Grieg Q2 earnings plummet, some harvest volumes postponed due to COVID-19 complications

Published on
August 18, 2020

Grieg Seafood Group (GSF) posted operational earnings before interest and taxes (EBIT) of just NOK 3 million (USD 339,948, EUR 285,501) before fair value adjustment of biomass in the second quarter of this year. The results were down from the NOK 302 million (USD 34.2 million, EUR 28.7 million) achieved in the corresponding period of 2019.

The Bergen, Norway-headquartered salmonid producer blamed the downturn on reduced prices and increased costs, which accounted for NOK 211 million (USD 23.9 million, EUR 20.1 million) and NOK 95 million (USD 10.8 million, EUR 9 million) of the decrease, respectively. The quarter’s EBIT-per-kilogram was NOK 0.12 (USD 0.014, EUR 0.011), down from NOK 13.86 (USD 1.57, EUR 1.32) a year previously.

GSF harvested 23,910 metric tons (MT) of gutted weight salmon in the quarter, which was 10 percent ahead of the corresponding period last year. Regionally, British Columbia provided the most fish with 6,000 MT, followed by Shetland (5,600 MT), Rogaland (5,300 MT), and Finnmark (4,500 MT).

The larger overall volume was able to partly offset the quarter’s lower realized prices which were mainly driven by market turbulence related to COVID-19, in addition to lower prices achieved on downgraded volumes in Finnmark, GSF said.

Total revenues during the quarter amounted to NOK 1.4 billion (USD 158.6 million, EUR 133.3 million), down from NOK 1.5 billion (USD 170 million, EUR 142.8 million) in Q2 2019, while farming costs increased due to negative currency effects and lower volumes from Rogaland.

Grieg CEO Andreas Kvame said that while the quarter was impacted by the continuous effect of the COVID-19 pandemic, the group was able to maintain efficient operations throughout the period.

“We have particularly seen disruptions in the U.S. market due to COVID-19, which is mainly supplied by our British Columbia region. However, lower prices in the U.S. have been matched by improved biology, lower costs, and increased competitiveness in B.C.,” Kvame said. “In Finnmark and Rogaland, the underlying biology remains strong. However, due to low seawater temperatures during the winter and spring, we have experienced reduced growth in Finnmark. Based on this external factor in combination with expectations of low market prices in the short term, we have decided to optimize production, utilize our existing licenses and postpone some harvest to 2021.” 

Kvame also said that in Shetland, costs remained high during Q2 due to few synergies between its operations on the Shetland isles and Skye in Scotland. Meanwhile, in the group’s Newfoundland region, the first eggs entered the company's new hatchery in July as scheduled, with the first harvest expected in 2022 or 2023.

“While we are in the middle of a pandemic, we have not set our commitments to sustainability on hold. Reducing our environmental footprint and improving fish welfare are key factors to achieve our financial and operational targets,” Kvame said. “Over the last months, we received [Aquaculture Stewardship Council] certification on two new sites, and we strengthened our greenhouse gas reduction target. With Brazilian soy in our feed, we are also concerned about the increasing deforestation rates in the country. We are committed to use our market power to push towards an end to soy-related deforestation where we source soy, the Brazilian Cerrado biome.”

GSF’s sales revenues for the first half of 2020 exceeded NOK 2.7 billion (USD 305.9 million, EUR 257 million), up from NOK 2.6 billion (USD 294.6 million, EUR 247.4 million) compared to H1 2019. Its harvest volume for the six-month period was 42,271 MT compared to 36,603 MT. At the same time, increased farming costs led to an EBIT before fair value adjustments of biological assets of NOK 239 million (USD 27.1 million, EUR 22.7 million), down from NOK 567 million (USD 64.2 million, EUR 54 million). This was equivalent to an EBIT-per-kilogram of NOK 5.65 (USD 0.64, EUR 0.54), compared with NOK 15.50 (USD 1.76, EUR 1.48) in H1 2019.

According to Grieg’s statement, the salmon market will continue to be impacted by the coronavirus situation – causing uncertainty and pressure on prices in the short-term – but the group expects to see limited impact on its operations. The contract share for its Norwegian operations will increase in the second half of 2020, with prices well above current spot prices. Estimated contract shares for the third-quarter are 63 percent and 5 percent for Norway and the United Kingdom, respectively, with full-year estimates of 32 percent and 8 percent.

With regards to the partial harvest postponement, it highlighted that in 2019, a total of 25.2 million smolt with an average weight of 190 grams was stocked at sea, with the aim of harvesting 100,000 MT in 2020. However, the combination of the limited growth situation at Finnmark and sluggish market prices in the short term has seen the expected harvest volume for 2020 revised down to 95,000 MT.

For the third quarter, GSF’s expected harvest volume is 21,400 MT, with Rogaland producing 5,300 MT, Finnmark 4,500 MT, Shetland 5,600 MT, and B.C. 6,000 MT.

The group maintains its long-term harvest volume target of 150,000 MT by 2025.

Photo courtesy of Grieg Seafood Group

Contributing Editor reporting from London, UK

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