tonnes last year and equivalent to a growth of 4.3% year-over-year, surpassing that to divide the industry by a large margin. For next year, we expect to harvest record high 500,000 tonnes, which is a milestone for us as we crossed the magic 500,000 tonnes mark for the first time in Mowi's 60 years history. As you can see from the chart here, as recently as 2018, we harvested 375,000 tonnes in Mowi, which means we are up by 125,000 tonnes over the last 6 years. And speaking of 6, a growth which alone would have been the world's sixth largest salmon farming companies, including ourselves. And which in practices organic growth, as we have lost as much volume as we have bought capacity in the period more or less and equivalent to a CAGR of 4.9% in what I would say is in a low growth environment. So simply stress enough how important this is for us because farming volumes are in the end of day, remains to our business model and what everything hinges on in this industry, everything. At the same time, there are 600 fewer people in Mowi back in 2018. So it's quite a transformational change we have gone through on productivity throughout the value chain. So I think in all humility, I can say we are in a better shape today than back then. So the world is going forward in Mowi. But we can and we will do more. Take the smart farming concept, for instance, it's just at the starting blocks, not to mention the ongoing digitalization and automatization of our value chain. So there's definitely more to come. Meanwhile, I would like to take the opportunity to thank my 11,500 colleagues for invaluable efforts in making this happen. It's, of course, much appreciated. When it comes to quarterly earnings, operational profit was EUR 203 million in the third quarter and was with that in line with the trading update of the 18th of October impacted by seasonally lower prices in addition to the elevated biological costs we typically see in the third quarter and this year, compounded by the weather phenomenon El Nino, particularly in our farming operations outside in Norway. Realized blended farming costs, i.e., weighted blended farming costs for 7 farmer countries was therefore up from EUR 5.60 per kilo in the second quarter to EUR 5.73 per kilo in the third quarter. Cost of stock on the brand was down quarter-over-quarter on the back of scale in addition to stable feed prices. And year-over-year cost to stock is stable in the quarter. As a result of this, we expect a stable realized banded farming cost for the fourth quarter, at least based upon the information we have today. Otherwise, once again, a heads up on FX of ForEx exchange in the wake of the weakening of the NOK we saw in the first half of the year. Remind that Mowi as a euro company has hatched away the FX gain our Norwegian peers have benefited from so greatly so far this year. And in the third quarter, this cost us alone EUR 35 million or EUR 0.41 per kilo. And for 2023 in total, so I accumulated, we are talking about as much as EUR 102 million or EUR 0.48 per kilo. So this is significant. So please take that into account when you do your own benchmark comparisons for Norway for the third quarter and for the year for that matter. So much about farming in terms of consumer products, our downstream business. We delivered another set of strong operational results in the quarter, I would say, actually a record high for our third quarter. And the same goes for feed. And our feed performance was strong in the quarter, which was manifested in our harvest volumes and guidance. Moving to another resource, rent tax. Since previous quarter, we have updated our resource rent tax estimate for Mowi Norway. As you all know, this tax is only applicable for our seawater operations in Norway. And after having carefully priced up our extensive and diverse value chain in Norway together with leading tax experts, a new estimate for this tax is now about 10% in steady state for Norway or for our Norwegian business across the value chain on top of corporate tax. Please bear in mind that this is still a preliminary estimate and consequently subject to material uncertainty. Since previous quarter, we have also revised our long-term debt target in Mowi from EUR 1.4 billion to EUR 1.7 billion to better reflect the growth we have been through over the past few years and thereby our improved debt service capacity. And yesterday, we were notified that