Austevoll Seafood, the Norwegian giant that straddles the world of pelagic fishing and salmon farming, delivered a solid Q1 2024. The numbers, on the surface, appear to be more or less in line with the previous year. Revenue hovered around NOK 8.3 billion, with an EBITDA of NOK 1.6 billion. But buried within the details of the Q1 2024 earnings call transcript, there's a single metric screaming a message that other analysts might be missing: inventory reserves.

This isn't about the usual accounting jargon. This is about the pulse of the pelagic fish market, and it's pointing towards a potential surge in profitability for Austevoll in the coming quarters.

Let's rewind. 2023 was a tough year for Austevoll's pelagic operations, particularly in Peru. El Niño wreaked havoc, decimating fishing seasons and sending profits into a nosedive. Factories and fishing vessels sat idle, unable to capitalize on the company's immense capacity.

Fast forward to Q1 2024, and the winds of change are blowing. El Niño is retreating, Peruvian waters are warming back to normal, and, as the transcript reveals, Austevoll is anticipating a massive rebound in catches, projecting a nearly threefold increase compared to the dismal 2023 season.

Here's where inventory reserves enter the picture. The transcript explicitly states that Austevoll is entering Q2 with significantly higher reserves of pelagic fish products than in the same period last year. This is a crucial detail. It signifies that not only is Austevoll anticipating a flood of new catches, but they've also managed to hold on to a large stock of products from the previous (and relatively profitable) second season in Peru.

This creates a potent combination. Austevoll is sitting on a stockpile of fishmeal and fish oil just as global demand is expected to pick up, fueled by a recovering Peruvian fishmeal industry and a continued strong appetite for these products from aquaculture giants like China. The company is perfectly positioned to ride this wave of demand, selling both their existing reserves at potentially higher prices and unloading the expected deluge of fresh catches.

To put this in perspective, consider these numbers. In 2023, Peruvian fish oil production plummeted to a mere 14,000 tons, down 85% from the already low production of 2022. This supply shock sent prices skyrocketing. With a return to normalcy in Peruvian waters, production is likely to rebound significantly, but even if it only reaches half of the 2022 levels, that still represents a massive influx of fish oil into the market.

Now, imagine Austevoll, holding a hefty chunk of existing inventory, able to strategically release it as prices potentially peak due to this renewed supply. The potential for profit is substantial.

Projected Peruvian Fish Oil Production and Austevoll's Advantage

Reference: Q1 2024 Earnings Call Transcript

Projected Increase in Austevoll's Pelagic Catches

Reference: Q1 2024 Earnings Call Transcript

Of course, there are always risks. Fishing quotas in Peru are notoriously volatile, and the fickle nature of El Niño could always throw a wrench in the works. But the current data points towards a scenario where Austevoll, leveraging its increased inventory reserves, could see a significant boost in profitability from its pelagic operations. This is a story that goes beyond the headline figures, a hidden gem waiting to be unearthed in the coming quarters.

"Fun Fact: Peru's anchoveta fishery is the largest single-species fishery in the world! These tiny fish play a huge role in the global food chain, providing a crucial source of protein for both humans and animals."

Q1 2024 Earnings Call Transcript