February 28, 2014

 

Salmar reports record high results in 2013 earnings by 270%

 

 

Boosted by high salmon prices, Salmar has become the latest Norwegian salmon producer to unveil soaring profits and generous dividends for 2013.

 

However, the company is no longer in a class of its own in terms of profitability, as high costs in part due to biological challenges and large losses in its sales processing arm dented the picture.

 

Salmar, which farms only in Norway, in addition to a 50% stake in Scottish Sea Farms in the UK, saw its total operational earnings before interests and taxes (EBIT) shoot up to NOK1.259 billion (US$208 million) for the year, up by NOK919 million (US$152 million) or 270% from 2012. This was despite a loss of NOK161 million (US$27 million) in its sales and marketing arm, which swung into the red from a profit of NOK55 million (US$9.1 million) in 2012.

 

However, like its peers, Salmar noted that the results were largely thanks to higher salmon prices and came in spite of higher costs and biological challenges such as pancreas disease (PD).

 

The company has recommended a dividend of NOK8 (US$1.32) per share, or approximately NOK906.3 million (US$150 million) based on its current share capital. Forecasting 145,000 tonnes for 2014

 

The result was accompanied by a 12% increase in its harvest volumes in Norway, which ended at 114,900 tonnes for the year, compared to 102,600 tonnes in 2012. Salmar expects to harvest 145,000 tonnes in total in the UK and Norway this year, up 12% from last year. NOK 10.6 per kilogramme harvested.

 

The largest chunk of Salmar's profits came from its central Norway division, which saw its EBIT more than quadruple, to NOK924 million (US$153 million). With a harvest of 70,200 tonnes last year, the division accounted for 61% of Salmar's volumes in Norway.

 

Total EBIT before depreciation and amortization (EBITDA) also soared, by NOK975 million (US$161 million) or 190% to NOK1.48 billion (US$24.5 billion). Overall revenues for the company were up by NOK2 billion (US$331 million) or 48% to NOK6.245 billion (US$1.03 billion).

 

The increase is particularly striking when looking at the EBIT per kilogramme where Salmar earned NOK10.6 (US$1.75 per kilogramme of salmon harvested in 2013, up from NOK3.32 (US$0.55) in 2012.

 

In sales and processing, the end of the year continued the losses, with the fourth quarter losing NOK38 million (US$6.3 million) in terms of EBIT, following a loss of NOK29 million (US$4.8 million) in the previous quarter. The processing segment includes Innovamar, Salmar's huge processing plant, which harvests all of Salmar's volumes (except those from its share of Villa Organic) and from third party producers. The segment harvested 30,262 tonnes during the fourth quarter of the year, of which half was from third parties. This was down by approximately 2,000 tonnes from a year ago.

 

Salmar attributed the segment's losses to fixed-price contracts and difficulties in dealing with a high level of PD-infected fish.

 

The secondary processing business, meanwhile, struggled with the high salmon prices, and PD-related challenges. "PD affects productivity and costs as a result of an inconsistent supply of fish through the plant, combined with quality issues relating to the fish being processed."

 

Regulation requiring the transport of harvestable fish in closed containers means that industrial activities must, to a larger extent, be undertaken beyond normal working hours, at higher variable costs than previously. In December, Salmar was granted approval for the holding of PD-infected fish in waiting pens, which will reduce logistics problems in the near future.