we are once again ranked as the world's most sustainable animal protein producer by the prestigious Coller FAIRR initiative. This is the fifth year in a time. And as we have said numerous times, sustainability is deeply ingrained in the Mowi culture and at the core of everything they do. So this is most definitely something we appreciate internally to acute use to organization for this achievement. Finally, the Board actors has decided to distribute a quarterly dividend of NOK 1.50 per share after the third quarter, which compares to roughly about 50% of underlying earnings per share, and as such, is in line with our dividend policy. That I think does it for the highlights of the quarter and over to key financials. Kristian as usual, go depth on financial figures in his session. So it's not to be too repetitive, we'll just touch briefly upon the most important ones in now. And first, a turnover. If you already have been through or we recorded a record high operational revenue of EUR 1.36 billion in the third quarter, which is up by 8% year-over-year on 1% higher farming volumes. Operating profit, on the other hand, was down year-over-year from EUR 240 million in the third quarter last year to EUR 203 million in the third quarter this year, at least measured in euro. I mentioned NOK, however, operational EBIT is quite stable year-over-year, NOK 2.3 billion this quarter versus NOK 2.4 billion in the third quarter last year. Cash flow in the quarter, I would characterize as good, at least adjusted for a tie-up of working capital and capital expenditures and net interest-bearing debt came in at EUR 1.71 billion, which is in line with our new debt target of EUR 1.7 billion. Otherwise, equity ratio was of healthy 48% at the end of the quarter, and underlying earnings per share was EUR 0.24 and annualized return on capital employed was 15%. Both adjusted for our new resource-rent tax estimate for Mowi in Norway. In terms of EBIT margins through the value chain, Mowi in Norway and [ Quatsino ] stood once again out positively, whilst our margin for our Canadian operations, in particular, stood out negatively this time around due to algae-induced mortality in British Columbia. We will get back to further details and explanations shortly, let me go through the different business entities. But first, briefly about the prices in the quarter.As expected, spot prices corrected down in the third quarter from record levels in the first half of the year due to seasonally higher supply. Having said that, I think it's still fair to say that we saw reasonably good prices in Europe in the quarter, while we struggled somewhat more in Americas, which also follows the trend we already saw in the second quarter on more influx of volumes in the American market, including wild salmon. Year-over-year prices is also done for the salmon of Chilean origin by 4%, whilst it's somewhat up for the salmon of the other regions, at least adjusted for contracts. Then our own relative price performance in the quarter, which I would characterize as strong as it was 9% above the reference price, which is the price we like to hold ourselves to internally. And we didn't have any particular negative outliers either this time around. Maybe with the exception of Canada East, we have out some small ISOs in the quarter. Otherwise, total contract share for the group was 24% in the quarter and for the first time this year, contracts contributed positively to our price achievement. And unfortunately, I guess I should add to that. Then briefly about the EBIT waterfall as we already have been through. And as we can see from this chart, operational EBIT decreased year-over-year from EUR 240 million to EUR 203 million. And as said, that is measured in euro. Financial NOK, however, operational EBIT was, as I said, quite stable year-over-year NOK 2.3 billion in the third quarter this year versus NOK 2.4 billion in the third quarter last year. The driver in our business model is farming, which was a mixed bag in the third quarter, following a rather challenging biology, which is typical or quite typical for this time of year. And this time around, also compounded by the weather phenomenon El Nino, particularly in our farming operations outside in Norway. Consumers and feed on the overland saw strong financial figures in the quarter, also improvements year-over-year, which I think is a timely juncture to address the different