Results driven by record high price of Atlantic salmon

Results driven by record high price of Atlantic salmon

Norway's Leroy Seafood has booked higher first-half sales and earnings compared to the same period last year on the back of what the group said are record salmon prices.

Leroy said sales for the first half of the year were NOK8.07bn (US$987m), up 23% on the first six months of 2015. Profit before tax and fair value adjustment of biomass was NOK1.36bn in the first half of 2016, compared with NOK754m in the same period last year.

CEO Henning Beltestad said: "The price of Atlantic salmon reached a record high in the second quarter, which was the key driver in Leroy Seafood Group achieving its highest revenue and operating profit in any quarter in the group's history. We're pleased to be able to announce record profits, but there is still considerable potential for improvement and this is where we're concentrating our efforts."

Revenue for the second quarter was NOK4.26bn, compared with NOK3.32bn for the same period in 2015. Compared with the second quarter of last year, the group's volume of harvested salmon and trout rose by 2%. The group's profit before tax and fair value adjustment of biomass in the second quarter of this year was NOK775m compared to NOK364m in the same period last year.

Meanwhile, Beltestad said the group is continuing to introduce measures to drive down production costs for salmon and trout. "In that respect, it's pleasing to report that the number of treatments was significantly down in the first half of 2016 compared with the first half of 2015, and that the treatments carried out in the second quarter were largely mechanical treatments," he said. "At the same time, release from stock costs were significantly higher in the second quarter of 2016 than in the same period last year, with higher feed costs as the key driver. We expect release from stock costs to fall through the year, and to be lower for the second half of 2016 than for the first half." 

Beltestad said the group had seen "a positive price trend for trout in the second quarter, but prices realised for trout remain significantly lower than those for salmon".

He said the trout market "has been extremely challenging in the wake of Russia's ban on imports introduced in autumn 2014, but we're now seeing our long-term efforts to develop new markets for trout starting to bear fruit".

In terms of sales and distribution, Beltestad said activity was good, but high prices remained a challenge. The segment's operating profit for the second quarter of the year was NOK74m, up from NOK67m in the second quarter of last year, but the operating margin fell from 2.1% to 1.8% in the same period.Beltestad said: "High prices are putting pressure on the operating margin, which is down compared with the same period last year. But there is still extensive unutilised capacity in several of the group's 'fish-cuts', and we see great potential to increase activities and earnings within this part of the value chain in the years ahead."

In June, Leroy struck a deal to buy majority stakes in two fellow Norwegian seafood businesses, Havfisk and Norway Seafoods Group. The company agreed to buy 64.4% of Havfisk and 73.6% of Norway Seafoods.