LSG Lake Shore Gold Corp Ordinary Shares (Canada) (delisted)

Satisfactory conclusion to a good year

In Q4 2017, Lerøy Seafood Group (LSG) reported revenue of NOK 4,567 million, compared with NOK 4,924 million in the same period of 2016. The harvest volume in Q4 2017 totalled 42,000 tonnes gutted weight of salmon and trout, up 8% from the same period in 2016.

Operating profit before fair value adjustment related to biological assets was NOK 777 million in Q4 2017, compared with NOK 1,017 million in Q4 2016. Exclusive of earnings from the Wild Catch and Whitefish segment, this corresponds to an EBIT per kilo all-inclusive in Q4 2017 of NOK 16.5 compared to NOK 24.0 for the same period in 2016. This fall in profit is mainly attributed to a reduction in prices realised for salmon and trout in Q4 2017 when compared with Q4 2016.

            "Improvements in biological performance for the entire Norwegian fish farming industry in 2017 resulted in a higher harvest volume in Norway, which in turn put pressure on salmon prices towards the end of 2017. Lerøy has close links with the end market, and we continue to experience very strong demand for seafood and salmon. We are convinced that the Group and the Norwegian fish farming industry will in the long term create more value with some growth than without growth," says CEO Henning Beltestad.

For 2017 as a whole, the Group reports revenue of NOK 18,624 million, up 8% on the equivalent period last year. Operating profit before fair value adjustment related to biological assets was NOK 3,717 million in 2017, compared with NOK 2,843 million in 2016. The profit before tax and fair value adjustment related to biological assets in 2017 was NOK 3,805 million compared with NOK 2,926 million in 2016. This represents the highest revenue, highest operating profit before fair value adjustment related to biological assets and highest profit before tax and fair value adjustment related to biological assets in any year in the Group's history.

• "We can look back on one of the most exciting and demanding years in the Group's history," says CEO Henning Beltestad. "2017 saw the proper implementation of our strategy to integrate whitefish into the Group's well-established value chain for red fish. We are experiencing positive development in our downstream operations and we can report successful operations within fish farming. I would like to express my sincere thanks to the Group's skilled employees. In 2017, Lerøy has taken huge steps towards a position as an integrated supplier of seafood and we believe we are uniquely well-positioned to meet our customers' needs in the years to come."

At 31 December 2017, net interest-bearing debt was NOK 2,262 million and the equity ratio was 56%.

The Wild Catch and Whitefish segment

In October 2016, Lerøy Seafood Group obtained 100% ownership of both Havfisk ASA (Havfisk) and Norway Seafoods Group AS (now Lerøy Norway Seafoods AS - LNWS). These companies comprise the Wild Catch and Whitefish segment.

Havfisk's primary business is wild catches of whitefish. Havfisk has licence rights to harvest just above 10% of the total Norwegian cod quotas in the zone north of 62 degrees latitude, corresponding to more than 30% of the total quota allocated to the trawler fleet. Havfisk's total catch volume in Q4 2017 was 12,345 tonnes, compared with 13,387 tonnes in Q4 2016. The catch volume in Q4 2017 comprised 8,511 tonnes of cod, 1,545 tonnes of saithe and 1,264 tonnes of haddock. The catch distribution in Q4 2016 was 7,896 tonnes of cod, 2,853 tonnes of saithe and 1,377 tonnes of haddock. When compared with Q4 2016, the prices for cod and haddock were up 7% and 17% respectively, while the price for saithe was down 14%.

For 2017 as a whole, Havfisk's total catch volume was 66,729 tonnes, up 5% from 2016. The company reported stable and good operations throughout the year.

LNWS's primary business is processing wild-caught whitefish. The company has use of eight processing plants in Norway, five of which are leased from Havfisk. LNWS is the largest purchaser of cod from the coastal fishing fleet in Norway.

In total, these two businesses reported operating profit of NOK 79 million in Q4 2017, compared with NOK 76 million in the same period of 2016.

• "We are looking forward to further developing the Wild Catch and Whitefish segment. Havfisk received delivery of a new trawler in January 2018 and we have high expectations for the new arrival. Industrial development of whitefish processing in Norway is challenging, but we have a clearly defined objective to increase both competitiveness and earnings by means of successful marketing and efficient operations. A long-term perspective and investments are essential elements in this process, and we expect stability and harmony from framework conditions," says Henning Beltestad.