business entities. The first one out is as usual, Mowi in Norway, our largest and most important entity by far. Operational EBIT was EUR 185 million for Mowi Norway in the quarter and was with that down from EUR 220 million in the comparable quarter last year due to first and foremost higher costs driven by inflation. Both spot price and harvest volumes were quite stable year-over-year. EBIT margin was EUR 2.15 per kilo for Mowi Norway in the quarter, and as addressed in the highlights, as a euro company, Mowi in Norway, did not benefit from the weakening of the NOK we saw in the first half of the year. This cost us EUR 35 million alone in the third quarter of EUR 0.41 per kilo. So adjusted for that, the operational EBIT for Mowi Norway would have been EUR 220 million and not EUR 185 million in the third quarter and margin would have been EUR 2.56 per kilo instead of EUR 2.15 per kilo. Otherwise, we have seen good growth in C from Mowi Norway so far this year. And further to that, we have increased our farming or our volume guidance for this year to record high 295,000 tonnes from originally 290,000 tonnes and further to a record high 305,000 tonnes next year, which is our new milestone for us and the continuation of Mowi Norway's impressive growth trajectory over the past few years and cementing our strong license utilization and production efficiency in Norway. As you can see from the chart here, we harvested 210,000 tonnes in Mowi Norway as recently as 2017.So a growth of almost 100,000 tonnes, which in practice is organic growth as our MEB reductions through the traffic light system are close to both capacity in the period. So a big thank you to our Norwegian farming organization for these three months. It's, of course, highly appreciated. Then shortly about the breakdown of the margins for the different regions in Mowi Norway in the quarter.As you can see from this chart, we saw strong margins for both Region North, Region West and Region South in the quarter at EUR 2.61 per kilo, EUR 1.86 per kilo and EUR 2.48 per kilo, respectively. For itemed parts, margin was adversely impacted by low harvest volumes in the quarter in addition to harvesting out problematic sites. On a positive note, however, our turnaround plan for this region is progressing slowly but surely. And for the fourth quarter, we expect improved financial performance on higher volumes in addition to harvesting from better-performing sites. Then the last slide on Norway, our Norwegian sales contract portfolio. After having lost on our Norwegian contracts in the first and the second quarter, we finally profited on them in the third quarter. And unfortunately, as I said earlier, contract level was 22% in the quarter, but that's approximately in line with the guidance. For the fourth quarter, we expect it to be around 29% at relatively stable prices quarter-over-quarter. As for 2024 contracts, since we are negotiating, as we speak, we are not so much about that today, over then ask for your understanding that we will get back to it in February at our fourth quarter release. Meanwhile, we must keep things close to the chest. Then it's time to address the overforming countries and first one is Mowi Scotland. After an encouraging first half of the year for our Scottish operation, the third quarter was as expected, much tougher due to record high seawater temperatures in the wake of El Nino and subsequent issues with micro jellyfish and gills causing elevated mortality at some of our farms in addition to low harvest weights as we have been forced to harvest out some of our fish earlier than we would like. So although better than last year, this resulted in a what I would say, soft margin of EUR 0.63 per kilo for our Scottish volumes in the quarter and an operational profit of EUR 9 million. And in terms of course of events, I would say I think we be well for events until September when things escalate due to rapidly deteriorating water quality. And I think it's fair to say that we have experienced a challenging October as well. So a heads up on ecological costs for the fourth quarter. And by extension, we have reduced our farming volume guidance for this year from 64,000 tonnes originally to 62,000 tonnes. And if anything, there is a downside risk to this estimate. Then overseas to Mowi Chile. Mowi Chile also an operational profit of EUR 9 million in the quarter, and for their part, down from EUR 