Leroy earnings soar on record salmon prices
Thanks primarily to record high farmed salmon prices, Bergen, Norway-based Leroy Seafood Group had record-setting profits in its most recent quarter.
Leroy achieved an operating profit before fair value adjustment of biomass of NOK 760 million (USD 93.2 million, EUR 82.1 million) in the second quarter, compared with NOK 370 million (USD 45.4 million, EUR 40 million) in the same period last year. The supplier’s volume of harvested salmon and trout rose 2 percent for the quarter.
Revenue also soared to NOK 4,262 million (USD 522 million, EUR 460.7 million), compared with NOK 3,324 million in the same period in 2015.
“The price of Atlantic salmon reached a record high in the second quarter, which was the key driver in Lerøy Seafood Group achieving its highest revenue and operating profit in any quarter in the Group’s history,” says CEO Henning Beltestad. “We’re pleased to be able to announce record profits, but there is still considerable potential for improvement and this is where we’re concentrating our efforts.”
Leroy implemented several measures that aim to reduce production costs for salmon and trout, according to Beltestad. “In that respect, it’s pleasing to report that the number of treatments was significantly down in the first half of 2016 compared with the first half of 2015, and that the treatments carried out in the second quarter were largely mechanical treatments.”
In Leroy’s farming segment, operating profit before fair value adjustment of biomass spiked from NOK 266 million (USD 32.6 million, EUR 28.7 million) in the second quarter of 2015 to NOK 674 million (USD 82.6 million, EUR 72.9 million) in the second quarter of 2016.
However, “Release from stock costs were significantly higher in the second quarter of 2016 than in the same period last year, with higher feed costs as the key driver. We expect release from stock costs to fall through the year, and to be lower for the second half of 2016 than for the first half,” Beltestad said.
Likewise, the trout market “has been extremely challenging” in the wake of Russia’s ban on imports, “but we’re now seeing our long-term efforts to develop new markets for trout starting to bear fruit,” Beltestad said. While Leroy realized a positive price trend for trout in the second quarter, prices remain significantly lower than those for salmon, he added.
Looking ahead, Leroy’s board sees “considerable potential for value generation in the global growth in demand for seafood, and believes it is important for Norway – from a socioeconomic perspective – to ensure that parts of this value generation can take place in Norway,” the company said.
Meanwhile, the Norwegian krone has weakened against key currencies. “This dynamic is positive for prices realized for salmon but also means – other things being equal – higher feed prices.”
Leroy is in a transitional phase within production of salmon and trout, “with extraordinarily high direct and indirect processing costs, combined with increasing costs for infection prevention,” the company said. “The Group has made substantial investments, including in the use of cleaner fish, and is seeing good results from this. The Group is also investing in other tools to optimize production, including increased capacity for mechanical cleaning and freshwater treatment in well boats.”