Biological challenges mark Grieg Sefood’s Q1 2023 results

Nevertheless, the company notes that the salmon market remains strong, supporting earnings, as it awaits the final "salmon tax" proposal in Norway.
Worker at a Grieg Seafood marine farm. Photo: Helge Hansen / Grieg Seafood.
Worker at a Grieg Seafood marine farm. Photo: Helge Hansen / Grieg Seafood.

After a historic 2022, biological challenges at the beginning of the year affected results although, thanks to advanced harvests, Grieg Seafood was able to maintain volume above guidance. The operating EBIT was NOK 385 million (EUR 33.07 million / USD 36.06 million) in Q1 2023, NOK 68 million (EUR 5.84 million / USD 6.37 million) lower than in the same period last year. Harvest volume also decreased; it was 15,357 tons during the period compared to 16,916 tons in 2022. As a result, operating EBIT per kg was NOK 25.1 (EUR 2.15 / USD 2.35) compared to NOK 26.8 (EUR 2.30 / USD 2.51) in Q1 2022. Eighty-one percent of the volume harvested in the quarter was ASC certified.

Grieg has already announced that there will be an increase in smolt release to compensate and rebuild biomass. In addition, like all other salmon producers with operations in Norway and almost the entire aquaculture sector in the country, the company is awaiting the final proposal of the resource tax, commonly known as 'salmon tax'.

Markets for Atlantic salmon remained strong

Despite this lower volume, the strength of the salmon market has supported earnings. "The markets for Atlantic salmon remained strong during the quarter, with solid demand from both the retail, and the hotel and restaurant segments", said Andreas Kvame, CEO of Grieg Seafood. "On the farming side we were still impacted by biological challenges in the beginning of the year, though biology improved throughout the quarter and is currently good in Rogaland, BC and Newfoundland", he added.

As was the case in the previous quarter, Grieg Seafood's Finnmark operation was affected by the Spiro parasite during Q1 2023, forcing an early harvest. However, the company has said that mitigation measures have been taken to address the problems. In Rogaland, an early harvest was carried out to reduce biological risk related to Infectious Salmon Anemia (ISA) at one site, and winter ulcers. Finally, the harvest volume was 2200 tons above the guidance.

Likewise, freshwater production was good during the quarter in Newfoundland, with good fish health and growth. "The fish in Newfoundland handled a cold winter in the sea well and the development of the region is going according to plan", Kvame explained. Also by the plan, there was no harvest in British Columbia during the first quarter to give priority to the biomass crop.

Expecting the final proposal of the salmon tax

Following the results of this first quarter, Grieg Seafood expects the global harvest of Atlantic salmon in 2023 to be in line with the previous year. According to its forecasts, current harvest estimates indicate a significant difference between supply volumes in the first and second half of 2023, i.e. the pattern observed in 2022 will be repeated. It already expects an increase for Q2 2023, where the total expected harvest volume is 21,300 tons.

The company is also confident that the salmon market will keep strong in the future, although it remains expectant about the regulatory framework in Norway. Normally, Grieg Seafood targets an annual contract share of 20-50%, however, the estimated contract share for Norwegian operations in Q2 2023 is 12% and only rises to 15% for the full year 2023. In the salmon producer's words, the uncertainty arising from the proposed resource rent tax on salmon in Norway means that the contract market is "somewhat muted".

"In Norway, we are expecting the final proposal of the resource tax to be made public soon", said Grieg Seafood CEO Andreas Kvame. "The current version of the tax would negatively impact a sustainable development of the industry in Norway significantly. We sincerely hope that the Parliament will make the necessary changes to secure continued innovation, investments and development throughout the production cycle, which is necessary to improve biology and sustainability of Norwegian salmon farming".

About Grieg Seafood

Grieg Seafood ASA is one of the world's leading salmon producers. More than 750 people work for the company in all its regions. Headquartered in Bergen, Norway, the company has fish farms in Norway (Finnmark and Rogaland) and Canada (British Columbia and Newfoundland). Sustainable farming practices are the basis of its operations in all of them. Grieg Seafood ASA has been listed on the Oslo Stock Exchange since June 2007.

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