GSF Q3 2010: Strongly improving profitability in a continued strong market
Highlights - third quarter 2010
Results third quarter 2010
The Group's operating profit before fair value adjustments of biomass was NOK 105,1m, compared with NOK 5.5m in last year's weak third quarter. It is particularly the results for Finnmark and Shetland which show a strong improvement compared with last year. The margins per kilo in Norway have been significantly affected in some areas by the low harvested volume and the planned stop of harvesting during the third quarter, as in previous years. This entails higher fixed costs per kilo as well as a relatively higher proportion of sales on fixed price contracts. The result for BC, Canada is only marginally better than last year's third quarter performance, despite the fact that the biological situation was relatively good in a quarter that is normally characterised by biological challenges and high mortality. The weak performance in BC, Canada is mainly due to low prices as a result of the record high wildcatch of Pacific salmon in the 2010 season. The biological situation in all of the Group's production areas is good. The situation regarding salmon lice is also good in all of Grieg Seafood's production areas. Following PD outbreaks at several sites in Rogaland this summer, the biological situation has normalised, and in the second half of the third quarter both the biological situation and seawater production have been good in this region. The Group's EBIT was NOK 7.20 per kg (NOK 0.51 per kg). Rogaland achieved an EBIT of NOK 7.61 per kg (NOK 6.94 per kg), while Finnmark reached an EBIT of NOK 9.12 per kg (NOK 0.92 per kg). The EBIT in Shetland also showed a strong increase and reached NOK 10.40 per kg (NOK -5.71 per kg), while the result in Canada increased to NOK 3.89 per kg (NOK 2.52 per kg). The Group's total harvested volume in the second quarter rose close to 37% to 14 602 tons. The equity ratio at the end of the second quarter was 46.0% (38.5%). The cash flow from operations was NOK 58.5m in third quarter 2010, compared to a negative of NOK -108.5m in the same period in 2009. Net interest bearing debt was NOK 1,036.3m at the end of the third quarter 2010, compared to NOK 1,350.5m at the same time last year.
Outlook
The strong salmon market and the good prices continued in the third quarter. Despite a seasonal reduction in prices compared with price levels in the second quarter, prices in the third quarter were also at a historically high level. The only exception was the American market where prices during the quarter were low due to a record high wildcatch of Pacific salmon. Grieg Seafood expects a harvested volume of 65 000 tons in the current year, in accordance with existing production plans. In 2011 Grieg Seafood expects a harvested volume of 63 000 tons. In 2012 the harvest volume is expected to be 72 000 tons. The sale through Grieg Seafood's and Bremnes Seashore's jointly held sales company, Ocean Quality AS, will commence in Q4 2010. With a shareholding of 60%, Grieg Seafood will fully consolidate Ocean Quality in Grieg Seafood's group accounts, while Bremnes Seashore's share will be reported as a minority share. Ocean Quality will be reported as a separate segment in Grieg Seafood's segment reporting. The Board of Grieg Seafood has decided to increase the pace of investment in smolt production facilities. Over the next two years this will involve a total investment of NOK 200m, in recirculation plants. This is the most important of the larger improvement projects to be carried out by Grieg Seafood. Better production planning from egg to harvesting, better utilisation of production licences and lower production costs will be the result of these investments. The strong salmon market is expected to continue. The improvement in the biological situation in Chile is expected to result in more offers from Chile from the end of 2011. However, there is nothing to indicate that there will be strong growth in Norwegian production in the next few years. Combined with further good demand in the major salmon markets and increasing demand in growing markets, this means that the market prospects for salmon are good in both the short and the longer term.
- A greatly improved result, compared with a weak third quarter in 2009, reports www.megafishnet.com with reference to GSF.
- The operating profit before fair value adjustments of biomass was NOK 105.1m, against NOK 5.5m in last year's third quarter.
- A very strong salmon market with high prices in most market segments.
- A low harvest volume in Norway has impacted negatively on margins per kilo.
- Low prices in USA due to record catches of wild Pacific salmon had led to sharp drop in prices for BC, Canada.
- The biological situation is good in all regions.
Results third quarter 2010
The Group's operating profit before fair value adjustments of biomass was NOK 105,1m, compared with NOK 5.5m in last year's weak third quarter. It is particularly the results for Finnmark and Shetland which show a strong improvement compared with last year. The margins per kilo in Norway have been significantly affected in some areas by the low harvested volume and the planned stop of harvesting during the third quarter, as in previous years. This entails higher fixed costs per kilo as well as a relatively higher proportion of sales on fixed price contracts. The result for BC, Canada is only marginally better than last year's third quarter performance, despite the fact that the biological situation was relatively good in a quarter that is normally characterised by biological challenges and high mortality. The weak performance in BC, Canada is mainly due to low prices as a result of the record high wildcatch of Pacific salmon in the 2010 season. The biological situation in all of the Group's production areas is good. The situation regarding salmon lice is also good in all of Grieg Seafood's production areas. Following PD outbreaks at several sites in Rogaland this summer, the biological situation has normalised, and in the second half of the third quarter both the biological situation and seawater production have been good in this region. The Group's EBIT was NOK 7.20 per kg (NOK 0.51 per kg). Rogaland achieved an EBIT of NOK 7.61 per kg (NOK 6.94 per kg), while Finnmark reached an EBIT of NOK 9.12 per kg (NOK 0.92 per kg). The EBIT in Shetland also showed a strong increase and reached NOK 10.40 per kg (NOK -5.71 per kg), while the result in Canada increased to NOK 3.89 per kg (NOK 2.52 per kg). The Group's total harvested volume in the second quarter rose close to 37% to 14 602 tons. The equity ratio at the end of the second quarter was 46.0% (38.5%). The cash flow from operations was NOK 58.5m in third quarter 2010, compared to a negative of NOK -108.5m in the same period in 2009. Net interest bearing debt was NOK 1,036.3m at the end of the third quarter 2010, compared to NOK 1,350.5m at the same time last year.
Outlook
The strong salmon market and the good prices continued in the third quarter. Despite a seasonal reduction in prices compared with price levels in the second quarter, prices in the third quarter were also at a historically high level. The only exception was the American market where prices during the quarter were low due to a record high wildcatch of Pacific salmon. Grieg Seafood expects a harvested volume of 65 000 tons in the current year, in accordance with existing production plans. In 2011 Grieg Seafood expects a harvested volume of 63 000 tons. In 2012 the harvest volume is expected to be 72 000 tons. The sale through Grieg Seafood's and Bremnes Seashore's jointly held sales company, Ocean Quality AS, will commence in Q4 2010. With a shareholding of 60%, Grieg Seafood will fully consolidate Ocean Quality in Grieg Seafood's group accounts, while Bremnes Seashore's share will be reported as a minority share. Ocean Quality will be reported as a separate segment in Grieg Seafood's segment reporting. The Board of Grieg Seafood has decided to increase the pace of investment in smolt production facilities. Over the next two years this will involve a total investment of NOK 200m, in recirculation plants. This is the most important of the larger improvement projects to be carried out by Grieg Seafood. Better production planning from egg to harvesting, better utilisation of production licences and lower production costs will be the result of these investments. The strong salmon market is expected to continue. The improvement in the biological situation in Chile is expected to result in more offers from Chile from the end of 2011. However, there is nothing to indicate that there will be strong growth in Norwegian production in the next few years. Combined with further good demand in the major salmon markets and increasing demand in growing markets, this means that the market prospects for salmon are good in both the short and the longer term.
{{countTopicsText}}
{{post.body_processed}}