“Extremely volatile” salmon prices, challenging processing climate dent Lerøy’s profits

Published on
February 25, 2020

Lerøy Seafood Group (LSG) reported operating profit before fair value adjustments of NOK 769 million (USD 82.1 million, EUR 75.7 million) for the fourth quarter of last year, down 19 percent from NOK 948 million (USD 101.2 million, EUR 93.4 million) in the corresponding period of 2018. The Norwegian fish-farming and fishing company’s revenue for the last quarter stood at NOK 5.2 billion (USD 554.9 million, EUR 512.1 million), which was 2 percent less than in Q4 2018.

“The fourth quarter saw extremely volatile prices for Atlantic salmon, but the underlying development during the quarter and the profit figures have in the main been as expected,” LSG CEO Henning Beltestad said. “Looking back on 2019 as a whole, we experienced several unforeseen incidents in the Farming segment that had a negative impact on the harvest volume and, as a result, our cost levels. The onshore industry for whitefish has experienced challenges, while we can report a good development in downstream operations. At the start of 2020, we are confident that Lerøy has a sound position for profitable growth in the years to come.”

For the full-year 2019, LSG’s revenue totaled NOK 20.4 billion (USD 2.2 billion, EUR 2 billion), up from NOK 19.8 billion (USD 2.1 billion, EUR 1.9 billion) in the previous year, while its operating profit fell by NOK 845 million (USD 90.2 million, EUR 83.2 million) to NOK 2.7 billion (USD 288.1 million, EUR 265.9 million).

The farming segment of the business harvested 42,823 metric tons (MT) gutted weight of salmon and trout in the last quarter, falling 13 percent from 49,414 MT in Q4 2018. Its EBIT-per-kilogram of NOK 14.00 (USD 1.49, EUR 1.38) was down on the NOK 15.90 (USD 1.70, EUR 1.57) achieved a year previously.

For 2019 as a whole, Lerøy harvested a total of 158,178 MT, compared with 162,039 MT in 2018.

The company explained that in September 2019, salmon exports were up 23 percent year-on-year, and high export volume continued through the final quarter. Consequently, at the start of Q4 2019, the spot price for salmon was the lowest it had been for four years, at approximately NOK 40 (USD 4.27, EUR 3.94) per kilogram. But by the end of the quarter, spot prices had increased and were close to NOK 80 (USD 8.54, EUR 7.88) per kilogram.

Prices realized for trout in the quarter were around NOK 9.00 (USD 0.96, EUR 0.89) per kilogram lower than for salmon.

Lerøy’s estimated salmon and trout harvest volume for 2020, including the share from associates, is currently 183,000 to 188,000 MT. And for 2021, the target range is between 200,000 and 210,000 MT.

Meanwhile, in LSG’s wild catch segment, Havfisk's total catch volume in the last quarter was 12,949 MT, compared with 11,515 MT in Q4 2018. Landings comprised of 7,215 MT of cod, 1,907 MT of haddock and 1,595 MT of saithe. Compared with Q4 2018, prices for cod were up 10 percent, while prices for haddock and saithe were up 14 percent and 10 percent, respectively.

While the high raw material prices in the quarter generated satisfactory earnings for the trawler fleet, they proved challenging for LSG’s whitefish processing arm, Lerøy Norway Seafoods AS (LNWS). As a result, the wild-catch segment contributed an EBIT of NOK 42 million (USD 4.5 million, EUR 4.1 million), down from NOK 54 million (USD 5.8 million, EUR 5.3 million) in Q4 2018.

For the full-year 2019, the EBIT delivered by the segment was NOK 293 million (USD 31.3 million, EUR 28.9 million), down from NOK 388 million (USD 41.4 million, EUR 38.2 million) in 2018.

“In recent years, the group has implemented and completed a high number of measures relating to production and marketing, in a move to improve earnings for the onshore industry,” Beltestad said. “The group expects to start to see the positive results of these measures in 2020.”

Meanwhile, the VAP, sales and distribution (VAPS&D) segment reported Q4 2019 revenues of less than NOK 5 billion (USD 533.8 million, EUR 492.6 million), falling 3 percent compared with the same period of 2018. Operating profit before fair value adjustment related to biological assets was up from NOK 134 million (USD 14.3 million, EUR 13.2 million) in Q4 2018 to NOK 162 million (USD 17.3 million, EUR 16 million) in the last quarter.

The company said that while some areas are challenging, the segment had seen a positive development throughout the quarter, and that its target is for operations and earnings to continue to increase throughout 2020 and in the years beyond. 

Photo courtesy of Lerøy Seafood Group

Contributing Editor reporting from London, UK

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