“Very strong” market demand, increased harvests boost Lerøy’s Q3 earnings
Lerøy Seafood Group has reported a boost in its harvests and wild catches, and on the back of strong demand for seafood and positive price-movement, the company reported increased operating profit and revenue in Q3 2021.
Lerøy reported operating profit before fair-value adjustments of NOK 579 million (USD 66.3 million, EUR 58.5 million) for Q3, representing an increase of NOK 209 million (USD 23.9 million, EUR 21.1 million) on the corresponding period of 2020.
Total revenue for the past three months amounted to more than NOK 6.3 billion (USD 721.8 million, EUR 636.3 million), up from around NOK 4.8 billion (USD 549.8 million, EUR 484.8 million) in Q3 2020. Lerøy attributed the growth to improved earnings from its wild-catch segment’s land-based operations, substantial growth in its farming segment’s harvest volume, the lifting of COVID-19 restrictions resulting in a positive development in prices, and also “continued positive development” for its value-added, sales, and distribution (VAPS&D) segment.
“Revenue in Q3 2021 is up 33 percent on the same quarter last year, mainly due to increased activity and higher prices. We recorded our highest-ever quarterly revenue as well as all-time high harvest volumes. Demand for seafood is, in general, very strong, giving grounds for an optimistic outlook for the future of the industry,” Lerøy CEO Henning Beltestad said.
However, Beltestad said the group’s Q3 earnings were lower than expected at the start of the quarter.
“During the final weeks of the quarter, we had to make changes to our harvest schedules, and were forced to harvest early at lower weights than planned. This had a negative impact on both prices realized and costs. We also underestimated the export volumes from Norway, especially in September,” he said.
LSG’s wild catch and whitefish segment revenues in the quarter totaled NOK 522 million (USD 59.8 million, EUR 52.7 million), up from NOK 453 million (USD 51.9 million, EUR 45.8 million) in Q3 2020. Its farming segment’s earnings increased by NOK 792 million (USD 90.7 million, EUR 80 million) to more than NOK 3 billion (USD 343.7 million, EUR 303 million), while revenues generated by VAPS&D climbed by NOK 1.5 billion (USD 171.8 million, EUR 151.5 million) to NOK 6.1 billion (USD 698.9 million, EUR 616 million).
For the first three quarters of 2021, Lerøy's overall revenue increased by NOK 1.8 billion (USD 206.2 million, EUR 181.8 million) year-on-year to almost NOK 16.6 billion (USD 1.9 billion, EUR 1.7 billion), while its operating profit topped NOK 1.6 billion (USD 183.3 million, EUR 161.6 million).
Within LSG’s wild-catch segment, Havfisk's landings in the last quarter totaled 12,336 metric tons (MT), compared with 11,083 MT in Q3 2020. The catch included 3,387 MT of cod, 902 MT of haddock, 2,494 MT of saithe, and 4,259 MT of shrimp. Lerøy Havfisk has a large quota remaining for the year, creating a “solid foundation for good profitability” in Q4 2021, the company said.
In total, the segment reported a Q3 2021 earnings before interest and tax (EBIT) of NOK 17 million (USD 1.9 million, EUR 1.7 million), compared with losses of NOK 50 million (USD 5.7 million, EUR 5 million).
“Earnings in the wild-catch segment have improved significantly in the third quarter compared with 2020. It’s very encouraging that the underlying improvements in land-based operations are gradually delivering increased earnings in this part of the business,” Beltestad said.
In Q3, Lerøy's farming segment harvested 56,397 MT of gutted-weight salmon and trout, up from 44,227 MT in Q3 2020. Its EBIT-per-kilogram of NOK 7.60 (USD 0.87, EUR 0.77) up from NOK 7.00 (USD 0.80, EUR 0.71) in Q3 2020.
Beltestad said growth at the end of Q3 2021, and particularly the start of Q4 2021, has been slightly lower than expected.
“The estimated harvest volume in 2021, including the share from associates, is approximately 204,000 GWT, with an estimated 207,000 GWT in 2022,” he said. “We expect costs in Q4 2021 to be lower than in previous quarters in 2021, although this potential is affected by the inflation in the cost of many of our raw materials we are now experiencing, including feed, which is our largest cost item.”
Lerøy said price developments for Atlantic salmon have been very volatile this year, which has been “substantially influenced by the ripple effects of the COVID-19 pandemic.”
It said that while it is not possible for LSG’s management and board of directors to form any precise opinion on the duration or consequences of the pandemic, developments in 2021 provide the company's leadership with grounds for optimism, with indications that seafood is gaining in popularity with consumers.
Photo courtesy of Lerøy Seafood Group