Fall in salmon price lowered Lerøy’s result

Aslak Berge

Lerøy Seafood Group (LSG) achieved revenues of EUR 506 million and an operating profit of EUR 50 million in the third quarter.

Downstream operations have reported positive growth in earnings when compared with the same period in 2018. However, lower earnings for Farming, attributed to lower prices realised and higher release from stock costs, represent the most significant reason behind the fall in earnings in Q3 2019 when compared with Q3 2018.

Excluding earnings from Villfangst, this results in an operating profit per kilo before biomass adjustment of EUR 0.9 compared to EUR 1.6 in the same period last year.

“We are confident that our business potential is higher and know that our skilled employees are working hard to exploit this to the full,” said CEO Henning Beltestad.

“The Group’s Farming segment has experienced more challenges than expected in Q3 2019,” says CEO Henning Beltestad. The export volume for Atlantic salmon saw a substantial increase when compared with the same quarter of 2018, resulting in a fall in spot prices. Release from stock costs in Q3 2019 is lower than in Q2 2019, but still too high. We expect falling release from stock costs to remain into Q4 2019,” added Beltestad.

During the period, it harvested 45,983 tonnes of salmon and trout.

In the third quarter, Lerøy Aurora achieved an operating EBIT of EUR 1.6 per kg. For the same period, Lerøy Midt and Lerøy Sjøtroll report EBIT per kg of EUR 0.8 and 0.2 respectively.

“We are in the process of implementing a substantial investment programme in the Farming segment, and expect to see growth in volume along with lower costs in the years to come,” confirmed Beltestad.

The development in prices for Atlantic salmon has been weak throughout the third quarter, partly impacted by an extremely high export volume from Norway, but also a relatively high volume from the UK. The Group can report a good and sustained underlying demand for both salmon and seafood. The Group expects to see sustained volatility but nonetheless satisfactory market conditions in the near future.

Lerøy’s Board of Directors wrote that it was not satisfied with the developments reported by Farming in 2019 but felt confident that “the initiatives taken and investments made will provide positive development in the years to come”.

“Operations at both Lerøy Aurora and Lerøy Midt are now back to normal. Lerøy Sjøtroll’s new smolt facility will unfortunately not be completed until the end of the fourth quarter. Smolt production is successful, but the delays in commissioning the plant for the production of so-called post-smolt have unfortunately resulted in a six-month delay in access to large smolt,” it added.

“As a result of reduced growth and a slightly weaker than expected price development throughout the third quarter, the harvesting time for parts of the 2019 production stock will be postponed until 2020. Depending on price developments, the Group currently expects to harvest between 172,000 and 175,000 tonnes of salmon and trout in 2019. These figures include the Group’s share from associates. The harvest volume in 2020, correspondingly, is currently estimated to increase to 183,000 to 188,000 tonnes of salmon and trout. The growth in harvest volume is expected to provide lower release from stock costs per kg in 2020 when compared with the estimated figures for 2019. The Group’s contract share for salmon in Q4 2019 is estimated to be around 35%,” it added.

At the time of writing, the company’s Board of Directors said it expects earnings in the fourth quarter of 2019 to be substantially higher than those achieved by the Group in the third quarter of 2019.


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