Lerøy reports 58% profits boost for Q2

Norwegian seafood group Lerøy has joined its peers in reporting record second quarter results.

The company, which is an integrated fish farming, conventional whitefish trawling and fish processing business, announced a 58% increase in its operational EBIT or profit of NOK 923 million (£77m). Lerøy also owns a half share in Scottish Sea Farms, but performance data for the subsidiary is not detailed in Lerøy’s report.

Group turnover totalled NOK 6.567bn (£570m), an increase from NOK 5.304bn (£461m) in Q2 2021.

The company said strong demand for seafood, including a substantial increase in prices realised for the group’s main products, was the key factor in the year-on-year earnings improvement.

The farming segment delivered improved results in the quarter. Salmon prices were high again in the second quarter, based on continued high demand and low supply.

The harvest volume was slightly lower than in the same period of 2021 but the company expects it to improve in the second half of the year.

Lerøy has joined Grieg in warning that inflationary pressure in the economy and low harvest volumes are affecting cost developments.

The total salmon and trout harvest volume for full-year 2022 is estimated at 203,000 tonnes (including Lerøy’s share in Scottish Sea Farms).

The group supplies a large share of its products on a contract basis to strategic customers in the end markets, and it takes time for higher prices and cost inflation for input factors, such as transport costs, to be fully reflected in the markets.

The Lerøy report pointed out: “Results for the wild catch segment (mainly cod, haddock and saithe) improved significantly compared with Q2 2021, driven by high prices and higher catch volumes. Higher bunker [fuel] costs are affecting cost developments.”

CEO Henning Beltestad said: “The harvest volume of salmon and trout will increase in the second half of the year. As usual, there will be a seasonal reduction in prices in the second half, but the underlying market is robust, and we expect earnings in the Farming segment to remain good.

“Lerøy has developed long-term relationships with a number of strategic customers, which ensures stability and is a premise for building the world’s most efficient and sustainable value chain for seafood. However, it will take time for the recent cost inflation to be fully reflected in the value chain.

“This has a negative impact on earnings in VAP [value added products], Sales & Distribution, but the long-term picture is unchanged, and we expect to see a gradual improvement through the second half of the year.”

He concluded: “Seafood is a sustainable, nutritious and tasty protein source with attractive market prospects – including in the long term – driven by ever increasing demand. There is of course great uncertainty in the global economy at present, but history has shown seafood markets to be resilient, even in difficult times.”