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Lerøy Seafood Group has distributed production throughout three regions in Norway (Photo: LSG/FIS)
COMPANY OF THE WEEK: Lerøy Reports Strong Increase in Operating Profit
(NORWAY, 9/3/2010)
In the second quarter of 2010, Lerøy Seafood Group (Public: OSE:LSG) had a turnover of NOK 2,176 million, representing an increase from NOK 1,823 million for the same period in 2009. The Board of Directors is very satisfied with the Group's development and with the result achieved for the period, which is the highest result achieved in the history of the Group to date.
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| Lerøy Seafood Group is a leading exporter of seafood from Norway |
The Group's operating profit before fair value adjustment of biomass was NOK 367.8 million in the second quarter of 2010, compared with NOK 221.6 million in the second quarter of the previous year. The strong increase in operating profit compared with the same period last year is as high as 66 percent. This is explained by volume growth and improved prices for the Group’s main products, Atlantic salmon and salmon trout, and an extremely good development for the Sales and Distribution business segment.
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| Lerøy Seafood Group sales per market Q2 2010, more than 60 countries |
As a result of the Group's long-term industrial market strategy, the prices achieved for salmon and salmon trout will naturally deviate from the spot market prices. Realised contract prices have been lower than prevailing spot prices in the quarter under review. At the beginning of 2010, the Group's
share of contracts was higher than at the same point in 2009, and will vary between 40 percent and 50 percent throughout the year. Taken into consideration with the Group’s positive market outlook, this indicates that the Group can also expect to achieve good prices in the time ahead. Despite improvements in all farming regions, there continue to be considerable regional differences within the Group in terms of production costs.
On the back of increased volumes and improved production for the Group as a whole, the Board of Directors anticipates falling production costs in the second half year of 2010 compared with the first half year of 2010.
Thanks to good market conditions, satisfactory biology and high volumes, the affiliated company Norskott Havbruk (owner of the Scotland-based Scottish Sea Farms Ltd) saw an extremely good development in net earnings in the second quarter. Income from affiliated companies before fair value adjustment of biomass therefore increased from NOK 16.2 million in the second quarter of 2009 to NOK 29.3 million in the second quarter of 2010.
The Group's profit before tax and fair value adjustment of biomass in the second quarter of 2010 was NOK 382.0 million as against NOK 219.0 million in the second quarter of 2009.
Key Figures
- 27.6 thousand tons gutted weight of salmon and salmon trout harvested (Q2 2009: 23.2)
- Turnover NOK 2,176 million (Q2 2009: 1,823)
- Operating profit before fair value adjustment of biomass NOK 367.8 million (Q2 2009: 221.6)
- Profit before tax and before fair value adjustment of biomass NOK 382.0 million (Q2 2009: 219.0)
- Spot prices for whole superior salmon have seen an increase of 14 percent compared with Q2 2009
- Paid dividend NOK/share 7.00, NOK 375 million (Q2 2009: NOK/share 2.80 / NOK 150 million)
- Net interest-bearing debt was NOK 1,321 million (NOK 1,924 million at 30.06.2009)
- Equity ratio 54.3 percent
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| The group’s global sales network consists of Hallvard Lerøy AS’s sales offices in a number of countries |
Financial Summary for First Half Year of 2010
In the first half year of 2010, Lerøy Seafood Group had a turnover of NOK 4,049 million, representing an increase from NOK 3,344 million for the same period in 2009. The Group's operating profit before fair value adjustment of biomass was NOK 622.9 million in the first half year of 2010, compared with NOK 363.4 million in the first half year of the previous year. The Group’s operating margin before fair value adjustment of biomass was 15.4 percent in the first half year of this year, compared with 10.9 percent in the first half year of 2009.
In the first half year of 2010, the Group generated an operating profit after fair value adjustment of biomass of NOK 824.8 million, against a profit of NOK 502.3 million in the first half year of 2009. Fair value adjustment of biomass in accordance with IFRS is NOK 201.9 million in the first half year of 2010, compared with NOK 138.9 million in the first half year of 2009. The positive IFRS adjustment in the first half year of 2010 and the first half year of 2009 are both explained by higher salmon prices as of 30.6 compared with year end prices.
