STRONG DEMAND FOR SEAFOOD
In Q1 2018, Lerøy Seafood Group
(LSG) reported revenue of NOK 5,000 million, compared with NOK
5,459 million in the same period in 2017. Operating profit before
fair value adjustment related to biological assets was NOK 960
million in Q1 2018, compared with NOK 1,277 million in Q1 2017. The
decline in profit in Q1 2018 when compared with the same quarter in
2017 is mainly attributed to a lower harvest volume and lower
prices realised for salmon and trout. Exclusive of earnings from
the Wild Catch segment, this corresponds to an EBIT per kilo before
value adjustment related to biological asset in Q1 2018 of NOK 20.8
compared to NOK 25.8 for the same period in 2017.
"I am satisfied with the result we
have achieved in the first quarter of 2018," confirms CEO Henning
Beltestad. He continues: "There is a strong demand for seafood and
this has produced a positive development in prices in the first
quarter of 2018."
"The process of developing Lerøy
into a fully integrated company with both whitefish and redfish in
our value chain continues at full pace," explains CEO Henning
Beltestad. "I am proud of the Group's highly skilled employees who
work towards targets in every part of the value chain and who
constantly have to adapt to developments in line with customer
requirements," confirms CEO Henning Beltestad.
The Group's associates play an
important role and have successful operations. Income, before fair
value adjustment related to biological assets, from associates were
NOK 84 million in Q1 2018, compared with NOK 63 million in Q1
2017.
The Group's profit before tax and
fair value adjustment related to biological assets was NOK 1,018
million in Q1 2018, compared with NOK 1,294 million in Q1 2017.
At 31 March 2018, net
interest-bearing debt was NOK 2,293 million and the equity ratio
was 57.5%.
THE WILD CATCH SEGMENT
Havfisk's primary business is wild
catches of whitefish. Havfisk's total catch volume in Q1 2018 was
22,268 tonnes, compared with 20,586 tonnes in Q1 2017. Catch rates
in the first quarter have been good. Catch volumes for the main
species in Q1 2018 were 9,275 tonnes of cod, 3,686 tonnes of saithe
and 6,545 tonnes of haddock. The catch distribution in Q1 2017 was
9,425 tonnes of cod, 2,841 tonnes of saithe and 7,380 tonnes of
haddock. In comparison with Q1 2017, the average price for all
species increased by 11% in Q1 2018. The prices for cod and haddock
increased by 12% and 20% respectively in the quarter, while prices
for saithe fell by 1%.
LNWS's primary business is
processing wild caught whitefish. The company has use of eight
processing 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,
the raw material prices increased throughout the first quarter of
2018, representing a challenge for processing operations.
In total, the segment reported
operating profit of NOK 178 million in Q1 2018, compared with NOK
158 million in the same period of 2017.
"Havfisk's new trawler, Nortind,
was delivered from the shipyard in January 2018 and has had very
successful operations so far," confirms CEO Henning Beltestad. He
continues: "The new trawler and the increase in catch volumes and
higher average prices have all resulted in a good quarter for
Havfisk."
"The processing of whitefish in
Norway is a challenging business. The Group has implemented a
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," explains Henning
Beltestad.
THE FARMING SEGMENT -
strong development in prices throughout the
quarter
The Farming segment reported
operating profit fair value adjustment related to biological assets
of NOK 740 million in Q1 2018, down from NOK 1,047 million in Q1
2017. The Farming segment harvested a total of 38,000 tonnes gutted
weight of salmon and trout in Q1 2018, down 13% from the same
period in 2017. EBIT/kg fell from NOK 24.2 per kg in Q1 2017 to NOK
19.7 per kg in Q1 2018, mainly attributable to the fall in prices
realised.
In Q1 2018, Lerøy Aurora achieved
operational EBIT per kg of NOK 28.4. Lerøy Midt and Lerøy Sjøtroll
are reporting EBIT per kg of NOK 21.8 and NOK 13.2 respectively for
the same period.
"Lerøy Sjøtroll's
costs remain too high, but Lerøy Midt and Lerøy Aurora can report a
very positive development. At the time of writing, the Group
expects to see this positive development in release from stock
costs continuing in 2018, with an even higher impact in the second
half of the year, confirms CEO Henning Beltestad.
THE VAP, SALES & DISTRIBUTION
SEGMENT (VAPS&D)
The VAPS&D segment reported
revenue in Q1 2018 of NOK 4,690 million, down 6% when compared with
the same period last year. Operating profit in the quarter suffered
from volatile and rapidly increasing spot prices for whitefish, and
also Atlantic salmon towards the end of the quarter. Operating
profit before fair value adjustment related to biological assets
was down from NOK 86 million in Q1 2017 to NOK 65 million in Q1
2018.
"It is evident that the Group's
wide product range, delivery reliability, product development,
traceability and efficient logistics are of increasing popularity
on the market," states CEO Henning Beltestad. "A high level of
price volatility has had a negative impact on earnings in Q1 2018,
but the underlying development in the segment is positive," he
confirms.
MARKET AND OUTLOOK
The Group and the Norwegian fish
farming industry have experienced a positive development in the
production of salmon in 2017 and the first months of 2018. This has
resulted in a slight increase in growth, putting some pressure on
the spot prices for salmon and trout. The Group has close links
with the end market for seafood, and the reports of a sustained
strong, underlying demand for salmon from Q4 2017 still apply in
2018. The market for Atlantic salmon and seafood is strong.
The Group has identified room for
operational improvements in all three regions where the Group
carries out fish farming. The Group's investments will provide
organic growth in volume in all the regions, and substantial
reductions in production costs in two of the regions. 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. This difference was not major in 2017, and the
Group does not expect this to change in 2018.
Developments within whitefish in
2018 have been positive, even though industrial development and
processing of whitefish 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. The process
of industrial development of 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. The Group can
report a positive development in catches to date in 2018, and its
best estimate remains a catch volume of whitefish and shrimp in
2018 of approximately 65,000 tonnes.
The Group feels that uncertainty
relating to the framework conditions for the seafood industry in
Norway has increased in recent years. It is unfortunate and
difficult to understand that the various key premise setters in
Norway have generated an overall impression that the Norwegian
farming and whitefish industry does not create value or spin-off
effects in local Norwegian communities. The reality is that
direct and indirect value creation from the seafood industries are
of decisive importance for employment and settlement in large parts
of Norwegian society, not least in areas close to the coast.
The seafood industry contributes substantial value in local
communities along the entire coastline of Norway, and the Group and
its colleagues shall continue to do their utmost to sustain this.
In 2017, Lerøy had operations in around 60 municipalities in
Norway, and annual investments reach the billions - along the
entire Norwegian coast. In 2017, the Group purchased goods and
services in Norway from 287 different municipalities for a total
NOK 12.5 billion. For a more detailed description of the
significant spin-off effects generated by Group operations, please
refer to the annual report for 2017.
The seafood industry is the second
largest export industry for Norway, employs tens of thousands and
has extremely positive spin-off effects. The industry is a globally
competitive food producer measured in terms of both costs and
environmental parameters - something very rare. Norway's seafood
industry has a strong position from which to sustain its positive
development, but is entirely reliant on an understanding among
Norwegian authorities and politicians, when laying down
regulations, of what it will take for the Norwegian seafood
industry to remain globally competitive in the long term. The
Group will continue in its efforts to contribute towards a
knowledge-based dialogue that creates value for society, regarding
the need for appropriate framework conditions in the future.
The Board of Directors currently
expects high earnings in Q2 2018 and 2018 as a whole.
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.
Q1 2018 Report
Q1 2018 Presentation
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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