Strong Q3 profits from SalMar, offers dividend

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Bucks the pandemic trend, with revenue and EBIT up.

On Thursday morning, SalMar posted its Q3 results with a EUR 60 million EBIT, up from EUR 57 million in the same period in 2019.

An EBIT of EUR 45.5 million was expected in advance, according to the financial news site TDN Finans.

For Norwegian operations, operating profit (EBIT) ended at EUR 62.2 million in the quarter, up 13 per-cent from the year before.

Operational focus
“Fantastic efforts by our employees overtime mean that SalMar is again behind a quarter of strong results. Good strategic assessments and a clear operational focus have led to strong biological and operational performance throughout the value chain. This has resulted in good capacity utilization, good cost development, and solid price attainment with associated margins. This is a period of increased uncertainty both for employees and in the market resulting from the coronavirus,” said CEO Gustav Witzøe.

Total revenues amounted to just over EUR 270 million in the quarter, up from Q3 2019’s EUR 260 million. Harvest volume for the quarter was 37,100 tonnes, compared to 35,800 tonnes in the corresponding period last year.

Operating profit per kilo came to EUR 1.6 per kilo, up from EUR 1.5 per kilo.

The increase is despite the average spot price of salmon in the period (NASDAQ Salmon Index) being NOK 2.08 (EUR 0.19) lower than the same period last year.

Performing
“The Fish Farming Central Norway segment once again posted a strong result and is reaping the rewards of operational efficiency and good biological performance. The bulk of the volume harvested in the quarter came from the spring-2019 generation, which has now been completely harvested out. This generation has performed very well biologically. The remaining volume harvested came from the autumn-2019 generation, which has also performed well biologically. The segment will continue harvesting this generation in the fourth quarter. In the fourth quarter, the segment expects to harvest a significantly lower volume, with production costs on a par with the third quarter,” said Witzøe.

Gustav Witzøe. PHOTO: Ronny Teigås

In the fourth quarter, a significantly lower harvest volume and production costs are expected to be at the same level as the third quarter of the year.

“The Fish Farming Northern Norway segment also posted a good operating profit in the period. The entire volume harvested was made up of fish transferred to sea farms in the spring of 2019. This generation has developed very well biologically in recent periods. However, the segment’s result was somewhat affected by low price achievement, because harvesting took place in September when prices were at their lowest. The segment will continue to harvest the spring-2019 generation in the fourth quarter. It expects similar production costs but a significantly higher harvested volume than in the third quarter,” added the CEO.

Icelandic Salmon
As expected, the third-quarter result for Icelandic Salmon (formerly Arnarlax) was weak. The result was affected by weak price achievement and high production costs for the 2018 generation that was harvested during the period. In the fourth quarter, the segment will start harvesting the 2019 generation, which has performed better biologically and with a lower cost level. The segment, therefore, expects to harvest a higher volume and achieve lower costs in the fourth quarter. In October, Icelandic Salmon carried out a successful private placement of shares worth around EUR 60 million. The company had its first day of trading on the Merkur Market on the 27th of October.

For the Sales and Processing segment, SalMar said that the third quarter was characterised by a “high level of market uncertainty due to the Covid-19 situation”. Despite this, the segment posted a strong result in the period, due to “efficient operations, good capacity utilization and positive contributions from fixed-price contracts”. The segment made an operating profit of EUR 14.5 million, compared with EUR 9.4 million in the third quarter 2019. Some 25 per-cent of the volume was sold under contract during the quarter. The contract rate is expected to remain the same in the fourth quarter.

“The Covid-19 pandemic and the measures implemented worldwide to curb the spread of infection have created heightened market uncertainty. However, SalMar is well-positioned to handle such crises because the company has good financial flexibility and the capacity to process products locally before dispatching them to customers worldwide. To date, none of SalMar’s employees have tested positive for Covid-19,” said Witzøe.

Believe in the future
“Even with the macroeconomic uncertainty that characterises the current market, SalMar has great faith in the way forward for the aquaculture industry. The board believes SalMar has a good basis for continued positive development, both in the field of sea-based and traditional aquaculture activities. The company, therefore, maintains its ongoing investment programs to ensure the development of an already robust platform for further growth. The purchase of just over 8,000 tonnes in increased MTB capacity at the traffic light auction in August underpins our strong belief in the future of the aquaculture industry,” said Witzøe.

SalMar maintains its expectations for total harvest volume in Norway of 152,000 tonnes, and increased MTB capacity provides flexibility to adapt the withdrawal profile on its biology conditions. The expectation for Iceland will remain unchanged at 12,000 tonnes in 2020. The expected harvest volume for 2021 is increased to 163,000 tonnes for Norway and 14,000 for Iceland respectively.

“Over the last few quarters, SalMar has demonstrated its ability to adapt to changing market conditions by delivering strong results and maintaining a solid financial position. On this basis, the Board of Directors sets out to pay out NOK 13 per share in dividends for the 2019 financial year in December 2020, and will therefore call an extraordinary general meeting on 4 December 2020. The Board of Directors has updated the company’s dividend policy which defines long-term financial goals and dividend form. The dividend proposal for the 2020 financial year will be published at the presentation of the result for the fourth quarter of 2020. In the board’s opinion, SalMar’s financial capacity for further growth is strong,” Witzøe concluded.