Tassal group (ASX:TGR) announced this morning that it has extended its retail supply agreement with Woolworths (ASX:WOW). Tassal also added that it will be supplying fresh salmon to Aldi going forward.
The agreement with Woolworths will come in effect from 1 October 2015 and it will extend the relationship for a further three years. The supply will be handled through De Costi Seafoods in Queensland and New South Wales.
The market reacted positively to the announcement as Tassal shares have gained around 6% so far today, trading at $5.77 at 2pm (AEST).
Whilst the extended agreement with Woolworths is positive for Tassal, shareholders are predominantly pleased with the newly established relationship with Aldi. It provides Tassal with an opportunity to be part of one of the fastest growing supermarket chains as Aldi continues to expand aggressively across most Australian states.
Woolworth shares are little changed and continue to trade near three year lows.
Tassal Managing Director and CEO Mark Ryan said that ‘these agreements further show how Tassal and De Costi Seafoods can successfully work together in providing improved supply to Australian retailers.’ Mr. Ryan also remains confident about the outlook for salmon consumption in Australia. He says: “Our strategy focused on growing domestic market per capita consumption will continue to underpin growing demand for salmon in Australia.”
The Tassal share price has experienced heavy volatility in the past 12 months. The stock has declined 15.6% year to date and also the 12 month return is negative which compares to a flat ASX200 market. Wise-owl has recommended to reduce exposure a while ago and as we are looking at the technicals of TGR it certianly does not look bullish. Media speculation about regularity restrictions surrounding the Tasmanian salmon farming industry have clouded Tassal’s outlook recently. However if the relationship with De Costi Seafoods will continue to drive expansion, TGR may be able to find support going forward.
Author: Simon Herrmann
Jun 30, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.