Highlights – Third quarter 2017
- Improved results driven by higher volume
- Margins maintained by good prices supported by and cost reductions
- EBIT margin negatively affected by planned harvesting stoppage in Rogaland
- Stable production in Norway and BC, Shetland remains challenging
- New location allocated in Finnmark (two in 2017)
- Special dividend of NOK 1.00 per share
- Planned volume growth of 17 % to 77 000 tons in 2018
Third quarter 2017 results
The harvest volume for the Grieg Seafood Group in Q3 2017 was 16 875 tons, up from 13 911 tons in the corresponding period last year, reflecting an increase of 21 %.
Combined with higher realised prices aggregate operating income amounted to NOK 1 855 million in the quarter, 19 % up on the corresponding period in 2016.
EBIT per kilo stood at NOK 13.60 in Q3, slightly up from NOK 13.30 per kilo in the same period last year. The average spot price in the quarter was down NOK 3.92 per kilo on the same period last year, while Grieg Seafood’s realised price increased by NOK 2.79 per kilo. The contract share for the Norwegian operation was 30 % during the period. Compared with last year’s third quarter, costs in Q3 increased by NOK 2.50 per kilo. This year’s increase was driven by a low harvest volume in Rogaland and a weak biological situation in Shetland.
“Grieg Seafood has an overall goal to increase production by minimum 10 % annually until 2020. The company also has an ambition for production-costs to be at or below industry average. We are working relentlessly to reach these targets, continuously initiating efforts throughout the entire organisation to improve operations. The positive development seen in the quarter indicates that our work is paying off”, says CEO Andreas Kvame in Grieg Seafood.
Access to smolt is vital to ensure growth and lower costs. In addition, release of larger smolt shortens time in sea, contributing to reduced biological risk. During 2017, Grieg Seafood entered collaborations with other industry players to improve smolt capacity. For 2017, Grieg Seafood plans to release 26 million smolt, an increase of 28 % from 2016. By the end of the third quarter the release program was according to plan, with an accumulated release of 18 million smolt year to date. Another key element to the growth strategy is greater yield per licence. In order to achieve the desired improvements, locational flexibility is crucial, and this is an ongoing focus of attention in the Company’s contact with local authorities which we seek to optimise.
The Group aims to provide a competitive return on capital investment to the shareholders in the form of payment of a dividend and share price appreciation. The company’s financial position is regarded as solid and available liquidity at the end of the quarter was strong. Based on this, the board of directors has approved a special dividend of NOK 1.00 per share.
Salmon prices were slightly down in Q3 2017. This is normal for this period since production, especially in Norway, increases towards the end of the third quarter and brings pressure to bear on the market prices. Demand normally picks up as the Christmas period approaches, with price increases as an expected consequence. In North-America the market for Atlantic salmon was stable throughout the third quarter.
The demand for salmon is expected to increase as the Christmas season approaches, which normally leads to higher prices in the fourth quarter. In the longer term, the relationship between supply and demand is likely to be stable, giving grounds to expect a continuation of good prices for salmon in the marketplace.
Grieg Seafood’s contract share for the fourth quarter is estimated to 18 %. The renegotiation of contracts is an ongoing activity for the company, and so far, contracts have been signed for 22 % of the Norwegian harvest volume for 2018. The harvest volume for Q4 2017 is expected to be 22 100 tons, giving an overall harvest volume for 2017 of around 66 000 tons. In 2018, an increase in the amount of smolt set out is expected to increase the harvest volume to around 77 000 tons.
Quarterly report material
Please find the company’s Q3 2017 report and presentation attached here:
GSF Q3 2017 Rapport ENG
GSF Q3 2017 Presentation ENG
Andreas Kvame, CEO, tel: +47 907 71 441
Atle Harald Sandtorv, CFO, tel +47 908 45 252
About Grieg Seafood
Grieg Seafood ASA is one of the world’s leading fish farming companies, specializing in Atlantic salmon. The business development of Grieg Seafood ASA focuses on profitable growth and sustainable use of resources. The company has and annual production capacity of more than 100,000 tons gutted weight. The Group is present in Norway, British Columbia (Canada) and in Shetland (UK), employing approximately 700 people.