SalMar outperformed in Q2

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SalMar made an Operational EBIT of NOK 882 million (EUR 84 million) in the second quarter 2020, down from NOK 990 million (EUR 94 million) in the same period last year.

Investment banks covering SalMar expected on average an EBIT of NOK 782 million (EUR 74 million), according to TDN Direkt.

“The SalMar Group has had another strong quarter, despite persisting turbulence and uncertainty in the global salmon market caused by the Covid-19 pandemic. Efficient operations and a strong biological performance at our Norwegian operations helped to reduce costs and secure good margins,” said SalMar’s CEO Gustav Witz√łe in a press release.

SalMar generated gross operating revenues of just over NOK 3.3 billion (EUR 314 million) in the quarter, an increase of 0.4 per cent on the second quarter 2019. SalMar harvested 40,900 tonnes of salmon during the quarter, compared with 41,400 tonnes in the corresponding period last year.

Operational EBIT per kg came to NOK 21.56 (EUR 2.05) in the second quarter 2020, down from NOK 23.90 (EUR 2.27) per kg in the second quarter last year. The decrease is largely attributable to the average spot price in the period (NASDAQ Salmon Index) being NOK 4.85 (EUR 0.46) per kg lower than in the same period in 2019. However, the reduction in margin was dampened by lower costs for the harvested volume.

Once again, Fish Farming Central Norway posted a strong result. The segment is reaping the rewards of its operational focus and sound biological performance. The generation of fish that made up the bulk of the volume harvested in the quarter, which was transferred to the sea in the spring of 2019, has shown strong performance and better than previous generations. Harvesting of the generation transferred to the sea in the autumn of 2019 will commence in the third quarter. SalMar expects Fish Farming Central Norway’s costs in the third quarter to remain at a similar level, while the volume harvested will be slightly higher than in the second quarter.

Fish Farming Northern Norway posted a very good result. The share of the autumn 2018 generation that was harvested in the second quarter achieved a good biological performance and lower costs. However, price achievement was somewhat affected by a high volume harvested early in the period, when prices were at their lowest. Harvesting of the spring 2019 generation will get underway in the third quarter. Due to these fish having a slightly lower level of performance, the segment expects somewhat higher costs and a low harvest volume compared with the second quarter.

As expected, Arnarlax had a weak second quarter. The segment suffered a high mortality rate and high costs as a result of fish with winter wounds. At the same time, almost 90 per cent of the volume was sold early in the quarter, when prices were at their lowest. The low volume also resulted in weak capacity utilisation at the harvesting plant. The affected sites have now been emptied. A somewhat lower level of costs and a higher harvested volume is therefore expected in the third quarter.

For the Sales and Processing segment, the third quarter was characterised by high market uncertainty as a result of the Covid-19 pandemic, as well as volatile salmon spot prices. Despite this, the segment posted a good result in the period, with a good allocation of spot sales and better capacity utilisation deriving from higher volumes at the harvesting plant. At the same time, lower spot prices resulted in a positive contribution from contract sales. The segment made an operating profit of NOK 70 million (EUR 6.6 million), compared with break-even in the second quarter 2019. Contract sales accounted for 30 per cent of the volume in the quarter. For the third quarter and 2020 as a whole, the contract rate is 25 per cent, with prices slightly higher than in 2019.

The spread of Covid-19 and the measures implemented worldwide to halt its transmission have created heightened market uncertainty. However, SalMar is well positioned to handle such crises, since the company has good financial flexibility and the capacity to further process products locally before they are shipped to countries around the globe.

Although the future is uncertain, SalMar has great faith in the way forward for the aquaculture industry. The company is therefore maintaining its ongoing investment programmes to ensure the development of its already robust platform for further growth. At a public auction in August 2020, SalMar boosted its maximum allowable biomass (MAB) by just over 8,000 tonnes. This reflects the company’s confidence in the future of the aquaculture industry.

In 2020 as a whole, SalMar still expects to harvest 152,000 tonnes of salmon in Norway: 103,000 tonnes in Central Norway and 49,000 tonnes in Northern Norway. In addition, it expects to harvest some 12,000 tonnes in Iceland.