Q2 2019 results – Strong performance in Norwegian operations

Highlights

  • Harvest volume of 21 800 tonnes
  • EBIT before fair value adjustment of NOK 309 million (NOK 426 million)
  • EBIT/kg NOK 14.17, down 25% from Q2 2018
  • Strong biological performance in Norway
  • Earnings driven by overall high prices and cost reductions in Norway
  • Continued high cost in Shetland, driven by enduring biological challenges
  • Biological challenges related to sea lice and algae in British Columbia
  • Expect harvest volume of 82 000 tonnes in 2019, 10% growth from 2018

Financial results

The Grieg Seafood Group harvested 21 800 tonnes GWT in Q2 2019, compared to 22 570 tonnes in Q2 2018.

Total revenues during the quarter amounted to NOK 2.2 billion, unchanged from Q2 2018.

Farming cost during the quarter (total cost related to fish harvested this quarter) increased from the same quarter last year, mainly driven by higher cost in Shetland and BC due to biological challenges related to sea lice and algae blooms.

The Group’s EBIT before fair value adjustment of biological assets was NOK 309 million (426) during the quarter, corresponding to an EBIT per kg of NOK 14.17 (18.89). EBIT from the four regions includes value creation from the respective sales activities of the Group’s jointly-owned sales company, Ocean Quality.

Commenting on the Group’s performance, CEO Andreas Kvame, said:

“Grieg Seafood continued to experience strong growth and biological improvements in Rogaland and Finnmark during the second quarter. With a steady focus on our operational priorities, we have increased biological control with preventive efforts and obtained a more efficient utilization of our licenses. Our post smolt strategy is on track, and during the quarter we acquired 50% ownership of Nordnorsk Smolt. We also ASC-certified an additional three sites in Finnmark.

While we still have some challenges related to gill disease and algae in Shetland, the biological condition is improving. We continue to work systematically to increase our smolt robustness in Shetland, and survival on smolt stocked to sea so far this year is increasing. We have initiated a strategic assessment for our operations on Skye, as we see that the synergy between our farming areas on Shetland and Skye are low. In BC, challenges related to algae, plankton and low oxygen levels have impacted production negatively during the quarter. This shows the importance of monitoring and use of aeration system to minimize impact. We are still in the early stages in executing on our priorities and we expect continued growth and operational improvements going forward.

By driving forward improvements to our farming operations, we remain committed to our ambition for sustainable salmon farming and long-term value creation for all our stakeholders, and also remain confident in our 2020 target of 100 000 tonnes harvest with cost at or below industry average.”

Strategic priorities

Improving sustainability is key to increasing our profits. By focusing on reducing our environmental impact and improving fish welfare, we aim to increase harvest rates and reduce production cost. Short term, our goal is to increase production to 100 000 tonnes with production cost at or below weighted industry average, targeting NOK 37.90 per kg by 2020.

We aim to provide our shareholders with a competitive return on capital invested and have set a ROCE target of 12%. Our investments reflect our growth strategy: digitalization, post-smolt, biosecurity and fish welfare, including continuous evaluation of expansion opportunities

Digitalization in salmon farming includes applying advanced sensors, big data, artificial intelligence and automation, to support better farming decisions. Post smolt improves biosecurity, survival rates and allows for a more efficient farming cycle, while expansion opportunities will allow for improved flexibility, biosecurity and fish welfare.

With a strict focus on biosecurity and fish welfare, Grieg Seafood aims to achieve strong biological performance through the implementation of a broad range of technological and operational initiatives, including large smolt, GSF Precision Farming and other preventive operational measures aimed at combating sea lice and algae. The group targets an average survival rate in seawater above 93%.

Outlook

The global supply of Atlantic Salmon for 2019 is expected to increase by some 4-7% compared to 2018, mainly driven by higher volumes in Norway and Chile, in addition to UK. With a growing demand and limited possibilities for increase in harvest volumes, prices are expected to remain high.

The Group’s total share of fixed price contracts in Norway in Q2 2019 was 20%. The share of fixed price contracts for the full year 2019 is estimated to 20% and 24% for Norway and the UK, respectively.

During Q2 2019, 7.1 million smolt were transferred to sea, with an average weight of 201 grams. Approximately 26-28 million smolt is planned stocked in 2019, with an average weight around 190 grams.

Grieg Seafood expects to harvest approximately 82 000 tonnes in 2019. Expected harvest volume for Q3 2019 is 20 200 tonnes, comprised of:

  • Rogaland: 2 800 tonnes
  • Finnmark: 10 600  tonnes
  • Shetland: 3 500  tonnes
  • BC: 3 200  tonnes

Results presentation

CEO Andreas Kvame and CFO Atle Harald Sandtorv will present the results later today at 08:00 CEST at Hotel Scandic Flesland Airport, Lønningsvegen 9, Bergen.

The presentation and subsequent Q&A will be held in Norwegian and can be followed live via webcast at www.griegseafood.com

It will be possible to ask questions online.

An English transcript of the presentation will be made available at www.griegseafood.com within a few days after the presentation.

For further enquiries, please contact:

Andreas Kvame, CEO
Cell phone: +47 907 71 441

Atle Harald Sandtorv, CFO
Cell phone +47 908 45 252

About Grieg Seafood

Grieg Seafood ASA is one of the world’s leading salmon farmers, specializing in Atlantic salmon. The Group has an annual production target of 100 000 tonnes gutted weight in 2020. 

Our farming facilities are in Finnmark and Rogaland in Norway, British Columbia in Canada and Shetland in the UK. Approximately 780 people are employed by the Group. Grieg Seafood ASA was listed at the Oslo Stock Exchange in June 2007. Our headquarters are situated in Bergen, Norway. The business development of Grieg Seafood ASA focuses on profitable growth, sustainable use of resources and being the preferred supplier to selected customers.

To learn more, visit www.griegseafood.com

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.