The Farming segment - Fall in prices due to high growth in harvest volume

The Farming segment reported operating profit before fair value adjustment related to biological assets of NOK 567 million in Q4 2017, down from NOK 827 million in Q4 2016. For 2017 as a whole, the harvest volume is 5% higher than in the corresponding period in 2016. EBIT/kg fell from NOK 21.1 per kg in Q4 2016 to NOK 13.4 per kg in Q4 2017, mainly attributable to the fall in prices realised.

In Q4 2017, Lerøy Aurora achieved operational EBIT per kg of NOK 23.9. Lerøy Midt and Lerøy Sjøtroll are reporting EBIT per kg of NOK 12.9 and NOK 4.7 respectively for the same period.

• "Release from stock costs in Q4 2017 are in total considerably lower than in Q3 2017," says CEO Henning Beltestad. "We have achieved extremely positive developments in two regions, but continue to face challenges in the third region. There is considerable room for improvement in release from stock costs in 2018." 

The VAP, Sales & Distribution segment (VAPS&D)

The VAPS&D segment reported revenue in Q4 2017 of NOK 4,301 million, up 4% when compared with the same period last year. Operating profit before fair value adjustment related to biological assets in the same period was down from NOK 141 million in Q4 2016 to NOK 122 million in Q4 2017. The segment reported a positive development in 2017, and operating profit before fair value adjustment related to biomass is up from NOK 399 million in 2016 to NOK 435 million in 2017.

• "The VAPS&D segment can report a good level of activity," confirms CEO Henning Beltestad, adding that: "This together with the positive synergy effects within marketing gained from the acquisition of whitefish operations provides an outlook for sustained positive development in terms of both our level of activity and earnings in 2018."

 Market and outlook

The Group and the Norwegian fish farming industry have experienced a positive development in biological production of salmon in 2017 and the first months of 2018. This has allowed for increased growth, resulting in an increase in harvest volume of salmon in Norway towards the end of 2017. After a long period without growth, it is not surprising that this growth in supply resulted in pressure on prices towards the end of the year. The Group has close links with the end market for seafood, including salmon, and can confirm that the trend for increased demand remains strong. The Group therefore highlights the unique opportunities that could be provided by appropriate framework conditions based on knowledge of the industry's global, environmental competitive strength. The fish farming industry in Norway has developed over several decades into something quite unique - a Norwegian global food producer that can compete both on costs and environmental protection.

It will always be absolutely essential for the Norwegian authorities to understand, when laying down regulations, what is required to ensure the Norwegian fish farming industry can remain globally competitive over time. The Group will continue in its efforts to contribute towards a knowledge-based dialogue that generates value for society, regarding the need for appropriate framework conditions in the near future.

The Group has identified room for operational improvements in all three regions where the Group carries out fish farming. The Group's investments will provide organic growth in volume in all the regions, and substantial reductions in production costs in two of the regions.

Current estimates for harvest volume in 2018, including the share of LSG's volume from associates, is 182,000 GWT. For many reasons, the harvest volume may vary, but any differences from estimates shall, under normal circumstances, not vary to any significant degree from the figures reported by the Group in recent years.

Developments within whitefish in 2017 have been positive, even though industrial development and processing of whitefish in Norway remain difficult. This situation is impacted by political framework conditions, but the Group has a clear ambition to increase competitiveness and earnings for whitefish, with the prevailing conditions and by means of improved marketing and improvements to operational efficiency. The process of industrial development of whitefish requires patience, a long-term perspective and considerable investments. Such investments are only possible if framework conditions are predictable, and the Group and its employees fervently hope to be able to carry out such work without any obstacles in the years to come.

The Norwegian quotas for cod and haddock were reduced by 12.3% and 12.6% respectively in 2018 when compared with 2017. The quotas allocated to the Group's vessels were reduced by slightly more, partly due to a buffer quota that has not yet been allocated. The Group expects to see further allocation of quotas in 2018, and has a solid position in relation to shrimp fishing. At the time of writing, the best estimate for the catch volume of whitefish and shrimp in 2018 is approximately 65,000 tonnes.

The Board of Directors currently expects satisfactory earnings in Q1 2018 and 2018 as a whole.

Questions and comments may be addressed to the company's CEO, Henning Beltestad, or to the CFO, Sjur S. Malm. 

Lake Shore Gold Corp Ordinary Shares (Canada) (delisted) (AMEX:LSG)
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Lake Shore Gold Corp Ordinary Shares (Canada) (delisted) (AMEX:LSG)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024