Lerøy Seafood Group (LSG) Q4 2018 earnings summary

Executive summary

• Revenue reached a record NOK 19,838 million in 2018, supported by strong prices for key products and increased downstream activity; adjusted profit before tax and EPS were lower or flat YoY.

• Investments in processing, farming and whitefish operations advanced the integrated value chain, with limited contribution to 2018 earnings and a focus on future efficiency and growth.

Financial highlights

• Revenue was NOK 19,838 million vs NOK 18,624 million in 2017; reported operating profit was NOK 4,323 million vs NOK 2,000 million.

• Excluding fair value adjustments for biological assets, operating profit was NOK 3,569 million vs NOK 3,717 million; pre-tax profit was NOK 3,697 million vs NOK 3,805 million.

• Reported net profit was NOK 3,598 million vs NOK 1,749 million; adjusted EPS before biological fair-value adjustments was NOK 4.90 in both years.

• Operating cash flow was NOK 2,783 million after NOK 851 million in tax payments; net investments in tangible assets were NOK 2,047 million, including financial leases.

Outlook and guidance

• 2019 salmon and trout harvest, including associates, was estimated at 189,000 tonnes; salmon contract coverage was ~30% of estimated harvest.

• Management expected satisfactory 2019 earnings, with improved VAP, sales and distribution activity and earnings versus 2018.

• Larger, higher-quality smolt were expected to support gradual production growth and stronger competitiveness at Lerøy Sjøtroll from 2020; broader farming investments were expected to lift output toward 2022.

• 2019 cod and haddock quotas were expected to decline 6.5% and 15%, respectively; higher raw-material prices were likely, while marketing and product development supported an optimistic whitefish outlook.