Lerøy Q2 result shaken by price fall

And it will probably not improve in Q3.

In Q2 2020, Lerøy Seafood Group (LSG) reported revenue of NOK 4,712 million (EUR 445 million), compared with NOK 5,340 million (EUR 505 million) in the same period in 2019. Operating profit before fair value adjustment related to biological assets was NOK 322 million (EUR 30 million) in Q2 2020, compared with NOK 774 million (EUR 73 million) in Q2 2019. Exclusive of earnings from the Wild Catch segment, this corresponds to an EBIT per kilo before value adjustment related to biological asset in Q2 2020 of NOK 7.8 (EUR 0.7) compared to NOK 19.0 (EUR 1.8) for the same period in 2019.

“Earnings in Q2 2020 are substantially lower than expected at the start of the year,” said CEO Henning Beltestad.

“The key factor behind this is the fall in salmon prices caused by the impact on demand of the COVID-19 pandemic. We have no way of knowing how long we will be affected by the pandemic, but we are experiencing that the Group’s model of close integration with our customers has grown even stronger throughout these challenges. We are confident that the long-term demand for healthy and sustainable high-quality seafood has not changed and will remain high”.

“Our main focus has been to keep the value chain open and ensure deliveries to our customers. We have succeeded in this. I am proud of and grateful for the hard work and determination my colleagues have shown,” said Henning Beltestad.

During the quarter, the Farming segment harvested 39,000 tonnes, compared with 37,000 tonnes in Q2 2019.

In Q2 2020, the EBIT/kg figure for Lerøy Aurora was NOK 6.30 (EUR 0.6), NOK 14.10 (EUR 1.3) for Lerøy Midt and NOK -1.60 (EUR -0.2) for Lerøy Sjøtroll.

“Due to extremely high export volumes from Norway, price developments for trout have been much weaker than for salmon in the second quarter and start of the third quarter,” said Beltestad.

“The total release from stock costs in Q2 2020 are higher than in the same quarter last year, but – as previously reported – we expect to see a decline in these costs in the second half of the year.” .

The factors behind the high release from stock costs are a challenging situation for Lerøy Aurora and the sustained high release from stock costs for salmon at Lerøy Sjøtroll. To date in the third quarter, production in the sea has been as expected, and the current outlook is for a significant reduction in release from stock costs in the second half of 2020 and beyond. The investments made by the Group in recent years in larger smolt will gradually start to become evident. The average size of released salmon smolt at Lerøy Aurora and Lerøy Sjøtroll will be around 300 grams in 2020. Both the corporate management and the Board of Directors expect the completed investments in new smolt plants, and the ongoing investments, to provide considerable growth in production in the sea in 2020 and the years ahead. From 2020 onwards, this increase in production will gradually result in higher year-on-year harvest volumes over the next four to five years.

The estimated harvest volume for 2020, including the share from associates, is currently 183,000-188,000 tonnes salmon and trout. The Group’s target is for the corresponding figures in 2021 to be between 200,000 and 210,000 tonnes.

The Board of Directors emphasises that the outlook is subject to much greater uncertainty than normal, but current estimates are for earnings in Q3 2020 to be significantly lower than would normally be expected. The Board of Directors underlines that the total result for the year is contingent upon how the pandemic develops and the ripple effects this will have on demand for seafood in the near future.


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