Reduced salmon prices impact Lerøy’s profits

Published on
February 27, 2018
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Norwegian fish farming and fishing company Lerøy Seafood Group (LSG) achieved revenues of almost NOK 4.6 billion (USD 588.5 million, EUR 477.5 million) in the fourth-quarter of last year, down from NOK 4.9 billion (USD 627 million, EUR 508.8 million) in the corresponding period of 2016. 

According to its preliminary figures, LSG’s operating profit before fair value adjustment of biomass for the last quarter amounted to NOK 777 million (USD 99.4 million, EUR 80.7 million), compared with NOK 1 billion (USD 127.9 million, EUR 103.8 million) in Q4 2016. The fall in profit was mainly attributed to a reduction in the prices realized for salmon and trout.

"Improvements in biological performance for the entire Norwegian fish farming industry in 2017 resulted in a higher harvest volume in Norway, which in turn put pressure on salmon prices towards the end of 2017,” LSG CEO Henning Beltestad said. “Lerøy has close links with the end market, and we continue to experience very strong demand for seafood and salmon. We are convinced that the group and the Norwegian fish farming industry will in the long-term create more value with some growth than without growth."

Its harvest volume in Q4 2017 totaled 42,000 metric tons (MT) gutted weight of salmon and trout, up eight percent from the same period in 2016.

For the full year 2017, the group reported revenues of NOK 18.6 billion (USD 2.4 billion, EUR 1.9 billion), up eight percent on the previous year year. Operating profit before fair value adjustment related to biological assets was NOK 3.7 billion (USD 473.4 million, EUR 384.1 million) for the year, up from NOK 2.8 billion (USD 358.3 million, EUR 290.7 million) in 2016. The profit before tax and fair value adjustment related to biological assets in 2017 was NOK 3.8 billion (USD 486 million, EUR 394.5 million), rising from NOK 2.9 billion (USD 370.9 million, EUR 301 million) in 2016. 

These results represented the highest revenue, the highest operating profit before fair value adjustment related to biological assets and the highest profit before tax and fair value adjustment related to biological assets in any year in the group's history.

"We can look back on one of the most exciting and demanding years in the group's history," Beltestad said. "2017 saw the proper implementation of our strategy to integrate whitefish into the group's well-established value chain for redfish. We are experiencing positive development in our downstream operations and we can report successful operations within fish farming.”

The company’s farming segment reported operating profit before fair value adjustment related to biological assets of NOK 567 million (USD 72.5 million, EUR 58.9 million) in Q4 2017, down from NOK 827 million (USD 105.8 million, EUR 85.8 million) a year earlier. For 2017 as a whole, the harvest volume was five percent higher than in the corresponding period in 2016, with the EBIT falling from from NOK 21.10 (USD 2.70, EUR 2.19) per kg in Q4 2016 to NOK 13.40 (USD 1.71, EUR 1.39) in Q4 2017.

At the same time, its VAP, sales and distribution segment achieved revenues of NOK 4.3 billion (USD 550.1 million, EUR 446.5 million) in the last quarter, up four percent year-on-year. Operating profit before fair value adjustment related to biological assets was down from NOK 141 million (USD 18 million, EUR 14.6 million) in Q4 2016 to NOK 122 million (USD 15.6 million, EUR 12.7 million) in Q4 2017. 

LSG’s wild-catch and whitefish segment, meanwhile – created following the acquisition of both Havfisk ASA and Norway Seafoods Group AS (now Lerøy Norway Seafoods AS - LNWS) in 2016 – posted an operating profit of NOK 79 million (USD 10.1 million, EUR 8.2 million) in the last quarter, compared with NOK 76 million (USD 9.7 million, EUR 7.9 million) in Q4 2016.

Havfisk, which landed 66,729 MT of fish in 2017, received delivery of a new trawler in January 2018 and Beltestad said there were “high expectations” for the new arrival. 

“Industrial development of whitefish processing in Norway is challenging, but we have a clearly defined objective to increase both competitiveness and earnings by means of successful marketing and efficient operations. A long-term perspective and investments are essential elements in this process, and we expect stability and harmony from framework conditions," he said.

Contributing Editor reporting from London, UK

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