LEROY SEAFOOD FOURTH QUARTER AND 2019 IN TOTAL
In Q4 2019, Lerøy
Operating profit before fair value adjustment related to biological assets was
For 2019 in total, the Group reported revenue of
- “The fourth quarter saw extremely volatile prices for
Atlantic salmon, but the underlying development during the quarter and the profit figures have in the main been as expected,” confirms CEOHenning Beltestad . “Looking back on 2019 as a whole, we experienced several unforeseen incidents in the Farming segment that had a negative impact on the harvest volume and, as a result, our cost levels. The onshore industry for whitefish has experienced challenges, while we can report a good development in downstream operations. At the start of 2020, we are confident that Lerøy has a sound position for profitable growth in the years to come,” he continues.
At
THE WILD CATCH SEGMENT
The wholly owned subsidiary Lerøy Havfisk's primary business is wild catches of whitefish. Lerøy Havfisk's total catch volume in Q4 2019 was 12,949 tonnes, compared with 11,515 tonnes in Q4 2018. Catch volumes for the main species in Q4 2019 were 7,215 tonnes of cod, 1,907 tonnes of haddock and 1,595 tonnes of saithe. The catch distribution in Q4 2018 was 6,534 tonnes of cod, 961 tonnes of haddock and 2,568 tonnes of saithe. In total, average prices for all species saw an increase of 11% in Q4 2019 when compared with the same period in 2018, mainly due to an increased share of fish species with a higher value in the total catch volume. Prices realised were up 10% for cod, 14% for haddock and 10% for saithe, all compared with Q4 2018.
LNWS’s primary business is processing wild-caught whitefish. The company has use of 12 processing and purchasing plants in
In total, the segment contributed an EBIT of
- “2019 was a good year for catches,” confirms the CEO. “However, high prices for raw materials represent challenges for the onshore industry in
Norway . In recent years, the Group has implemented and completed a high number of measures relating to production and marketing, in a move to improve earnings for the onshore industry. The Group expects to start to see the positive results of these measures in 2020.
THE FARMING SEGMENT
The Farming segment reported operating profit before fair value adjustment related to biological assets of
In Q4 2019, Lerøy Aurora contributed an EBIT/kg of
- The Farming segment was affected by several unforeseen incidents in 2019, which had a negative impact on harvest volume and thereby also cost levels per kilo. For 2020 and the following years, we expect the Group's investments in smolt to gradually become evident with an increase in volume, which will also help provide a reduction in the Group's costs per produced kilo of red fish,” says CEO
Henning Beltestad .
THE VAP, SALES & DISTRIBUTION SEGMENT (VAPS&D)
The VAPS&D segment reported revenue in Q4 2019 of
- “The VAPS&D segment has reported a positive development throughout the quarter,” says CEO
Henning Beltestad . “Although some areas remain challenging for the segment, the Group has a target to sustain the increase in level of activity and earnings throughout 2020 and the years to come,” confirms Henning Beltestad.
MARKET AND OUTLOOK
Price developments for
In 2019, the Group's Farming segment has experienced several interruptions in production, some unforeseen. As previously mentioned, production at Lerøy Aurora was interrupted by the fire in the smolt facility and the outbreak of toxic algae. Lerøy Midt had a good first half year in terms of production, but reported significant reductions in growth compared with expectations in the second half. Production at Lerøy Sjøtroll remains impacted by our inability to date to achieve the projected smolt yield.
The Board of Directors is not satisfied with the performance reported by Farming in 2019, but feels increasingly confident that the initiatives taken and the investments made will provide a positive development in the form of increased volume and improved competitiveness in the years to come.
In recent years, the Group has followed a long-term investment plan, aiming to increase production of larger smolt (post-smolt). Lerøy Sjøtroll's new facility in Fitjar in Vestland, with a capacity of around 4,000 tonnes biomass production, has now been completed and will contribute to the company’s production with larger and more robust smolt in 2020. The Group is also in the final part of a three-stage development project for Lerøy Aurora’s plant in Laksefjord, Finnmark, increasing capacity at the plant to approx. 4,500 tonnes biomass production. The project is scheduled for completion in
Gradually, the new facilities will increase the average smolt size in the Group, and for 2020 the Group expects the average size of the released salmon smolt to be around 300 grams both at Lerøy Aurora and Lerøy Sjøtroll. Both the corporate management and the Board of Directors expect the implemented and completed investments in the smolt plants to provide considerable growth in production in the sea in 2020 and the years to come. From 2020 and onwards, this increase in production will gradually result in higher harvest volumes every year over the next four to five years.
Estimated harvest volume for 2020, including the share from associates, is currently 183,000-188,000 tonnes salmon and trout. The Group's target is for the corresponding figures in 2021 to be between 200,000 and 210,000 tonnes. The Group's contract share for Q1 2020 is approx. 40%.
The Group has made substantial investments in whitefish in recent years. One new vessel was added to the fleet in 2018 – Nordtind – and another in early 2020 – Kongsfjord.
For the onshore industry, where operations are based on whitefish, 2019 has been extremely difficult. Lower quotas, along with a number of large new operations opening in an industry that already had excess capacity, have resulted in challenging framework conditions. The industry is subject to extremely strong seasonal fluctuations, and Lerøy is of the opinion that profitability for the industry will depend on innovation and opportunities for specialisation. In recent years, Lerøy has made substantial investments to start facilitating this. A new processed fish factory opened in Stamsund in 2019, and a major conversion of the filleting plant in Melbu is expected to be completed in early 2020. Considerable investments have also been made in other facilities. The Board of Directors and the Group expect these investments, together with diligent, organised improvement measures in each factory, to gradually generate results. The Board of Directors and corporate management expect to see higher earnings for the segment in 2020.
Lerøy has spent many years developing an efficient and sustainable value chain for seafood. This not only provides cost-efficient solutions, but also quality, availability, a high level of service, traceability and sustainable solutions. At the start of 2020, the Board of Directors and corporate management feel that Lerøy has a sound position and good starting point for continued, profitable further development of the Group's downstream operations (VAPS&D).
At the time of writing, the Board of Directors expects earnings in the first quarter of 2020 to be substantially higher than those achieved by the Group in the first quarter of 2019.
Questions and comments may be addressed to the company’s CEO,
This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act
Attachments
- Report Q4 2019
- Presentation Q4 2019
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