Salmar announces ‘best ever’ Q1 results

SalMar owner and CEO Gustav Witzøe

EFFORTS to deal with long standing biological problems at Scottish Sea Farms negatively impacted on its performance at the start of this year, Norwegian salmon giant SalMar reports with its 2020 Q1 results today.

The company has a 50 per cent stake in the UK-based operation which it calls Norskott Havbruk and which it shares with the Lerøy Seafood Group. SalMar’s main farming activities are based in Norway, but it also owns a majority stake in the expanding Icelandic salmon company Arnarlax.

On a group level SalMar announced its ‘highest ever’ Q1 operational EBIT or profit of NOK 1,065 million (£87m)compared with NOK 806 million (£66m) for the same period in 2019. While the results from Scottish Sea Farms were a disappointment, there are positive indications that the measures to tackle issues at its UK operation are bringing improvements.

Harvest volumes from Scotland were well down at 2,900 tonnes, compared with 4,800 tonnes for Q1 2019 and 5,300 tonnes in the previous (Q4 2019) quarter. The division generated revenues of NOK 264 million (£21.5m) against NOK 405 million (£33m) in Q1 2019 and NOK 392 million (£31m) in the previous quarter.

SalMar said:

‘The low volume harvested is a result of the decision to let fish continue to grow at sea farms after biological challenges in the second half of 2019 caused fish to be harvested at a low average weight. Some 86 per cent of the volume in the quarter was sold under fixed-price contracts. Operational EBIT per kg gutted weight came to NOK 14.36 in the first quarter 2020, compared with NOK 9.28 in the previous quarter. The improvement can be attributed to the fish harvested having a better biological performance.

‘However, profitability is down on the corresponding period last year, when an EBIT of NOK 22.78 per kg gutted weight was achieved. SalMar’s share of Norskott Havbruk’s loss before tax came to NOK -27 million in the first quarter, primarily as a result of a decrease in the fair value of the biomass due to lower forward salmon prices.

‘The fish have grown well and their biological performance during the quarter has been good. The status of the standing biomass in all regions is good. Norskott Havbruk maintains its expectations to harvest 26,000 tonnes in 2020 as a whole.’

SalMar’s CEO Gustav Witzøe described the performance of the group as ‘very good’. He said:

‘We posted the highest ever Operational EBIT in the company’s history, achieved through strong underlying operations, high volumes and good prices. Central Norway in particular distinguished itself through solid performance in the quarter.’

Gross operating revenues came to just over NOK 3.6 billion (£294m) for the quarter, up 22 per cent on the same quarter of 2019. SalMar harvested 40,000 tonnes in the first quarter, up from 35,500 tonnes in the corresponding period last year. Operational EBIT per kg came to NOK 26.61 for the first quarter, up from NOK 22.71 per kg for the first quarter of 2019. The increase is attributable to higher prices and a larger harvested volume.

CEO Witzøe said that while the Covid-19 pandemic created significant uncertainty for world trade, SalMar strongly believed in further growth in the aquaculture industry and expects a total group harvest of 152,000 tonnes from Norway this year plus 12,000 tonnes from Arnarlax and 26,000 tonnes from Scottish Sea Farms in which it has a half share. The company has already decided to cancel a dividend this quarter.

Footnote: £1 pound Sterling equals NOK 12.25