SALMAR DELIVERS STRONG RESULTS IN THIRD QUARTER
SalMar delivers strong results in third quarter. SalMar ASA reported an Operational EBIT of NOK 646.8 million in the third quarter 2020, up from NOK 613.5 million in the same period in 2019. SalMar’s Norwegian operations reported an Operational EBIT of NOK 668.7 million in the quarter, up 13% on the same period last year.
“Fantastic efforts from our employees over time makes it possible for SalMar to once again deliver strong quarterly results. Good strategic assessments and a clear operational focus have led to strong biological and operational performance throughout the entire value chain. This has resulted in good capacity utilisation, good cost development and solid price achievement with associated margins. This in a period of increased uncertainty both for employees and in the market caused by the Covid-19 pandemic, “ says CEO Gustav Witzøe.
SalMar generated gross operating revenues of just over NOK 2.9 billion in the quarter, up from just under NOK 2.8 billion in the third quarter last year. The Group harvested 37,100 tonnes of salmon in the quarter, compared with 35,800 tonnes in the corresponding period last year. Operational EBIT per kg came to NOK 17.46, up from NOK 17.12 per kg in the third quarter of 2019. The increase was achieved despite the average spot price for salmon (NASDAQ Salmon Index) during the period being NOK 2.08 per kg lower than in the same period last year.
The Fish Farming Central Norway segment once again posted a strong result, and is reaping the rewards of operational efficiency and a good biological performance. The bulk of the volume harvested in the quarter came from the spring-2019 generation, which has now been completely harvested out. This generation has performed very well biologically. The remaining volume harvested came from the autumn-2019 generation, which has also performed well biologically. The segment will continue harvesting this generation in the fourth quarter. In the fourth quarter, the segment expects to harvest a significantly lower volume, with production costs on a par with the third quarter.
The Fish Farming Northern Norway segment also posted a good operating profit in the period. The entire volume harvested was made up of fish transferred to sea farms in the spring of 2019. This generation has developed very well biologically in recent periods. However, the segment’s result was somewhat affected by low price achievement, because harvesting took place in September when prices were at their lowest. The segment will continue to harvest the spring-2019 generation in the fourth quarter. It expects similar production costs but a significantly higher harvested volume than in the third quarter.
As expected, the third-quarter result for Icelandic Salmon (formerly Arnarlax) was weak. The result was affected by weak price achievement and high production costs for the 2018 generation that was harvested during the period. In the fourth quarter, the segment will start harvesting the 2019 generation, which has performed better biologically and with a lower cost level. The segment therefore expects to harvest a higher volume and achieve lower costs in the fourth quarter. In October, Icelandic Salmon carried out a successful private placement of shares worth around NOK 647 million. The company had its first day of trading on the Merkur Market on 27th of October.
For the Sales and Processing segment, the third quarter was characterised by a high level of market uncertainty due to the Covid-19 situation. Despite this, the segment posted a strong result in the period, due to efficient operations, good capacity utilisation and positive contributions from fixed-price contracts. The segment made an operating profit of NOK 156 million, compared with NOK 102 million in the third quarter 2019. Some 25 per cent of the volume was sold under contract during the quarter. The contract rate is expected to remain the same in the fourth quarter.
The Covid-19 pandemic and the measures implemented worldwide to curb the spread of infection have created heightened market uncertainty. However, SalMar is well positioned to handle such crises because the company has good financial flexibility and the capacity to process products locally before dispatching them to customers worldwide. To date, none of SalMar’s employees have tested positive for Covid-19.
Even with the macroeconomic uncertainty affecting today’s markets, SalMar is confident in the way forward for the aquaculture industry. The board considers that SalMar has a strong foundation on which to continue building its operations, both in the traditional coastal fish farming sector and offshore. The company is therefore maintaining its ongoing investment programmes to secure development of its already robust platform for further growth. The purchase of just over 8,000 tonnes of additional MAB capacity at the ‘traffic light’ auction in August underpins SalMar’s firm belief in the future of the aquaculture industry.
In 2020 as a whole, SalMar still expects to harvest a total of 152,000 tonnes of salmon in Norway. However, the increased MAB capacity gives it the flexibility to adjust its harvesting profile. The expectation for Iceland remains unchanged at 12,000 tonnes.
For 2021 as a whole, SalMar expects to harvest 163,000 tonnes in Norway and 14,000 tonnes in Iceland.
The last few quarters have proven SalMar’s ability to handle demanding market conditions by delivering strong results and maintaining a solid financial position. Based on this, the board proposes to pay out NOK 13 per share in dividend and will invite to an extraordinary general meeting on 4th of December 2020. The Board has updated the company’s dividend policy which defines long-term financial targets and form of dividends. The dividend proposal for the financial year 2020 will be announced when the results for the fourth quarter of 2020 are presented. The Board considers that SalMar’s financial capacity for further growth to be strong.