RESULT Q3 2021
In Q3 2021, Lerøy
“Revenue in Q3 2021 is up 33% on the same quarter last year, mainly due to increased activity and higher prices. We recorded our highest ever quarterly revenue as well as all-time high harvest volumes. Demand for seafood is, in general, very strong, giving grounds for an optimistic outlook for the future of the industry,” confirms CEO
“At the same time, our earnings in the third quarter are lower than what we expected at the start of the quarter. During the final weeks of the quarter, we had to make changes to our harvest schedules, and were forced to harvest early at lower weights than planned. This had a negative impact on both prices realised and costs. We also under-estimated the export volumes from
THE WILD CATCH SEGMENT
The wholly owned subsidiary Lerøy Havfisk's primary business is wild catches of whitefish. Lerøy Havfisk has licence rights to harvest just above 10% of the total Norwegian cod quotas in the zone north of 62 degrees latitude, corresponding to around 30% of the total quota allocated to the trawler fleet. Lerøy Havfisk also owns several processing plants, which are mainly leased out to its sister company Lerøy Norway Seafoods (LNWS) on long-term contracts. Lerøy Havfisk’s trawler licences stipulate an operational obligation for these processing plants.
Lerøy Havfisk has had 10 trawlers in operation in Q3 2021. The catch volume in Q3 2021 totalled 12,336 tonnes compared with 11,083 tonnes in Q3 2020. A higher volume of cod in the catches is the most important factor behind the increase in catch value when compared with the third quarter of 2020. Lerøy Havfisk has a large quota remaining in 2021, and therefore solid foundation for good profitability in Q4 2021. The company is in a strong position to be able to fully capitalise on their cod quota. The remaining quotas for saithe and haddock have been affected by major re-allocations throughout the year. It is normal for the catch volumes for these species to be unpredictable, but the company still expects to see satisfactory catches.
The most important markets for whitefish remain slightly affected by COVID-19 restrictions, but the development in demand is good and most products have seen a positive development in prices. Compared with Q3 2020, prices realised for cod are down 3%, while prices for haddock and saithe are substantially up, by 59% and 35% respectively.
LNWS’s primary business is processing wild-caught white fish. The company has use of 12 processing plants and purchasing stations in
The Group’s focus on boosting the competitiveness of the white fish industry is a long-term process and will continue undiminished, despite what the Group presumes are temporary market-related challenges brought about by the pandemic. Over time, the Group has carried out organisational changes and made significant investments in facilities, which we expect to produce sustainable earnings.
In total, the segment reported EBIT of
“Earnings in the Wild Catch segment have improved significantly in the third quarter compared with 2020. It’s very encouraging that the underlying improvements in land-based operations are gradually delivering increased earnings in this part of the business,” says CEO
THE FARMING SEGMENT
The Farming segment comprises the Group’s three farming regions in
Operating profit for the Farming segment before fair value adjustment related to biological assets was
In Q3 2021, Lerøy Aurora reported EBIT/kg of
“Growth at the end of Q3 2021 and particularly the start of Q4 2021 has been slightly lower than expected. The estimated harvest volume in 2021, including the share from associates, is approx. 204,000 GWT, with an estimated 207,000 GWT in 2022,” he continues.
“We expect costs in Q4 2021 to be lower than in previous quarters in 2021, although this potential is affected by the inflation in the cost of many of our raw materials we are now experiencing, including feed, which is our largest cost item,” comments Henning Beltestad.
VAP, SALES & DISTRIBUTION (VAPS&D)
With its fully integrated, cost-efficient value chain for salmon, trout, whitefish and shellfish, Lerøy
In 2020, seafood markets were negatively impacted by the COVID-19 pandemic. The impact was seen first in markets in
Demand for seafood in the retail market remained strong in Q3 2021, and we have also seen a gradual improvement in the hospitality and catering market as, little by little, COVID-19 restrictions have been lifted. The Group is experiencing a very strong demand for seafood, and the segment’s revenues are up 33% compared with the same quarter of last year, with growth driven by both prices and increased activity.
