Grieg’s Q1 results suffer from high production costs

Farmed salmon producer Grieg Seafood reported losses for the first quarter of 2015, caused mainly by higher production costs at its European operations and downward pressure on prices from a closed Russian market and competition for U.S. market share.

“Salmon prices fell slightly in the first quarter, reflecting the continued closure of the Russian market and a general increase in the supply of salmon compared with Q1 2014. This is not a significant decline, and the European market is characterized by strong demand. In the American market the trend has been significantly weaker,” the Bergen, Norway-based company stated in its quarterly update.

“The level of business based on fixed price contracts was low in Q1 and will remain so in the second quarter, while some increase can be expected in Q3.”

The company reported an EBIT, before fair value adjustment of biomass, at NOK 70 million (USD 9.2 million; EUR 8.3 million), down from NOK 143 million (USD 18.9 million; EUR 16.9 million) in 2014.

The company reported strong production throughout the period, with volume indication for 2015 maintained at 72,000 metric tons (MT). Some of the expected Q1 volume has been moved to Q2. Group sales revenues in Q1 totaled NOK 990 million (USD 131.2 million; EUR 117.5 million), a decline of 2.5 percent year-on-year.

Grieg said that pancreatic disease among fish in Rogaland and harvesting from inefficient locations in Finnmark, including North Cape, resulted in a high cost level in Norway in Q1. The cost of harvested fish was also high in Shetland due to sea lice treatment.

Andreas Kvame will assume CEO duties for the company on 1 June 2015.

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