SATISFACTORY RESULT DESPITE BIOLOGICAL CHALLENGES
The steady rise in the price of Atlantic salmon seen in recent periods continued in the fourth quarter 2016, with spot prices reaching record levels. However, earnings in the quarter were negatively affected by a high contract rate and the challenging biological situation in Central Norway. Despite this, Operational EBIT in the quarter came to NOK 21 per kg, up NOK 11 per kg on the corresponding period last year.
"For the SalMar Group, results in the fourth quarter were mixed," says SalMar's acting CEO Gustav Witzøe. "Fish Farming Northern Norway performed very well, while the results posted by Fish Farming Central Norway were affected by the biological situation. SalMar has implemented a number of measures to deal with the situation, and fish welfare has been well protected throughout the quarter. Investments in non-medicinal delousing equipment and the improved availability of lumpfish have also strengthened the segment's preparedness and response capacity. However, measures to deal with the lice situation are costly, and a challenging biological situation over time has significantly affected the segment's production costs. Nevertheless, the situation is better than it was in the same period in 2015."
Witzøe also says the Sales and Processing operating loss is largely attributable to the fact that 60 per cent of its volume was sold under contract at prices well below the average spot price in the period. "In addition," he adds, "because Norway has not implemented the EU regulations on organic farming, Norwegian salmon producers cannot label their organically farmed fish as such when selling it in EU markets. This is creating a challenging market situation, with a corresponding loss of price premium. SalMar hopes a solution will quickly be forthcoming now that both the Norwegian and Icelandic authorities have agreed to implement the EU regulations."
Gross operating revenues totalled just under NOK 2.5 billion in the quarter, up from approx. NOK 2.0 billion in the corresponding period in 2015. SalMar harvested 26,500 tonnes of salmon in the quarter, 11,600 tonnes less than in the same period the year before. Operational EBIT came to NOK 557.0 million, up from NOK 374.3 million in the fourth quarter 2015.
Although the lice situation for fish farmers in Central Norway remains challenging, SalMar has invested heavily in non-medicinal delousing equipment in recent quarters. This, combined with improved access to lumpfish, has improved the segment's preparedness and response capacity. The last portion of the generation transferred to the sea in the spring of 2015 (S15) was harvested out during the quarter. These fish came primarily from sites encountering biological challenges, with correspondingly high production costs. The biological situation for fish transferred to the sea in the autumn of 2015 is better. Costs are therefore expected to be lower in the first quarter 2017. To optimise production of the segment's standing biomass, SalMar has elected to push back the harvesting of some volumes from 2016 until 2017.
The biological situation for the Fish Farming Northern Norway segment is less demanding, and output in the fourth quarter was good. Effective operations combined with high salmon prices have contributed to the segment's record results. Going forward, the segment's overall costs are expected to remain stable.
The Sales and Processing segment made an operating loss in the fourth quarter 2016, largely because 60 per cent of the volume was sold under contract at prices well below the average spot price for the period. The biological situation at the fish farms also has a negative impact on this segment's operating efficiency.
Based on estimates of the standing biomass at the close of 2016, the global supply of Atlantic salmon is expected to grow by 2 per cent in 2017. Combined with strong consumer demand, this indicates that the salmon market will remain tight, with the outlook for continued high salmon prices and strong earnings.
For 2017 as a whole, SalMar expects to harvest 131,000 tonnes in Norway, up from 115,600 tonnes in 2016. Norskott Havbruk (Scottish Seafarms) expects to harvest 30,000 tonnes, compared to 28,000 tonnes in 2016.
Based on the Group's results for 2016, SalMar's Board of Directors is recommending a dividend payout of NOK 12 per share.
The complete report for the fourth quarter 2016 is attached.
For further details, please contact:
CFO Trond Tuvstein
Tel: + 47 918 53 139
Email: trond.tuvstein@salmar.no
Runar Sivertsen, Head of Investor Relations
Tel: + 47 960 97 000
Email: runar.sivertsen@salmar.no
This information is subject to the disclosure requirements stipulated in section 5-12 of the Norwegian Securities Trading Act.
