Norway Royal Salmon Q2 harvest boosted by Icelandic ops
Faced with increased production costs, Norway Royal Salmon (NRS) reported operational earnings before interest and taxes (EBIT) of NOK 94 million (USD 10.5 million, EUR 9 million) for the second quarter of 2021, a decrease from the NOK 119.7 million (USD 13.4 million, EUR 11.4 million) achieved for the corresponding period of 2020. However, the Trondheim-headquartered producer’s operating revenues of NOK 1.34 billion (USD 149.5 million, EUR 127.6 million) were 3.4 percent higher than a year previously.
NRS’s Farming division harvested 9,703 metric tons (MT) of gutted weight salmon in the quarter, an increase of 23 percent year-on-year, thanks to a 126 percent increase within its Farming Iceland segment, while its total volume sold in the quarter amounted to 21,213 MT, up from 20,650 MT in Q2 2020.
Farming Norway’s operational EBIT-per-kilogram gutted weight was NOK 12.22 (USD 1.36, EUR 1.16) compared with NOK 17.06 (USD 1.90, EUR 1.63) in the corresponding quarter of last year, and Farming Iceland’s was NOK 9.66 (USD 1.08, EUR 0.92) per kilogram, compared with NOK 3.88 (USD 0.43, EUR 0.37) in Q2 2020.
For 2021, the total harvest volume of the group is expected to be 48,000 MT, of which 36,000 MT will be in Norway and 12,000 MT in Iceland. This is an increase of 18 percent for Norway and 61 percent for Iceland compared to 2020.
“The demand for salmon is increasing and a reduction in the global harvest volumes is expected for the rest of the year. This provides the basis for a positive market view for salmon,” NRS CEO Charles Høstlund said.
In the last quarter, NRS’s Sales segment sold 9 percent less than in Q2 2020 at 18,776 MT. The company’s volumes sent to Western Europe decreased by 17 percent, while volumes sent to Asia and Eastern Europe each increased by 8 percent, and its volumes sold in Norway decreased by 12 percent in the quarter. Overall, Western Europe accounted for 77 percent of the export volumes, Asia 16 percent, and Eastern Europe 7 percent. The domestic volume accounted for 19 percent of the total sold volume.
Høstlund said in the second quarter, NRS successfully started-up its new smolt facility in Dåfjord and made good progress on its Arctic Offshore Farming development project.
“Together with the company's activity in Iceland, these two projects are important for the group's ambition for volume growth. The smolt facility will, in the long run, ensure the supply of smolts and reduce production costs. Arctic Offshore Farming is expected to be launched into the to sea in the third quarter of 2021,” he said. “Regarding the second quarter results, we are not satisfied with the production cost in the quarter, but we expect reduced costs in the third quarter.”
For the first half of 2021, the group posted operating revenues of almost NOK 2.8 billion (USD 312.6 million, EUR 266.7 million), representing an increase of 8 percent year-on-year. Its operational EBIT for the period slipped by NOK 40.6 million (USD 4.5 million, EUR 3.9 million) to NOK 153.9 million (USD 17.2 million, EUR 14.7 million). Its farming segment harvested 25,119 MT (up from 13,303 MT), and posted a lower EBIT-per-kilogram of NOK 8.47 (USD 0.95, EUR 0.81). Its sales business sold 40,852 MT in H1 2021, up from 38,550 MT a year previously.
During Q1 2021, NRS increased its ownership in Arctic Fish to 51.28 percent and achieved control over the company. Consequently, the Arctic Fish Group became consolidated from 1 January, 2021.
The group currently owns 53,995 MT maximum allowed biomass (MAB), for salmon farming in Norway, located in Troms and Finnmark, and 17,800 MT MAB for salmon farming in Iceland, located in the Westfjords area. In addition, the group owns 5,300 MT MAB for trout farming in Iceland. It also has minority interest in two associated Norwegian fish farming companies which together own nine fish farming licenses.
On 16 July, NTS ASA made a mandatory offer for all shares in NRS at NOK 209 (USD 23.33, EUR 19.91) per share. Afterwards, the board of NRS announced that a strategic process had been initiated. Subsequently, NTS increased its offer to NOK 240 (USD 26.79, EUR 22.86) per share with an acceptance deadline of 26 August, 2021. On 20 August 2021, SalMar ASA announced it would make a voluntary offer for all shares in NRS of NOK 270 (USD 30.14, EUR 25.72) per share.
In a statement issued to the Oslo Stock Exchange on 23 August, NRS’s board said it was pleased that its shareholders have been presented with offers at significantly higher prices than the original NTS offer. It also noted that the offer from NTS is unconditional, while the offer from SalMar is conditional upon a minimum acceptance of more than 50 percent of the shares in NRS on a fully diluted basis and certain other conditions.
“Given the significant price difference between the offers, the board of directors is of the view that the intended offer from SalMar ASA is superior to the offer from NTS ASA. In consequence, the board of directors recommends that shareholders do not accept the offer from NTS ASA,” it said.
The board of directors said it will review SalMar’s offer document when published, and will publish a formal statement in due course.
Photo courtesy of Norway Royal Salmon