Weak markets take bite out of salmon producer's Q2 profits

Grieg Seafood ASA has reported a sharp drop in it profits for the second-quarter of 2015, blaming its performance on a number of production issues and resulting high costs, as well as weak prices in the U.S. market.

The Norway-based Atlantic salmon farming group achieved sales of NOK 1.2 billion (EUR 131 million; USD 144.7 million) for the quarter, reflecting an increase of 3.5 percent on Q2 2014. The jump in sales revenue was attributed to changes in exchange rates, whereas the actual sales volumes and prices were down 7.3 percent and 3.9 percent, respectively.

The group’s operational earnings before interest and taxes (EBIT) before fair value adjustment of biomass was NOK -21 million (EUR -2.3 million; USD -2.5 million), down from NOK 123 million (EUR 13.4 million; USD 14.8 million) in Q2 2014.

At the same time, its salmon harvest for the quarter fell to 17,558 metric tons (MT) from 18,950 MT in Q2 2014.

Grieg said the American market remains weak, while in Shetland a large proportion of small fish resulted in lower income. The level of fixed price contracts was low in Q2 and the same can be expected for Q3, it said.

Also in the last quarter, its British Columbia (BC) operation encountered a low oxygen incident that resulted in the loss of 1,000 MT of biomass, while biological issues in Shetland and Norway led to higher production costs.

Grieg has reduced its 2015 harvest forecast by 2,000 MT to 70,000 MT, saying its Norwegian volumes would be lower due to colder summer sea temperatures, but that there would be increased production in both Shetland and BC.

On announcing the results, Grieg’s board said it was not satisfied with the cost of operations within the group and that the new CEO, Andreas Kvame, would implement operative measures enabling the company to improve the cost of operations in all areas of the value chain.

The company’s management, meanwhile, will focus on biological risk management and operations.

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