Production costs surge by 36%

The company’s Q3 report, which was released today, shows that the harvest volume was 9,811 tonnes gutted weight, a significant decrease from the corresponding quarter in 2015 (16,586 tonnes), while operational EBIT amounted to EUR 0.60 per kg (EUR 0.69).

The report states: “Harvest volumes were negatively impacted by health issues and early harvest due to gill disease and sea-lice challenges in prior quarters. Growth has improved in the third quarter due to a reviewed feeding strategy, but this was more than offset by high mortality in certain areas.

“Several of the sites harvested in the quarter had a high cost level. Biological costs per kg increased by 36% in the third quarter of 2016 compared to the corresponding quarter in 2015. This is mainly caused by increased health and feed costs. Other seawater costs have also increased due to negative scale effects.”

The report also reveals an increase in the costs of freshwater production and almost EUR 6 million-worth of mortalities.

It continues: “Non-seawater costs per kg harvested increased in the third quarter of 2016 compared to the third quarter of 2015 due to higher costs related to incident based mortality. Incident based mortality of EUR 5.8 million was recognized in the quarter (EUR 2.1 million), mainly related to gill disease and sea-lice treatment losses.”

Similar story in Norway

The Q3 report shows that MH's Norwegian operations also suffered from lice, stating: "the health cost per kg salmon harvested [in Norway] in the third quarter of 2016 increased by 36% compared to the corresponding quarter in 2015. The estimated exceptional cost related to sea lice mitigation and losses amounted to EUR 27.2 million (EUR 17.6 million) in the third quarter of 2016. Per kg harvested, exceptional sea lice mitigation costs amounted to EUR 0.42 (EUR 0.30) in the quarter. Incident based mortality losses in the amount of EUR 11.5 million were recognized in the quarter, of which EUR 5.1 million is included in the cost of lice mitigation and losses above. Losses from incident based mortality in the third quarter of 2015 were EUR 3.3 million."

MH sees the cost development as "concerning", and believes that these are likely to remain high in Norway during Q4.

Cause for optimism?

On a more positive note, it seems that MH Scotland's sea lice treatments, which now include a number of non-chemical options, such as Thermo- and hydro-licers, appear to be having a positive impact on parasite levels.

“Although the sea-lice situation in the third quarter has been challenging, increased efficiency of treatments has resulted in a significant reduction of sea-lice numbers compared to the second quarter of 2016 and the third quarter of 2015,” states today’s report.

Despite this - and despite a weakening value of the GBP - the group expects production costs in Scotland to remain high.

"The ongoing restructuring process and a strong focus on feeding and improved growth aim to make Marine Harvest Farming Scotland more streamlined and cost-efficient," the report continues. "However, we expect high costs also in the fourth quarter of 2016."