Continuing biological challenges at its Norwegian and British Columbia (B.C.) salmon farming sites impacted Grieg Seafood ASA’s production and results in Q3, hitting its revenue and earnings.
Grieg’s Q3 2023 report, published on 14 November 2023, said the company had low harvest volumes in the quarter, as the focus was put on rebuilding biomass.
CEO Andreas Kvame said that as a result of the low salmon harvest volume, costs per kilogram increased. Operational performance had been impacted by a mixture of different biological challenges, including the Spiro parasite (Spironucleus salmonicida) in its Finnmark region, harvesting at low weights due to previous infectious salmon anemia (ISA) outbreaks in Rogaland, and seasonal biological issues in BC.
“Unfortunately, these events reduced our price achievement and earnings,” he said. “I am not satisfied with the results. We are turning every stone in the regions to get back on track. Mitigating measures have been implemented, such as vaccination programs against ISA and winter ulcers as well as a UV-filter to prevent Spiro from entering our smolt facility.”
Due to the long production cycle of farmed salmon, it will take some time before Grieg sees the effect of the measures, Kvame said. But he added that he’s encouraged that the underlying biology in Rogaland is good, while in Finnmark, the generation of fish transferred to the ocean during 2023 has not been impacted by Spiro and is performing well.
Kvame said Newfoundland’s first harvest in October was a “high point,” and that the biological control in the region has been strong, with high survival, good fish health and welfare, good growth, good product quality, and no sea lice issues.
“We look forward to taking the next steps in Newfoundland,” he said.
The company reported that Newfoundland transferred 2.5 million smolt to sea with an average weight of 140 grams in the quarter, and at the end of Q3, it had approximately 9,300 MT biomass at sea with an average weight of 2 kilograms. The average weight of the fish transferred to sea in 2022 was 4.1 kilograms at the end of the quarter.
The good news from Newfoundland was not enough to offset challenges elsewhere. The company’s Q3 operational earnings before interest and taxes (EBIT) was a loss of NOK 86 million (USD 7.8 million, EUR 7.3 million), down from the NOK 145 million (USD 13.1 million, EUR 12.3 million) it earned in Q3 2022. Revenue also fell sharply, dropping over 32 percent year-over-year from NOK 1.71 billion (USD 154.1 million, EUR 144.8 million) to NOK 1.16 billion (USD 104.5 million, EUR 98.2 million).
Grieg’s total harvest volume also dropped 46 percent from 22,923 metric tons (MT) in Q3 2022 to 12,245 MT – giving a negative operational EBIT, with the company losing NOK 7 (USD 0.63, EUR 0.59) per kilogram.
Grieg’s pre-tax loss for the quarter totaled NOK 27.1 million (USD 2.4 million, EUR 2.3 million), compared to a loss of NOK 402.5 million (USD 36.3 million, EUR 34.1 million) in Q3 2022. The loss in 2022 was related to biological challenges at its B.C. salmon farming operations and inflation.
Rogaland’s Q3 2023 harvest volume was 4,738 MT, down from 6,841 MT in Q3 2022; while Finnmark harvested 1,354 MT, down from 8,174 MT; and its farming operations in B.C. contributed 6,108 MT, down from 7,908 MT.
The report advised that in Q4, Grieg expects to achieve a harvest volume of 25,800 MT, with Rogaland providing 2,200 MT, Finnmark 12,200 MT, B.C. 6,400 MT, and Newfoundland 5,000 MT. It also said the total harvest volume guidance for 2023 will be 76,000 MT, down from the 78,000 MT it reported previously.
Because of the early harvest of ISA-infected fish in Q3, the full-year harvest target for Rogaland was reduced from 27,000 to 26,000 MT. For Finnmark, the full-year harvest estimate has lifted from 26,000 to 27,000 MT. The company said it expects that B.C. and Newfoundland will contribute 18,000 MT and 5,000 MT respectively.
For 2024, the company is projecting a total harvest volume of 85,000 MT.
Alongside its results, Grieg has also announced it is investing NOK 1.1 billion (USD 99.1 million, EUR 93.1 million) in a new post-smolt unit at its facility in Finnmark. This, it said, will increase the region’s annual production of post-smolt from 1,800 MT to 4,800 MT.
Grieg previously announced it was putting all investments on hold after Norway proposed a 40 percent resource tax on all aquaculture operations. The final tax rate ended up being 25 percent, and while some of the technical details of the tax are still unclear, the lower rate has Grieg re-investing in its operations again – albeit with a tighter focus.
"The 25 percent resource tax has reduced funds available for investments. It is now more critical to prioritize the location, the investment amount, and the order of investment than before,” Kvame said. “The post-smolt expansion in Finnmark is a relatively low-risk investment with a good profitability outlook. Based on our experience in Rogaland, we strongly believe that post-smolt will improve biology, fish health, and welfare in our Finnmark region."
Grieg also confirmed it is seeking long-term partners to help with the development of its farming operations in Canada, and has engaged DNB Markets as a financial advisor to help identify potential collaborators. Subject to market conditions and final approval by its board of directors, the company said it expects to conclude the process 2024.
Photo courtesy of Grieg Seafood ASA
