Leroy Q1 results mixed, Russia trade ban still a factor

Lower prices contributed to Norwegian salmonid farmer and seafood processor Leroy Seafood Group posting a lower first-quarter operating profit (before fair value adjustment of biomass) of NOK 404 million (EUR 48.1 million; USD 55 million), down from NOK 550 million (EUR 65.5 million; USD 74.8 million) in Q1 2014.

The result represents an operating profit before biomass value adjustment of NOK 11.50 (EUR 1.37; USD 1.57) per kilogram (kg), down from NOK 16.50 (EUR 1.96; USD 2.25) per kg in Q1 2014.

For Q1 2015, Leroy reported revenue of NOK 3.27 billion (EUR 389.4 million; USD 445.1 million), up from NOK 3.18 billion (EUR 378.7 million; USD 432.9 million) in the same period of 2014.

Compared with Q1 2014, the group increased its volume of harvested salmon and trout by 5 percent.

"The ban on imports of Norwegian salmon and trout into Russia, introduced on 7 August 2014, continues to have an impact on the markets. The volume of fish formerly sold to Russia is now mainly channeled to Europe. As a result, the growth in import on European main markets is much higher than the growth in volume produced,” said Henning Beltestad, CEO of Leroy. “This dynamic has had a particularly negative impact on trout prices, although there was an improvement in prices by the end of the quarter.”

Leroy has invested in increasing its capacity for high-value processed salmon and trout, which led to its Value Added Processing (VAP) segment increasing its revenues by 16 percent year-on-year to NOK 425 million (EUR 50.6 million; USD 57.8 million) in Q1 2015. Its operating margin also increased from 4.1 percent in Q1 2014 to 4.3 percent in Q1 2015.

“We expect to achieve a continued increase in earnings from this segment by making even more extensive use of capacity and improvements to operations,” said Beltestad.

Leroy’s sales and distribution segment reported revenue of NOK 3.08 billion (EUR 366.8 million; USD 418.7 million) in Q1 2015, which was on a par with the figure reported for Q1 2014. At the same time, the segment reported that its operating margin increased from 1.3 percent in Q1 2014 to 2 percent in Q1 2015.

“Sales and distribution continuously target a position whereby they drive demand for seafood, by launching new products and pioneering new markets. The segment not only sells and distributes its own production of salmon and trout, but also has a high level of sales activity in cooperation with third parties, ensuring a wide product range for the group within seafood,” said Beltestad.

“We aim to drive a ‘revolution’ in the distribution of fresh seafood. We have made significant investments in industrial capacity in recent years within processing units in several central parts of Europe, allowing us to ensure fresh products, a high level of service and proximity to our customers. We still have considerable potential to increase our level of activity and earnings within our fish-cut facilities,” he said.

The group has estimated a total harvest volume of 181,500 metric tons for 2015, including its share associates’ volumes.

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