May 20, 2011

 

Morpol achieves outstanding results despite expensive raw material

 

 

Salmon company Morpol ASA announced that it had a positive EBIT pre fair value of EUR6.2 million (US$8.87 million) for Q1 and an operational EBIT of EUR7.3 million (US$10.4 million) in contrast to EUR5.2 million (US$7.4 million) during the same period last year.

 

Operating revenues also shot up to EUR127.1 million (US$181.9 million) compared to EUR90.2 million (US$129 million) in Q1 2010, mainly due to farming revenues not included in 2010, and to better unit prices in the processing division.

 

At the same time, overall sale volumes in the quarter fell by 3.1% on year, but price increases for customers raised the average unit selling price.

 

While revenues were up in processing at EUR103.5 million (US$148 million) versus EUR90.2 million (US$129 million) on year, EBIT for processing dropped to EUR300,000 (US$429,300) from EUR5.2 million (US$7.4 million), mostly because raw material purchase prices rose and were only somewhat offset by the increased sale prices for Morpol customers.

 

Farming revenues in the first quarter were EUR31.6 million (US$45.2 million) and EBIT pre fair value stood at EUR8.1 million (US$11.6 million).

 

Salmon raw material prices remained high and impacted processing margins negatively.

 

In the first quarter of the year, sale volumes skidded due to the timing of Easter (three weeks later than in 2010), which has always paired to strong demand for smoked salmon. This plus a slower demand brought sales of cold smoked salmon and specialty salmon down by 5% and 11%, respectively, while other products remained flat.

 

"Despite the short-term pressure on processing margins, we believe we have built a solid platform to return to higher operational margins when there is a better balance between supply and demand on the raw material side. We have continued to take market share in key areas such as France and UK, and we have a strong base to further expand" said Morpol CEO Jerzy Malek.

 

Moreover, Morpol acquired Norwegian salmon farming company Jøkelfjord Laks AS in the first quarter and its results appear in the consolidated results for Q1.

 

Through its subsidiary Lakeland Smolt, Morpol has invested in land and a building in Rosyth, Scotland, for EUR4.2 million (US$6 million). Morpol bought the facility to establish a large-scale value-added processing plant, which will contribute to the expansion of its market strength in the UK and other regions.

 

At the end of the first quarter 2011, Morpol showed a net interesting bearing debt of EUR199.1 million (US$284.9 million) compared to EUR72.2 million (US$103.3 million) in the corresponding period of 2010. The increase is attributed to acquisitions of farming operations during the last three quarters.