The result in the first three months of the year was lower than expected.
Record high prices boosted both sales and profit in the first quarter. Turnover in the quarter was NOK 5,524 million (€540.3 million), which corresponds to an increase of 12 percent compared with the same period in 2021. Operating profit before value adjustment was NOK 852 million (€83.3 million), and has greatly improved compared with NOK 455 million (€44.5 million) in the first quarter of 2021.
However, according to financial outlet TDN Direkt, it missed an expected operating profit of NOK 943 million (€92.2 million).
“In the first quarter, we have seen an extreme price development for seafood, and especially salmon and trout. This development is positive for earnings in aquaculture and fishing activity for whitefish, but is required for earnings in the group’s downstream operations,” CEO Henning Beltestad said in a statement.
Becoming more expensive
During the period, 32 thousand tonnes of salmon and trout were harvested. Lerøy Aurora delivered an EBIT / kg of NOK 18.9 (€1.9), Lerøy Midt of NOK 24.3 (€2.4) and Lerøy Sjøtroll of NOK 15.7 (€1.5).
“We are experiencing a very strong cost increase on almost all input factors, where price increases on feed are the most obvious. This will result in higher costs in 2022 than in previous years, at the same time it seems so far that the increase in price achievement will be greater than the increase in costs,” Beltestad said.
“The development in seafood prices and transport costs in the first quarter was far higher than expected. This puts temporary pressure on the margins in the group’s downstream activities, and will also affect us in the coming quarter,” Beltestad added.
Cost inflation is gradually reflected in increased bunkers and energy costs, but, more importantly, feed costs. Uncertainty about the future cost level for the group’s input factors is high, but the company’s expectation, as of today, is, for example, that feed prices will continue to rise in the coming quarters. Rising prices will gradually be reflected in the withdrawal cost in the group’s aquaculture operations. It is likely that feed cost per kilo of fish harvested will increase by an estimated 3-4 kroner (€0.3-0.4)/kg in 2022 compared with 2021. The price of other input factors will also increase, this inflationary pressure highlights the importance of operational improvements.
High contract share
The spot price for salmon is at a historically high level, characterized by good demand, but also small volumes available in the spot market. The group’s harvesting profile in 2022 also means a high contract share in the second quarter.
In recent years, Lerøy has invested significantly in several parts of the value chain, including by expanding facilities for smolt / post-smolt capacity in all the group’s regions. The investments within the group’s smolt production have been an important driver for the growth in the group’s harvest volume in Norway, the harvest volume has gone from 158 thousand tonnes in 2019 to 187 thousand tonnes in 2021. At the same time, the new smolt plants enable significant changes in operations. realization of improvements in the years to come.
For consolidated operations, Lerøy expects to harvest about 185 thousand tonnes in 2022. The group’s share from associated companies is expected to be about 23 thousand tonnes. This includes the expected volume from Scottish Sea Farms Ltd’s newly acquired Grieg Seafood UK. Lerøy’s total harvest volume in 2022 is expected to be in the order of 208 thousand tonnes.