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A challenging quarter for Grieg Seafood ASA

Highlights – Third Quarter 2014

  • EBIT before fair value adjustment of biomass was MNOK -63.2 in the third quarter (MNOK 76.5 in 2013).
  • After correcting for the three events mentioned below, the underlying Q3 EBIT was positive in the sum of MNOK 30.
    • In Finnmark the matter of fish maturation has presented challenges with overall economic consequences estimated at MNOK 29. Action has been taken to avoid this in the future.
    • Environmental and disease conditions have been demanding in Rogaland as a result of PD (Pancreas disease) and unusually high sea temperatures. Because of this, the regional accounts include write-downs of MNOK 39.
    • The results from Canada reflect negative profitability, including a weak market, on Pacific salmon. As a result, the Q3 accounts include losses and write-downs totalling MNOK 25. GSF is terminating its production of Pacific salmon and will focus solely on Atlantic salmon in the period ahead.
  • The company’s CEO, Morten Vike, has resigned from his position and the process of finding his successor has started.
  • The Board is not satisfied with the third quarter results. There will be a keener focus on the core business and the quality of internal operating procedures.

Third Quarter results

EBIT for the Group in the third quarter before fair value adjustment of biomass was MNOK -63.2, against MNOK 76.5 in 2013. The harvested volume in this year’s third quarter was 16 750 tons, against 13 953 in the corresponding period last year, reflecting an increase of 20%.

The weak performance in the third quarter must be considered in the light of several unforeseen operational deviations. Specifically, this relates to PD in Rogaland (MNOK 39), salmon maturation in Finnmark (MNOK 29) and a high proportion of Pacific salmon in BC (MNOK 25).

If the events mentioned above are disregarded, the costs of fish harvested in the third quarter were largely stable in all regions compared with the same period last year. But the Board is of the view that the cost level is too high. The company has had to deal with several unfortunate and unforeseen events over the last year, but steps have been taken to improve processes and procedures with the aim of ensuring greater operating stability in the period ahead. Sea production in the third quarter was good in all regions apart from Rogaland which has had major biological challenges. The global supply of salmon increased by 12% in the third quarter, with some decline in prices. This should also be seen in connection with the closure of the Russian market. The decline in prices was part of the reason for the weaker performance in the third quarter.

Before tax and fair value adjustment of biomass the third quarter result was MNOK -83.1, against MNOK 64.4 in the third quarter of 2013.

Group operating income in the third quarter totalled MNOK 599.1, an increase of 2.5% on the same period last year.

Volumes were 20% higher, while prices were 17% lower compared with the third quarter of 2013. Pacific salmon in Canada and mature fish in Finnmark contributed to a reduction in the realised average price.

Outlook

Following a third quarter characterised by high supply-side growth, the fourth quarter is expected to bring a decline in this growth. There is therefore reason to believe that prices will rise towards the end of the year. In addition, forecasts for 2015 indicate a supply-side growth rate that is lower than the increase in demand, which will further strengthen the market.

GSF expects to harvest 65 000 tons in 2014. This is 2 500 tons less than previously indicated, but 1 000 tons have been moved to 2015. The decline in the harvested volume is mainly due to the biological situation in Rogaland. PD and an unusually warm summer have resulted in lower fish growth than expected.

In 2015 expects to harvest 72 000 tons. This is based on a harvested volume of 13 000 tons in BC. A normalised harvested volume in this region would be in the order of 15 000 tons. In Finnmark and Scotland the harvested volumes will be slightly lower in 2015. This must be seen in the light of the zone and location structures in these regions. These volumes are expected to increase again in 2016.

The process of appointing a new CEO is ongoing. The company’s CFO, Atle Harald Sandtorv, is acting CEO.

In the period ahead GSF will be targeting on the production and sale of Atlantic salmon. At the same time, there will be an increased focus on the core business and the quality of internal operating procedures.


For further information, please contact:

– CFO/Acting CEO Atle Harald Sandtorv, cell phone: +47 908 45 252.

For more information, please see griegseafood.com

GSF Q3 2014 report
GSF Q3 2014 presentation


This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

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