Diminished harvest but record profits for Leroy

Published on
November 10, 2016

Leroy Seafood Group has posted an operating profit before fair value adjustment of biomass of NOK 481 million (USD 58 million, EUR 53.1 million) for the third-quarter of this year, an increase from NOK 253 million (USD 30.5 million, EUR 27.9 million) in Q3 2015.

The Norwegian-headquartered salmonid farmer said the latest performance is equivalent to operating profit before biomass adjustment of NOK 15.20 (USD 1.83, EUR 1.68) per kg, up from NOK 6.20 (USD 0.75, EUR 0.68) per kg in the same period of 2015.

It reported revenue of NOK 4.3 billion (USD 518.2 million, EUR 474.8 million) in the last quarter, compared with NOK 3.3 billion (USD 397.7 million, EUR 364.4 million) in Q3 2015. At the same time, its profit before tax and before fair value adjustment of biomass was NOK 534 million (USD 64.4 million, EUR 59 million), compared with NOK 231 million (USD 27.8 million, EUR 25.5 million). 

"Leroy Seafood Group can report [its] highest revenue and highest operating profit as of the third-quarter throughout the group's history," said CEO Henning Beltestad. "We are delighted with such a great result. It has not been an easy quarter. We have experienced a number of biological challenges and recorded lower average weights than expected and higher costs than normal.”

With a positive market, Leroy chose to harvest a large volume of fish throughout Q2 2016, entering the third-quarter with 10 percent less biomass than in the same period in 2015, explained Beltestad. As a result, the group has had much more flexibility in terms of the timing of release from stock throughout the quarter.

“Based on the group's market analyses, a somewhat limited volume has been harvested in the quarter, and the group has focused on accumulating biomass. This strategy to harvest a lower volume in the quarter, combined with the higher contract share in the quarter, has resulted in lower prices realized.”

The volume of salmon and trout harvested by its farming segment in the last quarter was 22 percent lower year-on-year at 31,744 metric tons (MT).

"Prices realized for trout remain lower than for salmon, but the gap in prices is growing smaller, and the group expects to see a positive development for the trout market in the future," said Beltestad.

Leroy expects higher harvested volumes, the prices realized to improve significantly, and lower release from stock costs in the present quarter, he said. It has estimated a total harvest volume of 44,000 MT for Q4 2016, and a total harvest volume for 2017 of 180,000 MT.

Beltestad confirmed that the volatile prices for salmon have been and continue to be a challenge for Leroy’s processing facilities, but that its value-added products (VAP) segment can report a “positive underlying development,” while operations continue to be adapted in line with the projections of permanently high raw material prices.

The VAP segment reported a 9 percent increase in revenue to NOK 524 million (USD 63.2 million, EUR 57.9 million) in Q3 2016, but its operating profit was down from NOK 31 million (USD 3.7 million, EUR 3.4 million) to NOK 8 million (USD 963,586, EUR 883,395).

Also in the last quarter, Leroy completed its acquisition of shares in Havfisk ASA and Norway Seafoods Group AS, making it the majority shareholder in both companies with shareholdings of 67 percent and 74 percent respectively. Subsequent to the transactions, Havfisk and Norway Seafoods are consolidated in LSG's figures with effect from September.

Consolidation of the two companies had a positive effect of NOK 13 million (USD 1.6 million, EUR 1.4 million) on the operating profit before fair value adjustment of biomass in Q3. 

Contributing Editor reporting from London, UK

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