Sea lice, Chilean price challenges hit Marine Harvest’s profits

Published on
February 17, 2016

Marine Harvest Group achieved operational earnings before interest and taxes (EBIT) of NOK 837 million (EUR 87.1 million; USD 97 million) in the fourth-quarter of 2015, down from more than NOK 1 billion (EUR 104.1 million; USD 115.9 million) in the corresponding period of 2014. This year-on-year decrease was largely attributed to higher production costs in Norway and challenging market conditions in the Americas.

The Norway-headquartered salmon farmer reported operational revenues of NOK 8.1 billion (EUR 843.3 million; USD 938.7 million) in the last quarter, up from NOK 6.9 billion (EUR 718.4 million; USD 799.6 million) in Q4 2014. Its total harvest volume was 110,551 metric tons (MT), compared to 105,122 MT in Q4 2014.

The group’s harvest guidance for 2016 is 436,000 MT, which is 4,000 MT lower than the previous guidance but still an increase of 5 percent on last year.

Announcing the company’s Q4 results, CEO Alf-Helge Aarskog said the biological situation in Norway, particularly with regard to sea lice challenges, had been a concern last year and will continue to be so in 2016.

Aarskog also conceded that the farming results from Chile remained weak despite a recent increase in prices and that the profitability was still below break-even levels. But he added that a reduction in smolt stocking – down 17 percent over the last 4-5 months – could improve this situation in future quarters.

“The only thing that can save the Chilean industry is a strong reduction in biomass. It’s not happened [so far] because of regulation, but I think that finally financial laws will kick in. It’s hard to farm fish without money and this will tighten the market and lead to better biology.

“The long-term solution for Chile is to get better, more predictable regulations so that you cannot start over again – introducing more smolt – if prices go up, as they probably will. Discipline is essential to getting this business to work.”

Marine Harvest’s salmon of Norwegian origin achieved an operational EBIT of NOK 12.14 (EUR 1.26; USD 1.41) per kg in the last quarter, down from NOK 12.59 (EUR 1.31; USD 1.46) a year previously.

“This was a good result, there’s no doubt about that,” said Aarskog. “But it was highly price driven. Costs are up, but so are prices. To me that is a concern, especially in the areas where we have a real issue with sea lice.”

Meanwhile salmon of Scottish and Canadian origin reported operational EBIT of NOK -2.10 (EUR -0.22; USD -0.24) and NOK 3.32 (EUR 0.35; USD 0.38) per kg respectively, compared to NOK -3.42 (EUR -0.36; USD -0.40) and NOK 3.69 (EUR 0.38; USD 0.43) in Q4 2014.

Salmon of Chilean origin reported operational EBIT of NOK -12.28 (EUR -1.28; USD -1.42) per kg in the quarter, down from NOK 0.35 (EUR 0.04; USD 0.04).

These figures include contribution from Sales and Marketing, including MH Consumer Products which reported an operational EBIT of NOK 89 million (EUR 9.3 million; USD 10.3 million) compared to NOK 117 million (EUR 12.2 million; USD 13.6 million) in Q4 2014.

MH Feed reported a record operational EBIT of NOK 74 million (EUR 7.7 million; USD 8.6 million), compared to NOK 61 million (EUR 6.4 million; USD 7.1 million) in the corresponding quarter of 2014.

The group expects to increase its feed production to around 310,000 MT this year. On the back of this success, the board has approved the investment in a new feed factory for Scotland, which will have the capacity of 170,000 MT to supply the company’s salmon operations in Ireland, Scotland and the Faroe Islands as well as freshwater diets to Europe.

The facility is expected to be operational in May 2018 when Marine Harvest’s contracts with its other feed suppliers run out.

Contributing Editor reporting from London, UK

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