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| Lerøy Seafood Group ASA (LSG) is the second largest producer of salmon and trout in the world |
Income from affiliated companies totalled NOK 70.0 million in the first half year of 2010, compared with NOK 42.0 million in the first half year of 2009.
Adjusted for fair value adjustment of biomass, the figures were NOK 55.6 million and NOK 27.7 million respectively. The Group's net financial items in the first half year of this year amounted to NOK -29.6 million, compared with NOK -48.0 million in the first half year of 2009. The reduction in financial costs is mainly attributable to a significant drop in net interest-bearing debt. The Group’s profit before tax and before fair value adjustment of biomass was NOK 648.9 million in the first half year, compared with a corresponding figure of NOK 343.1 million in the first half year of 2009.
Net earnings for the first half year of this year corresponded to a profit before fair value adjustment of biomass of NOK 8.90 per share, as against a corresponding figure of NOK 4.72 in the first half year of 2009. The number of outstanding shares is 53,577,368. The Group’s annualised return on capital employed (ROCE) before fair value adjustment of biomass was 24.6 percent in the first half of this year, as against 13.8 percent in the same period of the previous year.
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| The Group's core activities are distribution, sale and marketing of seafood, processing of seafood, production of salmon, trout and other species, as well as product development |
The Group’s financial position is solid, with book equity of NOK 4,576 million, corresponding to an equity ratio of 54.3 percent. The Group's net interest-bearing debt at the end of the first half year of 2010 was NOK 1,321 million as against NOK 1,924 million at the end of the first half year of 2009. In this period, a dividend of NOK 7.0 per share was paid out, i.e. NOK 375 million. The reduction in the Group's net interest-bearing debt over the past year of close to NOK 1 billion adjusted for dividend is extremely satisfactory. Cash performance must also be viewed in the context of an increase in biomass in the same period.
Market Situation/ Outlook
Expectations in terms of future developments in the world economy, including development in demand for the Group's products, have become more positive through 2009 and the first half year of 2010, despite the turmoil in Greece, and are now characterised considerably less by fear than was the case at the beginning of 2009.
That said, the Board of Directors believes there is still rather more uncertainty than normal at the macro scale. Development in demand for the Group’s main products, Atlantic salmon and salmon trout, has been extremely positive so far in 2010. Moreover, a substantial drop in the global supply of Atlantic salmon for 2010 is expected, as well as limited growth in the next few years.
Correspondingly, the Board of Directors anticipates a continued good development in the global demand for Atlantic salmon. This, together with expectations for improved productivity in the Group's production, including improved biology, provides justification for the Board’s positive attitude to the Group’s development. The Board of Directors currently anticipates a better result for the Group in the third quarter of 2010 than was achieved in the second quarter of 2010, and correspondingly a significantly better result for the year as a whole compared with 2009.
About Lerøy Seafood Group
Lerøy Seafood Group is the leading exporter of seafood from Norway and is in business of meeting the demand for food and culinary experiences in Norway and internationally by supplying seafood products through selected distributors to producers, institutional households and consumers. The Group's core activities are distribution, sale and marketing of seafood, processing of seafood, production of salmon, trout and other species, as well as product development.
The Group operates through subsidiaries in Norway, Sweden, France and Portugal and through a network of sales offices that ensure its presence in the most important markets. The Group's task is to satisfy the customer's requirements for cost-effective and continuous supplies of a wide range of high-quality seafood products. Lerøy Seafood Group`s vision is to be the leading and most profitable global supplier of quality seafood.
Photos: Lerøy Seafood Group
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Margaret E.L. Stacey
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Address:
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Thormøhlens gate 51 B
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City:
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Bergen
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(NO-5006)
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Norway
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Phone:
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+47 55 21 36 50
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+47 55 21 36 32
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[email protected]
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