Shetland and Rogaland top Grieg table

Grieg Seafood’s Q2 report, which was published this morning, shows that its results in all four regions improved considerably compared to the same quarter last year, with its Shetland and Rogaland operations the best performers. 

Published Last updated

EBIT before fair value adjustment of biomass for Grieg Seafood Shetland (GSS) was NOK 22.0 per kilo, up from NOK -12.5 per kilo in the same period last year and well above the NOK 9.2 and 11.7/kg achieved in Finnmark (up from NOK -3.7) and Canada (up from NOK 0.9) respectively. Only the group’s Rogaland operations, which produced salmon at an average EBIT of NOK 26.5/kg (up from NOK 3.1/kg), performed better.

Overall results

EBIT for the Group in Q2 before fair value adjustment of biomass was MNOK 312, against MNOK -21 in 2015. The harvest volume in Q2 2016 was 16,263 tonnes, against 17,558 tonnes in the same period last year, reflecting a decline in volume of 7.4%.

Before taxes and fair value adjustment of biomass, the accounts for Q2 show a profit of MNOK 273, compared with a loss of MNOK 20 in the corresponding period last year.

As Q2 started, the market was historically strong. In Europe prices strengthened further throughout the period, but the US market came under some pressure towards the end of Q2.

In Norway, the proportion of sales based on fixed price contracts stood at 31% in Q2 2016 and is expected to rise to 52% in Q3. The low harvest volume in Q3 will increase the contract proportion in this period, and it will fall in Q4.

Boosting production and reducing costs

A stated goal is to reduce GSF's cost level to the industry average, or lower. The company will also be aiming to increase production by 10% annually in the period 2017-2019.

GSF has an ongoing focus on improving operational efficiency, and this involves both increasing production per plant and per licence, as well as reducing costs per kilo.

One of the key steps being taken is to set out bigger smolt, which will make it possible to shorten the production time in the sea. An increase in the number of smolt is also decisive to achieve growth and lower costs.

Outlook

There is strong underlying demand for salmon and good prices are therefore expected during the remaining months of 2016 and into 2017. The market may, however, come under sporadic pressure during some weeks in the course of Q3 2016, which could result in lower prices during these periods.

The US market is expected to develop particularly well in the second half of 2016 due to a reduction in offers from Chile.

The harvest volume for 2016 is expected to be 68,000 tonnes, which is 2,000 tonnes less than the amount indicated in the first quarter report, due to lower than expected production results in BC and Rogaland.

A relatively low harvest volume of 13,500 tonnes is expected in Q3, while a significantly higher harvest volume is planned for Q4.

The process of hiring a new regional director in BC is ongoing.