Aquaculture for all

Marine Harvest: Falling Prices But Strong Contracts

Salmonids Economics +2 more

NORWAY - The Marine Harvest Group achieved an operational EBIT of NOK 457 million in the third quarter of 2011, compared to NOK 759 million in the corresponding quarter of 2010. A high share of contracts at favourable prices reduced the impact on margins from a steep decline in spot prices.

Marine Harvest has implemented several measures to prepare for a challenging market the coming quarters. Costs associated with reduced smolt stocking are expensed with NOK 56 million in the quarter.

Marine Harvest reported operational revenues and other income of NOK 3,636 million in the third quarter of 2011. Harvest volumes were 83,076 tons compared to 64,034 tons in the third quarter of 2010. Net earnings in the period were NOK 18 million (NOK 670 million).

"Global supply increased by 19 per cent in the third quarter, leading to a steep decline in spot prices in all key markets. Our strong contract portfolio reduced the impact on our margins this quarter. Marine Harvest Scotland delivered strong results also in this quarter, and VAP Europe improved their margins from previous quarters. We are now preparing the organisation for a challenging period," commented CEO of Marine Harvest ASA, Alf-Helge Aarskog.

Cash flow from operations amounted to NOK 261 million (NOK 599 million) in the third quarter of 2011. Net financial items amounted to NOK -28 million (NOK -104 million). Net financial items include interest expenses of NOK 105 million (NOK 97 million), and a positive change in the fair value of the conversion option of the convertible bond of NOK 232 million. Net interest-bearing debt increased to NOK 6,142 million (NOK 5,799 million at end of the second quarter).

The equity ratio was 47.3 per cent at the end of the quarter (47.3 per cent at end of the second quarter). Annualized ROACE was 11.5 per cent (18.9 per cent) and NIBD/Equity was 58.1 per cent, compared to 55.9 per cent at the end of the second quarter.

Marine Harvest Norway achieved an operational EBIT per kilo of NOK 5.92 (13.52) in the third quarter, while in Scotland and Canada reported operational EBIT per kilo was NOK 10.40 and NOK -7.44 respectively (10.93 and 2.74). Marine Harvest VAP Europe reported an operational EBIT margin of 3.7 per cent (2.2 per cent) in the third quarter of 2011, while Marine Harvest Chile achieved an operational EBIT per kg of NOK 5.79 (18.01).

Marine Harvest expects to harvest a volume of 338,000 tonnes in 2011, of which 99,000 tonnes is expected to be harvested in the fourth quarter.

"We expect a continued strong increase in global supply for the rest of 2011 and in 2012. A strong contract portfolio will reduce the impact of low spot prices also in the fourth quarter. While the demand stimulus from low prices can have a positive impact on spot prices the coming quarters, we must be prepared for a challenging market also in 2012."

"We will reduce smolt stocking in 2011 and 2012 by 11.3 million smolt in total, reduce planned capex in 2012 by NOK 600 million to approximately 400 million and have initiated a group wide cost-program to preserve our financial strength. We remain committed to exploit consolidation opportunities that may arise as a result of the challenging market conditions," concluded Mr Aarskog.

Create an account now to keep reading

It'll only take a second and we'll take you right back to what you were reading. The best part? It's free.

Already have an account? Sign in here