Grieg Seafood earnings drop by 24% in Q1, but "progress after a challenging 2023"

"During the first quarter of 2024, we experienced progress after a challenging 2023," said Grieg Seafood CEO Andreas Kvame, presenting the company's first quarter results this morning.

"The main driver of the improvement was a strong biological performance in Rogaland, which reduced costs and increased price achievement. The underlying biology is improving in all of our farming regions," Kvame said, thanking the Grieg staff for their efforts.

Grieg's harvest volume for the quarter increased to 21,075 tonnes from 15,357 tonnes last year, resulting in an operational EBIT per kg of NOK 13.8 (EUR 1.19 / USD 1.29) -- down by almost half compared to the previous year's NOK 25.1 (EUR 2.16 / USD 2.34), with the drop largely due to ongoing significant biological problems in the company's Finnmark operations in northern Norway.

Despite the increased harvest volume, Grieg Seafood still took a significant financial hit during the quarter, compared with last year.

The company reported an operational EBIT of NOK 292 million (EUR 25.1M / USD 27.3M) in the first quarter of 2024, down a whopping 24% from the NOK 385 million (EUR 33.1M / USD 36M) the company achieved during Q1 2023.

The drop in earnings echoes similar scenarios at all of Norway's big salmon farming companies, as winter biological problems continue to take their toll and levels of downgraded "production fish" soar.

Grieg's Rogaland operations in western Norway provided the high point of the company's first quarter results, achieving a harvest volume of 9,426 tonnes, significantly above the guidance for Q1 2024. Kvame said that this increase was driven by early harvesting in order to mitigate biological risks, producing an operational EBIT/kg of NOK 39.4.

The Rogaland region achieved its second-best quarterly results ever due to lower costs and strong price achievements, supported by high average weights driven by post-smolt, the CEO explained.

However, like many of its competitors, Grieg's northernmost operations were hit hard by biological and environmental factors. Its Finnmark division struggled with Spiro parasite, string jellyfish, and low seawater temperatures, which negatively impacted fish welfare, health, and quality.

The Finnmark region's harvest volume was 5,663 tonnes, with an operational EBIT/kg of just NOK 3.1.

The company has implemented various measures in an effort to prevent future infections, such as a new vaccine against winter ulcers and a UV filter against Spiro.

"We are also making changes to our production planning and reducing biological risk as our post-smolt strategy is gradually rolled out in our regions. Because of our long production cycles it takes time to see the results of our measures. During 2024 and especially next winter, however, we expect significant improvements," Kvame said.

In Newfoundland, Grieg Seafood completed its first harvest with a high share of superior quality fish. The total harvest volume for the quarter was 5,320 tonnes, with an impressive realized price of NOK 85.0 per kg.

This success, Kvalme said, underscores the potential of Newfoundland as a robust farming region, contributing to job creation and value for local communities.

The company continues to seek long-term partners for further development in Canada.

Grieg Seafood is on track with the construction of post-smolt facilities in Rogaland, Finnmark, and Newfoundland, Kvame confirmed.

The company also announced the establishment of a 10,000-tonne value-added processing plant, which will support its Norwegian operations and enhance value creation from its fish.

Looking ahead over the remainder of 2024, Grieg Seafood said it expects the global harvest of Atlantic salmon to increase by 1%. With limited supply growth and strong demand for sustainably produced proteins, the market outlook remains positive, Kvame indicated.

The company estimates a contract share of 11% for Q2 2024 and 7% for the full year.

Grieg's expected harvest volume for Q2 2024 is 17,100 tonnes, with a full-year target of 81,000 tonnes.