Why would you short Tassals *now*?, page-292

Thanks McQuade..

The margins are an issue though only if you don't look through the current headwinds. What I mean is, if you think current margins are perpetuating into the future, then you are essentially arguing that low global salmon prices, increased competition in retail, and reduced demand by wholesale is here to stay. That's a pretty negative view, and not one that I can triangulate with the evidence. It seems salmon prices have bottomed and are already potentially bouncing (c.7% over past 12 weeks); and despite Victoria's lockdown the wholesale / restaurant market was already showing signs of improvement.

Another back of the envelope on the $3.60/KG salmon EBITDA margins. Let's assume domestic retail (55%) remains flat (as Huon has suggested); that the 35% wholesale takes a 20% hit to the margin as they shift some of their sales from wholesale to retail due to restaurant closures etc; and that export (15%) margins are smashed by 50%. That still leaves a margin of above $3.32/KG. Essentially as long as volumes aren't dropping, and that fixed costs are remaining relatively fixed, the rest can be managed despite the price action. Sounds ridiculous, but the biggest issue in these circumstances is dropping volumes - a la' Huon.

By the way I don't worry too much about NPAT. Prefer to just follow the trail of cash (operating earnings / EBITDA, capex).