LOW HARVESTED VOLUME - BUT RECORD
PROFIT
In Q3 2016, Lerøy Seafood Group
(LSG) posted an operating profit before fair value adjustment of
biomass of NOK 481 million in Q3 2016, compared with NOK 253
million in Q3 2015. This is equivalent to operating profit before
biomass adjustment of NOK 15.2 per kg compared with NOK 6.2 per kg
in the same period last year.
-
CEO Henning Beltestad confirms: "Lerøy Seafood
Group can report their highest revenue and highest operating profit
as of the third quarter throughout the Group's history." "We are
delighted with such a great result. It has not been an easy
quarter. We have experienced a number of biological challenges and
recorded lower average weights than expected and higher costs than
normal," continues Henning Beltestad.
-
"With a positive market, the Group chose to
harvest a substantial volume of fish throughout Q2 2016, entering
the third quarter with 10% less biomass than in the same period in
2015," explains CEO Henning Beltestad. He continues: "As a result,
the Group has had much more flexibility in terms of the timing of
release from stock throughout the quarter. Based on the Group's
market analyses, a somewhat limited volume has been harvested in
the quarter, and the Group has focused on accumulating biomass.
This strategy to harvest a lower volume in the quarter, combined
with the higher contract share in the quarter, has resulted in
lower prices realised. The Group expects higher harvested volumes,
prices realised to improve significantly, and lower release from
stock costs in the present quarter."
Lerøy Seafood Group reported
revenue of NOK 4,268 million, compared with NOK 3,295 million in
the same period in 2015. The volume harvested in Q3 2016 is 22 %
lower when compared with the same quarter last year. The Group's
profit before tax and before fair value adjustment of biomass was
NOK 534 million in Q3 2016, compared with NOK 231 million in Q3
2015.
The acquisition of the shares in
Havfisk ASA and Norway Seafoods Group AS was completed on 31 August
2016. LSG is now the majority shareholder in both companies, with
shareholdings of 67 % and 74 % respectively. Subsequent to the
transactions, Havfisk ASA and Norway Seafoods Group AS are
consolidated in LSG's figures with effect from September.
Consolidation of the two companies had a positive effect of NOK 13
million on the operating profit before fair value adjustment of
biomass in the third quarter.
The Group reported revenue of NOK 12,345 million
as of the third quarter 2016, an increase of 30% on the equivalent
period last year. Operating profit before fair value adjustment of
biomass was NOK 1,826 million for the first three quarters of 2016,
compared with NOK 1,027 million in the same period last year.
Profit before tax and fair value adjustment of biomass as of the
third quarter 2016 amounted to NOK 1,901 million, compared with NOK
985 million in the same period last year.
At 30 September 2016, net interest
bearing debt was NOK 2,752 million and the equity ratio was
58%.
FISH FARMING SEGMENT - LOW
HARVESTED VOLUME, HIGH COSTS
Operating profit before fair value
adjustment of biomass reported by the Farming segment was NOK 397
million in Q3 2016, up from NOK 178 million in Q3 2015. The Farming
segment harvested a total of 31,744 GWT salmon and trout in Q3
2016, down 22% from the same period in 2015. EBIT/kg increased from
NOK 4.4 per kg in Q3 2015 to NOK 12.5 per kg in Q3 2016.
In Q3 2016, Lerøy Aurora achieved
operational EBIT per kg of NOK 18.4. Lerøy Midt and Lerøy Sjøtroll
are reporting EBIT per kg of NOK 8.0 and NOK 15.4 respectively for
the same period.
-
"Prices realised for trout remain lower than for
salmon, but the gap in prices is growing smaller, and the Group
expects to see a positive development for the trout market in the
future," confirms CEO Henning Beltestad.
VAP SEGMENT - VOLATILE PRICES A
CHALLENGE
While the VAP segment reported a
9% increase in revenue from NOK 482 million in Q3 2015 to NOK 524
million in Q3 2016, the operating profit was down in the same
period from NOK 31 million to NOK 8 million. Correspondingly, the
operating margin was down from 6.5% in Q3 2015 to 1.6% in Q3
2016.
-
"The volatile prices for salmon have been and
continue to be a challenge for our processing facilities," explains
CEO Henning Beltestad. Despite this, he adds: "The segment can
report a positive underlying development, and the Group is
sustaining its efforts to adapt operations in line with the
projections of permanently high raw material prices."
SALES & DISTRIBUTION - GOOD
LEVEL OF ACTIVITY, BUT VOLATILE PRICES A CHALLENGE
Revenue from the Sales &
Distribution segment totalled NOK 3,845 million in Q3 2016, up 27%
on Q3 2015. The operating profit for Q3 2016 was NOK 82 million, up
36% from NOK 60 million in Q3 2015. Correspondingly, the operating
margin saw an increase from 2.0% in Q3 2015 to 2.1% in Q3 2016.
