Biological challenges for Norway Royal Salmon (NRS) have affected the results of Region South two quarters in a row.
On Tuesday, NRS reported that the first quarter results were affected by poor performance in Region South. Region South posted an operational EBIT of EUR 254,621 in the quarter, compared with EUR 2.1 million in Q1 2018. Operational EBIT per kilo gutted weight was NOK EUR 0.24, from EUR 1.59 in the same quarter last year.
In Region South production cost per kilo was EUR 5.4 which was EUR 0.14 higher than in Q4 2018 and EUR 1.51 higher than in Q1 2018. The high production costs at this site were caused by high mortality on harvestable fish in the previous quarter due to the fish disease yersinosis.
“The quarterly figures for Q1 in Region South region show too high costs, something we are not happy with. It is the same project that we slaughtered at the previous quarter so that it corresponds to what we signalled in the previous reporting. After a number of quarters with satisfactory results in Region South, we have had weak figures in the last two quarters due to biological challenges,” wrote CEO of NRS, Charles Høstlund, to SalmonBusiness.
Tuesday it was also known that NRS is considering strategic alternatives for Region South. The salmon farming business of NRS is divided into two geographical segments; Region North and Region South, where the latter is the area around Haugesund in Western Norway.
“The board and the management have decided to consider strategic alternatives for the Region South. Specifically, this means that we will look at alternatives that can lead to sales, mergers, different forms of cooperation with other actors or other outcomes. When we conclude, it can also mean that we are developing what we have today. We have not been able to exploit the potential of the licenses, sites and employees in the region. We have had good margins in the region, but we have not gotten the volume over time we believe is the potential. We believe that through this strategic review we will be able to identify structures that will realize the potential that lies in Region South,” wrote Høstlund.
NRS has hired DNB Markets to assess strategic alternatives for the group’s operation in the South.