Grieg Seafoods delivers €43.9 million EBIT in Q2

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The Bergen-based salmon farmer aims for 75,000 tonnes in 2018 harvesting volume.

The Grieg Seafood Group harvested 22 568 tonnes of salmon in Q2 2018, compared to 18 503 tonnes in Q2 2017, an increase of approximately 22%. The average spot price (Nasdaq Salmon Index) for the period was NOK 68.81 per kg, up by NOK 0.98 per kg compared to the same period in 2017. The average realized price for Grieg Seafood was down by NOK 3.21 per kg comparing these quarters. This was partly due to a combination of a high proportion of harvesting towards the end of the quarter when prices were lower, and partly due to lower price achievement for PD-affected fish from Rogaland, according to a press release from the company.

Grieg Seafood’s total operating income in Q2 2018 amounted to €238.8 million. The farming cost (total cost related to fish harvested this quarter) decreased by €0.16 per kg compared to the same quarter last year. Higher harvested volume in Finnmark and BC contributed positively.

The Group’s EBIT before fair value adjustment of biological assets was €43.9 million during the quarter, implying an EBIT per kg amounted at €1.94.

Grieg Seafood has an overall goal of increasing production by at least 10% annually until 2020, with the main growth in 2019. Furthermore, the Group has an ambition to achieve production cost at or below the industry average. Continued access to high-quality smolt is critical to ensure future growth. In addition, larger smolt will result in shorter production time in sea, thus contributing to reduced biological risk and increased survival. Another essential aspect of Grieg Seafood’s growth strategy is the increased utilization of the Group’s licenses. High site flexibility is essential to improve utilization, and Grieg Seafood cooperates with local authorities on an ongoing basis to optimize flexibility. Increased volumes, improved capacity utilization and shorter production time in sea will contribute to higher efficiency and reduced production costs.

The Group also continually undertakes cost-reducing initiatives and has established an internal improvement program, scheduled to run until 2020.

Salmon prices were very volatile in the second quarter of 2018. Despite of this the average price level was high compared to Q1 2018. The salmon supply has been higher month by month compared to Q2 2017, which in relation to the high average prices confirms the strong underlying demand for farmed salmon.

The Group’s total share of fixed price contracts in Norway in Q2 2018 was 27%. For Q3 the share of fixed price contracts is estimated to be 31%, with an estimate of 30% for the full year.

Supply growth is limited and expected to stabilize going forward. The strong underlying demand for salmon is likely to continue, and prices are expected to remain strong for the rest of 2018.

Grieg Seafood expects to harvest approximately 17 100 tonnes in Q3 2018 and 75 000 tonnes for the full year 2018, corresponding to an increase of 20% from 2017. The full year estimate has been reduced by 5 000 tonnes due to PD in Rogaland and algal bloom in BC.