Good salmon prices give solid results - still room for further improvements
The SalMar Group's second-quarter operating profits are more than 50 per cent up on the corresponding period last year. However, fixed-price contracts in a market characterised by rising prices, as well as non-recurring costs linked to an outbreak of Pancreas Disease (PD) have affected margins in Central Norway. Scottish Sea Farms delivered another strong quarter. The outlook is good for improved results in the second half of the year.
The Group generated consolidated operating revenues of NOK 456.3 million in the second quarter 2009, compared with NOK 414.9 million in the same quarter in 2008. Operating profit before fair value adjustment of the biomass totalled NOK 102.2 million in the second quarter, compared with NOK 65.5 million in the same period the year before. The increase in operating profits can largely be ascribed to higher salmon prices during the quarter.
"Although we achieved solid results in the second quarter, we are still not completely satisfied. The fact that we supplied relatively large volumes under fixed-price contracts made it difficult to fully benefit from the strong salmon prices in the quarter and thus impacted our second-quarter results. This was particularly true of the prices achieved for processed products. However, during the quarter we renegotiated many of our positions and contracts such that we will achieve higher prices for our finished products in the second half. Our financial results were also affected by non-recurring costs incurred in connection with the handling of an outbreak of disease in line with our uncompromising focus on fish health and quality. The business in Scotland delivered another strong quarter. Overall SalMar has strengthened its position both from a biological and financial point of view, and we are optimistic with regard to developments in the second half," said CEO Leif Inge Nordhammer.
The Group made an operating profit before fair value adjustment of the biomass of NOK 102.2 million in the second quarter, compared with NOK 65.5 million in the same quarter in 2008. This resulted in a second-quarter operating profit per kg gutted weight of NOK 8.23 for SalMar Central Norway and NOK 11.15 for SalMar Northern Norway. SalMar Central Norway's margins were significantly affected by both a high proportion of volumes sold under fixed-price contracts, as well as a NOK 25 million charge linked to an outbreak of PD.
SalMar owns 50 per cent of Norskott Havbruk AS which operates fish farming facilities in mainland Scotland, the Orkneys and Shetland. The business generated gross operating revenues of NOK 201.8 million in the second quarter 2009, and made an operating profit before fair value adjustment of the biomass of NOK 42.4 million, compared with NOK 16.6 million in the same quarter in 2008.
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 SalMar Group, including its 50 per cent shareholding in Norskott Havbruk AS, harvested around 14,900 tonnes gutted weight in the second quarter, divided between 10,600 tonnes in central Norway, 1,500 tonnes in northern Norway and 2,800 tonnes in Scotland/Orkneys/Shetland.
The export price of fresh whole salmon rose during the quarter, and was around NOK 10 higher than in the corresponding quarter last year. The exchange rate between the NOK and the EUR, USD and JPY remained relatively weak, which helped keep up the price paid to salmon farmers and exporters.
SalMar considers the outlook ahead to be good. Higher volumes from Norway, a sharp fall in volumes from Chile and continued strong demand will provide the basis for strong salmon prices throughout the second half.
For further information, please contact:
Leif Inge Nordhammer, CEO, +47 916 85 250
Roar Husby, CFO, +47 982 06 974
See also www.salmar.no