22 million in the comparable quarter last year. Margin is also down from EUR 1.27 per kilo to EUR 0.48 per kilo, driven by both lower prices and higher costs. In regard to the latter, mainly due to inflation as biology was reasonably good for Mowi Chile in the quarter and year-to-date for that matter. The price we have already commented on, it's down year-over-year. Harvest volumes on the overland were quite stable year-over-year at 17,000 tonnes. Then farming off to Mowi Canada. Mowi Canada made also EUR 5 million in the third quarter, which is quite similar to last year and this year, driven by what I said initially here, algae-induced mortality in British Columbia due to record high seawater temperatures in the wake of El Nino. In Canada East, on the other hand, we saw steady operational performance in the quarter. And as for the fourth quarter, although both temperatures and mortality have normalized since the third quarter, we expect our fourth quarter numbers to be impacted by this as well, in addition to low dilution of costs due to little harvest and lack of scale. Which brings us to our smallest farming entities, Mowi Ireland and Mowi Faroes. For Salmon Irish region, we made an operational profit of EUR 1.5 million in the quarter with a margin of EUR 0.75 per kilo on 2,000 tonnes harvest volume. This is substantially better than last year when our numbers were made by biological issues. Mowi Faroes, operator EBIT also improved year-over-year and came to EUR 5 million. That means a strong margin of EUR 1.91 per kilo on 2,500 tonnes harvest volume. Operating metrics were also strong for Mowi Faroes in the quarter. Then the latest addition to the Mowi family, Arctic Fish, our 51% owned Iceland subsidiary, which we took over earlier this year. I think it's fair to say that the third quarter in Iceland did not live up to our expectations as we just broke even on a decent harvest volume of 4,500 tonnes. This was mainly a result of increased biological costs in relation to life issues in addition to start-up costs at our new processing plant in BolungarvÃk. Historically, lives haven't been our problem in Iceland, but now we see that Iceland is becoming more akin to the other farming countries in Europe. And we, therefore, need to build up de-icing capacity and implement appropriate procedures accordingly, which in all honesty are not in place today. [indiscernible] the authorities, we also have to streamline the bureaucracy around the de-icing approval so that we can take the right measures at the right time. That's critically important in this. Today, it takes far too long. And in our humble opinion, the decisions are not always the right ones either. As a result of these live issues, we have regrettably found ourselves obliged to take down our farming volume guidance for Arctic Fish for this year from 15,000 tonnes to 11,500 tonnes and further to 10,000 tonnes in next year. Then I think we are ready for consumer products, our downstream business. Operating profit was EUR 40 million for consumer products in the third quarter and was with that, our best third quarter to date and up from EUR 30 million in the third quarter last year on strong operational performance more or less across the board, I would say, in addition to capitalizing on lower raw material costs due to seasonally lower salmon prices. We also sold 6% more volumes quarter-over- not quarter-over-quarter, but year-over-year, which contributed positively to our quarterly earnings. In terms of overall demand, I think it's fair to say, it's holding up reasonably well. I'm talking about the salmon notwithstanding the economic slowdown we are facing. Then last one out, Mowi Feed. The third quarter is a high season for our feed division but all that entails. And this quarter was no exception in that respect as we can put behind us a quarter with feed profit and feed volumes at record levels on strong demand from Mowi farming. Operating EBITDA was EUR 20 million in the quarter, while sold volumes were 169,000 tonnes. And the feed performance was, as usual, good, which is something we never take lightly as the world's largest salmon farmer by far. So I heard it before, and I say it again, the proof of the pudding is literally in the eating in this industry, all the way to the plate. So then Kristian, the floor is all yours, you can walk us through the financial figures and fundamentals. Thank you so far.
