RUSSIAN SEA GROUP looks to farmed salmon and upper end products to improve margins

OJSC «Russian Sea Group», one of Russia's leading consumer food companies, on 10 August in Moscow announced its revenue for the first 6 months of 2012 based on unaudited management accounts and made important statements as regards its strategy for the future, reports http://www.megafishnet.com/ with reference to the company's respective release.

The main changes, according to the company, will have to do with selling less low margin fish mainly from the Russian Far East while processing and selling more farmed salmon and other delicacies.

The Group revenue decreased by 12.2% to RUR 7,567.6 million in the 1H of 2012 as compared to the same period of 2011.

Other financial results for the 6 months ended 30th of June 2012 will be announced once an auditor's report on interim condensed consolidated financial statements is finalized.

Chilled and Frozen Segment

Net sales to external customers decreased by 11.1% to RUR 5,951.4 million in the 1H of 2012 due to Far Eastern and Russian pelagic fish prices volatility that affected the Company's ability to steadily sell its stocks.   

Ready-to-eat Segment

Net sales to external customers decreased by 18.9% to RUR 1,561.3 million in the 1H of 2012 as compared to the 1H of 2011. The sales dropped mainly in the modern retail trade channels as a result of the Company's systematic rejection to sell branded products on tender basis. Besides, the sales volumes decreased in the 1H of 2012 as compared to the same period of the previous year because in 2012 the Group stopped to sell significant volumes of salmon whole roe under Chingai and Soviet brands due to insufficient gross profit earned in this product category.   

Aquaculture segment

The segment's revenue amounted to RUR 88.1 million. Net sales to external customers were equal to RUR 54.9 million.

Timofey Tarasov, the Group CEO, has commented on operating results and major priorities:

"In the first half of 2012 the revenue decreased in both segments - ready-to-eat and chilled and frozen.  

In chilled and frozen segment we currently see the improvement of operating results - sales growth rate recovers and already in July we see the revenue growth as compared to the same period of the previous year. The Company reduces the stock of Far Eastern and Russian pelagic fish with low gross margin and continues to increase sales of salmon and trout including regional sales. We continue to expand our regional network - in the first half of 2012 regional trade representatives started to work in Orel, Noyabrsk, Vladikavkaz and Arkhangelsk.

In ready-to-eat segment the main target for 2012 is to increase the segment's marginality. In order to achieve it the Company rejects to sell branded products on tender basis required by a number of retail chains that work in discounter format. In the third quarter of 2012 we plan to launch delicacy red fish products in economy price segment and simultaneously launch the redesigned main delicacy red fish products line. In the second half of the year we will introduce a number of new products in delicacy red fish category as well premium price segment products. The sales of salmon roe of new fishing season have already started".

Russian Sea Group

 Russian Sea Group was founded in 1997 and began its operations by importing herring and mackerel from Norway. In 1999, the Company launched production of the ready-to-eat fish products under its core ‘Russian Sea' brand and then continued its development as a producer and distributor of fish and fish products. At present, Russian Sea Group comprises two main business divisions, operated respectively by Russian Sea Company, and Russian Fish Company, each a wholly-owned subsidiary of Russian Sea Group.

The ‘ready-to-eat' business (Russian Sea Company) produces and sells "ready-to-eat" fish and seafood products under well-recognized brands, such as "Russian Sea", "Islandka", "Selyodochka Stolichnaya", "Mediterana", "7 Uzlov" and "Flottika". These products include salted and smoked salmon and trout, red caviar, a wide assortment of herring products, seafood, seaweed products and roe spreads. The Group operates a modern fish and seafood production facility in Noginsk, Moscow region (approximately 40 km from Moscow).

The Group's ‘chilled and frozen' business (Russian Fish Company) sells and distributes over 60 types of fish and seafood, including, among others, salmon, trout, cod, herring, mackerel, pink salmon, pollock, flounder, shrimp and squid, to nationwide and regional retail chains, regional distributors and fish processing companies throughout Russia. The chilled and frozen fish and seafood business sources fish from domestic suppliers, as well as foreign suppliers from 18 countries, including, among others, Norway, the UK, the USA, Chile, Iceland, Vietnam and China. Its major international suppliers include Marine Harvest, Shetland Catch and Norway Pelagic. The Company supplies fish and seafood to over 85% of the regions of the Russian Federation.

Aquaculture segment (Russian Sea - Aquaculture) is represented by two projects: trout farming in Karelia and Atlantic salmon farming in Murmansk region. The trout is farmed at the Farm Segozerskoe, a part of the Russian Sea Group since 2007, that is based at Lake Segozero in Karelia. The potential farming volumes on existing sites may reach over 30 000 tons of trout, or 1,5 more than overall volume of trout currently farmed in Russia. The farmed fish is sold through Russian Fish Company distribution channels and directly to external customers. In 2011 the company launched the project on Atlantic salmon farming in Murmansk Region. Overall potential farming volumes on existing sites exceed 40 000 tons of salmon. The first marine Atlantic salmon farm on the site in Barents Sea was launched in June 2012.