Low fishing quotas and ISA issues weigh down Lerøy Seafood's results in Q3 2023

Despite the difficulties, Lerøy reports a higher turnover than last year and highlights the "high activity" and the "clear potential for improvement."
Lerøy Mid's aquaculture farm. Lerøy Seafood recorded higher turnover in the third quarter, although its operating income declined, weighed down by low fishing quotas and the company's recent ISA problems.
Lerøy Mid's aquaculture farm. Lerøy Seafood recorded higher turnover in the third quarter, although its operating income declined, weighed down by low fishing quotas and the company's recent ISA problems.Lerøy Seafood Group.

Lerøy Seafood today presented its Q3 2023 results report highlighting that turnover was 8% higher than last year. However, the company's operating income declined, weighed down by low fishing quotas and the ISA issues recently recorded by the company.

"At the end of the third quarter and the beginning of the fourth quarter, we have faced challenges at some sites resulting in lower production than expected. This affects the expected harvest volume in 2023 and 2024. For 2024, we now expect a harvest volume of approximately 193,500 GWT, including jointly controlled operations," said CEO Henning Beltestad.

Great confidence in measures implemented

Lerøy's operating EBIT in the third quarter of 2023 amounted to NOK 631 million (EUR 53.67 million / USD 58.30 million) compared with NOK 833 million (EUR 70.86 million / USD 76.96 million) in the same quarter last year, a drop of just over 24%.

As mentioned, in the aquaculture segment, revenues were affected by one-time effects related to the early harvesting of fish with ISA detection, which is in addition to those already reported during Q2 of this same year.

Meanwhile, wild catch quotas for 2023 have been lower than those for 2022, which negatively affects revenues. However, the downstream activities - Value Added Products, Sales and Distribution (VAPS&D) - showed significantly better earnings than in the same quarter of the previous year and, according to the report, "further improvements are expected."

Despite the drawbacks, optimism seems to prevail. "High activity" and "clear potential for improvement" are the two expressions used by Lerøy Seafood to summarize its Q3. The company thus emphasized the measures it is already implementing to tackle the problems of the farming segment.

"To achieve our goals in farming for 2025, we have implemented a range of measures where the focus on increased smolt quality, investments in new technology, and the implementation of Lerøy Way are crucial," Henning Beltestad explained. "We have great confidence in these measures, and their effects are expected to gradually become apparent in the form of higher growth in through 2024," he added.

Well-positioned for the future

Beltestad also said that, compared to the level in Q3, the release from stock costs in farming in Q4 is expected to be at the same level. Lerøy expects the harvest volume, including controlled joint ventures, to be 169,500 GWT in 2023 and, as mentioned, 193,500 GWT in 2024, and its report assures that it continues "its efforts to achieve its targets for 2025 which include a harvest volume of 205,000 GWT."

Likewise, the seafood company has recalled that a lower fishing quota affects income in the wild catch, although, as it states in the report, this is something inherent to this activity. "Operations in the wild catch segment are difficult, with falling quotas and weakening basis for operations, but quotas have always varied throughout the history of this segment," the report notes.

The Group will continue to focus on operational efficiency both at sea and for the onshore industry, a sector that is showing signs of improvement. "It is particularly important to increase capacity exploitation in factories for the onshore industry, in order to ensure increased profitability. Continuous efforts are made both in processing more species of fish and offering new products," the Q3 report says.

Again, optimism is the dominant note in Lerøy Seafood's discourse. "Historically, demand for seafood has held up relatively well in economic downturns. We find that our value chain meets the market's needs, and Lerøy is well-positioned for the future," stated CEO Henning Beltestad. Its second place - behind competitor Mowi - in the 2023 Coller FAIRR Protein Producer Index, which ranks 60 of the world's animal protein producers according to their sustainability, backs this up.

"We have areas to improve, of course, but this is an important recognition of Lerøy and the work our employees do. Norwegian seafood is among the most sustainable protein we can consume, and Lerøy is proud to serve millions of sustainable meals to the world every day throughout the year," concluded Lerøy Seafood CEO.

About Lerøy Seafood Group

Headquartered in Bergen, Norway, Lerøy Seafood Group (LSG) is a global seafood corporation. Its almost 6,000 employees process between 350,000 and 400,000 tonnes of seafood every year via its value chain, corresponding to around 5 million meals every day. The Group has a vertically integrated value chain for redfish and whitefish, as well as significant activities using third-party products. Lerøy has set a number of ambitious targets within sustainability, including cutting greenhouse gas emissions by 46% by 2030.

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