Thank you very much, Ivan. Good morning, everybody. I hope everybody is doing well this morning. As usual, we start with the overview of profit and loss, which shows a record high revenue of EUR 1.36 billion. And that's an all-time high harvest volumes and somewhat higher achieved farming prices. Operational EBIT is somewhat down from Q3 last year as we realized higher costs from inventory driven by previous inflation. Cash feed prices have been rather stable this year. And with regards to the items between operational EBIT and financial EBIT. The fair value adjustment on biomass in the balance sheet is relatively stable, so a limited P&L effect. Operational earnings from our associated company in Nova Sea was good in the quarter, EUR 2.73 per kilo, including a temporary FX gain related to the weakening of the NOK. Net financial items increased on higher interest costs, partly offset by currency fluctuations. With regards to the financial KPIs, underlying earnings per share was EUR 0.24 in Q3 and EUR 1.03 year-to-date versus EUR 109 year-to-date last year. Net cash flow per share was EUR 0.10, impacted by working capital tie-up and tax payments. And return on capital employed of 15% is adjusted for resourcement in Norway, [ the resource tax ], the figure would have been 15.9%. Then over to the resource tax in Norway. This slide illustrates the value chain in our Norwegian operations. This is the most diverse value chain in the industry. Most of the activities we see here are subject to the ordinary 22% corporate tax only. And then in addition, of course, the seawater phase here, as indicated, that's subject to 25% resource and tax from 1st of January this year. And as the work internally, led by leading tax experts that has helped us externally has progressed, we have been able to update our estimate on the effective resource tax across the Norwegian value chain. And that estimate is 10%. And that is an estimate on a run rate basis, an indication of what this will be over time, not necessarily per quarter or per year due to various adjustments, but an indication over time. And the reason, of course, that the effective rate is lower than the nominal rate is that all these other activities, such as breeding, small feed, processing, distribution, they are not in scope for the new tax. They're only subject to 22% tax. Please note that this 10% estimate is preliminary and subject to material uncertainty. In accordance with IFRS, we have included this estimate in the tax costs in the P&L. Please also note that when we were talking about the Norwegian value chain, we exclude consumer products as this is activities abroad. Turn over to costs. We have seen a leveling out of cash cost to stock as shown in the top graph here. We see 2023 in the red and 2022 in gray. Feed prices have been stable this year, as mentioned already, and that's an important factor here. Many of the feed ingredients have reduced in price, but this has been offset by the development in marine ingredients, such as fish meal and particularly fish oil. The higher fish oil prices have been driven by cancellation of the first season of the Peruvian and Saveta season. But on a positive note, the second season is progressing well, and the announced quota is 1.7 million tonnes. And we see here from the below graph that this is above the 10-year average of 1.5 million tonnes. And 70% of the quota is already caught. Also a positive for cost to stock is the fact that biological KPIs in farming have improved year-to-date 2023 versus '22, and with regards to realized P&L costs, we expect this to be stable in Q4 versus Q3, provide no material biological incidents. Before we leave the profit and loss entirely, we also need to remind you of the currency effects from the weakening of the NOK. Mowi is a euro company with a cash flow predominantly in euro, financed in euro. And this means that we remove currency fluctuations. The NOK has seen a significant weakening since 2012. As we see here, 56% versus euro and as much as 96% versus U.S. dollars, quite considerable numbers. And the NOK weakening leads to FX gains for our Norwegian peers. And this gain is due to the difference between revenue immediately being realized at high rates and costs at a lower rate due to a time lag on currency impact on costs. Cash-wise, it takes approximately 6 months before a weaker NOK drives up cash costs, but it takes longer time for the full P&L effect to catch up due to the long production cycle. In the meantime, there is a gain, which is gradually reduced as time passes and is neutral in steady state. And the inverse is true when the NOK is strengthening, then there is an FX loss for Norwegian peers. Mowi has hedged away these effects. In Q3, the margin difference represents a loss of EUR 0.41 per kilo for the Norwegian volumes or EUR 35 million nominally. And this means that the margin for Mowi Norway would have been EUR 2.56 per kilo in Q3, adjusted for this effect. Year-to-date effect is EUR 0.48 per kilo. Moving on to the balance sheet. From year-end 2022, noncurrent assets have increased by approximately EUR 100 million on higher fixed assets driven by investments, different projects in our value chain. Furthermore, current assets have increased driven by higher biomass. Mowi has a strong financial position with a covenant