SalMar’s ‘satisfactory’ Q4 profits undermined by sea lice costs
Higher production costs due to sea lice challenges in key fish farming areas saw SalMar post operational earnings before interest and taxes (EBIT) of NOK 374.3 million (EUR 39.4 million; USD 43.5 million) in the fourth-quarter of 2015, down from NOK 508.7 million (EUR 53.5 million; USD 59.2 million) in the corresponding period of 2014.
The Norway-based Atlantic salmon farming group said the biological situation for its Central Norway and Rauma production segments remained challenging and had contributed to higher costs in Q4 2015. To control the level of lice, SalMar had on its own initiative elected to harvest fish earlier than planned. This resulted in a lower average weight, higher production costs per kg and lower prices achieved.
It added that the biological situation in the Northern Norway segment was satisfactory, and that along with good underlying operations, this had contributed to a strong result in the quarter.
The positive price trend continued in the last quarter, driven by a tight market and a weak Norwegian currency. The average spot price for salmon was NOK 45.28 (EUR 4.76; USD 5.27) per kg in the period, up NOK 4.19 (EUR 0.44; USD 0.49) per kg from the previous quarter and NOK 6.19 (EUR 0.65; USD 0.72) per kg from Q4 2014.
Higher prices were, however, partly offset by the fact 50 percent of the volume it harvested in the period was sold under contract at prices lower than spot. This resulted in SalMar’s Sales and Processing segment making an operating loss in the last quarter.
"Our operational challenges persisted in the fourth quarter, and costs associated with biological situation had a negative impact on earnings and operational efficiency," said Leif Inge Nordhammer, CEO of SalMar. "Favorable price developments measured in NOK contributed to a satisfactory result for the year as a whole, and the board is proposing a dividend of NOK 10 (EUR 1.05; USD 1.16) per share for 2015."
SalMar generated gross operating revenues exceeding NOK 2 billion (EUR 210.3 million; USD 232.6 million) in Q4 2015, marginally up from the same period the year before. The group harvested a total of 38,100 metric tons (MT), 3,600 MT less than in Q4 2014.
For 2016 as a whole, it expects a total harvest of 133,000 MT in Norway, down from 136,400 MT in 2015. Norskott Havbruk (Scottish Seafarms) is expected to harvest a total of 26,000 MT, compared with 27,000 MT last year.
Based on estimates for the standing biomass, SalMar expects the global supply of Atlantic salmon to fall by 3 percent in 2016 to 2.23 million MT, which is 80,000 MT less than in 2015.