Lerøy Seafood Group ASA:
Best second quarter and a record high first half for the Group
Lerøy Seafood Group reported operating profit before biomass value adjustment of NOK 500 million in Q2 2014. This represents an operating profit per kg of NOK 12.2. By comparison, the operating profit before biomass value adjustment in Q2 2013 was NOK 462 million.
- We are delighted to report yet another strong quarter and half yearly result for the Group. In total, the first half of 2014 will go down in the history books with Lerøy Seafood Group's highest turnover, highest operating profit and highest result before tax and biomass adjustment ever reported in a first half year period, says CEO Henning Beltestad.In Q2 2014, Lerøy Seafood Group reported turnover of NOK 3,177 million, compared to NOK 2,513 million in the same period in 2013. When compared with Q2 2013, the Group increased its volume of harvested salmon and trout by 21%. This growth in volume is the most significant factor behind the increase in turnover and operating profit.
The Group has reported turnover of NOK 6,356 million for the first half of the year, compared with NOK 4,845 million for the same period of 2013. Operating profit before value adjustment for biomass for the first half of 2014 was NOK 1,051 million compared with NOK 832 million for the first half of 2013. The profit figure before tax and before value adjustment for biomass for the first half of 2014 was NOK 1,129 million compared with NOK 818 million for the first half of 2013.
As previously notified, Villa Organic AS underwent a demerger in the summer of 2014, and Lerøy Seafood Group's shareholding in this company will be reported as a wholly-owned Group holding from the second half of 2014.
Net interest-bearing debt at 30 June 2014 was NOK 2,050 million and the equity ratio was 56%.
FARMING SEGMENT - A STRONG QUARTER
With the demerger of Villa Organic, Lerøy Aurora now has eight new licences at its disposal. This will undoubtedly facilitate substantial growth for Lerøy Aurora in 2015. Moreover, Lerøy Vest has been nominated for the acquisition of one new licence during the governmental green licence allocation round.
Farming reported an increase in operating profit before biomass adjustment, from NOK 400 million in Q2 2013 to NOK 421 million in Q2 2014. The increase in volume is the most important factor behind the higher profit figure. Farming harvested 40,944 gwt of salmon and trout in the second quarter of 2014, up 21% from the same quarter last year. EBIT/kg fell from NOK 11.9 in Q2 2013 to NOK 10.3 in Q2 2014.
The prices realised by Farming were substantially lower in Q2 2014 than in Q1 of the same year, although the decline in prices realised is significantly smaller than the decline in spot prices for the same period.
Lerøy Aurora AS reported an operational EBIT per kg of NOK 15.47 in Q2 2014. The EBIT/kg figures reported by Lerøy Midt and Lerøy Sjøtroll for the same quarter are NOK 9.9 and NOK 9.2 respectively.
- The high temperatures enjoyed during the spring and summer have allowed for increased production, but have also presented several challenges. We will harvest a significantly higher volume in 2014 than in 2013. At the same time, we expect costs for the farming companies to be somewhat higher in the second half of 2014 than in the first half, says CEO Henning Beltestad.
VAP SEGMENT - POSITIVE DEVELOPMENT
Lerøy Seafood Group has made substantial investments in increasing capacity for high-quality processing of salmon and trout in recent years. The Group is now working towards gradually filling up this new capacity. This, together with product prices which to higher degree reflect the raw material spot prices are the most important factors behind the increase in turnover. Turnover for this segment is up 34% from NOK 294 million in Q2 2013 to NOK 395 million in Q2 2014. The operating margin for the same period saw a slight decline from 5.9% in Q2 2013 to 5.3% in Q2 2014.
- The underlying development in the VAP segment is very good. The Group has good progress in gradually exploiting the full potential of the investments made in recent years, explains CEO Henning Beltestad.
SALES & DISTRIBUTION - POSITIVE DEVELOPMENT BUT SOME START-UP COSTS
The Sales & Distribution segment reported its highest turnover to date in a second quarter. Turnover for this segment is up from NOK 2,371 million in Q2 2013 to NOK 2,999 million in Q2 2014. The operating margin in Q2 2014 was 2.1%, marginally down from 2.3% in Q2 2013. However, the increase in turnover for this segment generated a higher operating profit, up from NOK 54 million in Q2 2013 to NOK 64 million in Q2 2014.
- The margin reported by the segment remains lower than the target set by the Group. However, in light of the start-up costs required for several fish-cut facilities during the quarter, the Group is satisfied with developments and, not least, the potential within this segment for the future, says Beltestad.
Market and outlook
Projections for the global supply of Atlantic salmon and trout are for limited growth in the foreseeable future. At the same time, Russia - one of the largest global markets for Atlantic salmon and trout - laid down a ban on import of among others these two species of fish on 7 August of this year.
- Our contract portfolio and substantial industrial downstream activities have afforded us a level of protection against the short-term outcome of the ban introduced by Russia. At the same time, however, this represents a significant challenge that will influence earnings not only for Lerøy but the industry as a whole in the near future. We call on the politicians to adapt framework conditions in order to minimise the most acute consequences of these trade barriers, comments CEO Henning Beltestad.
The Group has currently estimated a total harvest volume of 163,000 gwt for 2014. The corresponding estimate including the share of volume in associated companies is 181,500 gwt.
Questions and comments may be addressed to the company's CEO, Henning Beltestad, or to the CFO, Sjur S. Malm.
Lerøy Seafood Group ASA
Lerøy Seafood Group is the second largest producer of salmon and trout in the world. The estimated volume for slaughter in Norway in 2014 is 163,000 gwt. When taking into account the volume from associated companies, the estimated slaughter volume is 181,500 gwt. Lerøy Seafood Group sells seafood to more than 70 markets worldwide, and has more than 2,000 employees. The Group's headquarters are located in Bergen. Lerøy Seafood Group is listed on the Oslo Stock Exchange, with ticker LSG. Visit us at www.lsg.no for more detailed information.
