Rising seafood demand from recovering markets boost Lerøy’s Q2 earnings

Published on
August 19, 2021
Lerøy Seafood Group salmon net pens in the water.

Citing the gradual easing of COVID-19 restrictions in a number of key markets that led to stronger demand and higher prices for seafood products, Lerøy Seafood Group (LSG) reported its second-quarter 2021 revenues saw significant increases over the same period in 2020.

The company reported revenues of NOK 5.3 billion (USD 589.9 million, EUR 504.3 million), up from the NOK 4.7 billion (USD 523.1 million, EUR 447.2 million) that it made in the corresponding period of last year. Its operating profit before fair value adjustments climbed by NOK 280 million (USD 31.2 million, EUR 26.6 million) to NOK 583 million (USD 64.9 million, EUR 55.5 million).

The Norwegian fish farming and fishing group, which trades publicly on the Oslo Stock Exchange, also acknowledged that its earnings benefited from increased productivity in the whitefish sector.

Lerøy Seafood CEO Henning Beltestad said in the company's earnings report there has been “a good development” in demand for seafood in 2021.

“Demand in retail was strong in the first-quarter. This continued in the second-quarter, when we also saw demand gradually picking up in the hospitality and catering segments further to the easing of COVID-19-related restrictions. We're seeing a very strong position for seafood in the markets,” Beltestad said. “In the second quarter, we've seen a significant improvement on last year within [the] wild-catch [segment] and good progress in downstream activities, although we're not exploiting the full potential of our farming segment. We can and will improve, and the last quarter shows that we have a robust business model with significant potential.”

LSG operates in three farming regions in Norway: Lerøy Aurora, located in Troms and Finnmark; Lerøy Midt, located in Nordmøre and Trøndelag; and Lerøy Sjøtroll, located in Vestlandet. The company's farming segment’s operating profit before fair-value adjustment related to biological assets was NOK 388 million (USD 43.2 million, EUR 36.9 million), compared with NOK 216 million (USD 24 million, EUR 20.5 million) in Q2 2020. Some 36,756 metric tons (MT) gutted weight of salmonids were harvested, down from 38,896 MT in Q2 2020.

Its earnings before interest and taxes (EBIT) per kilogram was up from NOK 5.50 (USD 0.61, EUR 0.52) in Q2 2020 to NOK 10.60 (USD 1.18, EUR 1.01).

While the retail sector continued to be the key driver for LSG's salmon in the quarter, it was “very pleasing to see demand picking up in the hospitality and catering market too,” the group’s second-quarter report stated.

LSG reported its average price for salmon it sold in Q2 2021 was NOK 62.50 (USD 6.95, EUR 5.94) per kilogram, compared with NOK 57.90 (USD 6.44, EUR 5.51) in Q2 2020 and NOK 52.10 (USD 5.79, EUR 4.95) in Q1 2021. Norwegian trout export volumes have continued a declining trend this year, which has also led to improved prices.

Its estimated harvest volume of salmon and trout for 2021, including the share from associates, is currently 205,000-210,000 MT.

Within the group’s wild-catch segment, Havfisk's whitefish landings in the last quarter totaled 16,345 MT, down from 19,708 MT in Q2 2020. This catch included 3,241 MT of cod, 2,435 MT of haddock, 3,347 MT of saithe, and 1,521 MT of redfish. Some 5,174 MT of shrimp was also caught.

LSG said prices for its most-important wild-caught species, cod, are down 12 percent compared with Q2 2020, while prices for haddock and saithe climbed 3 percent and 13 percent, respectively. The company said its current expectations are that the further easing of COVID-19-related restrictions could result in a positive price development for the remainder of 2021, including for cod.

The group's quotas for 2021 are up 17 percent for cod, 22 percent for haddock, and 16 percent for saithe north of 62 degrees latitude and down 43 percent for saithe south of 62 degrees.

However, in June, the International Council for the Exploration of the Sea (ICES) published its recommendations for the total quotas of cod, haddock, and saithe in 2022, which include reductions in the cod and haddock quotas of 20 percent and 23 percent, respectively. For saithe north of 62 degrees latitude, a quota roughly equivalent to 2021 was recommended, while a 24 percent reduction was recommended in the total quota for the North Sea. Final quotas will be set in the autumn by Norwegian authorities.

Meanwhile, Lerøy Havfisk’s sister processing company Lerøy Norway Seafoods (LNWS) experienced “a substantial improvement in underlying operations,” which also led to an improvement in the financial results for the quarter.

In total, the segment reported an EBIT of NOK 65 million (USD 7.2 million, EUR 6.2 million) for Q2 2021, compared with a loss of NOK 5 million (USD 555,962, EUR 475,481) a year previously.

LSG’s value-added, sales, and distribution segment achieved revenues of NOK 5.1 billion (USD 567 million, EUR 484.8 million) in Q2 2021, up from NOK 4.5 billion (USD 500.3 million, EUR 427.8 million), with its operating profit before fair-value adjustment of biomass reported amounting to NOK 161 million (USD 17.9 million, EUR 15.3 million), up from NOK 114 million (USD 12.7 million, EUR 10.8 million) in the same period in 2020.

"The business is developing well this year. We're seeing the impact of new activities and the improvement measures we've put in place, but are still absorbing start-up costs for the new factories in Italy and Spain. We believe we're well-positioned to continue our earnings growth in this part of the business," Beltestad said.

With regards to its first-half 2021 results, LSG’s total revenues increased slightly to NOK 10.2 billion (USD 1.1 billion, EUR 970 million), while its operating profit for the six months fell by NOK 100 million (USD 11.1 million, EUR 9.5 million) to less than NOK 1.14 billion (USD 126.8 million, EUR 108.4 million).

Its profit before tax and fair-value adjustment related to biological assets for the period slipped slightly to less than NOK 1.04 billion (USD 115.7 million, EUR 98.9 million).  

Photo courtesy of Lerøy Seafood Group

Contributing Editor reporting from London, UK

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