The SalMar Group shook off low salmon prices and an outbreak of pancreas disease (PD) at a site in central Norway, forcing it to cull about 1.5 million fish and incur NOK 50 million in non-recurring costs, to post an operating profit in the fourth quarter of 2011.
Still, at NOK 63.3 million, the company’s operating profit (before fair value adjustment of the biomass and non-recurring costs) in the fourth quarter of 2011 was down from NOK 346.0 million in the corresponding period of 2010. At NOK 1.07 billion, its gross operating revenues were also down, albeit slightly, from NOK 1.15 million in the same period in 2010.
Difficult market conditions marked by low salmon prices have take their toll on the fourth-quarter results of many Oslo-listed salmon producers, including SalMar.
“The spot price of salmon fell by just over NOK 3 from the third to the fourth quarter. This has had a major impact on SalMar Northern Norway and the Rauma segment, which sell all of their volumes in the spot market,” said SalMar CEO Yngve Myhre. “SalMar Northern Norway sold pproximately 50 percent of its volume in October when the salmon price averaged less than NOK 20 per kilogram, and has therefore posted an operating loss for the quarter.
“We are satisfied with the performance of SalMar Central Norway, which has sold around 20 percent of its volume under fixed price contracts at the same time as the efficiency on InnovaMar continues to improve,” he continued. “The second half of 2011 produced a positive EBIT contribution from InnovaMar, and we see that the plant is drawing financial benefit from increased volume and better capacity utilization in the secondary processing facility. In this context we perceive significant potential for further benefits of scale, after having entered into a harvesting and processing agreement with Lerøy which will make a major contribution to improved capacity utilization at the InnovaMar plant in the years ahead.
Added Myhre: “When it comes to removal/destruction of fish where the PD virus was identified, SalMar will through 2012 and 2013 largely compensate for the loss of this volume through increased utilization of free MTB on other sites. This can be done at a low marginal cost, so some of the financial loss will also be compensated for.”
Looking ahead, SalMar expects to harvest about 116,500 metric tons (gutted weight) of salmon this year, which would be up about 12 percent from last year. The company harvested about 34,960 metric tons in the fourth quarter of 2011.