The segment’s underlying development is good, but continues to be impacted by start-up costs for the Group's new factories in
“Development in our downstream operation is positive and increased capacity utilisation drives profitability. We incur start-up costs relating to new facilities and there is potential for further increased activity and profitability going forward”, says CEO
MARKET AND OUTLOOK
Price developments for
The Group’s production of red fish currently takes place mainly in
In recent years, Lerøy has made significant investments in several parts of the value chain, including the construction of facilities for smolt/post-smolt capacity in all the Group’s regions. Lerøy Sjøtroll’s Kjærelva facility is now completed and has an annual biomass production of around 4,000 tonnes. In the fourth quarter of 2020, Lerøy Aurora completed the final stages of construction for their smolt facility in Laksefjord. Lerøy Midt can report that the second stage of development of the Belsvik facility is going to schedule. The plan is for completion in the first quarter of 2022, and the facility will produce around 5 thousand tonnes of biomass. The schedule is to introduce the first roe in the first quarter of 2022, and the results produced by the facility are expected to gradually materialise from 2023. The Group’s investments in improved smolt production and post-smolt production, combined with a number of other initiatives, will support the Group’s ambition for continued growth in volume and improved competitiveness by means of lower production costs.
The Group has recently worked on a project in Årskog in Fitjar for further development of large smolt. Based on several factors, including COVID-19 and related consequences, the Group has decided to postpone the final decision regarding commissioning.
The Group achieved significant improvements in production in the sea in 2020. The harvest volume was up from approximately 158 thousand tonnes in 2019 to 171 thousand tonnes in 2020. Moreover, standing biomass increased from 111 thousand tonnes at year-end 2019 to 119 thousand tonnes at year-end 2020. The first months of 2021 were cold, affecting growth conditions negatively. Growth was good in the second quarter, while the late autumn of 2021 had slightly lower growth than expected. Since
For its consolidated operations, Lerøy
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. Further improvements to fish quality were priority design criteria for Kongsfjord. Consumers are making ever-increasing demands and expectations on quality. High quality and competitiveness are essential for success when competing for consumers’ preferences.
The whitefish industry still faces significant challenges in relation to the impact on demand of COVID-19. It is naturally not possible for the Group to know how long the restrictions will last, but Lerøy’s long-term plans remain the same. The work on and investments in making the factories less seasonally dependent continue, along with well-organised and meticulous work on making improvements to each unit. We believe that this process will generate results with time.
The Group’s quotas for 2021 are up 17% for cod, up 22% for haddock, up 16% for saithe north of 62 degrees, and down 43% for saithe south of 62 degrees. Third-country quotas were re-allocated and distributed during the summer, resulting in an increase in the quotas for cod and haddock of 21% and 37% respectively when compared with the same period in 2020. The quota for saithe north of 62 degrees latitude is up 17% and the saithe quota south of 62 degrees latitude remains unchanged from 2020.
In June, ICES (the
Lerøy works to develop 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 competitive climate-related and environmental solutions. Investments in recent years, e.g., in a new industrial facility for Lerøy Midt, a new factory in Stamsund and new factories in
Lerøy
On
The Group’s products are healthy and tasty. Production is sustainable from a financial, climate and environmental perspective. The management and Board of Directors continue to expect good underlying growth in demand in the years ahead. It is not possible for the management and Board of Directors to estimate how long the COVID-19 pandemic will last, but we are increasingly confident, in recent months, in assuming that demand for high-quality seafood will continue to grow in the years to come.
The Board of Directors underlines that uncertainties related to assessments of future developments remain higher than normal, but believes that the strong development in demand for seafood gives grounds for optimism. At the same time, the Group is currently experiencing inflation in the costs for important input factors, and this will impact cost developments in 2022. Nonetheless, the Board of Directors is confident that the Group has a strong position for the years to come. The Board of Directors currently expects earnings in Q4 2021 to be higher than in Q3 2021, with a corresponding improvement for 2021 as a whole when compared with 2020.
The Board of Directors and corporate management would like to thank all the Group’s employees for their valuable work to date during the COVID-19 pandemic.
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ABOUT LERØY SEAFOOD GROUP ASA
Lerøy Seafood Group ASA is a global seafood corporation with its head office in Bergen. The Group's approx. 5,000 employees handle between 350,000 and 400,000 tonnes of seafood every year through our value chain, corresponding to around 5 million meals every day. The Group has a vertically integrated value chain for red fish and whitefish, and significant activities using third-party products.
The Group's values - open, honest, responsible and creative - shall represent the very foundations of everything we do, and we work hard to achieve our goal of creating the world's most efficient and sustainable value chain for seafood. The target for return on capital employed (ROCE) is 18% p.a. The Group has set a number of targets within sustainability, including cutting greenhouse gas emissions by 46% by 2030.
Attachments
- Q3 21 Presentation LSG
- Q3 21 report LSG
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