SalMar posts lower second-quarter results off “darker” salmon market

Published on
August 26, 2021
SalMar CEO Gustav Witzøe announced his company's lower second-quarter results on 26 August.

“Solid craftsmanship and good biological performance” in its Norwegian salmon farming operations saw Frøya, Norway-headquartered SalMar ASA achieve operational earnings before interest and taxes (EBIT) of NOK 661 million (USD 75 million, EUR 63.8 million) for the second quarter of 2021, down from NOK 882 million (USD 100.1 million, EUR 85.1 million) in Q2 2020.

SalMar’s Norwegian operations made an operational EBIT of NOK 633 million (USD 71.9 million, EUR 61.1 million) for the period, compared with NOK 912 million (USD 103.5 million, EUR 88 million) a year previously.

The company’s quarterly operating revenues reached almost NOK 3.17 billion (USD 359.9 million, EUR 305.9 million), down NOK 140 million (USD 15.9 million, EUR 13.5 million) year-on-year, while the harvest totaled 36,600 metric tons (MT), compared with 40,900 MT a year previously. The operational EBIT-per-kilogram decreased to NOK 18.05 (USD 2.05, EUR 1.74).

“What pulls us down this quarter is the weak EBIT result from sales and industry. At the beginning of the year, we unfortunately had a darker view of the market and the price of salmon, which has proven to be the case,” SalMar CEO Gustav Witzøe said. “The fact that we actually underestimated the salmon, and the market, is the main reason why we today – overall – do not deliver a good enough result. On the positive side, the development recently has shown us how strong the salmon market is and we are optimistic in relation to continued strong market development going forward."

Regionally, Fish Farming Central Norway, the group’s largest business segment, harvested a total of 21,000 MT of salmon in the last quarter, some 6,200 MT less than in Q2 2020. Fish Farming Northern Norway harvested around 13,300 MT of salmon in the last quarter, which was 1,300 MT more than a year previously.

According to the quarter’s report, Fish Farming Central Norway achieved “a good result” in the period, driven by sound operations and good price achievement. SalMar expects the segment to harvest around 107,000 MT in the full-year 2021.

Fish Farming Northern Norway, meanwhile, “continues to produce consistently solid results,” and is expected to harvest around 56,000 MT of salmon this year.

Icelandic Salmon harvested 2,300 MT of salmon in Q2 2021, compared with 1,700 MT a year previously. Its operating revenues totaled NOK 182 million (USD 20.7 million, EUR 17.6 million) for the quarter, up from NOK 99 million (USD 11.2 million, EUR 9.6 million), thanks to the higher volumes and a better price achievement than in the corresponding period of last year. It also achieved an operational EBIT of NOK 28 million (USD 3.2 million, EUR 2.7 million), reversing a loss of NOK 30 million (USD 3.4 million, EUR 2.9 million) in Q2 2020. Icelandic Salmon will continue harvesting the 2019 generation in the third quarter, though at a higher volume than in Q2. It expects to harvest 14,000 metric tons in 2021.

During the last quarter, the company also invested in two new smolt facilities, which will increase the company’s production capacity by up to 800,000 smolt in 2022 and by 1,500,000 from 2023.

Meanwhile, Norskott Havbruk (Scottish Sea Farms) harvested 11,400 MT of salmon in the quarter. By comparison, the company harvested 5,900 MT the quarter before and 6,500 MT in the corresponding quarter in 2020. SalMar owns 50 percent of Norskott Havbruk.

SalMar’s Sales and Industry segment, which sells all of the fish that the group harvests in Norway, generated lower revenues of almost NOK 3.1 billion (USD 351.9 million, EUR 299 million) in the last quarter. The unit’s operational EBIT was actually a loss of NOK 136 million (USD 15.4 million, EUR 13.1 million), compared to a positive NOK 70 million (USD 7.9 million, EUR 6.8 million) in Q2 2019, with the report citing a negative contribution from fixed-price contracts as a result of the higher spot-price level, as well as costs relating to the completion and start-up of operations at its Vikenco and InnovaNor harvesting and processing plants.

Overall, for the first six months of this year, SalMar generated gross operating revenues in excess of NOK 6.4 billion (USD 726.5 million, EUR 617.4 million), down from NOK 6.9 billion (USD 783.2 million, EUR 665.5 million) in the first half of 2020. Excluding Norskott Havbruk, the group harvested 73,500 MT in the first six months of this year. In the same period last year, it harvested 80,900 MT.

The price of salmon for H1 2021 averaged NOK 58.07 (USD 6.59, EUR 5.60) per kilogram, compared with NOK 63.16 (USD 7.17, EUR 6.09) per kilogram in the same period last year.

SalMar’s operational EBIT for the first six months of this year fell to less than NOK 1.3 billion (USD 147.6 million, EUR 125.4 million) from NOK 1.9 billion (USD 215.7 million, EUR 183.3 million) in the first half of 2020. This gave an operational EBIT per kilogram of NOK 17.04 (USD 1.93, EUR 1.64), compared with NOK 24.06 (USD 2.73, EUR 2.32) in H1 2020.

At the beginning of June 2021, SalMar completed a private placement of 4.5 million new shares, which raised gross proceeds of NOK 2.7 billion (USD 306.5 million, EUR 260.4 million).

"This has given SalMar further flexibility and underpins our capacity to grow through strategic acquisitions along the entire value chain. We are looking at the purchase of salmon licenses, acquisition of companies and organic investments in smolt production, coastal farming, as well as harvesting and processing activities," Witzøe said.

Earlier this year, SalMar acquired ownership interest in Nekton Havbruk AS and Refsnes Laks AS, which together give SalMar 5,500 MT of increased maximum allowed biomass (MAB) for salmon production in central Norway.

It also has an offer on the table to purchase all outstanding shares in Norway Royal Salmon (NRS) for NOK 270 (USD 30.64, EUR 26.04) per share.

Photo courtesy of SalMar

Contributing Editor reporting from London, UK

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