Norwegian aquaculture and fishing giant Leroy Seafood Group saw its operating profit fall 11 percent in the fourth quarter of 2022, dragged down by lower catch volumes and earnings in its whitefish division and various cost pressures across its operations.

The company, with presence in both wild whitefish harvesting and salmon and trout farming, posted earnings before interest and taxes (EBIT) of NOK 800 million (€72.9 million/$77.7 million) in the quarter, compared with NOK 902 million (€82.2 million/$87.7 million) in the same period a year earlier.

Revenue was just over NOK 7 billion (€637.9 million/$680.3 million) in the quarter, up 9 percent on the same time a year ago, largely driven by high salmon prices.

For the full year, Leroy posted a 28 percent hike in operating profit, amounting to NOK 3.2 billion (€291.6 million/$311 million), and a record revenue of NOK 26.6 billion (€2.4 billion/$2.6 billion).

"Seafood markets were strong in 2022. Like other industries, we also experienced cost pressure," said Leroy CEO Henning Beltestad.

The company's salmon and trout harvest volume was 53,310 metric tons in the fourth quarter, up 4 percent year-on-year, with harvest volumes for the full year down 7 percent at 174,629 metric tons.

Demanding biological conditions in Leroy Midt and Leroy Sjotroll affected growth negatively, said the company, and for 2023 the group is targeting an estimated harvest of 193,500 metric tons.

Whitefish weighs on earnings

Lower whitefish quotas led to lower catch volumes and earnings. Leroy's wholly owned subsidiary, Leroy Havfisk, carries out the group’s wild- harvest operations.

The catch volume in the fourth quarter dropped 23 percent to 13,099 metric tons, compared with 17,119 metric tons in the same period a year ago.

Lower catches, particularly of cod, is a key reason for the trawler fleet’s lower earnings in the quarter, which were unable to be offset by the significantly higher prices of a number of whitefish species, which increased by 25 percent for cod, 6 percent for haddock and 8 percent for saithe in the quarter.

In total, the segment reported an operating loss of NOK 9 million (€820,221/$874,627) in the quarter, compared with an operating profit of NOK 73 million (€6.7 million/$7.1 million) in the same period in 2021.

For the year as a whole, the wild-catch earnings totaled NOK 348 million (€31.7 million/$33.8 million).

In addition, the group's whitefish processing division, Leroy Norway Seafoods, saw its earning squeezed during the year.

Prices for end products did not perform as strongly as those for raw materials, resulting in significant pressure on margins in the onshore industry.

Leroy said it expects that higher raw material prices will gradually be reflected in the prices for end products.

Volatile prices and extreme price development on the spot market entail changes in margin performance throughout the value chain, said the group, and it takes time for the various parties in the different parts of the value chain to adapt to a new price level.