Norway Royal Salmon’s year starts with lower harvest, higher costs

Published on
May 12, 2020

Citing lower volumes sold, Norway Royal Salmon ASA (NRS) reported first-quarter operational revenues of NOK 1.27 billion (USD 123.9 million, EUR 114.5 million) and operational earnings before interest and taxes (EBIT) of NOK 74.8 million (USD 7.3 million, EUR 6.7 million), down on the respective totals of NOK 1.49 billion (USD 145.3 million, EUR 134.3 million) and NOK 161.5 million (USD 15.7 million, EUR 14.6 million) achieved in Q1 2019.

An increase in production costs also affected the lower EBIT, the Trondheim-headquartered fish farming group said in announcing the results on the Oslo Stock Exchange, the Oslo Børs.

NRS’s Q1 2020 report explained that the higher production costs were due to higher harvest and wellboat costs on fish harvested from a restricted area infected by the viral disease infectious salmon anaemia (ISA), challenges with winter wounds, and higher feed and smolt costs. In addition, low sea water temperatures last year led to lower growth, which contributed to an increase in fixed costs.

The group now owns 35,035 metric tons (MT) maximum allowed biomass (MAB) in Troms and Finnmark after purchasing additional capacity through the Norwegian authorities’ traffic light system.

The company is organized into two business areas: Farming and Sales. Its Farming business harvested 5,409 MT gutted weight salmon in the last quarter, which was 23 percent lower than in Q1 2019. At the same time, the Sales business sold 17,900 MT, a decrease of 22 percent.

Due to the increased production costs, Farming and Sales achieved an operational EBIT-per-kilogram of NOK 16.53 (USD 1.61, EUR 1.49), compared to NOK 25.51 (USD 2.49, EUR 2.30) in 2019.

Its estimated harvest volume for 2020 is 37,000 MT gutted weight, of which 6,500 MT is expected in the second quarter.

“NRS shall grow through sustainable growth and the group has 38 percent higher biomass in the sea at the end of the quarter compared to the same quarter last year,” CEO Charles Høstlund said. “With our ambitions for sustainable growth, we want to increase our capacity with both existing and extended licenses.”

NRS’s interim report also highlighted that two further sites were certified according to the Aquaculture Stewardship Council (ASC) standard in the last quarter, thereby making 80 percent of its sites certified. Its goal is to be 100-percent certified at active sites by 2022.

Additionally, NRS has two major investment projects in progress; a new smolt facility that is scheduled for completion in 2021, and Arctic Offshore Farming, which will produce salmon in more exposed waters.

With regards to the latter, two cages and a feed barge are under construction, and the first fish are expected to be released at the site this coming fall. However, the complex nature of the offshore project has increased the estimated investment costs, it stated.

The report also confirmed that Icelandic subsidiary Arctic Fish harvested 863 MT in the quarter, of which NRS’s share was 431 MT. Arctic Fish reported a profit of NOK 7.3 million (USD 712,074, EUR 658,243) for the three-month period, with NOK 3.7 million (USD 360,960, EUR 333,655) going to NRS.

“That the group's growth initiative on Iceland, Arctic Fish, achieved an operating EBIT of NOK 16 million (USD 1.6 million, EUR 1.4 million) and an operating EBIT-per-kilogram of NOK 18.47 (USD 1.80, EUR 1.67) in the quarter is very satisfactory,” Høstlund said.

Meanwhile, its associated Norwegian farming companies harvested 2,143 MT, which was 1,194 MT less than in Q1 2019. Correspondingly, NRS’s share amounted to 764 MT, a decrease of 424 MT. 

Image courtesy of Norway Royal Salmon

Contributing Editor reporting from London, UK

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