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Morpol Increases Profitability In Q2

NORWAY - Morpol ASA reported a positive EBIT pre fair value for the second quarter 2011 of EUR 11.7 million and reported that improved margins in processing and solid results in farming have led to increased profitability.

The EBIT in the corresponding quarter last year was negative EUR 2.1 million. Salmon raw material prices dropped significantly throughout the quarter. However, the overall average price for the quarter remained at high levels compared to historical levels.

Processing

Revenues in processing were EUR 89.4 million compared to EUR 83.4 million prior year.

EBIT for processing in the second quarter 2011 was EUR 2.6 million, compared to a loss of EUR 2.1 million in corresponding quarter 2010.

Raw material purchase unit prices to Morpol were lower than prior year and increased sales prices to Morpol customers year on year resulted in higher profitability. However, higher sales prices led to reduced demand and volumes were down 11 per cent from prior year levels.

Farming

Revenues in farming in the second quarter were EUR 34.6 million. EUR 10.2 million was internal sales to the Morpol processing division for further processing and sales. Morpol did not own farming assets in the corresponding quarter in 2010.

EBIT for farming in the second quarter 2011 was EUR 10.0 million, whereof EUR 7.7 million was generated by the UK operations Meridian Salmon and EUR 2.3 million generated by Jøkelfjord Laks AS. EBIT/kg was EUR 1.6 for Meridian Salmon with sales volumes of 4,917 tonnes gutted fish equivalent and EUR 1.7 for Jøkelfjord Laks with sales of 1,348 tonnes.

High operating revenues Operating revenues in the second quarter 2011 were significantly above prior year at EUR 113.7 million (EUR 83.4 million).

The revenue increase was mainly due to farming revenues in 2011 of EUR 34.6. The group had no farming operations in the same period prior year. Despite volumes for the Easter season included in the quarter, processing volumes decreased year on year, but the volume impact was offset by increased unit sales prices.

Sales volumes decrease in the quarter

Total sales volumes excluding contract processing in the quarter were down by 11 per cent compared to last year, but price increases to customers have been executed various times in the last 12 months, consequently raising the average unit selling price.

Cold smoked salmon sales were flat year on year in the second quarter and specialities increased by 58 per cent, due to high sales in the Easter period. However, volumes of other products and lower price by-products reduced sharply by 13 per cent and 25 per cent respectively.

"Even though salmon raw material prices are dropping­ - they still remained high on average in the quarter - we had a strong result from the farming operations and expect that the second quarter will be a turning point in the results of processing. The lower salmon prices are expected to increase processing margins for the rest of the year," says Jerzy Malek, CEO.

"Despite a reduction in demand and lower volumes we expect sales to pick up as retail prices decrease," comments Mr Malek.

Divestment

In July 2011 Morpol divested its sea bass and sea bream operations in Spain (Culmarex S.A) to Cooke Aquaculture Inc., a large global aquaculture company headquartered in Canada for a total enterprise value of EUR 48.7 million. The transaction will reduce Morpol's net debt by approximately EUR 40 million.

Morpol had a net interesting bearing debt of EUR 186.3 at the end of the second quarter, a decrease of EUR 12.8 million from the first quarter 2011.

the Fish Site Editor

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