SalMar posts Q4 results 'weaker than expected'
Thursday, February 27, 2020, 00:00 (GMT + 9)
SalMar ASA made an Operational EBIT of NOK 658.1 million (USD 70.3 million) in the fourth quarter 2019, compared with NOK 934.9 million (USD 100.8 million) in the same period in 2018.
“The fourth quarter was weaker than expected for the SalMar Group,” says the Group’s CEO Gustav Witzøe. “This is largely attributable to the Fish Farming Central Norway segment harvesting a large volume of salmon at the start of the quarter when the spot price was at its lowest point. At the same time, it is satisfying to see that our Fish Farming Northern Norway segment posted substantially better results after several weak quarters.”
SalMar generated just under NOK 3.2 billion in gross operating revenues in the fourth quarter 2019, up NOK 86 million on the corresponding period in 2018. A total of 40,300 tonnes of salmon was harvested in the quarter, 200 tonnes less than in the same period the year before. SalMar’s Operational EBIT per kg came to NOK 16.31 in the fourth quarter, down NOK 6.8 per kg on the fourth quarter 2018. The decrease is largely attributable to weak price achievement due to harvesting when prices were at their lowest in the quarter.
Fish Farming Central Norway harvested fish transferred to sea farms in the autumn of 2018 earlier than planned at the start of the fourth quarter 2019 to reduce the biological risk posed by salmon lice. This had a negative impact on average fish weight and costs and resulted in weak price achievement in a quarter when salmon prices rose by 46 per cent from October to December. A lower harvest volume and slightly higher costs are expected in this segment in the first quarter 2020.
As expected, Fish Farming Northern Norway achieved a significantly lower level of costs and a higher harvested volume than the quarter before. This was due to larger volume and harvesting of fish from sites with a better biological performance. SalMar expects stable costs and a similar volume in the first quarter 2020.
Arnarlax ended 2019 with yet another positive quarter, driven by good biological performance and better capacity utilisation at its harvesting plant. For the year as a whole, the company achieved a 46 per cent increase in the volume harvested and posted an EBIT per kg of NOK 10.21 compared with an EBIT per kg of NOK -11.82 in 2018. At the same time, there is still room for improvement throughout the value chain, particularly with respect to distribution costs. Arnarlax expects a higher harvested volume and higher costs in the first quarter 2020 due to the harvesting out of the 2018-generation following increased mortality in a demanding period caused by winter storms at the start of the year.
The Sales and Processing segment made an operating profit of NOK 7.5 million in the fourth quarter 2019, down from NOK 79.4 million in the fourth quarter 2018. The decrease is partly attributable to lower capacity utilisation at the harvesting plant as a result of a lower volume harvested. Profits were also affected by a lower positive contribution from fixed-price contracts resulting from a rising salmon spot price through the quarter. In the fourth quarter 2019, contracts covered 20 per cent of the volume. For the first quarter 2020 and for the year as a whole, the contract rate stands at 30 per cent and 20 per cent, respectively.
The global supply of Atlantic salmon is forecast to increase by around 4 per cent in 2020. Combined with expectations of good demand, this indicates a balanced salmon market, with the outlook for continued good prices.
SalMar maintains its expectation to harvest 152,000 tonnes of salmon in Norway, whereas 103,000 tonnes in Central Norway and 49,000 tonnes in Northern Norway and increases harvest expectations from 10,000 to 12,000 tonnes on Iceland. Norskott Havbruk (Scottish Sea Farms) is expected to harvest 26,000 tonnes in 2020.
Based on the financial results achieved in 2019, SalMar’s board of directors is proposing a NOK 21 per share dividend pay-out.
Click here to see the complete report for the fourth quarter 2019