EXTREMELY POSITIVE DEVELOPMENT ON OPERATING PROFIT IN THE 3RD QUARTER 2010
In the third quarter of 2010, Lerøy Seafood Group had a turnover of NOK 2,264 million, representing an increase from NOK 1,946 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. The Group's operating profit before fair value adjustment of biomass was NOK 424.2 million in the third quarter of 2010, compared with NOK 275.3 million in the third quarter of the previous year. The strong increase in operating profit compared with the same period last year is as high as 54.1%. 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. 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% and 50% 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 expects production costs to continue to fall in the fourth quarter 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 third quarter. Income from affiliated companies before fair value adjustment of biomass therefore increased from NOK 14.0 million in the third quarter of 2009 to NOK 23.4 million in the third quarter of 2010.
The Group's profit before tax and fair value adjustment of biomass in the third quarter of 2010 was NOK 431.1 million as against NOK 272.4 million in the third quarter of 2009.
Key figures:
- 31.0 thousand tons gutted weight of salmon and salmon trout harvested (Q3 2009: 28.0)
- Turnover NOK 2,264 million (Q3 2009: 1,946)
- Operating profit before fair value adjustment of biomass NOK 424.2 million (Q3 2009: 275.3)
- EBIT/kg all inclusive NOK 13.7 (Q3 2009: 9.8)
- Profit before tax and before fair value adjustment of biomass NOK 431.1 million (Q3 2009: 272.4)
- Spot prices for whole superior salmon have seen an increase of 19.9% compared with Q3 2009
- Net interest-bearing debt was NOK 1,032 million (NOK 1,813 million at 30 September 2009)
- Equity ratio 55.8%
FINANCIAL SUMMARY AS PER 3RD QUARTER 2010
As per Q3 2010, Lerøy Seafood Group had a turnover of NOK 6,314 million, representing an increase from NOK 5,290 million for the same period in 2009. The Group's operating profit before fair value adjustment of biomass was NOK 1,047.1 million as per Q3 2010, compared with NOK 638.7 million as per Q3 2009. The Group's operating margin before fair value adjustment of biomass was 16.6% as per Q3 this year, compared with 12.1% for the corresponding period in the previous year.
As per Q3 2010, the Group generated an operating profit after fair value adjustment of biomass of NOK 1,218.9 million, against a profit of NOK 634.3 million as per Q3 2009. Fair value adjustment of biomass in accordance with IFRS is NOK 171.8 million as per Q3 2010, compared with NOK -4.4 million as per Q3 2009. The positive IFRS adjustment as per Q3 2010 is mainly attributed to higher salmon prices as of 30 September 2010 compared with year-end prices.
Income from affiliated companies totalled NOK 83.1 million as per Q3 2010, compared with NOK 50.0 million as per Q3 2009. With fair value adjustment of biomass, the figures were NOK 79.0 million and NOK 41.7 million respectively. The Group's net financial items as per Q3 2010 amounted to NOK -46.1 million, compared with NOK -64.9 million as per Q3 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 1,080.0 million as per Q3 2010, compared with a corresponding figure of NOK 615.5 million as per Q3 2009.
Net earnings for the first three quarters of 2010 correspond to a profit before fair value adjustment of biomass of NOK 14.76 per share, as against a corresponding figure of NOK 8.47 as per Q3 2009. The Group's annualised return on capital employed (ROCE) before fair value adjustment of biomass was 27.2% as per Q3 2010, as against 16.0% in the same period of the previous year. The Group's financial position is solid, with book equity of NOK 4,837 million, corresponding to an equity ratio of 55.8%. The Group's net interest-bearing debt at the end of the third quarter of 2010 was NOK 1,032 million as against NOK 1,813 million at the end of the third quarter 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 1.2 billion, adjusted for dividend, is extremely satisfactory.
Through organic growth and acquisitions over the last decade, the Group has become one of the world's leading producers of Atlantic salmon and salmon trout. It has also consolidated its position as a major participant in seafood distribution in Norway and worldwide, and it has strengthened its position as the leading exporter of seafood from Norway. In the third quarter, Lerøy Seafood Group signed an agreement for the acquisition of 50.71% of the shares in Sjøtroll Havbruk AS. Sjøtroll Havbruk AS farms salmon and salmon trout through 25 licenses in Hordaland. The closing date for the acquisition is mid-November this year. Lerøy Seafood Group will continue to selectively consider possible investment and merger opportunities, as well as alliances, which could strengthen the basis for further profitable growth and sustainable value creation.
THE 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 three quarters 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 drop in the global supply of Atlantic salmon for 2010 is expected, in addition to 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 fourth quarter of 2010 than was achieved in the third quarter of 2010, and correspondingly a significantly better result for the year as a whole compared with 2009.
Questions and comments may be addressed to the company's CEO, Henning Beltestad, or to the CFO, Ivan Vindheim.
Bergen, 3 November 2010
The Board of Directors of Lerøy Seafood Group ASA
