PROFIT/LOSS FOURTH QUARTER AND 2020 IN TOTAL
In This autumn 2020, Lerøy Seafood Group (LSG) reported income of NOK 5,170 million, in contrast with NOK 5,239 million in the identical interval of 2019. Working revenue earlier than truthful worth adjustment associated to organic belongings was NOK 441 million in This autumn 2020, in contrast with NOK 769 million in This autumn 2019. The worldwide COVID-19 pandemic has a unfavorable affect on demand and has resulted in decrease costs for each redfish and whitefish. The principle issue behind the autumn in earnings from This autumn 2019 to This autumn 2020 is the discount in costs realised.
The Group reported annual income of NOK 19,960 million for 2020, in contrast with NOK 20,427 million in 2019. Annual working revenue earlier than truthful worth adjustment associated to organic belongings in 2020 was NOK 1,950 million in contrast with NOK 2,734 million in 2019. Revenue earlier than tax and truthful worth adjustment associated to organic belongings for 2020 as an entire was NOK 1,869 million in contrast with NOK 2,718 million in 2019.
- “Lerøy’s focus is creating an environment friendly and sustainable worth chain for seafood that meets the purchasers’ long-term demand. This not solely gives cost-efficient options, but additionally high quality, availability, a excessive degree of service, traceability, and aggressive climate-related and environmental options. Due to our sturdy and long-term give attention to the client, we really feel that we now have emerged all of the stronger from a troublesome yr,” confirms CEO Henning Beltestad.
- “We have now invested closely in our worth chain in recent times, within the type of belongings, human sources and our strategy to operational enhancements. This can be a long-term course of however, as we enter 2021, we’re beginning to reap the outcomes of our initiatives and we’re assured that we now have a powerful place for the years to return,” confirms Henning Beltestad.
THE WILD CATCH SEGMENT
The wholly-owned subsidiary Lerøy Havfisk’s main enterprise is wild catches of whitefish. Lerøy Havfisk has licence rights to reap simply above 10% of the full Norwegian cod quotas within the zone north of 62 levels latitude, akin to round 30% of the full quota allotted to the trawler fleet. Lerøy Havfisk additionally owns a number of processing crops, that are primarily leased out to its sister firm Lerøy Norway Seafoods (LNWS) on long-term contracts. Lerøy Havfisk’s trawler licences stipulate an operational obligation for these processing crops.
Lerøy Havfisk took supply of the brand new trawler, “Kongsfjord”, on schedule in February 2020, and subsequently had 10 trawlers in operation in 2020. Expertise of operations with Kongsfjord is optimistic.
As described within the earlier interim stories, demand for seafood has been negatively impacted by the restrictions launched to fight the unfold of COVID-19. It’s troublesome to undertaking how lengthy this extraordinary state of affairs will final. The pandemic can also be having a unfavorable impact on costs realised.
The catch quantity for This autumn 2020 is 12,619 tonnes, in contrast with 12,949 tonnes in This autumn 2019. Catch charges for haddock had been weak within the fourth quarter. Catches of different species have been as anticipated.
When put next with This autumn 2019, the costs for cod and haddock had been down 13% and 17% respectively, whereas the costs for saithe had been up 5%. Our gross sales of seafood proceed, however the costs realised are decrease than usually skilled earlier than the COVID-19 restrictions had been launched. As compared with the height in costs in Q1 2020, the costs for cod and haddock are down 18% and 17% respectively.
LNWS’s main enterprise is processing wild-caught whitefish. The corporate has use of 12 processing crops and buying stations in Norway, 5 of that are leased from Lerøy Havfisk. The processing of whitefish in Norway has been extraordinarily difficult for a few years. All else being equal, elevated stability and predictability may have a optimistic impact on the land-based trade. The repercussions of COVID-19 have been unfavorable for each the producer and the client. Market demand for recent and standard merchandise noticed a big decline within the quarter.
In complete, the section reported EBIT of NOK -10 million in This autumn 2020, in contrast with NOK 42 million in the identical interval of 2019. For 2020 in complete, the section contributed EBIT of NOK 205 million, in contrast with NOK 293 million in 2019.
- “The winter cod season has simply began, and we face a really excessive seasonal provide quantity on a troublesome market. With our expertise of processing whitefish all yr spherical in Norway, we really feel we now have the capability and energy to face this problem,” says CEO Henning Beltestad.
THE FARMING SEGMENT
The Farming section includes the Group’s three farming areas in Norway: Lerøy Aurora positioned in Troms and Finnmark, Lerøy Midt positioned in Nordmøre and Trøndelag and Lerøy Sjøtroll positioned in Vestlandet.
Working revenue for the Farming section earlier than truthful worth adjustment associated to organic belongings was NOK 296 million in This autumn 2020, in contrast with NOK 597 million in This autumn 2019. Throughout the quarter, the Farming section harvested 48,000 tonnes, in contrast with 43,000 tonnes in This autumn 2019.
