Increased sales volumes boost Norway Royal Salmon’s Q2 earnings

Published on
August 26, 2020

Trondheim, Norway-headquartered Norway Royal Salmon (NRS) has reported operational earnings before interest and taxes (EBIT) of NOK 119.7 million (USD 13.4 million, EUR 11.3 million) for the second quarter of this year, an increase from the NOK 113.5 million (USD 12.7 million, EUR 10.7 million) achieved for the corresponding period of last year.

The producer’s operating revenues of almost NOK 1.3 billion (USD 145.4 million, EUR 123 million) were 7 percent higher than a year previously, due to higher volumes sold.

NRS’s Farming business harvested 7,894 metric tons (MT) of gutted-weight salmon in the quarter, an increase of 59 percent year-on-year, and 1,300 MT more than previously estimated.

Its forecast for the full-year 2020 is now 35,000 MT, which is a decrease of 2,000 MT from the volume previously reported, due to the detection of fish disease infectious salmon anemia (ISA) at one site in July and advanced harvesting.

The achieved price by its Farming operations was NOK 6.08 (USD 0.68, EUR 0.58) lower per kilogram than in the first quarter of 2020, and NOK 6.24 (USD 0.70, EUR 0.59) lower than in Q2 2019. Meanwhile, the total production cost for harvested fish in the last quarter was NOK 40.08 (USD 4.48, EUR 3.79) per kilogram, which was down NOK 3.87 (USD 0.43, EUR 0.37) from Q1 2020 and NOK 3.96 (USD 0.44, EUR 0.37) higher than in the corresponding period last year. The decreased production cost compared to the first quarter 2020 was mainly due to better performance on a site that reduced costs, the company said.

Farming and sales achieved an operational EBIT of NOK 17.06 (USD 1.91, EUR 1.61) per kilogram, down from NOK 27.46 (USD 3.07, EUR 2.60) in Q2 2019, with the decrease attributed to lower salmon prices and the higher production costs.

The sales business sold 20,650 MT, an increase of 18 percent. Volumes to western Europe increased by 23 percent, export volumes to Asia decreased by 15 percent, and volumes to Eastern Europe decreased by 32 percent in the quarter. The volumes sold in Norway increased by 64 percent in the quarter. As such, western Europe accounted for 82 percent of NRS’s export volumes, Asia 13 percent, and Eastern Europe 5 percent. The domestic market accounted for 19 percent of the total volume sold.

“We have had a quarter characterized by large fluctuations in the market price of salmon, and thus achieved a significantly lower salmon price than at the same time last year. This is largely due to the COVID-19 pandemic,” CEO Charles Høstlund said. “It is gratifying to see that the production cost has a positive development from the previous quarter, where we have achieved good biological and financial results at some sites during the quarter. However, we still see that we have too large fluctuations in performance, which means that our focus going ahead will be on strict cost control and better utilization of our production capacity.”

For the first half of 2020, the group posted operating revenues of almost NOK 2.6 billion (USD 290.8 million, EUR 246.2 million), representing a decrease of 4.9 percent year-on-year. Its operational EBIT for the period slipped by NOK 80.5 million (USD 9 million, EUR 7.6 million) to NOK 194.5 million (USD 21.8 million, EUR 18.4 million). Its farming segment harvested 13,303 MT (up from 11,978 MT), and posted a lower EBIT-per-kilogram of NOK 16.85 (USD 1.88, EUR 1.60). Its sales business sold 38,550 MT in H1 2020, down from 40,417 MT a year previously.

The group owns 36,085 MT maximum allowed biomass (MAB), located in Troms and Finnmark. It also has minority interest in three associated Norwegian fish farming companies which together own 11 fish farming licenses, as well as Iceland’s Arctic Fish which has licenses for 11,800 MT in MAB.

Earlier this month, it bought 1,050 MT of MAB in Region North for NOK 199 million (USD 22.3 million, EUR 18.8 million) through the Norwegian Directorate of Fisheries' aquaculture auction.

NRS also has two major investment projects in progress. A new, centrally-located smolt facility is expected to be completed next year. At the same time, its Arctic Offshore Farming program is expected to receive its first fish.

Photo courtesy of Norway Royal Salmon

Contributing Editor reporting from London, UK

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