equity ratio of 50.6% after implementing the resource rent tax in Norway in our numbers. With regards to our cash flow, the strong operational earnings were partly offset by tax payments and working capital tie-up. Accordingly, NIBD moved from EUR 1.67 billion to EUR 1.706 and Q3. The long-term NIBD target has been increased to EUR 1.7 billion from the EUR 1.4 billion target set back in 2018, following volume and earnings increase and consequently higher debt servicing capacity. With regards to the updated cash flow guidance, the working capital tie-up for this year is indicated to EUR 150 million, which is an increase from the previous guiding following good growth in feed and the working capital tie-up in biomass and also in the rest of our value chain from increased volumes. CapEx is reduced somewhat, while tax payments for this year somewhat increased, partly due to prepayments of tax. With regards to the financing, there are no changes in Mowi's financing in the quarter. We have a strong financing in place, where nothing matures until 2025 at the earliest. And the bank syndicate is the backbone of our financing, and we highly value our relationship with the banks listed here. Then we move on to supply and demand fundamentals, starting with global supply, which decreased by 3% versus Q3 last year compared with a guiding between minus 1% to plus 2%. Volumes from Europe were lower than expected due to generally more challenging environmental conditions and water quality issues as well as lower harvest weights, especially in Scotland, but also to a certain extent in Norway. Norway decreased by 2%. And Scotland decreased by 9%. And closing biomass in Norway is up 3%, which indicates some supply growth ahead. Chile decreased by 3% versus guiding of minus 6%, so more volumes from Chile than expected. Biological performance was stable, and we expect very limited growth in Chile next year. Consumption was reduced following lower supply. That being said, demand was reasonably good. In Europe, we had value growth and volume growth in retail in several markets, including Germany, Italy, Spain, activity levels were partly driven by promotions. In the U.S., consumption increased by 1% in Q3 versus Q3 last year, driven by food service as retail was flattish in the U.S. China continued its good development, while the rest of Asia was impacted by lower supply. And as expected, prices corrected down from the first half of the year in Q3 on seasonally higher volumes. In Chile, we saw a volume increase in the first half of the year and consequently more pressure on prices versus Europe. For 2023, the industry volume development is expected to be between minus 1% and 0%.So this would mean that 2023 will be the second year in a row with volume contraction in the market. For 2024, we expect a modest supply growth of 2% to 3%, supported by biomass data and current trends with regards to biological performance in the various regions. With regards to our own volumes, we maintain our 2023 guiding at 484,000 tonnes, although with some changes within the regions. And then the 24 million guiding is 500,000 tonnes, as already touched upon a new milestone for the company. Then it's over to Ivan for some comments to the outlook slide.
Thank you, Kristian. Much appreciated. And it's time to conclude with some closing remarks before we wrap the roll up with our Q&A session hosted by our IRO, Kim Dosvig. As already said earlier this morning, the third quarter was another record-breaking quarter for Mowi in terms of top line growth and further to that, we have maintained our farming volume guidance for this year of record high 484,000 tonnes, which is up from 464,000 tonnes last year and equivalent to a growth of 4.3% year-over-year, surpassing that of the wider industry by a large margin. For next year, we expect to harvest record high 500,000 tonnes, which is a milestone for us as we crossed the magic 500,000 tonnes mark for the first time in Mowi's 60 years history. As recently as 2018, we harvested 375,000 tonnes in Mowi, which means we are growing our farming volumes by 125,000 tonnes over the last 6 years and which in practices organic growth as we have lost as much volumes as we have bought in the period or more or less. And equivalent to a CAGR of 4.9% in what I would say is a low growth environment. At the same time, we are 600 fewer people in Mowi than in 2018. So it's quite a transformational change. We have gone through on productivity. But we can and we will do more. That said, having products have been productive are not enough, we also need customers and the demand for our products. And in a challenging environment, I think it's fair to say that the demand for the salmon has held up well so far.And in my view, thanks to the salmon's fantastic product features supported by strong megatrends, but also as a result of Mowi's and other highly market efforts over time because this doesn't happen by itself. As for the supply side, which is the over decisive factor in the price equation, we expect the historical trend of tighter supply towards Christmas and into the New Year to repeat itself this time around as well, which on a normal circumstances should be supportive for the salmon price. And for next year as a whole, we expect, as Kristian said here, a modest supply growth in the