Leroy Q3 results hit historic high

THE Norwegian seafood and fish farming group Leroy has announced record profits for the third quarter of 2016.
The company, which owns Scottish Sea Farms, posted an operating profit before fair value adjustment of biomass of NOK 481 million, compared with NOK 253 million during the same period last year.
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 said: ‘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.
‘With a positive market, the group chose to harvest a substantial volume of fish throughout Q2 2016, entering the third quarter with 10 per cent less biomass than in the same period in 2015.
‘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.’
He said the group expects higher harvested volumes, prices realised to improve significantly, and lower release from stock costs in the present quarter.
Earlier this year Leroy considerably expanded its activities by acquiring Havfisk, the Norwegian trawler company, which has a fleet of 10 vessels, along with the Norwegian Seafood Group. Both have now been incorporated into the Leroy Group.
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 per cent 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.
‘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,’  said Beltestad.
VAP segment – volatile prices a challenge
While the VAP segment reported a nine per cent 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 per cent in Q3 2015 to 1.6 per cent in Q3 2016.
The CEO said: ‘The volatile prices for salmon have been and continue to be a challenge for our processing facilities.’
Sales and distribution – activity good, but volatile prices a challenge
Revenue from the sales and distribution segment totalled NOK 3,845 million in Q3 2016, up by 27 per cent. The operating profit for Q3 2016 was NOK 82 million, up by 36 per cent from NOK 60 million in Q3 2015.  Beltestad described it as a very positive development in both revenue and operating profit.