Norcod ordered to cull fish, company says it will cause “significant” earnings drop

Norcod has been ordered to cull fish at two cages at a location in Frosvika, Norway, after the Norway Directorate of Fisheries discovered sexually mature cod at the facility. 

A press release from Norway’s Directorate of Fisheries on 2 February said it issued an order to slaughter two out of five cages at Frosvika within four weeks, with further control and reporting on the maturation of the cod at the remaining three cages. At the time the authority said it would “follow the matter closely” and impose further culling if necessary.

Then, on 28 February, it said it discovered sexually mature cod at three of the company’s locations. As a result, the authority ordered the company to cull its cod in accordance with its own culling plans at a total of five cages at three locations by 1 April, and Norcod will have to monitor the development of the fish in the remaining cages. 

The orders to cull cod come at the same time as the authority discovered escaped cod in the region near where the company has its aquaculture cages. The directorate of fisheries reported that “significant quantities” of farmed cod were being caught by fishermen in Åmnøya, where the company’s farm site is located.

Using DNA tracing, the authority determined that there is a “very large degree of genetic similarity” between the cod and cod located inside the aquaculture facility. Analysis by the Norway Institute of Marine Research concluded there was evidence that pairs of full siblings between fish in the facility and the escaped cod were found.

The escapes and the culls are both going to have an impact on Norcod’s financial performance. Norcod issued a financial update on 17 February that said “unforeseen changes” in its harvest plan would delay its Q4 results, which was issued on 2 March. In the report, the company said its cooperation with the Norway Directorate of Fisheries has led it to create a new harvesting and production plan for the 2021 generation of fish – the generation currently at sea.  

The fish, Norcod said, are healthy, but the company is undertaking an “accelerated” harvest plan provisionally agreed to with the directorate of fisheries. Because of the plan, the company said its harvests will result in lower volumes than expected, smaller fish sizes, and lower sales prices due to increased sales on the spot market.

“The overall consequence is a significant drop in earnings and simultaneous increase in expensed costs per kilogram,” Norcod said. “The effect on cashflow is limited to reduced sales income, somewhat offset by lower production costs in the next six months. Despite the operational and financial change to our 2021 generation, our growth plan and overall 2025 target is still on track and unchanged which means we will put four new batches into the sea phase during 2023.”

In Q4 2022, the company saw an operating loss before fair-value adjustment of NOK 32.3 million (USD 3 million, EUR 2.8 million), with total losses for the year reaching NOK 123.1 million (USD 11.5 million, EUR 10.9 million).

The company said the company posted a loss of NOK 87.9 million (USD 8.2 million, EUR 7.7 million) in the first half of 2022, compared to a loss of NOK 35.3 million (USD 3.3 million, EUR 3.1 million) in the second half, or an improvement of NOK 52.6 million (USD 4.9 million, EUR 4.6 million).

The company’s operating revenue for Q4 2022 increased slightly to NOK 51.4 million (USD 4.81 million, EUR 4.55 million), compared to NOK 51.2 million (USD 4.79 million, EUR 4.54 million) in Q4 2021. For the full-year, revenue increased significantly in 2022 to NOK 170.5 million (USD 15.9 million, EUR 15.1 million) from NOK 79.6 million (USD 7.4 million, EUR 7 million) in 2021.

That increase in revenue for FY 2022 was offset by a larger increase in costs, with operating expenses reaching NOK 293.6 million (USD 27.4 million, EUR 26 million), resulting in an operating loss before fair-value adjustment of NOK 123 million (USD 11.5 million, EUR 10.9 million).  

Photo courtesy of Norcod