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Grieg Seafood ASA Q3 2009

1Q 2009. Grieg Seafood ASA Q3 2009. Morten Vike CEO 10 November 2009. Agenda. Highlights Q3 2009 Group Financials Business Areas Outlook. Q3 2009 – HIGHLIGHTS AND FINANCIALS. Highlights Q3 2009.

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Grieg Seafood ASA Q3 2009

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  1. 1Q 2009 Grieg Seafood ASA Q3 2009 Morten Vike CEO 10 November 2009

  2. Agenda • Highlights Q3 2009 • Group Financials • Business Areas • Outlook

  3. Q3 2009 – HIGHLIGHTS AND FINANCIALS

  4. Highlights Q3 2009 • A weak quarterly result, due to biological challenges in Shetland and BC as well as low harvest volumes in Norway (suspended harvesting). • Q3 EBIT pre biomass adjustments decreased from 60,3 MNOK in 2008 to 5,5 MNOK in 2009. • A strong negative EBIT in Shetland due to early (precautionary) harvest in one area with a strong sea lice burden. • BC result hampered by algae problems and situation of low dissolved oxygen. • Low harvest volumes in Norway – fixed costs reduce EBIT/kg. • Continued good development in Rogaland. • Increased total supply from Norway caused market price reduction during Q3.

  5. Financial highlights Q3 2009 Comments Q3 • Total organic sales decline of 17% (excl. currency effects) – 21% volume decline and 4% price increase. • EBIT/kg (adj) with significant negative effect of premature (precautionary) harvest of one production area in Shetland (sea lice), algae and oxygen problems in BC and low harvest volumes in Norway. • Harvest volumes negatively influenced by suspended harvesting in Norway (market adaptation), biological situation in Shetland and growth in Finnmark and BC.

  6. P&L Q3 2009 Comments • Harvest volume decline causing sales decline. • Increase in biomass and lower harvest rate. • Strong negative FVA on inventory reflects sharp decline in market prices. • 46 MNOK agio included in net financial items.

  7. Balance sheet Q3 2009 Comments • 100% of 100 MNOK convertible subordinated bonds converted to equity. • Equity share is 38,5%. • Net interest bearing debt seasonally increased by 43 MNOK during Q3, now standing at 1,350 MNOK. • All valid loan covenants in compliance. • NIBD/EBITDA covenant waived until and including Q4 2009.

  8. Cash Flow Comments • Reduced harvest and increased biomass during Q3 is increasing. • Net investment during Q3 was 27,3 MNOK. • New share issue and convertible bond loan in 1H 2009.

  9. Key figures Q3 2009 Comments • Rogaland: Low harvest volume. Continued good performance and declining production costs. • Finnmark: Low harvest volumes. EBIT/kg negatively affected by fixed costs and some one-off items. • BC: Algae and low dissolved oxygen hampered biological performance. 2008 generation has performed poorly. • Shetlands: Last compulsory harvest of ISA fish. Harvested out one area due to high sea lice burden (precautionary harvest).

  10. BUSINESS AREAS

  11. Grieg Seafood Business Areas(Figures in 1,000 tons gutted weight and MNOK) • GSF Hjaltland (UK) • GSF Rogaland • GSF Finnmark • GSF BC (Canada)

  12. Farming Processig/HQ GSF Hjaltland (Shetland) • Last remaining ISA fish in Scalloway harvested out in July creating a financial loss. • St. Magnus Bay area (west coast) harvested out prematurely due to unusual high sea lice burden (until October 2009) • Biological issues on the west coast causing a loss of appr. 4,000 tons harvest in 2009 and a significant financial loss. • Good market conditions and good prices for market-sized fish. • Biology and operations on the east coast good and normal. • Significantly improved profitability expected in Q4 2009.

  13. Biosecurity in Shetland Scalloway (3a): • ISA identified in Scalloway in 2009. Whole area fallowed until spring 2010. • Comprehensive new area management agreement in place. St. Magnus Bay (4a and 4c): • Very high sea lice burden from summer 2009. • New area management agreement similar to Scalloway agreed. • Single year-class with synchronous fallow period. • No fish movements in and out of areas. • Regulated fish health cooperation (full transparency) between operators. Incl. independent fish veterinarian. • East coast biological situation good and normal (2c, 2a and 2b).

