Lerøy’s third-quarter results impacted by lower salmon prices

Published on
November 15, 2019

Norwegian fish farming and fishing company Lerøy Seafood Group (LSG) reported operating profit before fair value adjustments of NOK 501 million (USD 54.7 million, EUR 49.7 million) for the third quarter of this year, down from NOK 660 million (USD 72.1 million, EUR 65.4 million) in the corresponding period of 2018.

Its revenue for the last quarter totaled NOK 5.1 billion (USD 557.3 million, EUR 505.6 million), up 14 percent from NOK 4.5 billion (USD 491.7 million, EUR 446.1 million) in Q3 2018. 

LSG said that lower earnings from its Farming segment, due partly to lower prices, were the “most significant reason” for the quarter’s fall in earnings.

For the first three quarters of 2019, its revenue increased to NOK 15.2 billion (USD 1.7 billion, EUR 1.5 billion) from NOK 14.5 billion (USD 1.6 billion, EUR 1.4 billion), while its operating profit dropped by NOK 655 million (USD 71.6 million, EUR 64.9 million) to less than NOK 2 billion (USD 218.6 million, EUR 198.3 million).

In the last quarter, the Farming segment harvested 45,983 metric tons (MT) of gutted weight salmon and trout in the last quarter, up 24 percent from 37,227 MT in Q3 2019. Its EBIT per kg of NOK 7.90 (USD 0.86, EUR 0.78) was down from NOK 15.30 (USD 1.67, EUR 1.52) last year.

According to the group’s Q3 results statement, there was a substantial increase in Norway’s harvest volume towards the end of the quarter, with the salmon export trade increasing 24 percent year-on-year. This, it said, had a negative impact on spot prices for salmon, with the average Q3 price falling to NOK 48.60 (USD 5.31, EUR 4.82) per kg, compared with NOK 54.80 (USD 5.99, EUR 5.43) per kg in Q3 2018.

The segment currently estimates a total harvest volume between 172,000 and 175,000 GWT salmon and trout for 2019, including its volumes from associates. It has forecast the 2020 salmonid harvest will rise to 183,000 to 188,000 MT.

Within LSG’s Wild Catch segment, Havfisk's landings in the last quarter totaled 13,152 MT, compared with 14,282 MT in Q3 2018. This catch included 3,411 MT of cod, 615 MT of haddock, 4,469 MT of saithe and 2,814 MT of shrimp.

Compared with Q3 2018, prices for cod increased by 6 percent, while the prices for haddock and saithe for saithe were up 4 percent and 33 percent, respectively.

LSG’s results highlighted that the high raw material prices in the quarter generated satisfactory earnings for the trawler fleet, but these presented challenges for its processing subsidiary Lerøy Norway Seafoods (LNWS). In total, the segment contributed EBIT of NOK 40 million (USD 4.4 million, EUR 4 million) in the quarter, compared with NOK 41 million (USD 4.5 million, EUR 4.1 million) in Q3 2018.

It expects to see a slight increase in catch values in 2020, following increased cod and haddock quotas and an anticipated rise in the permitted saithe catch. However, the total shrimp quota has been reduced from 6,000 to 4,500 MT.

Meanwhile, the group’s VAP, Sales & Distribution (VAPS&D) segment reported Q3 2019 revenues of NOK 4.8 billion (USD 524.5 million, EUR 475.9 million), up 9 percent compared with the same period in 2018. Operating profit before fair value adjustment related to biological assets increased by NOK 37 million (USD 4 million, EUR 3.7 million) to NOK 109 million (USD 11.9 million, EUR 10.8 million) for the three-month period.

LSG said that some areas remain challenging, but the development for VAPS&D had been good throughout the quarter and the segment is expected to generate significantly higher earnings this year.

Photo courtesy of Lerøy Seafood Group

Contributing Editor reporting from London, UK

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