Challenging whitefish market hits Lerøy’s third-quarter earnings

Published on
November 12, 2020

Lerøy Seafood Group (LSG) reported operating profit before fair value adjustments of NOK 370 million (USD 41.1 million, EUR 34.8 million) for the third quarter of this year, representing a decline of NOK 131 million (USD 14.5 million, EUR 12.3 million) compared to the corresponding period of 2019.

The Norwegian fish farming and fishing company’s revenue for the past three months amounted to less than NOK 4.8 billion (USD 532.8 million, EUR 451.5 million), down from NOK 5.1 billion (USD 566.1 million, EUR 479.8 million) in Q3 2019, with its latest interim report stating that the most significant factor behind the lower earnings were challenges on the whitefish market resulting from the COVID-19 pandemic, as well the change in catch composition compared with a year previously.

LSG’s wild-catch and whitefish segment revenues in the quarter totaled NOK 453 million (USD 50.3 million, EUR 42.6 million), down from NOK 566 million (USD 62.8 million, EUR 53.3 million) in Q3 2019. Its farming segment’s earnings fell by NOK 76 million (USD 8.4 million, EUR 7.2 million) to NOK 2.3 billion (USD 255.3 million, EUR 216.4 million), while revenues generated by the third main segment – VAP, sales, and distribution – dropped NOK 213 million (USD 23.6 million, EUR 20 million) to NOK 4.6 billion (USD 510.2 million, EUR 432.6 million).

For the first three quarters of this year, the group’s overall revenue slipped NOK 398 million (USD 44.1 million, EUR 37.4 million) year-on-year to NOK 14.8 billion (USD 1.6 billion, EUR 1.4 billion), while its operating profit fell NOK 457 million (USD 50.7 million, EUR 43 million) to NOK 1.5 billion (USD 166.4 million, EUR 141.1 million).

Within LSG’s wild-catch segment, Havfisk's landings in the last quarter totaled 11,083 MT, compared with 13,152 MT in Q3 2019. This catch included 1,743 MT of cod, 164 MT of haddock, 2,638 MT of saithe, and 4,218 MT of shrimp.

Compared with a year previously, prices for cod decreased by 9 percent, while the prices for haddock and saithe were down 32 percent and 8 percent, respectively.

LSG’s report stated that, as was the case in Q2, restrictions introduced due to the COVID-19 pandemic have had a very negative impact on the demand for whitefish species, and have resulted in a challenging market for shrimp.

“There have been signs of market improvements in the third-quarter of 2020, but this has still been a difficult quarter with falling prices and lower catch rates compared with Q3 2019,” according to the report.

It was also highlighted that while lower prices for raw materials are usually a positive factor for the onshore industry and its processing subsidiary Lerøy Norway Seafoods, the “ripple effects of COVID-19” have been negative for both production and marketing. As such, the market demand for fresh and conventional products saw a significant decline in the quarter.

In total, the segment reported an EBIT loss of NOK 50 million (USD 5.5 million, EUR 4.7 million) for the quarter, compared with gains of NOK 40 million (USD 4.4 million, EUR 3.8 million) in Q3 2019. For the first three quarters of this year, it has contributed EBIT of NOK 215 million (USD 23.8 million, EUR 20.2 million), compared with NOK 252 million (USD 27.9 million, EUR 23.7 million) in the corresponding period of 2019.

Meanwhile, the farming segment harvested 44,227 metric tons (MT) of gutted weight salmon and trout in the last quarter, down from 45,983 MT in Q3 2019. Its EBIT per kilogram of NOK 7.00 (USD 0.78, EUR 0.66) was down from NOK 7.90 (USD 0.88, EUR 0.74) last year.

LSG said that since the first-quarter, the spot prices for salmon and the market have been “severely negatively affected” by the restrictions introduced to control the pandemic situation. While these eased in recent months, the prices realized remain lower than in the second quarter due to a seasonal increase in the salmon supply. As such, the average price for salmon in Q3 2020 was NOK 47.40 (USD 5.26, EUR 4.46) per kg, compared with NOK 57.90 (USD 6.42, EUR 5.45) in Q2 2020 and NOK 48.60 (USD 5.39, EUR 4.57) in Q3 2019.

The segment currently estimates a total harvest volume between 183,000 and 188,000 GWT salmon and trout for 2020, including its volumes from associates. It has also forecast that its 2021 salmonid harvest will rise to 205,000 to 210,000 GWT.

Photo courtesy of Lerøy Seafood Group

Contributing Editor reporting from London, UK

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