Grieg Shetland income up amid challenges

THE Grieg Seafood Group ended 2018 on a high with record harvest volumes and increased revenues, its results for the final quarter and whole year show.
Driven by high prices and cost reductions, the group reported a fourth quarter EBIT of NOK 351 million compared with NOK 151 million 12 months earlier. The EBIT per kg amounted to NOK 14.81 for the period, up from NOK 8.07 in Q4 2017.
The harvest volume was 27 per cent higher at almost 24,000 tonnes, thanks to a strong performance in Norway. But the company said it was still tackling biological challenges in Shetland.
Grieg said: ‘The farming cost (total cost related to fish harvested this quarter) increased by NOK 0.43 per kg compared to the same quarter last year. This is mainly related to the high cost of harvested fish in British Columbia (BC) and on Shetland, which was affected by harmful algal bloom (HAB) and gill related diseases.’
Yet despite these problems, fourth quarter revenues in Shetland were up from NOK 185.7 million to NOK 245.2 million and the year up from NOK 745.9 million to almost NOK 800 million. Grieg also said that the quality of the fish in the final quarter had been high, contributing to good prices.
However, the region experienced reduced survival during Q4, caused by gill related diseases and winter ulcers.
As part of the accounting principle of recognising extraordinary mortality as cost in the income statement, a write-down of NOK 30 million was recorded for the quarter, decreasing EBIT per kg by NOK 7.99. Cost will remain high going into Q1 2019.
The total harvest volume for the year in Shetland was 11, 924 tonnes, close to the expectation of 12,000 tonnes. Planned harvest volume for Q1 2019 is 1,600 tonnes.
EBIT per kg before fair value adjustment of biological assets was NOK 1.29 for the quarter, compared to NOK 9.46 in Q4 2017.
Grieg explained: ‘The aquaculture industry in Shetland has over time endured biological challenges. The industry in Shetland and on the Isle of Skye is collaborating to mitigate these challenges and Grieg Seafood Shetland continues to co-operate closely with the other sea farmers in the region to establish a long-term, stable and sustainable marine biology.
‘Whole farming areas now operate with a three-month fallowing period, and lice counting and treatment activity is coordinated between farmers, with reciprocal visits during lice counting operations.
‘Over the last four years, production at Grieg Seafood Shetland has been cut from 27 to 17 sites, focusing production on the best sites with the strongest biological control.’
The statement added: ‘The sea lice level remained high during the quarter and sea lice treatments have been carried out. The smolt transferred to sea from Grieg Seafood Shetland`s own smolt facility during the year were not of satisfying quality.
‘We have been looking into various improvement measures to improve smolt quality going forward.
‘By focusing on initiatives to improve biosecurity and fish welfare, Grieg Seafood Shetland maintains the target of a harvest volume of 17,000 tonnes with a production cost of NOK 43 per kg in 2020.’
Grieg also revealed that systems similar to those utilised in British Columbia have been implemented for the monitoring and mitigation of algae related issues.
Other prioritised measures to ensure strong biosecurity, improved fish welfare and control of the sea lice situation include the use of aeration systems, fresh water treatments, sea lice skirts and cleaner fish.
For the whole of 2018, group operating income totalled NOK 7,552 million, compared to NOK 7,038 million in 2017.
‘Higher prices and volumes contributed positively,’ said the company. Total harvest volume for the year was 74, 623 tonnes GWT, up from 62,598 tonnes in 2017. The expected harvest volume for 2019 is 82,000 tonnes, up by 10 per cent on 2018.
The EBIT per kg was NOK 14.72, compared to NOK 14.45 in 2017. EBIT per kg was positively affected by the large harvest volume and high spot prices, however the cost related to pancreas disease (PD), HAB and gill diseases during the year had a negative impact, both in terms of high cost and price achievement. The total farming cost per kg for the Group was NOK 43.1, NOK 0.7 above its targeted cost of NOK 42.4 for the year.
CEO Andreas Kvame said: ‘Q4 2018 ended a strong year for Grieg Seafood in which we reached our last guiding harvest volume of 75,000 tonnes – an increase of 20 per cent compared to 2017 – and revenues of more than NOK 7.5 billion. This was achieved by maintaining a strict focus on sustainability and driving forward improvements to our farming operations.’
Picture: Grieg Seafood CEO Andreas Kvame