Poor forecast for Grieg

Q2 EBIT came at NOK 124m, which was much weaker than expected, according to market analyst Kolbjorn Giskeodegard.

He continues: “The high share of Pacific salmon in Canada and generally unfavourable harvesting profile (40-50% sold in June), resulted in low prices. Looking into H2 2014, we expect lower earnings owing to weaker prices and negative one-offs. For the full year 2014, the company has lowered its volume guidance by ~1,500 tonnes and the cost recovery is not expected to occur until the beginning of 2015.

“Of the three operating regions, Norway was the only division with satisfactory earnings. The Canadian division reported a negative EBIT per kg of NOK 5.12, where the NOK 4m writedown could not fully explain why the EBIT per kg was NOK 15-17 lower than major peers'. The same goes for the UK, with an EBIT of only NOK 2.3 per kg. This is also a result of low contract coverage (more exposed to price drop).

“Grieg Seafood is lowering its volume guidance by 1,500 tonnes (2%) and also warning of a Q3 writedown of NOK 24m owing to a pancreas disease outbreak and extraordinary mortality in Rogaland. Following the sanctions on Russia and lower prices, the outlook for Q3 earnings seems grim.

“Following the report, we cut our earnings estimates for the major producing regions. As a result, we slash our target price to NOK 30 (40) and downgrade our rating to Buy (from Strong Buy).”