'Salmon biomass growth' paying off: Tassal (ASX:TGR) share price lifts following H1 FY22 results

The company just dropped its FY22 half-year results…

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ASX share price price jump represented by salmon jumping out of water

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Key points

  • Tassal shares edge 2.73% higher to an 8-month high of $3.76 
  • Strong growth across key financial metrics, with a majority in the double-digits
  • H2 FY22 outlook remains positive with salmon and prawn segments on track to continued robust performance

The Tassal Group Limited (ASX: TGR) share price is in positive territory on Tuesday. This comes after the company released its half-year results for the FY22 period during afternoon trade.

At the time of writing, the seafood company's shares are fetching for $3.76 apiece, up 2.73%.

Let's take a closer look to see how Tassal performed for the period.

Tassal shares pushes higher on achieving strong growth across key metrics

The Tassal share price is moving forward following the company's robust result for the 6 months ending 31 December 2021. Here are some of the key highlights:

  • Revenue of $419.14 million, up 43.3% on the prior corresponding period (H1 FY21 $292.48 million);
  • Operating cash flow of $86.99 million, up 110.2% (H1 FY21 $41.39 million)
  • Underlying earnings before interest and tax (EBIT) of $50.01 million, up 6.9% (H1 FY21 $46.78 million);
  • Underlying net profit after tax (NPAT) of $31.18 million, up 10.3% (H1 FY21 $28.26 million); and
  • Interim dividend of 8 cents per share, up 14.3% (H1 FY21 7 cents per share)

What happened in the first-half FY22 for Tassal?

Investors are buying up Tassal shares as the company announced strong growth in cash flow and earnings.

During the first-half, the company made investments in its salmon and prawn infrastructure which resulted in cash flow generation.

The salmon division recorded a sustainable annual harvest of 40,000 hog tonnes from existing marine leases. The sales mix leapt by 37.1% to $349.92 million with a recovery in both export pricing and volume, and domestic out-of-home.

Across the Prawn segment, the domestic market experienced an increase of 480% to $30.19 million. Sales volume growth of 365.3% to 1,670 tonnes included continued growth in harvested tonnes and in the frozen prawn inventory.

What did management say?

Tassal managing director and CEO, Mark Ryan touched on the result, saying:

Tassal has successfully completed its investment in salmon biomass growth and is now experiencing the benefits of scale. Together with the investments in and growth of our prawn business, where we achieve more attractive capital and working capital cycles, Tassal is focused on growing cashflow and optimising returns.

We have delivered a step- change in cash generation and believe Tassal is well positioned to deliver further improvements in cash flow and cash conversion going forward.

What's the outlook for Tassal for the remainder of FY22?

Pleasingly, Tassal advised the global salmon market has recovered and the pricing is restored to pre-COVID levels.

Looking ahead, South-East Asia demand remains strong and global pricing is expected to remain stable for the remainder of FY22.

Management stated that it's focusing on optimising pricing, particularly as supply chain costs have materially increased due to COVID.

Energy, feed commodities, labour and domestic freight costs have increased in the first-half, with no relief in sight for FY22.

No earnings guidance was given by the company for the second-half.

Tassal share price snapshot

Over the past twelve months, the Tassal share price has gained 10% following a long bumpy ride for investors.

When looking at year to date, the company's shares are up 5% off the back of positive sentiment since late January.

Based on today's price, Tassal commands a market capitalisation of around $781.81 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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