In This autumn 2020, the EBIT/kg determine for Lerøy Aurora was NOK 11.10, NOK 3.40 for Lerøy Midt and NOK 4.50 for Lerøy Sjøtroll. In complete, EBIT/kg for the section was down from NOK 14.00 in This autumn 2019 to NOK 6.10 in This autumn 2020. As compared with the identical quarter in 2019, prices per kilo are barely decrease, however the discount in costs realised in the identical interval is considerably bigger.
- “We have now seen a optimistic improvement in our prices per kilogram of harvested fish in 2020, and this has been confirmed within the fourth quarter,” explains CEO Henning Beltestad.
- “As we enter 2021, we anticipate that the initiatives and investments made in recent times will present a considerable development in quantity, and that this can assist us scale down our value base and obtain decrease prices,” he continues.
VAP, SALES & DISTRIBUTION (VAPS&D) SEGMENT
With its absolutely built-in, environment friendly worth chain for salmon, trout, whitefish and shellfish, Lerøy Seafood Group shall be capable to provide merchandise which are greatest suited to the shoppers’ preferences. Proximity to key markets and information of the client’s wants are subsequently of decisive significance if the Group is to develop demand for its essential merchandise. Lerøy distributes greater than 70 totally different seafood merchandise from Norway to greater than 80 totally different markets within the area of 1 calendar yr. As well as, the Group processes and distributes numerous market-specific seafood merchandise to their respective native markets the place Lerøy has operations. Lerøy Seafood Group’s worth chain shall be developed additional with a purpose to fulfill and enhance the shoppers’ complete demand for seafood.
In 2020, the seafood markets have been negatively impacted by the COVID-19 pandemic. The affect was seen first in markets in Asia, spreading globally all through Q1 2020 and into Q2 2020. The COVID-19 pandemic has had an impact on demand developments. The grocery market now represents a bigger quantity of consumption, whereas the hospitality and catering section on many core markets has virtually been closed down for lengthy durations of time. The pandemic has additionally had an affect on logistics, significantly for abroad markets, with a discount in cargo capability leading to elevated prices in the course of the interval.
The principle focus for the VAPS&D section has been to maintain the worth chain open. All through the second quarter, key markets confirmed a substantial degree of enchancment as the provision chain tailored to the change in shopper developments, with a a lot greater give attention to groceries, but additionally as some components of the hospitality and catering section have progressively reopened. At first of the third quarter, demand had improved significantly as compared with the standing in the course of the second quarter. At first of the fourth quarter, we as soon as once more skilled a rise in restrictions on key markets, with a big affect on demand. On the similar time, we’re happy to notice that demand continues to be as robust as it’s, and that the worth chain has proved to be very adaptable. This provides grounds for an optimistic outlook as soon as the pandemic is over and the restrictions are lifted.
Regardless of considerably decrease costs realised for key species, the section reported income in This autumn 2020 that was just one% decrease than in the identical interval in 2019. This can be a clear indication of a excessive degree of underlying actions. In recent times, the Group has applied substantial initiatives for enchancment of a number of of the models within the section, together with facilitating higher interplay alongside the Group’s worth chain. These initiatives are actually producing outcomes, and the working revenue earlier than truthful worth adjustment associated to organic belongings in This autumn 2020 is NOK 176 million, up from NOK 162 million in This autumn 2019.
- “2020 has been a troublesome yr throughout which it has been necessary to give attention to maintaining our worth chain open and making certain provides of seafood to the tip shopper. It’s our expertise that we now have clearly demonstrated the worth of the Group’s long-term investments in downstream operations, and we consider that we’re in a powerful place to develop upon this within the years to return,” says Henning Beltestad.
- “The Group’s merchandise are wholesome and good. Manufacturing is financially, climate-related and environmentally sustainable. We proceed to anticipate a optimistic underlying development in demand within the years to return,” he continues.
MARKET AND OUTLOOK
Worth developments for Atlantic salmon have been extremely risky in 2020 additionally, considerably influenced by the ripple results of COVID-19. This case stays in the beginning of 2021, with demand struggling considerably from the COVID-19 restrictions. It isn’t doable for the administration and Board of Administrators to kind any exact opinion on the length or penalties of the pandemic, however the development in quantity on the grocery market does present grounds for optimism. There are indications that seafood is gaining in reputation with shoppers, and we’re subsequently optimistic with a view to the underlying future developments for seafood.
Presently, the Group’s manufacturing of redfish takes place primarily in Norway. Norwegian and international salmon and trout manufacturing are experiencing comparatively modest development, which – mixed with a weaker Norwegian krone – has resulted in very excessive costs. This gives an incentive to begin manufacturing of salmon in new areas utilizing different applied sciences. These incentives have existed for a number of years now, however with lengthy lead instances within the trade, Norwegian manufacturing in marine fish farms has maintained its predominant place. The harvest quantity from salmon produced on land stays insignificant on the tip markets. The market share for Norwegian Atlantic salmon might, in the long run, be affected by manufacturing of salmon and trout in new areas and places. By enterprise improvement, investments and a transparent operational give attention to competitiveness, the Group shall be certain that its worth chain stands robust within the face of competitors within the years to return. Along with the event of present farming operations, the Group is accumulating information and competencies inside each land-based and offshore-based salmon manufacturing.
