September 8, 2020
Salmar releases results for second quarter of 2020
Norway-based salmon producer SalMar ASA has recently released its results for the second quarter of 2020.
According to the results, the company made an operational EBIT of kr882 million (US$98.5 million) in the second quarter 2020, down from kr990 million (US$110.5 million) in the same period last year. The group's Norwegian operations made an operational EBIT of kr912 million (US$101.8 million) in the second quarter 2020, down from kr964 million (US$107.7 million) in the same period in 2019.
"The SalMar Group has had another strong quarter, despite persisting turbulence and uncertainty in the global salmon market caused by the COVID-19 pandemic. Efficient operations and a strong biological performance at our Norwegian operations helped to reduce costs and secure good margins," said SalMar CEO Gustav Witzøe.
SalMar generated gross operating revenues of just over kr3.3 billion (US$368.5 million) in the quarter, an increase of 0.4% on the second quarter 2019. SalMar harvested 40,900 tonnes of salmon during the quarter, compared with 41,400 tonnes in the corresponding period last year.
Operational EBIT per kilogramme came to kr21.56 (US$2.41) in the second quarter 2020, down from kr23.90 (US$2.67) per kilogramme in the second quarter last year. The decrease is largely attributable to the average spot price in the period (NASDAQ Salmon Index) being kr4.85 (US$0.54) per kilogramme lower than in the same period in 2019. However, the reduction in margin was dampened by lower costs for the harvested volume.
Once again, Salmar's fish farming (Central Norway) segment posted a strong result. The segment is reaping the rewards of its operational focus and sound biological performance. The generation of fish that made up the bulk of the volume harvested in the quarter, which was transferred to the sea in the spring of 2019, has shown strong performance and better than previous generations.
Harvesting of the generation transferred to the sea in the autumn of 2019 will commence in the third quarter. SalMar expects the fish farming (Central Norway) segment's costs in the third quarter to remain at a similar level, while the volume harvested will be slightly higher than in the second quarter.
The segment posted a very good result. The share of the autumn-2018 generation that was harvested in the second quarter achieved a good biological performance and lower costs. However, price achievement was somewhat affected by a high volume harvested early in the period, when prices were at their lowest. Harvesting of the spring-2019 generation will get underway in the third quarter. Due to these fish having a slightly lower level of performance, the segment expects somewhat higher costs and a low harvest volume compared with the second quarter.
As expected, Arnarlax had a weak second quarter. The segment suffered a high mortality rate and high costs as a result of fish with winter wounds. At the same time, almost 90% of the volume was sold early in the quarter, when prices were at their lowest, Salmar said. The low volume also resulted in weak capacity utilisation at the harvesting plant. The affected sites have now been emptied. A somewhat lower level of costs and a higher harvested volume is therefore expected in the third quarter.
For the sales and processing segment, the third quarter was characterised by high market uncertainty as a result of the COVID-19 pandemic, as well as volatile salmon spot prices. Despite this, the segment posted a good result in the period, with a good allocation of spot sales and better capacity utilisation deriving from higher volumes at the harvesting plant. At the same time, lower spot prices resulted in a positive contribution from contract sales. The segment made an operating profit of kr70 million (US$7.8 million), compared with break-even in the second quarter 2019. Contract sales accounted for 30% of the volume in the quarter. For the third quarter and 2020 as a whole, the contract rate is 25%, with prices slightly higher than in 2019.
According to Salmar, the spread of COVID-19 and the measures implemented worldwide to halt its transmission have created heightened market uncertainty. However, the company is well positioned to handle such crises, since it has good financial flexibility and the capacity to further process products locally before they are shipped to countries around the globe. Salmar said.
SalMar is maintaining its ongoing investment programmes to ensure the development of its robust platform for further growth. At a public auction in August 2020, SalMar boosted its maximum allowable biomass (MAB) by just over 8,000 tonnes. This reflects the company's confidence in the future of the aquaculture industry.
SalMar's board of directors also considers that the company has a strong foundation for further positive development in both traditional and offshore-based aquaculture.
In 2020 as a whole, SalMar still expects to harvest 152,000 tonnes of salmon in Norway: 103,000 tonnes in Central Norway and 49,000 tonnes in Northern Norway. In addition, it expects to harvest some 12,000 tonnes in Iceland.