GOOD BIOLOGICAL DEVELOPMENT IN
FARMING
In Q3 2018, Lerøy Seafood Group
(LSG) reported revenue of NOK 4,456 million, compared with NOK
4,373 million in the same period in 2017. Operating profit before
fair value adjustment related to biological assets was NOK 660
million in Q3 2018 compared to NOK 861 in the same period in 2017.
The decline in harvest volume of salmon and trout is the main
reason for the fall in profit in Q3 2018. The Group's production in
the third quarter, and to date in the fourth quarter, reflects a
good biological situation. The Group's standing biomass has in the
third quarter gone from being 6% lower at 30 June 2018 than on the
same date last year, to being 4% higher at 30 September 2018
compared with 30 September 2017.
The Group reports revenue of NOK
14,498 million for the first three quarters of 2018, up 3% on the
equivalent period last year. Operating profit before fair value
adjustment related to biological assets for the first three
quarters of 2018 was NOK 2,620 million, compared with NOK 2,939
million for the same period last year. Profit before tax and fair
value adjustment related to biological assets for the first three
quarters of 2018 was NOK 2,729 million, compared with NOK 3,033
million for the same period last year.
-
"The biological production in
the third quarter has been good," says CEO Henning Beltestad. "Our
harvest volume was low but we've capitalised on the good level of
production with a significant increase in the biomass for
subsequent harvesting. As previously communicated, the low volume
means lower earnings for the quarter. However, we've paved the way
for good earnings and a continuing positive development in release
from stock costs going forward. We're experiencing high demand for
our high-quality seafood, the market is strong, and we maintain our
outlook for a harvest volume in Norway of 166,000 tonnes this
year."
At 30 September 2018, net
interest-bearing debt was NOK 3,111 million and the equity ratio
was 60%.
THE WILD CATCH
SEGMENT
Havfisk's primary business is wild
catches of whitefish. Total catch volume in Q3 2018 was 14,282
tonnes, compared with 17,029 tonnes in Q3 2017. Catch volumes for
the main species in Q3 2018 were 4,714 tonnes of cod, 3,908 tonnes
of saithe and 1,008 tonnes of haddock. The catch distribution in Q3
2017 was 7,662 tonnes of cod, 3,436 tonnes of saithe and 2,464
tonnes of haddock. Moreover, catches of shrimp increased from 165
tonnes in Q3 2017 to 2,703 tonnes in Q3 2018. Compared with Q3
2017, the average price realised for all species increased by 23%
in Q3 2018. The prices for cod and haddock increased by 23% and 38%
respectively in the quarter, while the price for saithe fell by
5%.
LNWS's primary business is
processing wild-caught whitefish. The company has use of 12
processing and purchasing plants in Norway, five of which are
leased from Havfisk. The processing of whitefish in Norway has been
extremely challenging for many years. As a result of high demand
for seafood and lower quotas, the raw material prices increased
throughout the first half of 2018, representing a challenge for
processing operations.
The quarter was impacted by an
increase in inventories of NOK 33 million within fishing
operations, with the segment contributing operating profit of NOK
41 million, compared with NOK 62 million in Q3 2017.
-
"There is strong demand for
white fish," says Henning Beltestad. "There was a lower catch
volume in the third quarter, but the average price realised for all
species was up 23% on the same quarter last year. However,
conditions remain challenging for the shore-based industry. The
Group has implemented a large number of measures within both
production and marketing to improve earnings, but these are
long-term initiatives and it will take time before significant
improvements are evident," he says.
THE FARMING
SEGMENT
The Farming segment reported
operating profit before fair value adjustment related to biological
assets of NOK 569 million in Q3 2018, compared with NOK 715 million
in Q3 2017. The Farming segment harvested 37,000 tonnes gutted
weight of salmon and trout in Q3 2018, compared with 46,000 tonnes
in Q3 2017. EBIT/kg of NOK 15.3 for Q3 2018 is roughly unchanged
from NOK 15.5 in Q3 2017.
In Q3 2018, Lerøy Aurora achieved
operational EBIT per kg of NOK 24.5. Lerøy Midt and Lerøy Sjøtroll
are reporting EBIT per kg of NOK 18.5 and NOK 4.5 respectively for
the same period.
