Production costs dent NRS profits in Q4

NRS reported an Q4 operating EBIT of NOK 136 million and an EBIT per kg of NOK 16.71. Corresponding figures from the same quarter in 2018 are NOK 233m and NOK 17.73.

“The sale of Region South was completed on December 16, 2019 and increased profit after tax with a gain of NOK 922m in the quarter,” said chief executive Charles Høstlund. 

Reduced margin

“Increased production costs have reduced the margin in the quarter, while the price of salmon increased during the quarter. NRS will grow through sustainable growth and the Group has 20% higher biomass at the end of the quarter compared to the same quarter last year.”

For the whole of 2019, NRS had operating revenues of NOK 5.6 billion and achieved an operating EBIT of NOK 543m and a profit after tax of NOK 1.313bn. The board proposes a dividend of NOK 10.00 per share for 2019.

The sale of Region South is the main reason why net interest-bearing debt was reduced by NOK 893m during the quarter to NOK 33m. Equity at the end of the quarter is NOK 3.357bn, giving an equity ratio of 72%.

Region North

Region North achieved operating EBIT in Q4 2019 of NOK 146m against NOK 243.3m in the corresponding quarter of 2018. Operating EBIT per kg of was NOK 17.71 compared to NOK 20.20 in Q4 2018.

Production costs in the region ended at NOK 40.44 per kg, up by NOK 5.01 from the third quarter of 2019 (35.43) and 6.66 (33.78) in Q4 2018.

In its quarterly report, NRS said this was due to higher production costs for fish released to sea in 2018.

It incurred higher harvest and wellboat costs for fish infected by infectious salmon anaemia (ISA), as well as increased feed and smolt costs.

Growth had also been lower than expected due to low seawater temperatures in 2019.

Region South

Before being sold, Region South achieved operating EBIT in Q4 2019 of NOK 5.6m compared to NOK 1m in Q4 2018. Operating EBIT per kg was NOK 6.77 against NOK 0.60 in the corresponding quarter last year.

In the south, production costs were NOK 55.59 per kg, just over NOK 15 / kg more than in the north, and up by NOK 6.59 from the third quarter (NOK 49 / kg).

The harvest volume fell by 915 tonnes (to 826 tonnes) compared to the fourth quarter. But that was close to a doubling from Q3 2019, which ended at 437 tonnes. 

Harvest volumes

NRS harvested 9,070 tonnes gutted weight during Q4, which is 34% lower than the corresponding quarter last year. Of that, 8,243 tonnes were harvested in Region North and 826 tonnes in Region South. 

For 2020, the harvest volume is expected to be 37,000 tonnes, an increase of 36% compared to the harvest volume for Region North in 2019.

Sales in the quarter reached 24,726 tonnes of salmon, 11% lower than the corresponding quarter last year.

“In the fourth quarter, the group was granted green financing of NOK 400m and 75% of NRS’s sites are now ASC certified. It is gratifying to see that the commitment to sustainable production results in more favourable loan terms and is appreciated by the bank,” said Høstlund.