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Grieg Seafood ASA : Q1 2012 - Low salmon prices caused weak profitability |
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Highlights - first quarter 2012
Results first quarter 2012 Production costs in the first quarter were generally lower compared with the same period last year, while biological production in Norway and Canada continued to maintain the progress shown in the previous quarters. Production in Shetland was weaker due to sea lice problems in one area, which also led to higher underlying costs in this region. Higher seawater temperatures in Norway have resulted in increased production and a rise in global production that is more than expected. At the same time, there has been an equally strong increase in demand in several countries. The strong demand-side growth is a consequence of lower salmon prices from the second half of 2011, as well as increased distribution and market penetration in both established and emerging markets, and a generally higher level of market activities. The Group's operational EBIT before fair value adjustments of biomass was 0.27 NOK/kg (11.08 NOK/kg). Rogaland achieved an EBIT of 1.58 NOK/kg (15.28 NOK/kg), while Finnmark had an EBIT of -0.16 NOK/kg (10.88 NOK/kg). The EBIT in Shetland reached -1.30 NOK/kg (6.58 NOK/kg), while in Canada the EBIT reached 2.71 NOK/kg in 2012 compared to 12.55 NOK/kg in 2011. The Norwegian sales company, Ocean Quality, continued its good development and achieved an EBIT of NOK 6.8m (1.5%) compared to NOK 1.5m (0.3%). At the end of the first quarter 2012 the equity ratio was 40.9% (51.3%), while net interest-bearing debt totalled NOK 1 376m, a reduction of NOK 48m from fourth quarter 2011. In the first quarter of 2012 Grieg Seafood established an extended financing agreement which provides Grieg Seafood with an increased financing framework of NOK 400-450m. NOK 300m of the loan is guaranteed by Grieg Seafood's largest shareholder, Grieg Holdings AS. Key parts of the company's loan covenants have been suspended. The NIBD/ EBITDA covenant has been suspended up to and including Q4 2013. The equity ratio can be reduced to 33% in one individual quarter. A replacement covenant has been established based on the accumulated EBITDA, with the first measurement at the end of Q2 2012. At the end of Q1 2012, Grieg Seafood exceeded the required level by good margin. Outlook Supply-side growth is expected to remain strong for the next six months, but with a declining trend. Prices in the first quarter have been better than expected, given the very strong supply-side growth. A volatile market must be expected in the second and third quarter, before the market balance according to the present production forecasts should improve towards the end of 2012. Grieg Seafood is carrying out a major investment programme in smolt production based on recirculation technology. This is the largest and most important initiative we have undertaken aimed at increasing production efficiency. In addition to reducing the cost of buying external smolts and transportation of smolt, the enhanced smolt quality and better control of both smolt released to sea and the smolt sizes will facilitate more optimal biological production, adapted to different production and environmental conditions. Altogether, the smolt programmed is expected to reduce production costs by NOK 1-2 per kilo. Grieg Seafood expects a total harvest volume of 71 000 tons in 2012, is in line with our previous volume guidance, but with some adjustments between the regions. Accordingly, a large proportion of the planned increase in total harvest volume for 2012 was harvested in the first quarter of the year. The current expectation is that 16 000 tons will be harvested in the second quarter, an increase from 14 300 tons in the second quarter of 2011 (+12%). This gives expected harvest growth of 9% (around 3 000 tons) in the second half of 2012. Grieg Seafood expects further organic volume growth in the coming year, but at a lower level than in 2012 and in line with historical demand growth. The increased focus on sales and marketing has shown results, as expected, and will continue. We expect that professional sales and market work will make an increasing contribution to value creation for both Grieg Seafood and the industry in general.
For more information, please see www.griegseafood.no.
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GSF Q1 2012 report GSF Q1 2012 presentation |