Grieg stutters in Shetland
Grieg Seafood Shetland (GSS) is hoping to turn around its fortunes after another poor quarter – with job layoffs to reduce costs, mechanical means to combat sea lice and new machinery to help disperse algal outbreaks all being cited as positive moves.
According to Grieg’s Q1 report, which was published today, EBIT for GSS before fair value adjustment of biomass was NOK 0.3 per kilo in Q1, against NOK 3.3 per kilo in the same period last year, while the harvest volume was 2,240 tonnes, down from 3,438 tonnes in Q1 2015.
Costs in Q1 showed an improvement on the previous quarter, and there is a general expectation that this trend will continue in Q2, but a relatively low harvest volume will, in itself, impact negatively on the cost level.
Processing activities in Shetland have been discontinued, but parts of the equipment which were written down have now been sold at a profit of NOK 6.2 million.
Mitigation measures
The production cycle is being changed from 24 to 18 months in Shetland, making it possible to utilise the best locations more effectively, while less favourable sites will be temporarily fallowed.
In a bid to combat sea lice issues, lumpsuckers and an enhanced mechanical treatment capacity are being introduced, while in a bid to mitigate the effects of algal blooms such as devastated a number of the company’s sites from late August last year, the company intends to use methods to disperse algal outbreaks.
However, the need to reduce costs means that jobs will be cut both at sea and on land – “manning levels in the sea” and “the number of employees in the harvesting plant will be reduced”, it states.
Investment opportunity?
The report also states that a “strategic review of the company’s operations in Shetland is ongoing”, while some commentators in Scotland have suggested that Grieg may well be considering selling up its Scottish operations, which have been performing poorly for several years.
Despite this uncertainty Kolbjørn Giskeødegård, the well-known Nordea seafood analyst, believes that it’s a good time to invest in the company – as the excellent performance of its Norwegian operations enabled it to have record returns for Q1.
As he reflected this morning: “The Q1 report shows an EBIT of 214m (consensus NOK 172m/Nordea NOK 202m), is considerably higher than expected. In Norway they are delivering an EBIT per kilo in the range NOK 19-20, while UK is now breaking even after terrible losses in previous quarters. The operations in Canada delivered NOK 9.4 per kilo, which is in line with Q4.”
