Lerøy Seafood's Strategic Innovations Amid Volatile Salmon Market

Lerøy Seafood Group ASA: Navigating Challenges in Salmon Production

THIRD QUARTER PERFORMANCE AND MARKET CONTEXT
Lerøy Seafood Group ASA has reported its operational performance for the third quarter of 2024, revealing a consolidated operational EBIT of MNOK 412. The Farming segment has demonstrated resilience with an operational EBIT of MNOK 310, despite prevailing low prices for both salmon and trout, and significant seawater temperature challenges experienced in Northern Norway.

CEO Henning Beltestad shared insights on the current market conditions, indicating that the third-quarter results were markedly influenced by these price fluctuations and environmental factors. While these challenges have slightly reduced growth rates in parts of the business, the overall outlook remains positive. Lerøy anticipates a total harvest volume of approximately 190,000 GWT for the year, slightly revised from earlier expectations. This includes a competitive contribution of 20,000 GWT from Scottish Seafarms, which has showcased remarkable profit growth, reflecting strong biological performance.

Innovative Farming Technologies for Sustainable Fish Welfare

COMMITMENT TO ADVANCING BIOLOGICAL PERFORMANCE
Looking ahead, Lerøy Seafood Group is excited about potential advancements in biological performance as they invest in innovative farming technologies. The company has recognized that implementing submerged cages can significantly reduce the need for lice treatment, with reports indicating nearly a 90% reduction compared to traditional methods. Early evidence suggests this has positively influenced not just survival rates but also the quality of fish produced.

As part of their strategy, Lerøy is set to invest an additional MNOK 350 in these submerged cages during the first half of 2025, with an aim to protect up to 45% of their salmon population. This approach reinforces the company's commitment to adhering to high fish welfare standards while also addressing environmental sustainability.

Solid Performance in Value-Added Processing and Distribution

TRACKING GROWTH IN VALUE-ADDED PROCESSING
The Value-Added Processing and Sales & Distribution (VAP S&D) segment of Lerøy has reported an operational EBIT of MNOK 220 in Q3 2024, which translates to an impressive rolling EBIT of MNOK 884 over the past 12 months. Beltestad applauded the growth trajectory observed in this sector, attributing it to operational enhancements and the effective utilization of their integrated value chain.

Challenges Ahead for the Wild Catch Segment

ADDRESSING OPERATING ISSUES IN WILD CATCH
In a contrasting review, the Wild Catch segment encountered significant challenges, reporting an operational EBIT of MNOK -58. This stark drop from the previous year's figures has been attributed to ongoing quota reductions in recent years, which have placed considerable strain on Lerøy's trawling operations. Beltestad emphasized that the processing facilities situated along the Norwegian coastline are facing under-utilization alongside increased raw material costs, which pose obstacles to future profitability.

Strategic Path Forward Amid Market Uncertainties

WORKING TOWARDS AMBITIOUS GOALS
Despite the hurdles presented by fluctuating salmon and trout prices, Lerøy maintains an optimistic outlook towards achieving their operational goals. The company is steadfast in its target of harvesting 200,000 GWT from its Norwegian operations by 2025. Current projections place the estimated harvested volume in Norway at around 195,000 GWT, with contributions from Scottish Seafarms anticipated to elevate the total to approximately 211,000 GWT.

Lerøy’s strategic focus on enhancing the quality of roe and smolt, along with the adoption of pioneering farming technologies, positions the group favorably for sustained success in the future. The company is also well-prepared to leverage growing demand for an integrated value chain that emphasizes sustainability, thereby unlocking further opportunities for earnings growth throughout their European operations.

Frequently Asked Questions

What were Lerøy Seafood Group's Q3 earnings?

Lerøy Seafood Group ASA reported a consolidated operational EBIT of MNOK 412 for the third quarter of 2024.

How did low salmon prices affect the company?

The decreased prices of salmon and trout have negatively impacted growth but Lerøy remains optimistic about long-term prospects.

What investment is Lerøy making for fish welfare?

Lerøy plans to invest MNOK 350 in new submerged cages during the first half of 2025 to improve fish welfare.

What challenges did the Wild Catch segment face?

The Wild Catch segment reported an EBIT of MNOK -58, facing difficulties due to significant quota reductions and high raw material costs.

What are Lerøy's future operational targets?

Lerøy aims to reach a harvested volume of 200,000 GWT from Norwegian operations by 2025, with an expected contribution from Scottish Seafarms.

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