Leroy Seafood Group ASA: Q4 2010 RESULTS
In the fourth quarter of 2010, Leroy Seafood Group had a turnover of NOK 2,574 million, representing an increase from NOK 2,184 million for the same period in 2009, reports www.megafishnet.com with reference to Leroy.
The Board of Directors is very satisfied with the Group's development and with the result achieved for the period, which is the highest result achieved in the history of the Group to date. The Group's operating profit before fair value adjustment of biomass was NOK 539.2 million in the fourth quarter of 2010, compared with NOK 311.4 million in the fourth quarter of the previous year. The strong increase in operating profit compared with the same period last year is as high as 73.2%. This is explained by volume growth and improved prices for the Group's main products, Atlantic salmon and salmon trout, and an extremely good development for the Sales and Distribution business segment. As a result of the Group's long-term industrial market strategy, the prices achieved for salmon and salmon trout will naturally deviate from the spot market prices. Realised contract prices have been lower than prevailing spot prices in the quarter under review. The Group's share of contracts was 45% in the fourth quarter of 2010 and will, based upon the current contract situation, be around 40% in 2011. Committed contract prices for 2011 are substantially higher than for 2010. Taking the above into consideration along with the Group's positive market outlook, this indicates that the Group can also expect to achieve good prices in the time ahead.
Despite considerably lower volumes in the fourth quarter of 2010 compared with the fourth quarter of 2009, the affiliated company Norskott Havbruk (owner of the Scotland-based Scottish Sea Farms Ltd) saw a good development in net earnings, thanks to good market conditions and satisfactory biology. Income from affiliated companies before fair value adjustment of biomass therefore increased from NOK 20.6 million in the fourth quarter of 2009 to NOK 23.8 million in the fourth quarter of 2010.
The Group's profit before tax and fair value adjustment of biomass in the fourth quarter of 2010 was NOK 543.3 million as against NOK 311.1 million in the fourth quarter of 2009.
Key figures:
* 35.8 thousand tons gutted weight of salmon and salmon trout harvested (Q4
2009: 35.0)
* Turnover NOK 2,574 million (Q4 2009: 2,184)
* Operating profit before fair value adjustment of biomass NOK 539.2 million
(Q4 2009: 311.4)
* EBIT/kg all inclusive NOK 15.1 (Q4 2009: 8.9)
* Profit before tax and before fair value adjustment of biomass NOK 543.3
million (Q4 2009: 311.1)
* Spot prices for whole superior salmon have seen an increase of 37.3%
compared with Q4 2009
* Net interest-bearing debt was NOK 1,299 million (NOK 1,443 million at 31
December 2009)
* Equity ratio 52.8%
FINANCIAL SUMMARY 2010
In 2010, Lerøy Seafood Group had a turnover of NOK 8,888 million, representing an increase from NOK 7,474 million in 2009, i.e. 18.9%. The Group's produced volume shows an increase from 108,500 tons gutted weight in 2009 to 116,800 tons gutted weight in 2010. This growth amounts to 7.7% which is in line with the Group's communicated plans. The Group's operating profit before fair value adjustment of biomass was NOK 1,586.2 million in 2010, compared with NOK 950.2 million in 2009. This is an increase of as much as 66.9%. The Group's operating margin before fair value adjustment of biomass was 17.8% in 2010, compared with a corresponding 12.7% for 2009. Both turnover as well as operating profit before fair value adjustment of biomass are, to date, by far the highest achieved in the history of the Group, and are a result of volume growth, satisfactory biological production and extremely good prices for the Group's main products, Atlantic salmon and salmon trout. In addition, the Sales and Distribution business segment has shown an extremely positive development in 2010. The Board of Directors is full of praise for the employees' efforts, their understanding of the need for goal-oriented operational focus and for their willingness to adapt to changes throughout the entire organisation. The Board of Directors would like to take this opportunity to thank the employees for their excellent efforts throughout the year.
In 2010, the Group had an operating profit after fair value adjustment of biomass of NOK 1,884.8 million, as against a profit of NOK 1,010.6 million in 2009. Fair value adjustment of biomass in accordance with IFRS came to NOK 298.5 million in 2010, as compared with a figure of NOK 60.5 million in 2009. The positive IFRS adjustment in 2010 is mainly explained by an increase in salmon prices.
Income from affiliated companies totalled NOK 122.0 million in 2010, compared with NOK 62.7 million in 2009. Adjusted for fair value adjustment of biomass, the figures were NOK 103.3 million and NOK 62.5 million respectively. This increase is mainly related to the affiliated company Norskott Havbruk (the Scotland-based Scottish Sea Farms Ltd.) which has experienced good sales prices throughout 2010. The Group's net financial items in 2010 amounted to NOK -66.3 million, compared with NOK -86.1 million in 2009. The reduction in financial costs is attributable to lower interest costs as a result of a reduction in net interest-bearing debt. The Group's profit before tax and before fair value adjustment of biomass was NOK 1,623.3 million in 2010, compared with a corresponding figure of NOK 926.6 million in 2009.
Net earnings for 2010 correspond to a profit before fair value adjustment of biomass of NOK 22.08 per share, as against a corresponding figure of NOK 12.80 per share in 2009. The Board of Directors intends to propose to the Annual General Meeting that the dividend for 2010 be set at NOK 10.0 per share. The Group's return on capital employed (ROCE) before fair value adjustment of biomass was 27.5% in 2010 as against 18.1% in 2009. The Group's financial position is solid, with book equity of NOK 5,994 million, corresponding to an equity ratio of 52.8%. The Group's net interest-bearing debt at year-end 2010 was NOK 1,299 million versus NOK 1,443 million at year-end 2009. On 4 June 2010, a dividend was paid of NOK 7.0 per share, i.e. NOK 375 million. On 10 November 2010, the Group acquired 50.71% of the shares in Sjøtroll Havbruk AS which increased the net interest-bearing debt by NOK 689 million through leverage and consolidated net interest-bearing debt. The reduction of net interest-bearing debt of NOK 1.2 billion in 2010, adjusted for dividend and acquisitions, is extremely satisfactory.
STRUCTURAL CONDITIONS
Through organic growth and acquisitions over the last decade, the Group has become the world's second largest producer of Atlantic salmon and salmon trout. In the fourth quarter of 2010, the Group signed an agreement for the acquisition of 50.71% of the shares in Sjøtroll Havbruk AS. Sjøtroll Havbruk AS produces salmon and salmon trout through 25 licenses in Hordaland. Furthermore, the Group
acquired 51.0% of the shares in the Finnish company Jokisen Eväät OY in January 2011. Jokisen Eväät OY enjoys a strong position within the sale and distribution of seafood in its domestic market and will thus contribute to strengthening the Group's position on the Finnish market.
THE MARKET SITUATION/OUTLOOK
Expectations in terms of future developments in the world economy, including development in demand for the Group's products, have become more positive throughout 2010 and to date in 2011, and are now characterised considerably less by fear than was the case at the beginning of 2010. That said, the Board of Directors believes there is still rather more uncertainty than normal at the macro scale. Development in demand for the Group's main products, Atlantic salmon and salmon trout, has been extremely positive so far in 2011. Moreover, a higher growth in the global supply of Atlantic salmon in the next few years compared with the two last years is expected. Correspondingly, the Board of Directors anticipates a continued good development in the global demand for Atlantic salmon. Good demand together with expectations for improved productivity for the Group, including improved biology, provides justification for the Board's positive attitude to the Group's development. The Board of Directors currently anticipates a better result for the Group in the first quarter of 2011 than was achieved in the first quarter of 2010, and correspondingly for 2011 as a whole.