  14. GSF Rogaland • Low harvest volume – 6 weeks stop in harvesting in last part of quarter (market adaptation). • Market prices declining in the period Aug-Oct due to sharp increase in harvest in Norway. • Continued positive development in biology and cost level.

  15. GSF Finnmark • Sharp decline in market prices in Aug-Oct 2009. Very low level of fixed price contracts in the quarter. • Low harvest volumes hampering EBIT/kg due to fixed costs and some one-off items. • Harvest costs in refurbished plant have remained higher than normal during the quarter, but are declining. • Seawater growth has normalized in the quarter, but negative consequence of previous lost growth. • Postponed harvest due to growth and market prices. Reduced harvest volume of 2,500 tons in 2009. • Export license to Russia regained in July 2009 – sales to Russia increasing in Q4. * 2008 values are operational EBIT before write down on assets (impairment).

  16. Merger between Volden Group (Finnmark) and Grieg Seafood in 2006. Huge untapped organic growth potential in Finnmark. Significant growth implemented, but business is still in phase of building up: New sites Harvest plant Smolt recirculation facility Organization GSF Finnmark – Building the business Smolt entries (x 1,000): Harvest volume gwe (x 1,000): Sites in operation:

  17. GSF BC (Canada) • Prices remained good during the quarter, but soft demand side makes market prices sensitive to supply side fluctuations. • Lower than expected EBIT/kg: • Pacific salmon harvest (lower prices). • Algae and oxygen problems. • 2008 generation performing poorly. • Specific sites with performance issues. • Postponed harvest due to poor growth, reduced harvest volume of 1,500 tons in 2009. • 2009 generation performing well. Cost of harvest development vs 1Q 2009 (CAD/kg):

  18. GSF BC – Measures to reduce production cost level • Algae mitigation system ('bubble walls') protecting farms from toxic algae – in place. • Reduced mortality losses. • Re-oxygenation system to increase dissolved oxygen – tests carried out with full implementation in 2010: • Reduced mortality losses. • Increased feeding and decrease lost feeding days • Site amalgamations to vacant underperforming farm sites. • Improve environmental conditions. • Freshwater recirculation facility for smolt production: • Improved smolt quality. • Smolt size – reduce seawater production time and reduce exposure to high-risk algae season.

  19. OUTLOOK

  20. Harvest estimate 2009/2010(1000 gwt) • Holding back volumes in Finnmark and BC, Canada due to growth and market price adaptations. • Shetland: Reduction due to Q3 sea lice mortalities. • Rogaland: Increase despite holding back harvest volumes in Q3. • 2010 harvest volume estimate at 70,000 tons. Most of 2010 growth from Finnmark and BC.

  21. Global supply reduction in 2009 and 2010 • Continued strong growth from Norway ('09: +14%; '10: +8%) • Improved biological situation. • Continued decline in Chile (ISA consequences): • '09: -50% • '10: -60% • UK moderate development: • '09: -1% • '10: +3% • Canada moderate increase in 2010 (2-3%)

  22. Outlook summary • Harvest plans for 2009 reduced to 50,000 tons (-4,000 tons) – mainly postponed harvest. • 2010 harvest estimate at 70,000 tons – strongest growth from Finnmark and BC. • 2009 cost level with significant negative influence of biological challenges in Shetland and BC. 2010 cost reductions to be expected. • Continued solid future market perspective: • Reduced global salmon supply expected to continue in 2010. • Demand in main market remains healthy despite global recession. • Key factors for length of the positive business cycle: • Timing and effect of rebuilding supply from Chile. • Demand development as global economy moves out of recession.

  23. Thank you !

  24. APPENDIX

  25. Share info • Number of shares • 111,7 million (after full conversion of bonds in August 2009) • Last issues: Q2 2009 • 139 MNOK new share issue • Subordinated convertible bond issue: Q1 2009 • 100 mill convertible at NOK 4.00 per share within 31.12.2010 • 85% converted in Q2 2009 • 15% converted in Q3 2009. • EPS • -4.50 NOK/share 2008 • 1.48 NOK/share per Q3 2009 (diluted) • Shareholder structure • Free float 35% • Largest 20 have 90,1% of total shares

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