Grieg Seafood ASA (NO) - GSF Q2 2011: Good results, in particular in Norwayin Norway

August 16, 2011 09:58
Highlights - first quarter 2011 and half-year report 2011
  • Strong salmon market in the first months of the year, followed by a significant decline in prices.
  • Strong result in Norway in second quarter. Weak results in Canada and Shetland influenced by non-recurring events.
  • EBIT before fair value adjustment of biological assets was MNOK 142.9 in second quarter 2011 (MNOK 175.1).
  • EBIT before fair value adjustment of biological assets was MNOK 274.5 in the first half of 2011 (MNOK 290.4).
  • Harvested volume in second quarter was 14 282 tons, an increase of 4.3%.
  • Acquisition of Erfjord Stamfisk AS in Norway and 2 licenses on Shetland in first half of 2011.

Results second quarter 2011 and first-half 2011

Operating profit before fair value adjustments was MNOK 142.9, against MNOK 175.1 last year. Both of the two Norwegian regions show good earnings and good operational development. The result in Canada has been negatively affected by non-recurring events and disease on the freshwater side. The result for Shetland is also strongly marked by weak biological achievement on the generation that is harvested in the quarter.

Second quarter has been characterized by a change in the supply side from no supply growth to a strong increase in the supply on the EU market in second half of the quarter. First part of the quarter continued strongly with record high prices for salmon. The prices fell considerably in second part of the quarter to the lowest level in almost 2 years. The decline in prices of salmon has been supply-driven. Following a longer period with no supply growth there was a strong increase in the supply towards the EU market in second half of the quarter. This change in the supply growth caused sharply declining prices in the last half of the quarter. The supply growth happened earlier and stronger than expected and new market development initiatives have not equally quickly led to a corresponding demand growth.

In first half of the year operating result before fair value adjustment of biological assets fell from MNOK 290.4 in 2010 to MNOK 274.5 in 2011. 

In second quarter the total harvested volume increased by in excess of 4% to 14 282 tons, while the harvested volume for the entire first half year was reduced by 17.7% to 26 161 tons.

The Group's operational EBIT before fair value adjustments of biomass was 10.01 NOK/kg (12.78 NOK/kg). Rogaland achieved an EBIT of 13.74 NOK/kg (13.22 NOK/kg), while Finnmark had an EBIT of 13.08 NOK/kg (11.72 NOK/kg). The EBIT in Shetland reached 2.14 NOK/kg (14.24 NOK/kg), while in Canada the EBIT reached 7.00 NOK/kg in 2011 compared to 14.37 NOK/kg in 2011. The Norwegian sales company, Ocean Quality, achieved an EBIT of NOK 2.9m (0.5%). All figures are Q2 2011 figures on isolated basis.

Equity ratio was 45.3% (45.3%) at the end of second quarter 2011. Net interest bearing debt was MNOK 1 135 (MNOK 1 075) at the end of second quarter 2011.


The strong salmon market continued in the beginning of second quarter. The prices in April were very good due to continued reduction in the global supply of salmon. Throughout second half of the quarter the prices of salmon fell sharply. This is explained by the change from no-growth to a double-digit relative supply growth on the EU market.

Continued supply growth is expected in the global salmon market ahead. This is due to both the growth coming from rebuilding the production in Chile, but also increase in other salmon farming regions. Norway is also expected to deliver growth in the second half of 2011.

The strong reduction in the prices of salmon has resulted in increased profitability in the distribution chain of salmon. This will lead to increased level of market activities for salmon, which again is expected to lead to increased demand in established markets.

In spite of both stronger and earlier fall in prices than expected, nothing has changed in the fundamental market and supply conditions for salmon. Rebuilding the production in Chile has been expected to cause a higher global supply growth than what has been seen in the last few years. The highest relative growth must be expected the first 1-2 years. At the same time the possibilities for supply growth from other fish farming regions remain limited. The utilization of capacity is high in other production regions and the prospects of significant capacity increase seem limited.

In recent years, Grieg Seafood has focused on improving profitability through improved operations. The group's most important improvement initiative is a larger investment program within smolt production, an investment providing good returns also based only on cost reductions on external purchases. Additionally, this is expected to become a significant driver behind biological production. The focus on the implementation of these operational improvements will continue.

The strategy that has been initiated through the establishment of a new sales company is an important element for the establishment of preferred customer relations and for the operation of a more systematic sales and marketing development. This will be even more important at a time of supply growth than at a time of an evident supply shortage.

Grieg Seafood expects a harvest volume in 2011 of 63 500 tons. This is a reduction of 1 500 tons compared to previous guiding. The reduction is a consequence of the poor production performance of the 2009 S0 generation in Shetland and an alteration of the harvest plan in Canada. In the third quarter of 2011, Grieg Seafood expects to harvest 16 000 tons, an increase of 10% from the same period in 2010. In the fourth quarter the expected harvest volume is therefore 21 300 tons, an increase of 19%.

A stop in harvesting in Norway in the third quarter will cause higher fixed costs per kilo in line with previous years. The underlying cost of fish harvested in Canada will increase slightly for the fish groups that scheduled to be harvested in second half of the year. This is due to production conditions originating from 1H 2010. On the other hand the Q2 result was negatively influenced by non-recurring events first and foremost within the freshwater production. The cost of fish harvested in Shetland is expected to be reduced considerably compared to second quarter.

For further information, please contact:

CEO Morten Vike (cell phone: +47 994 911 65)

CFO Atle Harald Sandtorv (cell phone: +47 908 45 252)

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