SalMar delivers good results despite pressure on production costs
SalMar generated gross operating revenues of NOK 415 million in the second quarter 2008, compared with NOK 339 million in the corresponding quarter in 2007. Operating profit before fair value adjustment of the biomass totalled NOK 65.5 million in the second quarter 2008, compared with NOK 97.7 million in the corresponding quarter last year. The fall in operating profit can largely be ascribed to lower margins caused by higher production costs.
"Our performance in the second quarter 2008 shows that the majority of our farming sites are still achieving satisfactory profitability. We are, however, not totally satisfied with the overall results. The quarter presented us with some challenges in the form of ISA outbreaks on three sites and lower than expected growth rates. Costs are also under a certain degree of pressure, but we are working hard to counteract this through the implementation of measures to increase our efficiency. Such measures, along with continued focus on fish health, will be important for us in the time ahead," says CEO Leif Inge Nordhammer.
SalMar Group generated gross operating revenues of NOK 415 million in the second quarter 2008, compared with NOK 339 million in the corresponding quarter last year. The increase is due to the fact that 13,000 tonnes gutted weight was harvested in Norway during the quarter, 1,800 tonnes more than in the second quarter 2007.
The Group's consolidated operating profit before fair value adjustment of the biomass totalled NOK 65.5 million in the second quarter 2008, compared with NOK 97.7 million in the same quarter in 2007. This resulted in an operating profit per kg gutted weight of NOK 6.56 for SalMar Central Norway and NOK 1.70 for SalMar Northern Norway in the second quarter 2008.
SalMar owns 50 per cent of Norskott Havbruk AS, which operates fish farming facilities in mainland Scotland and Shetland. The business generated gross operating revenues of NOK 166.5 million in the second quarter 2008, and made an operating profit of NOK 16.6 million, compared with NOK 45.1 million in the corresponding quarter in 2007.
SalMar's key figure for profit performance under IFRS is EBIT (operating profit) before fair value adjustment of the biomass. Adjustment of the fair value of the biomass results from the requirement to value biological assets (the biomass) at fair value instead of cost price. SalMar reports EBIT before fair value adjustment of the biomass in order to show the underlying performance of its operations during the period.
The ISA virus has been identified at three of SalMar's sites and increased production costs at these particular sites must therefore be expected. Moving forward, a high priority will be given to managing the biological situation and intensifying the focus on cost levels in general.
The SalMar Group, including 50 per cent of Norskott Havbruk AS, expects to harvest around 70,500 tonnes gutted weight in 2008. For the year as a whole this breaks down to approx. 45,500 tonnes from SalMar Central Norway (down from the previous estimate of 47,000 tonnes) and approx. 13,000 tonnes from SalMar Northern Norway. Norskott Havbruk expects to harvest some 24,000 tonnes (down from the previous estimate of 26,000 tonnes). SalMar's share (50 per cent) of this will total approx. 12,000 tonnes (down from previous estimate of 13,000 tonnes).
The price of salmon in the second quarter 2008 was marginally higher than in the second quarter 2007 and the first quarter 2008. Exports from Norway in the second quarter rose by around 4 per cent compared with the same quarter in 2007, the same increase as can be seen for the first six months of 2008 as a whole. Volumes in the EU grew by around 10 per cent, with the largest increases coming in France, Poland and Russia.
SalMar expects that there will be a good balance between supply and demand for Atlantic salmon for the rest of the year. The underlying factors indicate that salmon prices will remain strong.
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