-
"Significant investments are
currently being made in the Farming segment," says CEO Henning
Beltestad. "The new industrial facility in Lerøy Midt is now
operational, and we have high hopes that this will strengthen the
Group's competitiveness throughout its integrated value chain. The
building of RAS facilities for larger high-quality smolt in both
Lerøy Aurora and Lerøy Sjøtroll is also proceeding according to
plan," he adds.
-
"The release from stock costs
are lower in the third than the second quarter, but remain at a
level the Group considers unsatisfactory. Based, among other
things, on the positive development in the third quarter, we now
expect falling release from stock costs over the coming quarters,"
says Beltestad.
THE VAP, SALES & DISTRIBUTION
SEGMENT (VAPS&D)
The VAPS&D segment reported
revenue in Q3 2018 of NOK 4,408 million, up 3% compared with the
same period last year. Operating profit before fair value
adjustment related to biological assets fell from NOK 111 million
in Q3 2017 to NOK 72 million in Q3 2018.
-
"Despite lower earnings in VAP,
Sales & Distribution in the third quarter of 2018 than the same
period last year, the Group can report a positive underlying
development in the segment," says CEO Henning Beltestad. "The
volatile spot prices for salmon remain challenging for processing
operations, but we expect our new factories in Spain and the
Netherlands to help make the Group's production and distribution
even more efficient. The Group is proud to be a preferred partner
for demanding, high-calibre partners, not just internationally but
also in the Norwegian grocery market," he says.
MARKET AND OUTLOOK
The development in prices for
Atlantic salmon to date in 2018 has been highly volatile. This
complicates industrial development and reduces the willingness of
market actors to assume positions and develop the seafood market.
At the same time, the Group has close links with the end market and
observes very positive underlying growth in demand for both
Atlantic salmon and other seafood.
The Group remains dissatisfied
with the 2018 results for Lerøy Sjøtroll but is pleased that things
are moving in the right direction. The Group is confident that the
initiatives it has implemented will generate substantial
improvements in the next few years. The investment in the RAS
facility is crucial to the development of Lerøy Sjøtroll. The Group
expects the larger, higher-quality smolt produced by the facility
to improve productivity when the smolt are released to sea.
The current estimate for harvest
volume in 2018, including the share of LSG's volume from
associates, is 179,000 GWT. The harvest volume may, for numerous
reasons including biology and market evaluations, differ from
estimates. However, the Group does not expect the difference to be
major in 2018.
The current estimate for harvest
volume in 2019, including the share of LSG's volume from
associates, is 190,000 GWT.
On 18 October 2018, the
Norwegian-Russian fisheries commission stipulated total quotas for
cod, haddock, Greenland halibut and redfish for 2019. The total
quotas for cod and haddock are down 6.5% and 15% respectively,
while the quota for Greenland halibut is unchanged and that for
redfish is up 64%. Moreover, the advice from the International
Council for the Exploration of the Sea (ICES) is that the quota for
saithe in the zone north of 62 degrees latitude should be reduced
by 13%, while the advice for fishing for saithe in the North Sea
implies an increase of 21%. The final quotas per vessel will be
stipulated in November/December 2018.
Developments within whitefish in
2018 have been positive, even though industrial development and
processing of fish in Norway remain difficult. This situation is
impacted by political framework conditions, but the Group has a
clear ambition to increase competitiveness and earnings for
whitefish, with the prevailing conditions and by means of improved
marketing and improvements to operational efficiency in this part
of the organisation also. The process of industrial development for
whitefish requires patience, a long-term perspective and
considerable investments. Such investments require framework
conditions that are predictable, and the Group and its employees
fervently hope to be able to carry out such work without any
obstacles in the years to come. Developments in fishing operations
to date in 2018 have been positive. The Group maintains its best
estimates for 2018 catch volumes at approx. 65,000 tonnes.
The Board of Directors maintains
its outlook for strong earnings for 2018, and currently expects the
profit for the year to be higher than 2017.
Questions and comments may be
addressed to the company's CEO, Henning Beltestad, or to the CFO,
Sjur S. Malm.
This information is subject of the disclosure
requirements pursuant to section 5-12 of the Norwegian Securities
Trading Act.
Q3 2018 Report
Q3 2018 Presentation
This
announcement is distributed by West Corporation on behalf of West
Corporation clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Lerøy Seafood Group ASA via Globenewswire
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