Lerøy posts record NOK 7.67 billion Q2 2023 profit, warns of negative tax impact

Leroy Seafood processing workers.

Bergen, Norway-based Lerøy Seafood Group has swallowed a one-off cost of NOK 1.7 billion (USD 160.2 million, EUR 147.6 million) to implement Norway’s salmon farming resource rent tax, adopted in May 2023.

Lerøy Seafood Chief Financial Officer Sjur Malm said the firm paid NOK 2 billion (USD 188.5 million, EUR 173.6 million) in taxes and fees in 2022, but that figure is likely to grow significantly as a result of the tax, resulting in reduced operating cash flow. Producing an accurate estimate of how much the tax’s running costs will amount to is not currently feasible, Malm said, as work still needs to be done to calculate the value creation at its sea-based phase of salmon and trout production in Norway, the metric upon which the tax is based.

Speaking at the company’s presentation of its Q2 2023 results, Malm said historically, Lerøy Seafood measured profitability in its farming segment as a whole and traditionally assessed goods and services used through the value chain by their costs rather than focusing on the value creation at each step. However, with the new resource rent tax only applicable to the sea phase – not the full value chain – it now must shift its valuation measurement processes.

Malm said Lerøy Seafood may have to shift strategies as a result of the tax, saying it has hurt the ability of the company – and the larger salmon-farming industry in Norway – to invest in growth and development. To illustrate the “substantial ripple effect” that the new tax could have, Malm highlighted the fact that in 2022, LSG acquired NOK 19 billion (USD 1.8 billion, EUR 1.6 billion) worth of goods and services from some 5,100 suppliers across Norway.

“It doesn’t make sense to withdraw investment funds from coastal industries and transfer them into the central government,” he said. “We fear that the long-term consequences will be negative when it comes to value creation.”

The tax aside, driven by strong prices partly due to a weak Norwegian kroner, Lerøy Seafood posted 17 percent growth in revenue year over year 

Photo courtesy of Lerøy Seafood

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