Norwegian-headquartered salmon farming group SalMar ASA delivered operational earnings before interest and taxes (EBIT) of NOK 576.3 million (USD 68.1 million, EUR 63.6 million) in the third quarter of this year, up from NOK 333.7 million (USD 39.5 million, EUR 36.8 million) in the corresponding period of 2015, despite facing considerable biological challenges throughout the three months.
SalMar harvested a total of 29,600 metric tons (MT) of salmon in the last quarter, compared with 32,200 MT in Q2 2016 and 35,400 MT in Q3 2015. It said the market for Atlantic salmon has been tight, with correspondingly high prices over a long period of time, which has contributed to a record price of approximately NOK 75 (USD 8.87, EUR 8.28) per kg in the first weeks of the quarter. However, prices have fallen steadily through the period, such that the price of salmon at the close of the quarter was around NOK 54 (USD 6.38, EUR 5.96) per kg.
The high prices have resulted in further revenue growth for SalMar, which achieved an overall operating profit of NOK 19.46 (USD 2.30, EUR 2.15) per kg for its harvested fish in Q3 2016, up more than NOK 10 (USD 1.18, EUR 1.10) per kg from same period last year.
Nevertheless, the group found the third quarter “operationally challenging,” confirmed CEO Trond Williksen.
"Biological challenges, particularly those associated with lice management, have a negative impact on cost levels and operational efficiency. Over time, SalMar has implemented a number of measures to deal with the biological challenges. These include changes in operational plans, greater use of cleaner fish, investments in non-medicamental delousing equipment and increased well-boat capacity. Taken together, this has helped ensure that the challenging biological situation has been managed satisfactorily through the quarter," he said.
SalMar expects to harvest 118,000 MT in 2016. This is 8,000 MT less than the estimate given at the close of the first half-year, and is primarily attributed to the biological situation in Central Norway and the decision to postpone the harvesting of volumes in Northern Norway until 2017. Costs in Q4 2016 are expected to go up compared to the third-quarter, but SalMar expects this trend to be reversed in 2017.
As a result of the reduction in the overall harvested volume, the proportion of fish sold under contract will increase. For Q4 2016, the contract rate is expected to be around 55 percent. Contract prices for the current quarter are higher than the average contract prices for the first nine months of the year.
For 2017 as a whole, SalMar expects to harvest around 128,000 MT of salmon and the contract rate for this volume is currently just under 30 percent.
“The prospect of limited supply leads to expectations of continued good margins in coming quarters," said Williksen.
