Aker Seafoods Unsatisfied with its Profit Increase

Aker Seafoods’ trawlers have harvested a larger volume more efficiently than in earlier years. The plants enhanced their results somewhat through better margins, inventory reduction and increased sales of fresh products. Improved profits primarily reflect high production and greater sales, but raw material shortages emerged towards the end of the first half. Prices for fish and fillet products of cod remain under pressure.

Sales and profitability for both the fleet and the processing segment were higher than in the first half of 2009. From 30 June, little raw material is available for the plants, in part because the coastal fishing fleet had harvested more of its quotas than normal at that date. Taking account of seasonal variations, therefore, the result for the first half was still unsatisfactory from a full-year perspective. The company is now restructuring its business to achieve a stable improvement in profitability, with a stronger focus on markets and customers. All processing activities have been assembled from 1 July in a single company: Norway Seafoods.

Fishing was good during the first half, which led to efficient harvesting for the trawler fleet. Cod quotas increased by 16 per cent for 2010. Aker Seafoods harvested 54 per cent of its cod quota during the first half, compared with 45 per cent in the corresponding period of 2009. The remaining quota is nevertheless at the same level as at 30 June 2009.

– The plants in Norway enjoyed good supplies of raw material during the early part of 2010, but shortages arose towards the end of the first half. Remaining quotas for the coastal fishing fleet during 2010 are low, and raw material shortages are expected to continue exerting a negative effect during the second half even though the company’s own fleet has substantial remaining quotas. The latter are in any event insufficient on their own to meet the raw material requirements of the plants, says CEO Liv Monica Stubholt.

Fillet prices in the first half were lower than in the same period of last year, while production was at the same level. Turnover nevertheless increased because of increased sales from inventories. Good supplies of fresh raw materials from the coastal fleet helped to ensure a higher proportion of fresh products during the first half compared with the same period of 2009. Results for the plants were better than last year, primarily because of lower raw material prices, stable demand and more sales of fresh products.

EBITDA in Denmark was NOK 13 million as against NOK 18 million for the first half of last year. Corresponding figures for France were NOK 11 million and NOK 7 million. High raw material prices for salmon reduced overall margins for processing outside Norway. In France, however, higher trout prices contributed to some improvement in sales and profitability for trout farming. Volumes from the Danish and French plants declined compared with the first half of 2009.

The weakened result in Denmark also reflected strong competition and reduced sales of frozen products. Improved French profits related in addition to the fact that the group sold more products from Norway via Aker Seafoods France than in 2009.

Operating revenues for Aker Seafoods came to NOK 1 533 million for the first half, compared with NOK 1 349 million in the same period of 2009. This increase stemmed mainly from increased harvesting volumes, sales from inventories and higher turnover in France. Aker Seafoods achieved earnings before interest, taxes, depreciation and amortisation (EBITDA) of NOK 167 million for the first half, compared with NOK 106 million in the same period of 2009. EBITDA for the second quarter was NOK 65 million as against NOK 51 million in the same period of last year. Inventories had not risen by the end of the first half, which is the company’s high season. They were unusually high at 31 December 2009, and priority has been given to reducing their size in order to return to a more normal position.

After 30 June, Aker Seafoods has established Norway Seafoods as a marketing and production company. It will focus wholly on procurement and processing of raw material as well as the sale of seafood products. Aker Seafoods will concentrate on harvesting and sale of fish. All delivery commitments and other licence terms will be met in the new structure. Norway Seafoods remains wholly owned by Aker Seafoods for the time being.

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