Overall price achievement in the first quarter 2018 was good and contributed to revenue growth and further strong earnings for the SalMar Group. Operational EBIT totalled NOK 708.1 million in the quarter, up from NOK 670.7 million in the same period last year.
“The first quarter was somewhat mixed for the SalMar Group. Price achievement in the quarter was good and, operationally, all the Group’s business areas posted satisfactory results. However, higher underlying costs for fish harvested in Northern Norway and lower activity in the Sales and Processing segment had a negative effect on their performance. Our goal is to be the world’s best aquaculture company, and having the lowest costs has always been SalMar’s clear objective. We are therefore continuously working to control and reduce costs without compromising the welfare of our salmon,” says SalMar’s CEO Olav-Andreas Ervik.
The Group harvested 31,900 tonnes of salmon in the first quarter this year. EBIT per kg came to NOK 22.21 in the quarter, according to a press release from SalMar.
Biological developments in the Fish Farming Central Norway segment were satisfactory in the quarter, despite low sea temperatures, according to SalMar. The bulk of the volume harvested in the period were fish transferred to the sea in the autumn of 2016. Out of consideration for fish welfare, some stocks were harvested earlier than planned in the quarter. This negatively affected the production cost of the fish harvested. Overall, the segment kept developments in the cost of its harvested fish in line with previous quarters. The Central Norway segment’s costs are expected to improve in coming quarters.
The fish harvested in Northern Norway in the quarter had a higher production cost due to frequent delousing treatments in the autumn of 2017. The harvesting out of these fish will also affect the segment’s overall costs in coming quarters. Over time, SalMar has built up a robust lice treatment capability and is well equipped to handle any challenges that may arise going forward.
The Sales and Processing segment posted strong price achievement in the quarter, but its earnings were affected by seasonally low levels of activity in the secondary processing area. Furthermore, fixed-price contracts, which accounted for 39 per cent of the volume harvested in the period, made a negative contribution in the quarter.
As at mid-May, the contract rate for the second quarter 2018 stands at around 50 per cent. For the remaining volume to be harvested in 2018, the contract rate is 36 per cent.
Based on estimates of the standing biomass at the close of the first quarter 2018, the global supply of Atlantic salmon in 2018 as a whole is expected to increase by 4 per cent. Combined with expectations that demand will remain consistently high, this indicates a balanced salmon market, with the prospect of continued strong earnings.
SalMar expects to harvest around 143,000 tonnes in Norway in 2018 as a whole, with Fish Farming Central Norway accounting for 96,000 tonnes and Fish Farming Northern Norway for 47,000 tonnes. Norskott Havbruk (Scottish Seafarms) and Arnarlax expect to harvest 26,000 and 8,000 tonnes respectively in 2018.