OSLO - Grieg Seafood ASA has experienced a significant downturn in its third-quarter earnings of 2023, with operational EBIT plummeting to NOK -86 million from NOK 145 million in the same period last year. The company's CEO, Andreas Kvame, attributed the decline to a strategic shift from harvesting to fish growth, biological challenges, and heightened production costs.
In the third quarter, Grieg Seafood's harvest volume fell sharply to 12,245 tonnes from 22,923 tonnes year-over-year. This reduction was particularly felt in Rogaland where harvest volumes dropped to 4,783 tonnes due to Infectious Salmon Anemia (ISA)-related harvesting and lower overall volumes. Despite these setbacks, Kvame highlighted that the underlying biology in Rogaland remains positive, with a new vaccination program against ISA expected to significantly mitigate related risks.
Finnmark faced its own challenges with Spiro infections but took proactive measures by prioritizing early harvests to ensure fish welfare. The introduction of a UV filter at their smolt facility is one of the steps taken by Grieg Seafood to prevent future occurrences of Spiro.
The company's financial performance was also affected by the strategic shift towards fish growth which led to an operational EBIT per kg of NOK -7.0, a stark decrease from NOK 6.3 per kg in the previous year. The biological issues in Finnmark and ISA outbreaks in Rogaland contributed to low weight harvesting and were compounded by seasonal problems in British Columbia that negatively impacted earnings and price achievements.
Despite these challenges, there was a bright spot in the quarter with the commencement of the first harvest in Newfoundland in October. This new operation reported strong biological control with high survival rates and good fish health and welfare, including no sea lice issues.
Looking forward, Grieg Seafood is investing NOK 1.1 billion into a post-smolt expansion project in Finnmark aimed at producing an additional 3,000 tonnes. This investment underscores the company's commitment to improving biological control as well as fish health, welfare, and sustainability. With no growth expected in global harvest volumes and increasing demand for healthy food options and sustainably produced proteins, Grieg Seafood anticipates a strong market for the remainder of 2023.
InvestingPro Insights
According to real-time data from InvestingPro, Grieg Seafood's stock price has dipped by 5% in the last three months as of Q3 2023. Nevertheless, the company's revenue is forecasted to bounce back with a growth of 3.2% in Q4 2023. Furthermore, the operational EBITDA margin, which stood at a disappointing -5.9% in Q3 2023, is projected to recover to 8.5% by Q1 2024.
InvestingPro Tips suggest that, despite the recent downturn, Grieg Seafood's strategic shift towards fish growth might yield long-term benefits. Investors are advised to monitor the company's operational EBITDA margin as a sign of progress. In addition, with the increasing global demand for sustainably produced proteins, Grieg Seafood's investment in biological control and fish welfare could position it well for future growth. Investors should bear this potential market trend in mind when evaluating the company's prospects.
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