Grieg Seafood: “We have not been able to deliver on our ambitions”

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Negative value creation for salmon farmer.

On Tuesday, Grieg Seafood released its Q3 report on the Oslo Stock Exchange.

Revenue decreased from EUR 120 million in Q3 2019 to EUR 111 million this year. EBIT freefell, from EUR 13 million last year, to minus EUR 18 million.

Disrupted markets with low spot prices had a negative impact on the company by EUR 8.5 million on earnings in the quarter compared to the corresponding quarter in 2019.

Shetland’s profitability negatively impacted by EUR 14 million, Grieg Seafood decided to cease operations of five farms on the isle of Skye, which is a part of the company’s Shetland farming region (which altogether comprises 17 seawater licenses), earlier this year. “We aim for a sale when the timing is right,” said CEO Andreas Kvame.

“The reason was precisely the long-distance and few synergies between our main operations on Shetland and the farms on Skye. Now we are initiating a strategic review of all of our Shetland operations, aiming to sell when the time is right,” clarified Grieg Seafood communications manager Kristina Furnes to SalmonBusiness, after the article was published.

It had an EBIT/kg of minus EUR 0.8 compared to last year’s EUR 6.3.

Commenting on the company’s performance in Q3, Kvame said that the third quarter was challenging for Grieg Seafood.

“Effects of the Covid-19 impacted price achievements negatively in all markets and we experienced operational challenges out of the ordinary on Isle of Skye. On the other hand, our Norwegian regions delivered good results in the quarter. Progress is made at our recently acquired greenfield project in Newfoundland, and healthy fish are growing in our new hatchery. However, to lower risk in the initial phase of the project, we have decided to defer the construction of the first post-smolt unit to 2023, without causing delay to our target of harvesting 15,000 tonnes in 2025.”

“In 2020, we have not been able to deliver on our ambitions,” he wrote. “Grieg Seafood has a clear goal of creating value and we are taking decisive action and implementing measures to improve our performance the coming years. We will reduce cost per unit in all regions supported by cost-effective and sustainable farming methods and profitably grow our salmon production by around 45 per-cent towards 2025”, commented CEO Andreas Kvame.

In the short term, the company is pursuing three potential sources of capital which include: Extending a current bridge loan to after divestment of Shetland assets. Continue a dialog with GIEK on financing of the Newfoundland project. And following the successful issue of a Green bond in June, Grieg Seafood intends to actively utilise the bond market.

Last month, SalmonBusiness reported that Grieg posted a profit warning and that it may have been in breach with loan agreements. It said that following negotiations with the banks, Grieg Seafood “has been granted an amendment to the covenants through the third quarter of 2021”.

Q4 expected harvest is 26,500 tonnes. 2020 volume guidance is 90,000 tonnes.