-
CEO Henning Beltestad reports: "The Sales &
Distribution segment can report a very positive development in both
revenue and operating profit for the third quarter, and still has
significant unutilised capacity in several of its fish-cut
facilities. Unutilised capacity in fish-cuts continues to provide
major potential for an increase in operations and earnings within
this part of the value chain, and one aspect of this strategy is an
increased focus on white fish in the future," confirms the
CEO.
HAVFISK ASA AND
NORWAY SEAFOODS GROUP AS
On 2 June 2016, the Group signed
an agreement to acquire 64.4% of the shares in Havfisk ASA and
73.6% of the shares in Norway Seafoods Group AS. Once the statutory
approvals were obtained, the transaction was completed on 31 August
2016. On 16 September 2016, the Group made a voluntary offer for
all the shares in Havfisk ASA and Norway Seafoods Group AS. The
deadline for acceptance of this offer was in the fourth quarter. On
27 October 2016, Lerøy Seafood Group obtained 100 % ownership of
both Havfisk ASA and Norway Seafoods Group AS.
Consequent to the transaction,
both companies were consolidated in Lerøy Seafood Group as of 1
September 2016. The two companies made a positive contribution to
the Group's operating profit before biomass adjustment of a total
NOK 12.6 million.
MARKET AND OUTLOOK
The Board of Directors and
management have been clear in their views on the need for changes
to the regulation of the fish-farming industry in Norway, and have
also made clear their views on the need for rolling figures for
maximum allowance biomass (MABs). These would reduce seasonal
variation in the supply of salmon/trout and thereby improve terms
and competitiveness for industrial operations in Norway. It is
important that changes to regulatory conditions are based on
long-term thinking that will facilitate investments, industrial
development and growth to ensure the industry's competitiveness in
the global food markets. The Board sees considerable potential for
value generation in the global growth in demand for seafood, and
believes it is important for Norway - from a socio-economic
perspective - to ensure that parts of this value generation can
take place in Norway. Positive and constructive dialogue between
enterprises in the industry and the authorities is essential if we
are to exploit the potential for increased value generation and
employment in Norway. The Board takes a positive view of
initiatives from Norwegian authorities that aim to facilitate
growth in Norwegian seafood production, but is uncertain as to the
impact of the proposals launched to date. It is important to
re-establish predictability in framework conditions for the
Norwegian fish-farming industry; a 5 to 10-year time frame is
needed to secure future global competitiveness. Framework
conditions of this nature must be based on an understanding of
environmental sustainability and value generation. Future
competition to win global consumers will leave no room for
non-essential costs, or taxes or charges particular to Norway.
In more recent years, the
Norwegian krone has weakened against key currencies. This dynamic
is positive for prices realised for salmon but also means - all
other factors being equal - higher feed prices. The Norwegian krone
has grown stronger against key currencies in the third quarter of
2016. If this trend continues, it may have an impact on the Group's
realised prices for seafood, but may also help reduce feed
prices.
In Q3 2016, the Group became the
majority shareholder of both Havfisk ASA and Norway Seafoods Group
AS. The LSG Group has been a driver towards the end market via its
fully integrated value chain, product development, increased
traceability and availability, particularly for salmon. The Group
has also launched equivalent products for white fish, and is
noticing the same trends as for salmon and trout. The Board and
management are confident that there is considerable value
generation potential in further developing the white fish market,
including increasing capacity utilisation in Lerøy Seafood Group's
downstream activities. The investments in Havfisk ASA and Norway
Seafoods Group AS are important to achieve the Group's vision of
being the leading and most profitable global supplier of quality
sustainable seafood.
The Group currently estimates a
total harvest volume of 44,000 GWT for Q4 2016, including the share
of LSG's volume from associates. The Group currently estimates a
corresponding total harvest volume for 2017 of 180,000 GWT salmon
and trout, including associates.
The management and the Board of
Directors maintain its expectation that the second half of 2016
will be significantly better than the second half of 2015. In view
of the planned increase in harvested volume and the positive market
outlook, it's expected that the Group's earnings in Q4 2016 will be
considerably better than in Q3 2016.
Questions and comments may be
addressed to the company's CEO, Henning Beltestad, or to the CFO,
Sjur S. Malm.
This information is subject
to the disclosure requirements pursuant to section 5-12 of the
Norwegian Securities Trading Act.
Q3 2016 Presentation
Q3 2016 Report
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions 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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