May 20, 2020


SalMar achieves record first quarter earnings



In the first quarter of 2020, SalMar gained record operational earnings before interest and taxes (EBIT) of almost NOK1.07 billion (US$107.1 million, EUR977.8 million), reported SeafoodSource.


This is higher than the same period last year where the company earned NOK806 million (US$80.7 million, EUR73.7 million), citing high spot prices and a strong operational performance.


"For the SalMar Group, the first quarter was very good. We posted the highest-ever operational EBIT in the company's history, achieved through strong underlying operations, high volumes, and good prices. Central Norway in particular distinguished itself through solid performance in the quarter," SalMar CEO Gustav Witzøe said.


The Norway-headquartered salmon farmer's gross operating revenues of NOK3.6 billion (US$360.4 million, EUR329 million) in the last quarter were up 22% on-year, while the harvest totalled 40,000 tonnes, compared with 35,500 tonnes a year previously, and the operating EBIT per kg increased to NOK26.61 (US$2.66, EUR2.43).


Regionally, Fish Farming Central Norway, the group's largest business segment, harvested a total of 22,200 tonnes of salmon in the last quarter, some 4,000 tonnes more than in Q1 2019. Fish Farming Northern Norway harvested around 13,600 tonnes of salmon in the last quarter, which was 1,500 tonnes less than a year previously.


According to the quarter's report, Fish Farming Central Norway posted good results for the period on the back of "sound operations," while a more even spread of the harvested volume and higher spot prices resulted in considerably better price achievement than for the previous quarter. SalMar expects the segment to report lower costs and a slightly higher harvested volume in Q2 than in the first three months.


The latter segment's results were affected by higher harvesting costs at sites suffering from by the viral disease infectious salmon anaemia (ISA), but it achieved "a considerably better operating margin" than in previous quarters due to cost improvements and increased spot prices. Those sites affected by ISA have now been emptied out, and SalMar expects the segment to report a slightly lower harvested volume and lower costs for the second quarter this year.


Meanwhile, its Icelandic subsidiary Arnarlax harvested 4,300 tonnes of salmon in Q1 2020, compared with 2,100 tonnes a year previously. Its operating revenues totalled NOK280 million (US$28 million, EUR25.9 million) in the quarter, up from NOK133 million (US$13.3 million, EUR12.2 million).


The report states that Bíldudalur, Iceland-based Arnarlax "had a challenging quarter," with high mortality resulting from winter wounds. As previously reported, this high level of mortality forced the company to harvest out a significant number of fish during a period of poor weather conditions and low sea temperatures. These actions resulted in higher costs.


For the quarter, Arnarlax achieved an operational EBIT of NOK22 million (US$2.2 million, EUR2 million), some NOK3 million (US$300,334, EUR274,049) less than in the same period in 2019. Operational EBIT-per-kg gutted weight came to NOK4.92 (US$0.49, EUR0.45), compared with NOK11.77 (US$1.18, EUR1.08) per kg in Q1 2019.


"A substantially lower volume is expected in the second quarter this year. Weaker margins must also be expected because one will continue harvesting of the 2018 generation and because Arnarlax will not benefit from the same positive currency effects with regard to salmon prices, since they are sold and recognised largely in EUR," the report said.


In addition, associated business Norskott Havbruk harvested 2,900 tonnes of salmon, compared with 4,800 tonnes in Q1 2019. SalMar owns 50% of this producer.


A harvest of 152,000 tonnes is projected from SalMar's Norwegian farms in 2020, Arnarlax is expected to harvest around 12,000 tonnes, while Norskott Havbruk is forecast to harvest 26,000 tonnes.


SalMar's Sales and Processing segment, which sells all of the fish that the group harvests in Norway, generated higher revenues of NOK3.35 billion (US$335.2 million, EUR306 million) in the last quarter. However, the unit posted an operational EBIT loss of NOK17 million (US$1.7 million, EUR1.6 million), representing a NOK31 million (US$3.1 million, EUR2.8 million) reversal on Q1 2019. The decrease in earnings is blamed on a negative contribution from fixed-price contracts as a result of high spot salmon prices through much of the quarter.


The group previously advised that a dividend will not be paid for 2019 due to the uncertainty caused by the ongoing coronavirus situation. It is, however, continuing with its investment projects as planned, including the construction of the new InnovaNor harvesting and processing plant in northern Norway and a smolt production facility on Senja.


It is also considering the construction of a new hatchery in Tjuin, Trøndelag, and purchased a plot of land in the area in Q4 2019.