Aquaculture, fisheries and processing giant Leroy Seafood Group reported slightly lower earnings in 2019 as its farming, wild-catch and whitefish segments struggled, but the company's sales reached a major milestone, passing NOK 20 billion (€1.7 billion/$1.9 billion) for the first time.
Leroy made good developments in its value-added products (VAP) as well as its sales and distribution segments as its investments continue to pivot on new products for new markets.
Overall, Leroy's earnings before interest, tax, depreciation and amortization (EBITDA) decreased 32 percent to NOK 3.4 billion (€303 million/$332 million) against last year, but the company achieved revenues of NOK 20.4 billion (€1.8 billion/$1.9 billion), marking the first time Leroy has exceeded NOK 20 billion since its inception.
Leroy is now a fully-integrated company with control over the entire value chain, placing it in a good position for upcoming growth, the company said.
The group primarily farms salmon in Norway, which has been experiencing limited growth. This has pushed the company to consider producing salmon in new areas with alternative technologies, which it is yet to discuss in-depth.
Coronavirus dividend payment cut
"The spread of the corona pandemic has reduced predictability in the global economy. On this basis, the board of directors has adjusted its proposal for allocation of the annual profit figure for 2019," the company said in a stock exchange announcement.
One development Leroy is banking on in order to boost profits is its post-smolt strategy.
The company has been injecting capital into new smolt facilities that use recirculating aquaculture systems (RAS), in which smolt are kept longer in the facility compared to traditional smolt plants -- this had led to larger-sized smolt that will help relieve costs.
In 2020, the average size of released salmon smolt at Leroy Aurora and Leroy Sjotroll is expected to be 300 grams, the company said.
Leroy is also in the final stages of a development project for Leroy Aurora's facility in Laksefjord, Finnmark, which will have capacity for 4,500 metric tons. The project is expected to be completed by December 2020.
Raw material challenges
Last year posed was challenging for Leroy's whitefish segment, as seasonal fluctuations and lower quotas continue to impact catch figures.
In 2018, Leroy's Havfisk inked a deal for a new vessel -- Kongsfjord -- which was delivered to the company this February.
"The benefits with this new vessel were immediately evident on the very first sailing, with excellent results," the company said.
In order to mitigate risks in the segment related to seasonal fluctuations, the company will focus on several factors, including specialization, which will increase profitability.
Examples include the new processed fish and fillet factory in Stamsund that was completed in 2019, as well as the major conversion of the filleting facility in Melbu, with construction due to end in the beginning of 2020.
The overall objective for the onshore whitefish industry is to ensure production is less reliant on seasons.
As a result of fierce competition in the European region, many salmon companies are thinking of ways to recreate the space.
Leroy's new plant in Hitra, Norway, is one example. Set to be the most fully automated salmon facility in the world, fish will go from hatchery to market without touching human hands.
The company aims to sells its first products from its Italian factory in 2020, based on high-quality fillets from the plant in Hitra.