Lerøy Seafood Group ASA

Q1 2020 Results - Seite 3

The VAPS&D segment reported revenue in Q1 2020 of NOK 4,912 million, compared with NOK 4.514 in Q1 2019. Increased costs and risk have had a negative impact on earnings, and the VAPS&D segment’s operating profit before fair value adjustment related to biological assets was down from NOK 79 million in Q1 2019 to NOK 54 million in Q1 2020.

“Throughout the first quarter of 2020, the seafood markets were increasingly affected by the Covid-19 pandemic. This was initially evident in the markets in Asia, spreading globally by the last part of the quarter. Covid-19 has affected trends for demand, with an increase in consumption volumes within retail but with practical closure of the “HoReCa” markets in many central areas. The pandemic has also had an impact on logistics, particularly for overseas markets, with a reduction in cargo capacity resulting in increased costs during the period. The main focus for the VAPS&D segment has been to keep the value chain open. Activities in Q1 2020 have been good, with revenue up 9% on Q1 2019,” confirms CEO Henning Beltestad.

MARKET AND OUTLOOK

Price developments for Atlantic salmon have been highly volatile at the start of 2020, with the ripple effects of the COVID-19 pandemic gradually having a significantly negative impact on demand. While the hospitality/catering market has practically closed, demand on the retail market is good. Prices realised for products, measured according to Norwegian standards, are also affected by increased logistics costs.

Currently, the Group’s production of red fish takes place mainly in Norway. Norwegian and global salmon and trout production are experiencing a relatively limited growth. This factor, combined with a weaker Norwegian krone, has resulted in very high prices. This represents incentives to start production of salmon in new areas using new, alternative technologies. These incentives have existed for several years now, but with long lead times in the industry, Norwegian production in marine fish farms has maintained its predominant position. However, it must be noted that the market share for Norwegian Atlantic salmon will be affected by the introduction of salmon and trout production in new regions. We are confident that the Group’s value chain has a relatively strong position competition-wise in the years to come.