Grieg chief executive Andreas Kvame expects positive results in BC.

Higher prices and harvests boost Grieg

Canada and Norway salmon farmer Grieg Seafood made an operating profit of NOK 265 million (US $29.8m) in the fourth quarter of 2021, a significant turnaround on the same period in 2020 when it made an operating loss of NOK 16m.

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Grieg said the improvement was driven by high market prices and a 17% larger harvest volume than in Q4 2020. There was strong operational performance, with increased survival in all regions and good cost development.

Grieg farms salmon in Finnmark and Rogaland in Norway, and in British Columbia (BC) in western Canada and will soon stock sea farms in Newfoundland.

BC costs still too high

“Development throughout the year has been largely as expected, with costs in Norway gradually declining towards NOK 40 per kg,” said chief executive Andreas Kvame in the company’s Q4 2021 report.

“In BC, costs have been too high, but successful mitigating efforts have reduced impact from harmful algae blooms compared to earlier years, and we expect positive results from these initiatives going forward.”

The average spot price for salmon (Nasdaq Salmon Index) for Q4 2021 was NOK 59.7 per kg, up NOK 16.5 per kg from Q4 2020, and up NOK 5.2 per kg compared to Q3 2021. The increase was driven by muted supply growth combined with strong demand from supermarkets and the recovery in the food service segment.

Revenue up 32%

Harvest volumes increased by 17% to 23,727 gutted weight tonnes (gwt) in Q4 compared to the same period in 2020 and sales revenue increased by 32% to NOK 1.513 billion. EBIT per kg was NOK 11.2 (Q4 2020: NOK -0.8).

In Norway, Grieg harvested 7,259 gwt in Rogaland, with an EBIT per kilo of NOK 11.5, and 12,411 gwt in Finnmark, with an EBIT per kilo of NOK 17.0.

The company harvested 4,058 gwt in BC, 53% more than in Q4 2020, but with a lower EBIT per kg of NOK 4.1.

The farming cost in BC increased from Can $8.8 per kg (NOK 61.0) in Q4 2020 to Can $9.4 per kg (NOK 65.3) in Q4 2021, mainly due to harvesting from sites with elevated mortality.

However, cost recognised as abnormal mortality in the income statement (cost of reduced survival) was NOK 0.7 million in Q4 2021 (NOK 0.2 per kg, or CAD 0.0 per kg), compared to NOK 7 million in Q4 2020 (NOK 0.2/CAD 0.4 per kg).

“We expect the farming cost to come down in Q1 2022, due to harvesting from sites with strong biological performance. We expect reductions in the farming cost in the long term as volumes increase,” said Grieg.

Licence renewals

Licences for nearly all net pen salmon farms in BC, including 20 operated by Grieg, are due for renewal in June, and there is an element of doubt about what will happen given the Liberal-run federal government’s policy to transition the industry in BC away from open net pens.

Grieg doesn’t refer to licence renewals in its report but does talk about the transition.

“By 2025, the Canadian federal government aims to have created a responsible plan to transition from open net-pen salmon farming in British Columbia,” the company states. “Grieg Seafood supports the process of transitioning the traditional ways of farming salmon in BC.

Embracing technology

“We embrace new strategies and technologies to align with the government’s transition, such as keeping the fish longer on land and a shorter time in the ocean, or by introducing barriers around the farms to limit interactions between the fish and the environment. Such technologies do not only reduce our impact on wild salmon and the environment, but also improve biological control. Grieg Seafood is working with all levels of governments, including Indigenous governments, to find a path forward that works for our First Nations partners, our local communities, the government and industry.”

Grieg expects to harvest 15,500 gwt in the current quarter, 2,500 gwt of which will be in BC, and 90,000 gwt for the full year.