range of 2% to 3%. In the longer term, we expect demand supply discrepancy we have seen in recent years to continue because for a number of reasons, conventional salmon farming faces growth limitations in most countries that are suitable for conventional salmon farming and so far, so-called new technologies are long overdue. And personally, I think it will still take many years before they will come into their own and start making what I would say would be a most welcome difference in the supply because the fact is that [indiscernible] the industry have been able to meet the market demand for this fantastic protein over the past few years, which is a pity for many reasons. And one of the things holding us back is the increasing tax level we see in many of the countries where we operate, which is eating into our CapEx budget. I don't think a bit of more than I can chew when I say that's the most controversial and talked about tax of them all is the Norwegian resource rent tax, also called the salmon tax. And as Kristian just showed us, after having carefully priced up our extensive and diverse value chain in Norway together with leading tax experts or new estimate, but this tax is now about 10% in steady state for Norwegian business across the value chain on top of corporate tax. And please bear in mind that this is still a preliminary estimate and consequently subject to material uncertainty. Otherwise, we expect a stable realized branded pharma costs for the fourth quarter, at least based upon the information we have today. And finally, we have revised our long-term debt target in Mowi from EUR 1.4 billion to EUR 1.7 billion to better reflect the growth we have been through over the past few years and thereby our improved debt service capacity. So with these closing remarks, Kim, I think we are ready for the Q&A session. If Kristian can please join me on the stage.
Very good. So just a quick question from the web from Alexander Jones, Bank of America. He has got a question about demand within food service. What are the latest demand trends you are seeing in the foodservice channel globally?
So of course, food service has been great, I would say, since the end of the pandemic. And I would say we have been to a certain degree, surprised by the strong development in that sector despite cost of lending crisis and various challenges. The recent development in Europe is that we see some positive volume developments in retail. And of course, somewhat lower demand from foodservice because volumes in the market is down. So if you grow some place, then you need to see a reduction as somewhere else. But all in all, foodservice has performed very strong and they're still at a good level, I would say. And in the U.S., still foodservice is holding up very well and drives the increase in volumes in the market because retail is flattish in the U.S.
You now had very strong growth in Norway for a number of years. What are your plans to expand this for the next 5, 6 years under the current license regime? Are you solely dependent on new technologies? Or are there other measures to grow for you?
No. We have intrinsic growth capacity, both in Norway and the other jurisdictions where we operate. So we can -- as I said initially here during the presentation, we have still many cards up our sleeves. So there's more to come.
Thank you. [indiscernible] Markets. You mentioned El Nino a couple of times. Can you go a little bit into detail about the biological situation in Chile? Do you see any signs of algaes now? And what are you doing to minimize the risk?
Yes. What about Chile? It's still early days. So I think we can talk about in February. We are much better prepared this time around than last time when we had this big capacity together with the rest of the industry, including bubble curation, oxygen infusion, et cetera, plus all the procedures connected to it. So we are much well prepared. We are in much better shape, but that doesn't give you any guarantees. Chile, it's challenging with regard to algaes in normal years. And as you correctly said that. And as we said many times during the presentation, we have a linear ongoing. So in the normal hemisphere, it has taken its toll. Take Scotia, for instance, but also British Columbia. But how this will evolve or develop in Chile, if we don't know. So there is really hard to say what the outcome of this is. But we are on the alert, we are prepared and our clear intention is to do well as always. But in terms of timing, algae in Chile is more about February and March. So now we are in November, so still early. So there are no signs now, which at least concerns me.
Okay. And then just another question. What is the split between East and West in Canada for 2024 volumes?
The guidance, as a bit normal, we are not that accurate about it. But let's say we are about 10,000 tonnes in East and then the residual is best plus minus. So we always try to build in some slack in our guidance. As we have been through before, you like to deliver on our guidance, contrary to maybe some of our peers.
Thank you. Concludes the questions.
Okay. Then it only remains for me to thank you for the attention, both in the room and online, and I hope we see you back in February at our fourth quarter release, meanwhile, take care and have a great day ahead. Thank you.