Morpol reports increased EBIT despite challenges from high salmon purchase prices for processing

Morpol ASA reported a positive EBIT pre fair value for the first quarter 2011 of EUR 6.2 million. This includes one off exceptional costs related to acquisitions, totaling EUR 1.0 million, meaning the operational EBIT was EUR 7.3 million. The EBIT in the corresponding quarter last year was EUR 5.2 million, reports www.megafishnet.com with reference to Morpol.

Processing

Revenues in processing were EUR 103.5 million compared to EUR 90.2 million prior year. EBIT for processing in the first quarter 2011 was EUR 0.3 million, compared to EUR 5.2 million in corresponding quarter 2010. The impact of raw material purchase prices which were over EUR 1/kg higher in 2011 than prior year was only partially offset by increased sales prices to Morpol customers. This was the main factor in the reduced profitability in the processing division.

Farming

Revenues in farming in the first quarter were EUR 31.6 million. Of these revenues, EUR 8.0 million were sold internally to the Morpol processing division for further processing and sales. Morpol did not own any farming assets in the corresponding quarter prior year.  EBIT pre fair value for farming in the first quarter was EUR 8.1 million.

Salmon raw material prices remained at a high level in the quarter, impacting processing margins negatively. Purchase prices of salmon from Norway increased from the fourth quarter to the first quarter by approximately EUR 0.25/kg purchased. However, the farming segment benefited from the higher commodity prices of gutted salmon and returned high EBIT margins in the first quarter.

High operating revenues

Operating revenues in the first quarter 2011 were significantly above prior year at EUR 127.1 million (EUR 90.2 million). The revenue increase was mainly due to farming revenues which were not included prior year but also to increased unit prices in the processing division.

In the first quarter 2011, sales volumes decreased due to the timing of Easter, which is a period of strong demand for smoked salmon. In 2011 Easter occurred three weeks later than prior year, and the peak period takes place in second quarter rather than the first quarter.

Due to a combination of the Easter impact and a slowing in demand, cold smoked salmon sales and speciality salmon sales reduced by 5 percent and 11 percent respectively in the first quarter.  Other products were flat in terms of growth in comparison with first quarter 2010.

"Despite the short term pressure on processing margins, we believe we have built a strong platform to return to higher operational margins when there is a better balance between supply and demand on the raw material side. We have continued to take market share in key areas such as France and UK, and we have a strong base to further expand" says CEO Jerzy Malek. 

Acquisitions

Jøkelfjord Laks AS, a Norwegian salmon farming company based in Troms, was acquired in the quarter and the company's results are included in the consolidated results for the first quarter.

Through its subsidiary Lakeland Smolt, Morpol has invested in land and a building in Rosyth, near Edinburgh. The acquisition cost was approximately EUR 4.2 million. The facility is purchased with the intention to establish a large scale value added processing plant which will be used to further increase the market strength of Morpol in the UK and other markets.

At the end of the first quarter 2011 Morpol had a net interesting bearing debt (NIBD) of EUR 199.1 million compared to EUR 72.2 million in the corresponding period prior year. The increase is mainly due to acquisitions of farming operations during the last three quarters.