Grieg maintains “efficient production” in Q1, but biological threats impact earnings

Published on
May 8, 2020

Bergen, Norway-headquartered salmon farming group Grieg Seafood ASA claims that it weathered a lot of the challenges brought by the COVID-19 pandemic in the first quarter of this year, and that the crisis only had a limited bearing on its results for the period.

According to Grieg’s Q1 results statement, while the overall market situation has been impacted by the coronavirus, there continues to be a high demand for salmon. Also, the group’s diversified geographical presence has provided some flexibility and reduced logistical challenges.

“Grieg Seafood has been able to maintain efficient operations throughout the first-quarter and the impact on the first-quarter results has been limited,” it said.

For the three-month period, it posted operational earnings before interest and taxes (EBIT) of NOK 240.4 million (USD 23.5 million, EUR 21.7 million) before fair value adjustment of biomass, down from NOK 267.5 million (USD 26.2 million, EUR 24.1 million) in Q1 2019.

At the same time, its revenues increased by 25 percent to almost NOK 2.06 billion (USD 201.4 million, EUR 185.8 million), while the total volume of salmon harvested in quarter increased by 24 percent year-on-year to 18,360 metric tons (MT).

An EBIT-per-kilogram of NOK 13.09 (USD 1.28, EUR 1.18) was achieved, versus NOK 18.07 (USD 1.77, EUR 1.63) a year previously.

Grieg CEO Andreas Kvame said the first-quarter of 2020 “took a dramatic turn” when the pandemic hit, but added that immediate actions were taken by the group to manage the impact of the situation, with measures implemented to limit contamination. Furthermore, crises management teams have been operating in the head office and in each region – keeping operations running close to normal, with harvesting according to plan.

While the market situation has been “somewhat volatile,” with demand from hotels, restaurants and catering plummeting – partly offset by increased demand from the retail segment – and logistics and distribution issues arising, particularly to overseas markets with airfreight capacity reductions, Grieg Seafood has “maneuvered well in these harsh waters,” Kvame said.

“Safeguarding people, operations and partnerships are key priorities going forward, as well as protecting the financial solidity and flexibility of the group. We also will continue to execute on our ambitions. We hold on to our target of 100,000 MT harvest in 2020. By 2025, we aim to harvest at least 150,000 MT of Atlantic salmon, to achieve cost leadership and to reposition Grieg Seafood in the value chain,” Kvame said. “Lastly, but most importantly, despite the extraordinary situation, we do not yield in our commitment to sustainable and responsible farming. Sustainability is our license to operate and remains at the heart of our strategy and all our activities.”

Grieg’s Q1 2020 harvest comprised 6,944 MT and 6,827 MT from the Norwegian farming sites of Rogaland and Finnmark respectively, as well as 2,047 MT from Shetland, and 2,544 MT from British Columbia (BC). All of these volumes were up on the corresponding period of last year.

However, the group reports that Finnmark’s price achievement and costs were affected by the early harvest of fish at one site which had been impacted by the viral disease infectious salmon anaemia (ISA). In the same region, winter ulcers had been prevalent at several farming sites and had affected product quality.

Overall, Grieg’s harvest volume for the second-quarter is expected to be 24,900 MT, with its operations in Rogaland providing at 4,000 MT, Finnmark at 7,000 MT, Shetland at 3,900 MT, and British Columbia, Canada, at 10,000 MT.

In February, Grieg announced the acquisition of Grieg Newfoundland AS, a project with long-term harvest potential of 30,000 to 45,000 MT of Atlantic salmon. This investment brings exclusive farming rights in Placentia Bay, which has a farmable area larger than the Faroe Islands, and gives the group a close proximity to the U.S. East Coast market.

The first harvest from the region is expected in 2022-2023. It is expected to yield an annual harvest of at least 15,000 MT by 2025.

In 2019, Grieg’s operational EBIT for the full year amounted to almost NOK 1.09 billion (USD 106.6 million, EUR 98.3 million), down slightly from NOK 1.1 billion (USD 107.6 million, EUR 99.2 million). Its total harvest increased from 74,623 MT in 2018 to 82,973 MT. 

Photo courtesy of Grieg Seafood ASA

Contributing Editor reporting from London, UK

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