Profits fall at Grieg Seafood but bumper 2018 harvest expected
Grieg Seafood ASA achieved operational earnings before interest and taxes (EBIT) of NOK 904 million (USD 117.1 million, EUR 93.4 million) before fair value adjustment of biomass last year, down from almost NOK 1.2 billion (USD 155.5 million, EUR 124 million) in the previous year, with lower volumes and spot prices contributing to the decline.
The Norway-headquartered salmonid producer harvested 62,598 metric tons (MT) of salmon, a decrease of 2,128 MT compared with 2016. Its total operating income for 2017 exceeded NOK 7 billion (USD 906.8 million, EUR 723.4 million), up from NOK 6.6 billion (USD 855 million, EUR 682.2 million) in the previous year.
Cost per kg increased in the 12 months, mainly due to the reduced salmon harvest. However, the company anticipates a “considerable increase” in 2018’s harvest, which is expected to contribute to cost reductions.
In its results statement, Grieg said that the increased global harvest caused market prices to abate somewhat in 2017. The average spot price for the year was NOK 59.93 (USD 7.76, EUR 6.19) per kg, which was NOK 2.75 (USD 0.36, EUR 0.28) less than in 2016. However, with higher contract prices in 2017 than in 2016, Grieg’s realized price declined less than the spot market price reduction.
The company highlighted that a stated strategy is to increase its access to more and higher quality smolt. Last year, it released 26 million smolt, which was 27 percent more than in 2016.
This approach improves the exploitation of its existing production capacity and will reduce the cost per kg. The effect of this will be seen from the second-quarter of this year, it said.
Grieg also believes that the lower salmon prices will stimulate market activity, which in turn will lead to increased demand and may also have a positive effect on the salmon prices through the year. It added that in the longer term, the relationship between supply and demand for salmon should stabilize, which would also give grounds to expect good market prices in the future.
The company has forecast a Q1 2018 harvest of approximately 8,900 MT. For 2018 as a whole, a harvested volume of around 80,000 MT is expected, corresponding to an increase of 28 percent over last year.