Higher harvests and solid prices came together for SalMar's business in the first quarter to give the salmon producer strong results.

Earnings before interest, tax, demoritation and amortization (EBITDA) rose 29 percent to NOK 1.3 billion (€113.8 million/$125 million) on a 22 percent rise in operating income to NOK 3.6 billion (€329.9 million/$362.6 million).

Revenues benefited from increased spot prices and higher volumes in the quarter, reflected in a 17 percent rise in EBIT per kilo to NOK 26.61 (€2.40/$2.70).

"For the SalMar Group, the first quarter was very good," said CEO Gustav Witzoe who highlighted a record high operational EBIT, which rocketed up 32 percent to NOK 1.1 billion (€96.9 million/$106.5 million) thanks to strong operational performance, high volumes and good prices.

"Central Norway in particular distinguished itself through solid performance in the quarter," said Witzoe.

Harvests rose 13 percent to 40,000 metric tons.

Central Norway stands tall as Icelandic operations struggle

The group's Central Norway operations posted particularly good results, with a more even spread of the harvested volume and higher spot prices resulting in considerably better price achievement than for the previous quarter.

These results are expected to strengthen in the second quarter as the company begins to harvest its Spring 2019 generation, which has been performing well.

Conversely, the group's Northern Norway results were affected by higher harvesting costs at sites suffering from infectious salmon anemia (ISA). However, the segment achieved a considerably better operating margin than in previous quarters due to cost improvements and increased spot prices.

The sites affected by ISA have now been emptied, and SalMar expects the segment to report a slightly lower harvested volume and lower costs for the second quarter this year.

For the group's Icelandic operation, Arnarlax, the quarter was challenging. The segment experienced a high rate of mortality, which resulted in a large volume of fish being harvested in a period of poor weather conditions and low sea temperatures. This led to high costs.

Harvesting from this same generation will continue into the second quarter, and SalMar expects significantly lower volumes and weak margins.

Processing division suffers on contract prices

SalMar's sales and processing segment achieved good capacity utilization and effective operations, as well as securing "favorable placement of volumes at spot prices in a quarter characterized by high prices," said the company's report to the Oslo Bors.

Nevertheless, the segment reported an operational EBIT of minus NOK 17 million, after a negative contribution from fixed-price contracts, under which 24 percent of volumes were sold. The contract rate for the second quarter is 25 percent, while it stands at 20 percent for the year as a whole.

SalMar's board of directors decided in March to cancel the proposed dividend distribution to shareholders due to market uncertainty inflicted by the coronavirus pandemic, but the company continues to believe in further growth of the aquaculture industry, it said in the report.

The company is continuing its investment projects as planned, including the construction of the InnovaNor harvesting and processing plant in northern Norway and the smolt production facility on Senja.

SalMar maintains its expectations to harvest 152,000 metric tons in Norway: 103,000 metric tons in central Norway and 49,000 metric tons in northern Norway, as well as 12,000 metric tonnes in Iceland in 2020.

Finance

Strong operations, prices elevate salmon producer SalMar's results to new high