Strong start to 2020 for SalMar, but Icelandic salmon business struggles

Published on
May 19, 2020

Citing high spot prices and a strong operational performance, SalMar achieved record operational earnings before interest and taxes (EBIT) of almost NOK 1.07 billion (USD 107.1 million, EUR 977.8 million) in the first quarter of this year, up from NOK 806 million (USD 80.7 million, EUR 73.7 million) in Q1 2019.

“For the SalMar Group, the first quarter was very good. We posted the highest-ever operational EBIT in the company’s history, achieved through strong underlying operations, high volumes, and good prices. Central Norway in particular distinguished itself through solid performance in the quarter,” SalMar CEO Gustav Witzøe said.

The Norway-headquartered salmon farmer’s gross operating revenues of NOK 3.6 billion (USD 360.4 million, EUR 329 million) in the last quarter were up 22 percent year-on-year, while the harvest totaled 40,000 metric tons (MT), compared with 35,500 MT a year previously, and the operating EBIT per kilogram increased to NOK 26.61 (USD 2.66, EUR 2.43).

Regionally, Fish Farming Central Norway, the group’s largest business segment, harvested a total of 22,200 MT of salmon in the last quarter, some 4,000 MT more than in Q1 2019. Fish Farming Northern Norway harvested around 13,600 MT of salmon in the last quarter, which was 1,500 MT less than a year previously.

According to the quarter’s report, Fish Farming Central Norway posted good results for the period on the back of “sound operations,” while a more even spread of the harvested volume and higher spot prices resulted in considerably better price achievement than for the previous quarter. SalMar expects the segment to report lower costs and a slightly higher harvested volume in Q2 than in the first three months.

The latter segment’s results were affected by higher harvesting costs at sites suffering from by the viral disease infectious salmon anaemia (ISA), but it achieved “a considerably better operating margin” than in previous quarters due to cost improvements and increased spot prices. Those sites affected by ISA have now been emptied out, and SalMar expects the segment to report a slightly lower harvested volume and lower costs for the second quarter this year.

Meanwhile, its Icelandic subsidiary Arnarlax harvested 4,300 MT of salmon in Q1 2020, compared with 2,100 MT a year previously. Its operating revenues totaled NOK 280 million (USD 28 million, EUR 25.9 million) in the quarter, up from NOK 133 million (USD 13.3 million, EUR 12.2 million).

The report states that Bíldudalur, Iceland-based Arnarlax “had a challenging quarter,” with high mortality resulting from winter wounds. As previously reported, this high level of mortality forced the company to harvest out a significant number of fish during a period of poor weather conditions and low sea temperatures. These actions resulted in higher costs.

For the quarter, Arnarlax achieved an operational EBIT of NOK 22 million (USD 2.2 million, EUR 2 million), some NOK 3 million (USD 300,334, EUR 274,049) less than in the same period in 2019. Operational EBIT-per-kilogram gutted weight came to NOK 4.92 (USD 0.49, EUR 0.45), compared with NOK 11.77 (USD 1.18, EUR 1.08) per kilogram in Q1 2019.

“A substantially lower volume is expected in the second quarter this year. Weaker margins must also be expected because one will continue harvesting of the 2018 generation and because Arnarlax will not benefit from the same positive currency effects with regard to salmon prices, since they are sold and recognized largely in EUR,” the report said.

In addition, associated business Norskott Havbruk harvested 2,900 MT of salmon, compared with 4,800 MT in Q1 2019. SalMar owns 50 percent of this producer.

A harvest of 152,000 MT is projected from SalMar’s Norwegian farms in 2020, Arnarlax is expected to harvest around 12,000 MT, while Norskott Havbruk is forecast to harvest 26,000 MT.

SalMar’s Sales and Processing segment, which sells all of the fish that the group harvests in Norway, generated higher revenues of NOK 3.35 billion (USD 335.2 million, EUR 306 million) in the last quarter. However, the unit posted an operational EBIT loss of NOK 17 million (USD 1.7 million, EUR 1.6 million), representing a NOK 31 million (USD 3.1 million, EUR 2.8 million) reversal on Q1 2019. The decrease in earnings is blamed on a negative contribution from fixed-price contracts as a result of high spot salmon prices through much of the quarter.

The group previously advised that a dividend will not be paid for 2019 due to the uncertainty caused by the ongoing coronavirus situation. It is, however, continuing with its investment projects as planned, including the construction of the new InnovaNor harvesting and processing plant in northern Norway and a smolt production facility on Senja.

It is also considering the construction of a new hatchery in Tjuin, Trøndelag, and purchased a plot of land in the area in Q4 2019. 

Photo courtesy of SalMar

Contributing Editor reporting from London, UK

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