Lerøy not entirely satisfied, despite 26% increase in revenues in Q1 2023

In addition to seafood price inflation, the challenging situation in Lerøy's farming segment in the second half of 2022 resulted in a lower-than-expected harvest in Q1.
Lerøy Seafood Group booth at the Seafood Expo Global 2023 in Barcelona. Photo: WeAreAquaculture.
Lerøy Seafood Group booth at the Seafood Expo Global 2023 in Barcelona. Photo: WeAreAquaculture.

With an operating EBIT of NOK 989 million (EUR 85.30 million / USD 92.94 million), NOK 100 million (EUR 8.62 million / USD 9.39 million) above the same period in 2022, Lerøy Seafood posted a 26% year-on-year increase in revenues for the first quarter of 2023. However, the company is not entirely satisfied. Lerøy's farming segment struggled in the second half of 2022 and, at that translated into a decrease in average harvest weight and an unfavorable harvest profile in terms of pricing during Q1 2023. This situation is compounded by seafood price inflation which, like all of them, has also affected the Norwegian company.

However, Lerøy also noted that, compared to the same period last year, the Group's downstream activities showed a significant improvement. In addition, Wild Catch also posted strong results in Q1 (25269 tons, compared to 25116 tons in Q1 2022), despite the fact that 2023 quotas are lower than in 2022.

Farming difficulties and a weak Norwegian krone

As mentioned, Lerøy Seafood's farming segment went through a difficult situation in the second half of last year. That resulted in a harvest with a low average weight and also in what the company has defined as a "less than optimal" harvest profile with respect to prices during the first quarter. "We are not satisfied with the profitability in the farming segment this quarter and have implemented a number of measures expected to result in gradually improving performance", said CEO Henning Beltestad.

He also noted that, so far this year, the seasonal pattern has mirrored that of 2022, with seasonally low salmon and trout volumes, which is having a significant impact on prices. "The demand for seafood is strong, but it is also worth noting that the spot prices for salmon so far in Q2 are significantly higher than this time last year in NOK, but lower in EUR", Beltestad pointed out.

Salmon tax will weaken development in the industry

Like previously Ivan Vindheim, CEO of Mowi, or Andreas Kvame, CEO of Grieg Seafood, the CEO of Lerøy Seafood Group also used the Q1 results presentation to talk about salmon tax in Norway, which continues to accumulate uncertainty after Storting's finance committee announced on Friday a further delay in its decision making. "With more than 400 consultation responses received pointing out the harmful effects and operational challenges, it is extremely disappointing that the government did not take the input into consideration in its draft bill, which was published on 28 March 2023", he claimed.

Beltestad remarked that salmon production in Norway is sustainable from an economic, but also social and environmental perspective. "Norwegian aquaculture companies consistently appear in international rankings of the world's most sustainable protein producers. We are contributing to the global green shift", he said. "It is difficult to comprehend that the government is now substantially limiting the capital available for investments. It is well documented in the consultation responses that the proposed tax is in no way investment neutral. If it is adopted, it will significantly weaken development in the industry", he concluded.

Value chain well positioned for the future

As for the outlook for the remainder of 2023, it appears optimistic. According to its CEO, Lerøy expects farming costs to increase slightly in Q2, but also decline thereafter, with lower costs in the second half of the current year. The total expected harvest volume for the full year 2023 is 193,500 TGW (Tons of Gutted Weight). The wild catch segment, meanwhile, will be affected by lower quotas, "but we have a good basis of operations for the remainder of the year", said CEO Henning Beltestad.

The company also noted that there is an upward trend in downstream activities, and this positive momentum is expected to persist in the next quarter. "Historically, demand for seafood has held up relatively well in economic downturns. Our perception is that our value chain meets the market's needs and is well positioned for the future", summarized Beltestad.

About Lerøy Seafood Group

With approximately 6,000 employees and headquarters in Bergen, Norway, Lerøy Seafood Group ASA is a global seafood company. The company processes between 350,000 and 400,000 tons of seafood per year through its vertically integrated value chain for red fish and white fish, as well as significant third-party product activities. With a target for return on capital employed (ROCE) of 18%, the Group aims to create the most efficient and sustainable seafood value chain in the world. Its sustainability targets include reducing greenhouse gas emissions by 46% by 2030.

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