Northern dominance on profit among Norway’s largest salmon farmers

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All time high for Norway’s salmon farmers.

Northern Norwegian company Eidsfjord Sjofarm presented an operating margin of 45.7 per cent, making it the most profitable of the country’s largest fish farming companies last year. To emphasize local dominance, an even bigger player from Vesteralen, Northern Norway, followed directly behind. Stokmarknes-based Nordlaks could record 40.6 per cent in operating margin after the 2016 salmon price bonanza.

Northern dominance
A review by Salmon Business of the accounts so far presented by the big breeders, showed that five out of the six top positions went to farmers in the country’s most northern counties. The only ‘southerner’ that managed to squeeze into the top five is Western Norwegian firm Alsaker. 

Northern Norway’s dominance is caused by lower lice deposits in colder waters, and the lower costs of lice control in the north. The health status of the fish, also due to lower site density, has for a long time been better in Northern Norway than in the south.

This results in lower production costs, confirms Ulf Ellingsen, chairman of Ellingsen Seafood, which marked up a 38 percent operating margin.

Lice pressure
“Lice problems have been less in our region. We have not been unlucky so far this year,”  Ellingsen told Salmon Business.

“We had ISA (infectious salmon anaemia virus) in 2015, and that knocked out 50 percent of the stock. It had consequences for slaughtering volumes, which were only half of what we had budgeted. But the results were still good.”

The breeders get the same price for the fish all over Norway. Thus the variable costs associated with lice control and fish health are the variables.

“We took out some winter fish that we put out in January 2016, and slaughtered it in May. And it had a cost of less than NOK 30 (€ 3.22) in the box.

That certainly gives a healthy profit with a sales price of € 7.

“We have some contracts that are lower, and we’ve have those for a while, but nevertheless, these margins that are very, very good. The first half of this year was as good as the whole last year,” Ellingsen said.

Inflated costs
2016 was a year for the history books in terms of price and profit for the salmon farming industry in Norway. Never before has a higher profit from salmon farming been recorded. The main factor was obviously the record high farm gate salmon price of € 6.66 per kilo.

The year that comes closest in profit margin is 2010. That year, the average operating margin was 26.6 per cent – quite good after last year’s 29.1 per cent.

At that time, however, the farm gate salmon price was €4 per kilo – a total of € 2.68 lower than in 2016 – which, above all, shows the cost explosion that has affected the Norwegian aquaculture industry in recent years.