Grieg Seafood endures tough third quarter, mothballs parts of Newfoundland project

Bergen, Norway-headquartered salmonid producer Grieg Seafood Group (GSF) expects to post operational losses before interest and taxes (EBIT) of NOK 187 million (USD 20.3 million, EUR 17.1 million) before fair value adjustment of biomass in the third quarter of this year, citing lower spot prices, higher costs for its British Columbia, Canada, operations and the discontinued operations on the Isle of Skye as reasons for the NOK 341 million (USD 37 million, EUR 31.2 million) reversal from the corresponding period of 2019.

In an operational and financial update, provided ahead of the release of its full Q3 2020 report on 17 November, GSF estimates a harvest of 21,200 metric tons (MT) gutted weight salmon in the quarter, an increase of 200 MT year-on-year but 400 MT lower than its previous guidance.

It said that following market turbulence and the COVID-19-led demand shift from hotels, restaurants, and catering (HoReCa) to retail, market prices in the three-month period were down compared with Q3 2019. In addition, prices achieved in Shetland were negatively impacted by advanced harvesting at Skye resulting in lower harvest weight.

Prices achieved in Finnmark and Rogaland were good in the quarter, the company said.

Farming costs in the quarter were negatively impacted by the low harvest weights in Skye, as well as increased costs from handling of biological challenges in both Shetland and British Columbia.

As announced last month, Grieg decided to discontinue its operations on the Isle of Skye in Scotland, with immediate liquidation of parts of the operations. The previously communicated write-down of biomass due to mortalities, combined with low price achievements on fish harvested and high production and other shutdown costs will impact EBIT for the third quarter negatively by approximately NOK 150 million (USD 16.3 million, EUR 13.7 million), it forecasts.

The total harvest volume for the first nine months of 2020 was 63,472 MT. For the fourth quarter, the company expects to harvest 26,500 MT, bringing total volume for 2020 to around 90,000 MT. This is a reduction of 5,000 MT from previous estimate and is mainly related to the transfer of 5,000 MT harvest volume to 2021.

The update also confirms that due to market uncertainty and lower visibility following COVID-19, the company is postponing parts of its new salmon production project in Placentia Bay, Newfoundland. GSF Newfoundland currently comprises licenses for 11 sea sites. Eight licenses are approved, while the rest are in different stages of application. The project also includes a high-end recirculating aquaculture system facility, which is under construction.

“In the current environment with increased market uncertainty because of the ongoing COVID-19 pandemic, low salmon prices, and reduced market visibility, the basis for the development of GSF Newfoundland has changed. Further, due to more need for on-site construction rather than the planned module deliveries, the complexity has increased,” the company said. “Therefore, to lower risk in the initial phase of this large project, the company has decided to slow down the pace of investments. The construction of the planned post-smolt A unit in the first phase is deferred out in time. The RAS facility currently under construction is dimensioned to serve all future post-smolt modules. Consequently, the facility has adequate capacity to ensure necessary on-growth, also in a situation with post-smolt A facility moved out in time.”

Grieg estimated the total investment for the RAS smolt facility, excluding completion of the post-smolt A unit, will be around CAD 60 million (USD 45.8 million, EUR 38.6 million) for the years 2020-2021, adding that the project for post-smolt A will be evaluated for construction at a later stage. The current estimate for finalization is estimated at CAD 30 million (USD 22.9 million, EUR 19.3 million).

“Grieg Seafood’s ambition for the Newfoundland project remains, and the company is committed to develop the project according to milestones outlined in the permissions granted by the authorities,” it said. “The first fish [are] already growing in the freshwater facility and the annual harvest volume target to be reached by 2025 for the first phase is still 15,000 MT, with the first harvest planned for 2022/2023.”

For the full-year 2019, GSF operational EBIT amounted to almost NOK 1.09 billion (USD 118.3 million, EUR 99.7 million), down slightly from NOK 1.1 billion (USD 119.4 million, EUR 100.7 million). Its harvest increased from 74,623 MT to 82,973 MT.

Photo courtesy of Grieg Seafood