Scotland’s costly fourth quarter

And it was not just biological issues that were responsible for MH Scotland’s overall EBIT dropping to NOK -30 million (- £2.44m), equivalent to NOK -2.10 per kg (NOK -3.42).

According to the group's Q4 report, the strengthening of the GBP towards the NOK further contributed to reduced competitiveness for Scottish salmon, the feed cost has increased and the Rosyth processing plant caused “allocated losses” of NOK 87 million (£7.07m).

On a more positive note the harvest volume was 14,095 tonnes gutted weight, more than double the 6,376 tonnes harvested in Q4 2014; sea water costs were reduced by 11% year-over-year in local currency, “due to reduced health and maintenance costs compared to 2014, when the second half of the year was even more challenging with respect to biology”; and “non-seawater costs have been reduced compared to the fourth quarter of 2014 due to scale effects from increased volumes and lower mortality losses.”

Despite this, the company predicts that: “It will take some time before the measures taken in Scotland will materialize in improved earnings. Costs in the first half of 2016 are expected to increase further.”

Restructuring

As a result of the restructuring process, which has seen Ben Hadfield replace Alan Sutherland as MD, up to 100 jobs are expected to be terminated in the processing, services and farming parts of the Scottish operations.

"In the last three years," Ben explained to Fish Farming Expert, "the company has increased in size from about 500 to 658 staff, due the the projected rise in production, but round fish production has actually fallen from 60,000 to 53,000 tonnes."

Consequently, he explains, it's been imperative to cut costs.

"It's sad and has not been an easy decision, but it's the best way for us to grow and continue to attract investment from our parent company," he reflects. "And we're still very positive about Scotland, as is clear by the amount of investments - such as the £80 million feed mill and the new £23 million RAS hatchery at Inchmore - we're making here."

Processing

In terms of processing, the group’s operational EBIT for its chilled operations and for its Benelux and France Fresh operations improved, but “this improvement is more than offset by the negative effect of NOK 95 million in additional start-up costs at the Rosyth processing plant in Scotland”.

The rest of the group

MH's salmon of Norwegian origin achieved an operational EBIT per kilo of NOK 12.14 (NOK 12.59) in the fourth quarter; those of Canadian origin reported operational EBIT per kilo of NOK 3.32 (NOK 3.69); salmon of Chilean origin reported operational EBIT per kilo of NOK -12.28 (NOK 0.35). The figures include contribution from Sales and Marketing, including MH Consumer Products. MH Consumer Products reported an operational EBIT of NOK 89 million compared to NOK 117 million in the fourth quarter of 2014. MH Feed reported an operational EBIT of NOK 74 million (NOK 61 million).

“High production costs in all regions remains a concern. We see, however, that our Norwegian operation delivered good results even with the high sea lice mitigation costs. I'd like to recognize the efforts made by the employees who delivered the favourable results in the quarter,” says Group CEO, Alf-Helge Aarskog.