SalMar's Q1: "Not where we want to be," says CEO, as profits drop

"Biological challenges" is the phrase that has been echoing around many a Norwegian conference room recently, as Norway's largest salmon farmers present their first-quarter results, many of which show a significant dip in profits after a particularly difficult winter season.

SalMar was no exception to this trend, as revealed during this morning's Q1 2024 results presentation.

SalMar CEO Frode Arnsten looked back on a quarter characterised by what he described as "cold winter temperatures, extreme weather, and several attacks from string jellyfish", particularly in the group's northern Norway operations.

This meant a lower superior share and reduced average harvest weights, which in turn adversely affected both cost and price achievements.

"I can already now say that we are not completely satisfied with the result we are presenting today. This is not where we want to be," Arnsten said.

"We care about the fish, the people, the customers, the environment, and the local community that we are a part of. Therefore, we do not want it to be like this... We know there is a great potential for improvement, and we will work hard to take that on at every step of the value chain," he said, introducing this morning's presentation.

The SalMar Group has farming operations in Central Norway, Northern Norway, Iceland, and Scotland, as well as substantial harvesting and secondary processing operations.

In the first quarter of 2024, SalMar achieved operating revenues of NOK 6,555 million (EUR 562m / USD 606m), a decrease from NOK 6,792 million in the same period in 2023.

The company's key performance metric, operational EBIT (earnings before interest and taxes), which reflects the results from underlying operations, was almost a quarter down when compared with 2023 figures, at NOK 1,512 million (EUR 123m / USD 140m), from NOK 1,884 million in Q1 2023.

Overall harvest volume for Q1 stood at 52,900 tonnes, yielding NOK 28.6 (EUR 2.45 / USD 2.64) per kg - a hefty drop from last year's NOK 38.8 per kg, primarily due to lower achieved prices.

In its Norwegian operations, SalMar reported an EBIT of NOK 1,546 million (EUR 133m / USD 143m) on a harvest volume of 45,400 tonnes, translating to NOK 34.1 per kilogram.

Outwith Norway, SalMar's performance was more mixed. Its Iceland-based farming operations also struggled with high costs due to biological challenges. However, Scottish Sea Farms, SalMar's joint venture in Scotland with Lerøy Seafood Group, reported a solid quarter with significantly improved results and favourable biological status across all regions.

Meanwhile, SalMar Aker Ocean achieved "strong biological performance" in its semi-offshore projects, boosting confidence for future potential, the Arntsen said.

Looking ahead, SalMar reaffirmed its 2024 volume guidance, maintaining projections at 237,000 tonnes in Norway, 7,000 tonnes from SalMar Aker Ocean, 15,000 tonnes in Iceland, and 37,000 tonnes in Scotland.

The global demand for SalMar's products continues to be robust, with limited anticipated growth in global supply for 2024, the company said.

“The first quarter was challenging in many ways, and we were once again reminded of the importance of working with the forces of nature," Arntsen said.

"Our ability to understand biology and the environment is crucial for our operational and financial performance," he continued.

"That is why we believe so strongly that our many improvement initiatives, including Salmon Living Lab, are vital for the continued success of our company and our industry as a whole," he added, referring to the NOK 500 million research and development facility SalMar announced this Spring, aiming to foster advancements in salmon farming. The initiative has already garnered attention from numerous potential partners, the CEO said.

“In SalMar, we have a positive view on the future of the aquaculture industry, and we are committed to grow our business sustainably and create value for society and our various stakeholders," Arnsten added, saying "food does not go out of style, the world needs more healthy and nutritious food."