Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Leroy Seafood Group ASA (LYSFF, Financial) reported a strong operational EBIT of NOK906 million for the quarter, driven by improved biological performance in farming operations.
- The company achieved a 24% increase in quarterly harvest volume, with significant improvements in harvest weights and survival rates across various segments.
- Leroy Aurora in Norway reported high survival rates and strong biological performance, positively impacting price achievement.
- The VAP Sales and Distribution segment showed continued positive development, with higher profits compared to the previous year, driven by operational improvements.
- The company maintains a strong balance sheet with a 50% equity share, indicating financial stability and investment-grade status.
Negative Points
- The Wild Catch segment faced a significant year-on-year reduction in earnings due to lower quotas, impacting profitability.
- There was a substantial decline in catch volumes, down 25% year-on-year, with a challenging outlook for the remainder of 2024 and 2025.
- The company experienced a decrease in margin per kilo, with price realization and costs both contributing to a NOK4 decline compared to the previous year.
- Feed costs have increased, impacting overall costs despite adjustments for inflation.
- The company faces challenges with new regulations that will allocate quotas from the trawling fleet to the coastal fleet, potentially affecting future operations.
Q & A Highlights
Q: Can you elaborate on the biological improvements in your farming operations and their impact on harvest volumes?
A: Henning Beltestad, CEO: We've seen strong biological development in the first half of 2024, with increased harvest weights and volumes. For instance, Leroy Aurora achieved high survival rates and increased harvest weights, contributing to a 24% increase in quarterly harvest volume. This improvement is due to better genetics, smolt quality, and new farming technologies, which are expected to continue enhancing our harvest volumes and efficiency.
Q: How has the reduction in wild catch quotas affected your operations and profitability?
A: Henning Beltestad, CEO: The significant quota reduction has led to a 25% decrease in catch volumes year-on-year, impacting profitability negatively. Despite positive price developments, the lower quotas and new regulations reallocating quotas from trawling to coastal fleets present challenges. We are focusing on improving operations and catching other species to mitigate these effects.
Q: What are the key drivers behind the improved performance in the VAP Sales and Distribution segment?
A: Henning Beltestad, CEO: The segment has seen continued positive development, with higher profits compared to the previous year. This is driven by operational improvements, better utilization of processing capacity, and production prices that better reflect raw material costs. We expect this positive trend to continue, supported by higher volume development in key markets.
Q: Could you provide more details on the shielding technology and its expected impact on your operations?
A: Henning Beltestad, CEO: Shielding technology has shown exceptional results, with a 96% reduction in lice treatments and improved fish welfare. We currently have 30% of our salmon shielded, and expect to increase this to 35% by year-end. This technology is crucial for achieving our target of 200,000 tonnes of harvest by 2025, as it enhances survival rates and quality.
Q: What are the financial implications of the current market conditions and your strategic investments?
A: Sjur Malm, CFO: Despite challenges like reduced quotas and increased costs, our operational EBIT remains strong at NOK906 million. We are investing significantly in smolt quality and shielding technology, with an estimated CapEx of NOK1.6 billion for 2024. These investments are crucial for maintaining our competitive edge and achieving long-term growth targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
