Grieg Seafood ASA: Q2 2016 – strong EBIT
Highlights – Second Quarter & First Half-Year 2016
- Best-ever quarter with EBIT of MNOK 312 (EBIT/kg NOK 19.2).
- EBIT of MNOK 526 is a record high for first half-year.
- A historically strong market, but falling US prices at end of Q2.
- EBIT/kg NOK 22.5 in Norway.
– Fixed price contracts account for 31%.
– Low harvest volume in Finnmark.
– Lower costs in Rogaland.
- Improved operating results in Shetland, EBIT/kg NOK 22.
- Harvesting brought forward, in a strong market, in order to reduce the biological risk.
– The Group’s harvest volume in Q2 2016 was 16 263 tons gutted weight.
- The volume indication for 2016 has been reduced by 2,000 tons to 68,000 tons because of:
– Increased harvest.
– Weak production in BC due to algae.
– Lost feeding days in Rogaland due to increased lice treatment.
- Further improvement in key figures and financial base.
- The sale of GSF’s UK activities has been considered, but the improvement in operations in the region has not been reflected to a sufficient extent in offers received.
Second Quarter results 2016
EBIT for the Group in Q2 before fair value adjustment of biomass was MNOK 312, against MNOK -21 in 2015. The harvest volume in Q2 2016 was 16 263 tons, against 17 558 tons in the same period last year, reflecting a decline in volume of 7.4%.
EBIT from the four regions includes value creation from sales/Ocean Quality (OQ), while OQ’s value creation relating to fish from Bremnes (which owns 40% of OQ) appears in the item designated IKE in the above table.
Before taxes and fair value adjustment of biomass, the accounts for Q2 show a profit of MNOK 273, compared with a loss of MNOK 20 in the corresponding period last year.
Group sales revenues in Q2 totalled MNOK 1 682, an increase of 44% on last year’s corresponding figure.
As Q2 started, the market was historically strong. In Europe prices strengthened further throughout the period, but the US market came under some pressure towards the end of Q2.
In Norway, the proportion of sales based on fixed price contracts stood at 31% in Q2 2016 and is expected to rise to 52% in Q3. The low harvest volume in Q3 will increase the contract proportion in this period, and it will fall in Q4.
Measures to boost production and reduce costs
A stated goal is to reduce GSF’s cost level to the industry average, or lower. The company will also be aiming to increase production by 10% annually in the period 2017-2019.
GSF has an ongoing focus on improving operational efficiency, and this involves both increasing production per plant and per licence, as well as reducing costs per kilo.
One of the key steps being taken is to set out bigger smolt, which will make it possible to shorten the production time in the sea. An increase in the number of smolt is also decisive to achieve growth and lower costs.
We also focus on improved/good survival.
In a global perspective, there are expectations of limited supply-side growth in the salmon market. There is strong underlying demand for salmon and good prices are therefore expected during the remaining months of 2016 and into 2017. The market may however come under sporadic pressure during some weeks in the course of Q3 2016, which could result in lower prices during these periods.
The US market is expected to develop particularly well in the second half of 2016 due to a reduction in offers from Chile.
The harvest volume for 2016 is expected to be 68 000 tons which is 2 000 tons less than the amount indicated in the first quarter report. The revised figure reflects the expectation that production is likely to be lower than expected in BC and Rogaland.
A harvest volume of 13 500 tons is expected in Q3. This is relatively low. In this regard, a significantly higher harvest volume is planned for Q4.
The process of hiring a new regional director in BC is ongoing.
For further information, please contact:
– CEO Andreas Kvame (cell phone: +47 907 71 441)
– CFO Atle Harald Sandtorv (cell phone: +47 908 45 252)