Lerøy Seafood Group ASA

Q2 2020 Results - Seite 2

The market for whitefish suffered a significant blow from the ripple effects of COVID-19 in Q2 2020, with falling prices for the main species when compared with Q1 2020 and a challenging market situation for shrimp, which has affected both catch strategy and catch patterns.

Lerøy Norway Seafoods (LNWS)’s primary business is processing wild-caught whitefish. The company has use of 12 processing plants and purchasing stations in Norway, five of which are leased from Lerøy Havfisk. The processing of whitefish in Norway has been extremely challenging for many years. In normal circumstances, lower prices for raw materials should be a positive factor for the onshore industry, but the ripple effects of COVID-19 have been negative for both production and marketing. Market demand for fresh and conventional products saw a significant decline in the quarter.

In total, the segment reported EBIT of NOK -5 million in Q2 2020, compared with NOK 40 million in the same period of 2019. Catch patterns will always affect the timing of earnings realisation. In the first half of 2020, the segment contributed EBIT of NOK 264 million, compared with NOK 212 million in the first half of 2019.

• “In the second quarter, the whitefish market has also suffered the impact of the ripple effects of COVID-19,” confirms CEO Henning Beltestad. “Based on market status, we have focused on targeting our catches towards lower value species, resulting in an average price realised for all species in the second quarter that is substantially lower than the price realised in the same quarter last year. Towards the end of the second quarter and at the start of the third quarter, the Group has seen a more positive development in demand,” confirms Henning Beltestad.

THE FARMING SEGMENT

The Farming segment reported operating profit for the Farming segment before fair value adjustment related to biological assets was NOK 216 million in Q2 2020, compared with NOK 595 million in Q2 2019. During the quarter, the Farming segment harvested 39,000 tonnes, compared with 37,000 tonnes in Q2 2019.

In Q2 2020, the EBIT/kg figure for Lerøy Aurora was NOK 6.30, NOK 14.10 for Lerøy Midt and NOK -1.60 for Lerøy Sjøtroll. In total, EBIT/kg for the segment was down from NOK 16.10 in Q2 2019 to NOK 5.50 in Q2 2020, due to a significant reduction in prices realised per kilo and higher costs per harvested kilo.

• “Due to extremely high export volumes from Norway, price developments for trout have been much weaker than for salmon in the second quarter and start of the third quarter,” confirms CEO Henning Beltestad.
• The total release from stock costs in Q2 2020 are higher than in the same quarter last year, but – as previously reported – we expect to see a decline in these costs in the second half of the year,” confirms Henning Beltestad.