NORWAY: Leroy Seafood sales surge, biomass adjustment weighs
- Q1 sales of NOK3.18bn (US$537.4m), up from NOK2.33bn
- EBIT before fair value adjusted biomass NOK550.36m, compared to NOK369.35m
- Fair value adjustment biomass of -NOK477.6m, vs NOK209m
- Operating profit of NOK72.7m, compared to NOK578.4m
Leroy Seafood sales jump on pricing
Leroy Seafood said it had seen its "best quarter ever" as it reported higher sales and earnings before fairvalue biomass adjustments for the first three months to 2014.
Sales rose 36.4% year-on-year, while EBIT before biomass adjustment jumped 49%.
The company said: "The main driver behind the increased revenue and operating profit is higher price achievement for the group's main products, Atlantic salmon and trout. This is the highest operating profit before biomass adjustment ever reported in a quarter."
However, biomass adjustment - the value of biological assets less point of sale costs - weighed on the bottom line. When adjusted for biomass, EBIT fell 87%.
Lerøy Seafood Group ASA - a record-breaking quarter for the Group
Lerøy Seafood Group is proud to report an operating profit before fair value adjustment of NOK 550 million and an operating profit per kilo of NOK 16.5 in Q1 2014, the best operating result ever in the Group's history. By comparison, operating profit in Q1 2013 was NOK 369 million.
- We are proud and satisfied to report the best operating profit ever in the history of the Group. All of our segments have had a positive development, says CEO Henning Beltestad.
For Q1 2014, Lerøy Seafood Group reported a turnover of NOK 3,180 million compared to NOK 2,332 million in the same period in 2013. The main driver behind the high operating profit is higher price achievement for the Group's main products, Atlantic salmon and trout.
In order to shed more light on the Group's recent significant downstream investments, the Group has, as previously notified, slightly changed its reporting structure. From now on, the Group will report in three segments: Farming, Value-added-processing (VAP) and Sales & Distribution.
The Farming segment
Farming harvested 33,336 GWT of salmon and trout in Q1 2014, which is in line with the figure of 33,231 GWT in Q1 2013. Operating profit before biomass adjustment reported by the Farming segment increased from NOK 284 million in Q1 2013 to NOK 506 million in Q1 2014. This represents an operating profit per kilo (before biomass adjustment) in Q1 2014 of NOK 15.2 compared to NOK 8.6 i Q1 2013.
Lerøy Aurora AS achieved an operating profit per kilo of NOK 19.2 in Q1 2014, while Lerøy Midt AS and Lerøy Sjøtroll AS reported an operating profit per kilo of NOK 16.5 and NOK 12.4 respectively.
- All our farming companies have reported a positive development in Q1 2014, with lower release from stock (RFS) and a significant increase in price achievement on contract portfolio, explains Henning Beltestad. We are now also in a position where we have good control over biological elements, he continues.
The VAP segment
In recent years, Lerøy Seafood Group has made significant investments in increasing its capacity for high value processed salmon and trout. The very high spot prices for Atlantic salmon and trout are and have been challenging for the VAP segment. However, mainly driven by higher prices, revenues for the segment are up 44% from NOK 255 million in Q1 2013 to NOK 367 million in Q1 2014. The operating margin for the same period has seen a slight increase from 3.6 % in Q1 2013 to 4.1 % in Q1 2014.
- This margin is below the Group's target figure, and we are constantly working to increase margins for this segment, explains CEO Henning Beltestad.
The Sales & Distribution segment
The Sales & Distribution segment can report a positive development for Q1 2014. The segment has increased its revenue from NOK 2,229 million in Q1 2013 to NOK 3,067 million in Q1 2014. This is by far the highest revenue ever to be reported for any first quarter. The operating margin in Q1 2014 was 1.3%, which is in line with Q1 2013, but the operating profit increased from NOK 29 million in Q1 2013 to NOK 39 million in Q1 2014.
- The margin reported for the Sales and Distribution segment is lower than the Group's target. However, in light of start-up costs at several fish-cuts in the quarter, the Group is very satisfied with developments and the potential for the future, says Henning Beltestad in a comment.
Good growth conditions and the inclusion of the wholly-owned part of Villa Organic AS (subsequent to the demerger of company in the summer of 2014) for the second half of 2014 allow the Group to increase its harvested volume projections for 2014 from 157,000 GWT to 163,000 GWT.
Net interest-bearing debt totalled NOK 1,748 million on 31 March 2014 (31.12.2013: 2,117) with an equity ratio of 56% (31.12.2013: 54%).
Questions and comments may be addressed to the company's CEO, Henning Beltestad, or to the CFO, Sjur S. Malm.
Original source: Lerøy Seafood Group
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