August 22, 2024

 

Norwegian salmon farmers face profit decline amid lower demand and health challenges

Norwegian salmon farmers have reported a decline in second-quarter profits, driven by reduced consumer demand amid rising living costs and health-related issues affecting production yields, Bloomberg reported.

 

Grieg Seafood ASA saw its shares fall by as much as 16% in Oslo, marking the company's steepest drop since 2022. Mowi ASA, the largest salmon producer globally, experienced a modest recovery, gaining about 1%, while Leroy Seafood Group ASA rose by 3.8%. These gains followed earlier declines of over 2% for both companies on Tuesday, after a disappointing report from SalMar ASA.

 

Mowi noted that its earnings were impacted by lower demand in the US and increased raw material prices in Europe. The company posted a 24% year-over-year decline in earnings before interest and taxes. Grieg Seafood reported a loss, and Leroy's operating earnings fell more than anticipated. All three companies had previously disclosed their harvest volumes ahead of the quarterly earnings reports.

 

The salmon farming industry continues to grapple with the lingering effects of winter sores and string jellyfish infestations in Norway, which have forced producers to sell more fillets at lower prices compared to the more profitable whole fish.

 

Grieg's operations in British Columbia, Canada, were hit hard by low dissolved oxygen levels in the water, leading to higher mortality rates, fewer feeding days, and reduced growth. The company's farms in Finnmark, Norway's northernmost region, also suffered due to low average harvest weights and increased costs, stemming from earlier issues with the Spiro parasite and string jellyfish.

 

Analysts from Pareto Securities, Sander Lie and Oda Djupvik, warned that Grieg's short-term earnings could face significant negative revisions.

 

Norway's seafood exports saw a record slump in June, with a drop of over NOK 2 billion (US$190 million). Norway accounts for more than half of the world's farmed salmon supply, benefiting from ideal conditions along its fjords and coastlines that are hard to replicate elsewhere.

 

Despite the challenges, Mowi aims to boost its annual harvest to 500,000 metric tonnes this year, up from 475,000 metric tonnes in 2023. The company also plans to outpace the wider industry by reducing the time smaller fish spend in the sea to mitigate health risks. Mowi expects the US market to gradually improve as Western economies recover.

 

-      Bloomberg