Tassal Group Strategic Thoughts, page-116

To those not following what's going on @bug1, that would sound absolutely ridiculous. You're cray cray, mate! Go take a long bath and come back with some reasonable figures.

Meanwhile.. I'm with you on those calcs. My numbers are pretty similar, though I have been a bit less bullish on the export margins, and perhaps more bullish on volume. I was wrong in FY21 on the unwinding of inventory, but after the last investor conference, Tassal is definitely trying to unwind it. I think they had done 2200t, with a target of 5000t to be cleared from inventories. Surely with the market as it is, they are filling every inch of every plane flying from Hobart to the restaurants of Shanghai? If that is the case, then 8,000t of exports seems low. Because we know domestic will remain relatively stable, and so any unwinding of inventory has to go into the export market. That means it could be as high as 13,500t based on total harvest of 40,000t (may be closer to 41,000t).

For the margins, I have chosen $2.40/kg pre-air freight costs. I think that is going to be well short of the real mark. Current prices in China are way above the global export price due to their import restrictions - this benefits Australia, but Chile and parts of Europe are paying that cost. My estimate was based on 55NOK as average export price: we traded at 56NOK last week, and are just beyond the bottom of the cycle, with forecasts of 65NOK for our exporting period. Again to reiterate my point, the actual price we are getting is HIGHER because we are getting a premium from China. For every +10c EBITDA/KG margins on exports, it improves Free Cash Flow by $1.3m. Note that $2.40/KG in my estimates is based on ~60NOK.

I have assumed air freight charges remain at their highest levels, and in fact increases in FY22 because of the volume. Reality is, that FY21 was $2.30/KG I think, and China is actually cheaper around $1.70/KG. Further we should have easing of air freight in 2022 calendar year - just go look at Qantas' capacity on those routes as an example, they are ramping up. So we could get a few extra bucks from here.

I looked at Free Cash Flow, not NPAT. I think NPAT is a bit tricky because of one-off items, taxes, etc. Also it's FCF that will be used to repay debt, pay out CAPEX, etc. So with the unwinding of inventory, we should get a temporary sugar rush in the cash flow statement. But as we get into FY23 with no air freight costs, increasing productivity / prawns, etc, we could actually maintain if not increase out FCF from FY22...