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Normalized production in Norway and BC, weak price realisation in UK and US markets, and high costs in Shetland due to strong GBP and algae and sea lice challenges gives a Q3 EBIT before fair value adjustment of biomass MNOK -44.4, against MNOK -52.7 in 2014. Harvested volume in Q3 19 480 tons, against 16 750 tons in the same period last year.

Published: 06:00 CET 06-11-2015 /GlobeNewswire /Source: Grieg Seafood ASA / : GSF /ISIN: NO0010365521

Highlights – Third Quarter 2015

  • EBIT of MNOK 28 for Grieg Seafood (GSF) in Q3 2015.
  • Normalized production in Norway and BC.
  • Acceptable EBIT/kg in Finnmark. EBIT/kg in Rogaland negatively affected by low harvest volume.
  • Weak price realisation in UK and US markets.
  • Costs in Shetland are high due to strong GBP and algae and sea lice challenges.
  • BC has terminated its production of Pacific salmon and the last coho generation was harvested in Q3. Overall, this reduced GSF’s EBIT by MNOK 19.
  • The company has decided to divest its processing activities in Shetland. In this connection the accounts include a write-down of MNOK 50.
  • After allowing for the above restructuring effects, GSF’s EBIT was MNOK -44 in Q3.
  • The Group’s harvested volume in Q3 was 19 480 tons gutted weight.
  • The expected volume for 2015 has been reduced by 2 900 tons to 67 100 tons, mainly because part of the volume has been moved from 2015 to 2016.

Results

EBIT for the Group in Q3 before fair value adjustment of biomass was MNOK -44.4, against MNOK -52.7 in 2014. The harvested volume in Q3 2015 was 19 480 tons, against 16 750 tons in the same period last year.

Before taxes and fair value adjustment of biomass, the accounts for Q3 show a loss of MNOK 74.0, compared with a loss of MNOK 72.3 for the corresponding period last year.

Group sales revenues in Q3 totalled MNOK 1 245, reflecting an increase of 30% on the corresponding period in 2014. The volume increased by 16.3%

The low level of prices realised in some markets impacted negatively on the overall performance. The American market remains weak. The UK market is also challenged by strong GBP. The level of business based on fixed price contracts was low in Q3.

The third quarter accounts for GSF have also been affected by high costs in Shetland. In Rogaland, low volume has resulted in higher costs per kilo. In BC, costs have been affected by harvesting of the last generation of coho.

In Norway and BC the level of production in Q3 was as expected, while production in Shetland was weaker due algae and sea lice challenges.

Outlook

With the prospect of limited supply-side growth, a strong market is expected in the period ahead, but with the possibility of occasional regional variations.

GSF has reduced its expected overall harvest in 2015 by 2 900 tons to 67 100 tons, mainly because part of the volume has been moved from Q4 2015 to Q1 2016. This applies especially to Rogaland, where the move will enable this region to utilise its production capacity more effectively.

The harvested volume in 2016 is expected to be 70 000 tons, 4% up on 2015, among other factors this includes the fallow period in Øksfjorden.

Measures to boost production and cut costs

GSF needs to improve operational efficiency, and this involves both increasing production and reducing costs per kilo.

The company is not satisfied with the trend in the harvested volume and, as yet, has been unable to extract the potential available under existing concessions. GSF’s smolt-programme is therefore enhanced to secure access to a greater number of smolt, and the size of the smolt will also be gradually increased. Clearly defined targets will be set in each region for the next 4-year period. The company already has several external smolt contracts, and more will be established in the period ahead. Plans are also in hand to broaden our internal smolt capacity in Norway within the same 4-year period. The overall effect of this should be a 10% annual increase in production in the period 2017-2019.

The above-mentioned smolt programme is also designed to ensure that GSF achieves its goal of cutting costs, partly through increased production which will provide economies of scale in all parts of the value chain.

By increasing the smolt size it will be possible to shorten the production time in the sea. In those regions where the biological risks are greatest, Shetland in particular, priority will be given to producing more in the good locations, and less in the weakest areas. Initially, we plan to reduce the production cycle in Shetland from 24 to 18 months.

Work is also being done on key GSF projects, one of which relates to purchasing which to a greater extent will be coordinated/centralised within the Group. Disregarding the purchase of fish feed, which is currently centralised, our aim is to save 10% on external purchases. An IT project is also conducted to ensure system standardization and standardization of processes across regions in GSF.

Changes have also been made within the organisation in order to strengthen the focus on operations. All staff functions for Norway are now centralised in Bergen. This will give the regional management more time to concentrate on operational activities.  Accruals have been recorded in Q3 to absorb costs incurred due to these changes.

It is also our aim to bring the cost level down to the industry average, or lower.

Please find enclosed the company’s Q3 2015 report and presentation.

For further information please contact:

  • CEO Andreas Kvame (cell phone: +47 907 71 441)
  • CFO Atle Harald Sandtorv (cell phone: +47 908 45 252)

GSF Q3 2015 presentation
GSF Q3 2015 report


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

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