Lower prices, increased costs impact Grieg Seafood’s Q3 profits

Published on
November 7, 2018

Grieg Seafood Group (GSF) harvested 16,941 metric tons (MT) of salmonids in the third-quarter of this year, which was on par with the corresponding period of 2017. However, lower prices saw its total operating income for the quarter decrease by 14 percent year-on-year to less than NOK 1.6 billion (USD 192.7 million, EUR 167.7 million).

The Norway-headquartered producer achieved operational earnings before interest and taxes (EBIT) of NOK 160 million (USD 19.3 million, EUR 16.8 million) before fair value adjustment of biomass for the three-month period, down from NOK 229 million (USD 27.6 million, EUR 24 million) in Q3 2017. The quarter’s EBIT per kg amounted to NOK 9.43 (USD 1.14, EUR 0.99), down from NOK 13.59 (USD 1.64, EUR 1.42) in Q3 2017.

In its latest results statement, GSF said that the average salmon spot price fell by NOK 1.74 (USD 0.21, EUR 0.18) per kg to NOK 54.07 (USD 6.51, EUR 5.67), while its realized prices were down by NOK 1.38 (USD 0.17, EUR 0.14) per kg.

Farming costs increased by NOK 1.11 (USD 0.13, EUR 0.12) per kg year-on-year, mainly related to reduced survival towards the end of the quarter. 

“During the third-quarter, we had challenges with gill-related diseases in Shetland and algal blooms in BC (British Columbia), which resulted in reduced survival and higher costs in these regions. Our Norwegian operations performed better than expected, with good biological performance and decreasing cost, said Andreas Kvame, CEO of Grieg.

“Looking ahead, Grieg Seafood plans to grow harvest volumes and improve profitability, and our target of 100,000 MT harvested in 2020 with cost at or below industry average remains.”

It expects its harvest volume in Q4 2018 to be 24,100 MT. For 2018 as a whole, it is anticipated that the harvest will be 75,000 MT, which would be 20 percent more than last year. For 2019, its expected harvest volume is 82,000 MT.

It said that continued access to high-quality smolt is critical to ensure future growth and reduce costs. Increased production of larger smolt will also shorten production time in sea, thus reducing exposure to biological risks and contributing to increased survival. 

Another essential aspect of Grieg Seafood's growth strategy is increased utilization of the group's licenses. During the quarter, it was granted two new locations in Finnmark, Norway.

GSF also said that the current situation, with limited supply growth and strong underlying demand, is expected to continue. In addition, a rise in demand due to the Christmas season will most likely contribute to strong market prices in the final quarter of 2018.

Contributing Editor reporting from London, UK

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