In recent times, Lerøy has made important investments in a number of components of the worth chain, together with the development of services for smolt/post-smolt capability in all of the Group’s areas. Lerøy Sjøtroll’s Kjærelva facility is now accomplished and has an annual biomass manufacturing of round 4,000 tonnes. Lerøy Aurora accomplished the ultimate development stage of a brand new improvement in This autumn 2020, and the power is anticipated to achieve full exploitation in 2021. Lerøy Midt can report that the developments to the Belsvik facility are going to schedule. The plan is for completion by the beginning of 2022, and the power is anticipated to provide round 5,000 tonnes of biomass. The Group’s investments in improved smolt manufacturing and post-smolt manufacturing, mixed with numerous different initiatives, will assist the Group’s ambition for continued development in quantity and elevated competitiveness by the use of a discount in manufacturing prices.
The Group’s substantial investments in post-smolt services haven’t solely elevated the Group’s annual harvest quantity by the use of improved exploitation of present belongings, but additionally offered important competencies associated to RAS expertise. That is in the primary the identical expertise utilized for full-scale land-based manufacturing of salmon. The Group is now negotiating for an extra improvement of a brand new RAS facility within the area of Vestland. The plans are initially to develop the power in three phases. The primary and second phases signify additional will increase within the Group’s post-smolt manufacturing. The third and remaining stage can even present services for post-smolt manufacturing, however can also be used for salmon manufacturing as much as harvest measurement. The situation of the plant, together with the hyperlinks to the Group’s farming operations in West Norway, might doubtlessly present profitable interplay between sea and land. The teachings realized can also be exploited to understand land-based tasks in different areas. The event will happen in phases, however preliminary estimates point out that the primary two phases will signify estimated prices of round NOK 1 billion. The event is projected to supply an annual enhance in manufacturing within the sea of 8-10,000 GWT. Development work is scheduled for completion in 2023.
The Group can report important enhancements in manufacturing within the sea in 2020. The harvest quantity is up from approx. 158,000 tonnes in 2019 to 171,000 tonnes in 2020. Furthermore, standing biomass has elevated from 111,000 tonnes at year-end 2019 to 119,000 tonnes at year-end 2020. The Group maintains its projections of a harvest quantity for 2021, together with associates, of 205,000-210,000 tonnes. Ongoing investments and extra enchancment initiatives will present additional development within the years to return.
For the Group, the goal is evident – for this development, mixed with different enchancment measures, to supply reductions within the Group’s launch from inventory prices for salmon and trout in 2021 and the next years.
The Group has made substantial investments in whitefish in recent times. One new vessel was added to the fleet in 2018 – Nordtind – and one other in early 2020 – Kongsfjord. Additional enhancements to fish high quality had been established as necessary design standards for Kongsfjord. Shoppers’ expectations and high quality necessities proceed to extend, making prime quality and competitiveness key components for fulfillment when competing to draw shoppers.
The whitefish trade, additionally together with land-based operations, has suffered considerably from the affect on demand of COVID-19 in 2020. It’s naturally not doable for the Group to understand how lengthy the restrictions will final, however Lerøy’s long-term plans stay the identical. The work on and investments in making the factories much less reliant on seasons proceed, together with well-organised and meticulous work on bettering every unit. We consider that this course of will generate outcomes with time.
The Group expects to see a rise in quotas in 2021 as follows; 14% enhance for cod, 6% for haddock, 16% for saithe north of 62 levels. For saithe south of 62 levels, the Group tasks a discount within the quota of 26%. The ultimate quota determination is anticipated on the finish of February 2021.
Lerøy works to develop an environment friendly and sustainable worth chain for seafood. This not solely gives cost-efficient options, but additionally high quality, availability, a excessive degree of service, traceability, and aggressive climate-related and environmental options. Investments in recent times in, e.g., a brand new industrial facility for Lerøy Midt, a brand new manufacturing unit in Stamsund and new factories in Spain and the Netherlands, now commissioned, will signify a optimistic contribution within the years to return. The administration and Board of Administrators are assured that Lerøy has a great place to begin for continued worthwhile development and improvement of Group operations.
The Group’s merchandise are wholesome and good. Manufacturing is financially, climate-related and environmentally sustainable. The administration and Board of Administrators proceed to anticipate good underlying development in demand within the years forward. It isn’t doable for the administration and Board of Administrators to evaluate how lengthy the COVID-19 pandemic will final, however we’re assured in assuming that demand will with time return to historic ranges and proceed to develop from there.
The Board of Administrators underlines that uncertainties associated to assessments of future developments are a lot greater than regular, however present estimates are for earnings within the first half of 2021 to be negatively impacted by the impact on demand of the COVID-19 restrictions. On the similar time, the Board is of the opinion that the Group’s underlying improvement is optimistic, and that Lerøy has a superb place for improved profitability within the yr to return.
The Board of Administrators and company administration wish to thank all of the Group’s staff for his or her onerous work up to now in the course of the COVID-19 pandemic.
Questions and feedback could also be addressed to the corporate’s CEO, Henning Beltestad, or to the CFO, Sjur S. Malm.
This data is topic to the disclosure necessities pursuant to Part 5-12 the Norwegian Securities Buying and selling Act