Medicinal louse treatments down
The increasingly successful deployment of non-medicinal lice treatments is one of the husbandry highlights of Lerøy’s Q2 report, which was published this morning.
As CEO Henning Beltestad reflects: "It's pleasing to report that the number of treatments was significantly down in the first half of 2016 compared with the first half of 2015, and that the treatments carried out in the second quarter were largely mechanical treatments."
The Group reports it has made other substantial investments louse treatment investments, including in the use of cleaner fish, “and is seeing good results from this”.
Farming
The segment harvested a total of 41,132 tonnes (HOG) of salmon and trout in Q2 2016, up 2% from the same period in 2015. EBIT/kg increased from NOK 6.6 per kg in Q2 2015 to NOK 16.4 per kg in Q2 2016.
"The price of Atlantic salmon reached a record high in the second quarter, which was the key driver in Lerøy Seafood Group achieving its highest revenue and operating profit in any quarter in the Group's history," says Beltestad.
"We're pleased to be able to announce record profits, but there is still considerable potential for improvement and this is where we're concentrating our efforts," he continues.
Lerøy Aurora achieved operational EBIT per kg of NOK 22.4. Lerøy Midt and Lerøy Sjøtroll reported EBITs per kg of NOK 17.5 and NOK 14.1 respectively for the same period.
"We've seen a positive price trend for trout in the second quarter, but prices realised for trout remain significantly lower than those for salmon," continues the CEO. "The trout market has been extremely challenging in the wake of Russia's ban on imports introduced in autumn 2014, but we're now seeing our long-term efforts to develop new markets for trout starting to bear fruit.”
Value-added processing
"High raw material prices have been and remain a challenge for processing activities in the VAP segment," comments CEO Henning Beltestad. "The Group is continuing its efforts to adapt to the expectation of permanently high raw material prices and is pleased that the operating margin shows an upward trend in the second quarter compared with the first quarter this year," he adds.
Acquisitions
On 2 June 2016, the Group entered into an agreement to acquire 64.4% of the shares in Havfisk ASA and 73.6% of the shares in Norway Seafoods Group AS.
The acquisitions are subject to the approval of the Norwegian Ministry of Trade, Industry and Fisheries and the relevant competition authorities. The completion date for the transactions will depend on when the necessary regulatory approvals are obtained.
Completion will trigger a mandatory offer of NOK 36.50 per share for the outstanding shares in Havfisk ASA. The Group also intends to make a voluntary offer of NOK 1.00 per share for the remaining outstanding shares in Norway Seafoods Group. The total consideration for 100% of the shares in the two companies will be NOK 3.2 billion.
Outlook
The Group is in a transitional phase within production of salmon and trout, with extraordinarily high direct and indirect processing costs, combined with increasing costs for infection prevention.
The Norwegian krone has weakened against key currencies. This dynamic is positive for prices realised for salmon but also suggests higher feed prices compared with 2015, though the Board of Directors still sees opportunities for cost reductions in other areas in the second half of 2016.
The Group currently estimates a total harvest volume of 173,000 tonnes (HOG) for 2016, including the share of LSG's volume from associates.
In view of the potential for better productivity and the positive market outlook, the Board of Directors and management currently expect the Group's earnings in the second half of 2016 to be considerably better than in the equivalent period last year.
