Lerøy Seafood Group (LSG) has posted operating profit before fair value adjustments of NOK 691 million (USD 79.1 million, EUR 70.6 million) for the first quarter of this year, down 28 percent from the NOK 960 million (USD 109.9 million, EUR 98.1 million) announced for the corresponding period of 2018, and almost half of the record NOK 1.3 billion (USD 148.9 million, EUR 132.8) achieved in Q1 2017.
The group said the most significant factor behind the quarter’s lower operating profit was that the harvest volume from its farming segment was down compared to Q1 2018.
At the same time, LSG’s revenue for the last quarter fell 5 percent to NOK 4.7 billion (USD 538.3 million, EUR 480.1 million).
“The harvest volume for salmon and trout was low in Q1 2019, having a negative impact on release from stock costs. The group can, however, report successful production at sea. There has been good demand and lower quotas for whitefish, resulting in high prices, which have challenged onshore operations. In total, the first quarter has been moderately positive, but we could do better,” Lerøy CEO Henning Beltestad said.
The company’s farming segment reported operating profit before fair value adjustment related to biological assets was NOK 510 million (USD 58.4 million, EUR 52.1 million) in Q1 2019, compared with NOK 740 million (USD 84.7 million, EUR 75.6 million) a year previously.
Its Q1 slaughter volumes of salmon and trout decreased by 14 percent year-on-year to 32,317 gutted weight tonnage (GWT), while the earnings before interest and taxes (EBIT) fell from NOK 19.70 (USD 2.26, EUR 2.01) per kg in Q1 2018 to NOK 15.80 (USD 1.81, EUR 1.61).
“As forecast and previously reported, the harvest volume in Q1 2019 was lower when compared with the same quarter last year. This is one of the reasons behind the increase in release from stock costs in this quarter when compared with Q1 2018,” said Beltestad. “What’s more, realized prices [were] slightly lower than in Q1 2018, mainly related to downgrades for trout at the start of the quarter,” Beltestad said. “However, demand for seafood is good and we have achieved positive growth in the first quarter, laying the foundations for successful production for the rest of the year.”
The average price for salmon in Q1 2019 increased to NOK 61.30 (USD 7.02, EUR 6.26) per kilogram.
Within LSG’s wild-catch segment, Havfisk's total catch volume in the last quarter was 20,536 metric tons (MT), compared with 22,268 MT in Q1 2018. The main catch species were cod (8,881 MT), haddock (5,246 MT) and saithe (3,214 MT). Compared with Q1 2018, the average price for cod increased by 14 percent, haddock was 13 percent higher and saithe was up 1 percent.
The increase in prices was “a natural direct result” of lower quotas and increasing demand for the products, LSG said.
Overall, the segment reported an EBIT of NOK 171 million (USD 19.6 million, EUR 17.5 million) in Q1 2019, down NOK 7 million (USD 801,729, EUR 715,155) year-on-year.
The group highlighted that it had initiated measures within production and marketing to improve earnings from its onshore operations, but Beltestad said these were long-term initiatives and that it will take time before significant improvements are evident.
LSG’s VAP, sales and distribution segment achieved Q1 2019 revenues of NOK 4.5 billion (USD 515.4 million, EUR 459.8 million) and operating profit before fair value adjustment related to biological assets of NOK 79 million (USD 9 million, EUR 8.1 million). It expects the factories that opened in 2018 and the improvements in operations to produce higher earnings in this segment this year.
The group estimates a 2019 total salmonid harvest of 190,000 GWT, including LSG’s volume from associates, and a wild catch of approximately 64,000 MT.
Photo courtesy of Lerøy Seafood Group
