Leroy Seafood Group extremely positive development on operating profit in 3d quarter 2010

November 9, 2010 10:34

In  the third quarter of 2010, Leroy Seafood  Group had a turnover of NOK 2,264 million,  representing an increase from NOK 1,946 million for the same period in 2009, reports www.megafishnet.com with reference to Leroy Seafood. 

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  424.2 million  in the third quarter of 2010, compared  with NOK 275.3 million in the third  quarter of the previous year. The strong  increase in operating profit compared with  the same period last year is as high as 54.1%. 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. At the beginning of 2010, the Group's share of contracts was higher than at  the same  point in  2009, and will  vary between  40% and 50% throughout the year.  Taken into consideration  with the Group's  positive market outlook, this indicates  that the  Group can  also expect  to achieve  good prices in the time ahead.  Despite  improvements  in  all  farming  regions,  there  continue to be considerable regional differences within the Group in terms of production costs.
On  the back  of increased  volumes and  improved production  for the Group as a whole,  the Board of Directors  expects production costs to  continue to fall in the fourth quarter of 2010.

Thanks  to good  market conditions,  satisfactory biology  and high volumes, the affiliated  company Norskott Havbruk  (owner of the  Scotland-based Scottish Sea Farms  Ltd)  saw  an  extremely  good  development  in net earnings in the third quarter.  Income  from  affiliated  companies  before  fair  value adjustment of biomass  therefore increased from NOK 14.0 million in the third quarter of 2009 to NOK 23.4 million in the third quarter of 2010.

The  Group's profit before tax and fair value adjustment of biomass in the third quarter  of 2010 was NOK 431.1 million as against NOK 272.4 million in the third quarter of 2009.

Key figures:
  * 31.0 thousand tons gutted weight of salmon and salmon trout harvested (Q3 2009: 28.0)
  * Turnover NOK 2,264 million (Q3 2009: 1,946)
  * Operating profit before fair value adjustment of biomass NOK 424.2 million (Q3 2009: 275.3)
  * EBIT/kg all inclusive NOK 13.7 (Q3 2009: 9.8)
  * Profit before tax and before fair value adjustment of biomass NOK 431.1
    million (Q3 2009: 272.4)
  * Spot prices for whole superior salmon have seen an increase of 19.9%
    compared with Q3 2009
  * Net interest-bearing debt was NOK 1,032 million (NOK 1,813 million at 30 September 2009)
  * Equity ratio 55.8%

As  per  Q3  2010, Lerøy  Seafood  Group  had  a  turnover of NOK 6,314 million, representing an increase from NOK 5,290 million for the same period in 2009. The Group's  operating  profit  before  fair  value  adjustment  of  biomass was NOK 1,047.1 million as per Q3 2010, compared with NOK 638.7 million as per Q3 2009.
The  Group's operating margin before fair value adjustment of biomass was 16.6% as  per Q3 this  year, compared with  12.1% for the corresponding  period in the previous year.

As  per  Q3  2010, the  Group  generated  an  operating  profit after fair value adjustment  of biomass  of NOK  1,218.9 million, against  a profit of NOK 634.3 million as per Q3 2009. Fair value adjustment of biomass in accordance with IFRS is  NOK 171.8 million as per  Q3 2010, compared with NOK  -4.4 million as per Q3 2009. The positive IFRS adjustment as per Q3 2010 is mainly attributed to higher salmon prices as of 30 September 2010 compared with year-end prices.

Income  from affiliated  companies totalled  NOK 83.1 million  as per  Q3 2010, compared  with NOK  50.0 million as  per Q3  2009. With fair value adjustment of biomass,  the figures were  NOK 79.0 million and  NOK 41.7 million respectively.
The  Group's net financial items  as per Q3 2010 amounted  to NOK -46.1 million, compared with NOK -64.9 million as per Q3 2009. The reduction in financial costs is  mainly attributable to a significant  drop in net interest-bearing debt. The Group's  profit before tax and  before fair value adjustment  of biomass was NOK 1,080.0 million  as per  Q3 2010, compared  with a  corresponding figure  of NOK 615.5 million as per Q3 2009.

Net  earnings for the first three quarters of 2010 correspond to a profit before fair  value  adjustment  of  biomass  of  NOK  14.76 per  share,  as  against  a corresponding  figure of NOK 8.47 as per  Q3 2009. The Group's annualised return on  capital employed (ROCE) before fair value adjustment of biomass was 27.2% as per  Q3 2010, as  against 16.0% in  the same  period of  the previous  year. The Group's  financial position  is solid,  with book  equity of  NOK 4,837 million, corresponding to an equity ratio of 55.8%. The Group's net interest-bearing debt at  the end of  the third quarter  of 2010 was NOK  1,032 million as against NOK 1,813 million  at  the  end  of  the  third  quarter  of 2009. In this period, a dividend  of NOK 7.0 per share was paid out, i.e. NOK 375 million. The reduction in the Group's net interest-bearing debt over the past year of close to NOK 1.2 billion, adjusted for dividend, is extremely satisfactory.

Through  organic growth  and acquisitions  over the  last decade,  the Group has become one of the world's leading producers of Atlantic salmon and salmon trout.
It  has  also  consolidated  its  position  as  a  major  participant in seafood
distribution  in Norway and  worldwide, and it  has strengthened its position as the leading exporter of seafood from Norway. In the third quarter, Lerøy Seafood Group  signed  an  agreement  for  the  acquisition  of  50.71% of the shares in Sjotroll  Havbruk AS. Sjotroll Havbruk AS  farms salmon and salmon trout through 25 licenses  in Hordaland. The closing date  for the acquisition is mid-November this  year. Leroy Seafood  Group will continue  to selectively consider possible investment   and  merger  opportunities,  as  well  as  alliances,  which  could strengthen  the  basis  for  further  profitable  growth  and  sustainable value creation.

Expectations  in terms  of future  developments in  the world economy, including development  in  demand  for  the  Group's  products,  have become more positive through  2009 and  the  first  three  quarters  of  2010, despite the turmoil in Greece, and are now characterised considerably less by fear than was the case at the beginning of 2009. 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  2010. Moreover, a  drop in  the global supply of Atlantic  salmon for 2010 is expected, in addition to limited growth in the next few  years. Correspondingly, the Board of Directors anticipates a continued good development  in  the  global  demand  for  Atlantic  salmon. This, together with expectations  for  improved  productivity  in  the Group's production, 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 fourth  quarter of  2010 than was achieved in the third quarter of 2010, and correspondingly a significantly better result for the year as a whole compared with 2009.

Questions and comments may be addressed to the company's CEO, Henning Beltestad, or to the CFO, Ivan Vindheim.

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