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Lerøy Seafood Group ASA: Q1 2021 Results

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In Q1 2021, Lerøy Seafood Group (LSG) reported revenue of NOK 4,925 million, compared with NOK 5,305 million in the same period in 2020. Operating profit before fair value adjustment related to biological assets was NOK 455 million in Q1 2021, compared with NOK 816 million in Q1 2020. The global COVID-19 pandemic is having a negative impact on demand and has resulted in lower prices for both redfish and whitefish. The main factor behind the fall in earnings from Q1 2020 to Q1 2021 is the reduction in prices realised. At the same time, the Group can report a good underlying demand for seafood.

  • The trend in 2020, with a higher share of seafood sold through the retail channel, has continued in 2021. Price realisation in the quarter is below the corresponding quarter in 2020, but in our view the underlying demand for seafood is strong, states CEO Henning Beltestad.

  • We continue to strengthen our efficient and sustainable value chain for seafood. A value chain which not only provides cost-efficient solutions, but also quality, availability, a high level of service, traceability, and competitive climate-related and environmental solutions. Recent years investments in the end markets will contribute to our growth in the years to come. We have a strong position, says Beltestad


The wholly owned subsidiary Lerøy Havfisk's primary business is wild catches of whitefish. Lerøy 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 around 30% of the total quota allocated to the trawler fleet. Lerøy Havfisk also owns several processing plants, which are mainly leased out to its sister company Lerøy Norway Seafoods (LNWS) on long-term contracts. Lerøy Havfisk’s trawler licences stipulate an operational obligation for these processing plants.

Lerøy Havfisk has had 10 trawlers in operation in Q1 2021. Due to excellent catch rates, these vessels have produced the highest catch volume in the company's history. The catch volume in Q1 2021 was 25,721 tonnes, compared with 25,009 tonnes in Q1 2020. Fishing for haddock proved difficult in 2020, so the company has focused on haddock catches in Q1 2021. The share of cod in catches is down from 50% in Q1 2020 to 43% in Q1 2021. Lerøy Havfisk’s remaining quota for 2021 is positive in terms of market outlook.

As described in the previous interim reports, demand for seafood has been negatively impacted by the restrictions introduced to combat the spread of COVID-19. It is difficult to project how long this extraordinary situation will last. According to assessments, the pandemic is the most important factor behind the lower prices realised. Prices for cod, haddock and saithe in Q1 2021 are down 27%, 14% and 9% respectively from Q1 2020. Seafood is sold consecutively, and demand is considered to be good, but prices are lower than witnessed before the impact of the COVID-19 restrictions in the last part of Q1 2020.

LNWS’s primary business is processing wild-caught whitefish. The company has use of 12 processing plants and purchasing stations in Norway, five of which are leased from Lerøy Havfisk. Seasonal cod catches by the coastal fishing fleet represent an important source of raw materials, but the season had a late start in 2021. For several years now, processing of whitefish has been very challenging, and Q1 2021 was no exception. At the same time, however, there are fortunately signs that the initiatives taken are having a positive effect.

In total, the segment reported EBIT of NOK 185 million in Q1 2021, compared with NOK 270 million in the same period of 2020. Please note that Havfisk has a higher share of the remaining quota for cod in 2021 when compared with the same period last year.

  • Earnings in Wildcatch is lower than corresponding quarter last year, driven mainly by lower price realisation. However operations in the land based industry is developing positively, which gradually is yielding improvement in profitability, states CEO Henning Beltestad.


The Farming segment comprises the Group’s three farming regions in Norway: Lerøy Aurora located in Troms and Finnmark, Lerøy Midt located in Nordmøre and Trøndelag and Lerøy Sjøtroll located in Vestlandet.

Operating profit for the Farming segment before fair value adjustment related to biological assets was NOK 251 million in Q1 2021, compared with NOK 562 million in Q1 2020. During the quarter, the Farming segment harvested 42,000 tonnes, compared with 39,000 tonnes in Q1 2020.

In Q1 2021, EBIT/kg was NOK 1.70 for Lerøy Aurora, NOK 8.20 for Lerøy Midt and NOK 6.00 for Lerøy Sjøtroll. In total, EBIT/kg for the segment was down from NOK 14.30 in Q1 2020 to NOK 6.00 in Q1 2021. Costs per kilo are around the same as in Q1 2020, with the fall in prices realised the underlying factor behind the lower earnings.

  • We have had challenges with winter wounds in Lerøy Aurora in the first quarter and the start of second quarter. This has negative implications for price realisation in this quarter, and will also impact price realisation in second quarter, states CEO Henning Beltestad

  • For 2021 our expectation is that recent years efforts and investments within Farming creates the basis for significant growth in harvest volume, and with scaling of the cost base, lower costs per kilo produced, he continues.

VAP, Sales & Distribution

With its fully integrated, cost-efficient value chain for salmon, trout, whitefish and shellfish, Lerøy Seafood Group shall be able to supply products that are best suited to the consumers’ preferences. Proximity to key markets and knowledge of the customer’s needs are therefore of decisive importance if the Group is to develop demand for its main products. Lerøy distributes more than 70 different seafood products from Norway to more than 80 different markets in the course of a calendar year. In addition, the Group processes and distributes a number of market-specific seafood products to their respective local markets where Lerøy has operations. Lerøy Seafood Group’s value chain shall be developed further in order to satisfy and increase the consumers’ total demand for seafood.

In 2020, the seafood markets were negatively impacted by the COVID-19 pandemic. The impact was first evident in markets in Asia, spreading globally throughout Q1 2020 and into Q2 2020. The COVID-19 pandemic has affected the pattern of demand. The grocery market now represents a larger volume of consumption, while the hospitality and catering segment on many core markets has practically been closed down for long periods of time. The pandemic has also had an impact on logistics, particularly for overseas markets, with a reduction in cargo capacity resulting in increased costs during the period.

The trend for an increasing volume of seafood consumption in the grocery market has continued in Q1 2021, with very strong growth in sales via this channel. Campaigns carried out by major European grocery chains have produced extremely high sales volumes, particularly for salmon. This trend supports the strong position salmon and seafood hold with consumers, and provides strong grounds for an optimistic outlook for future growth in demand.

Prices realised for important species are substantially lower than in Q1 2020. Despite the 6% drop in revenue from the same quarter last year, underlying activities in Q1 2021 have been good. Over the past year, the Group has implemented substantial improvement initiatives in several of the units in the segment, including facilitating better interaction along the Group’s value chain. These initiatives are now producing results, and the operating profit before fair value adjustment related to biological assets in Q1 2021 was NOK 101 million, up from NOK 54 million in Q1 2020.

  • The continued trend of increased sales through retail, is validating the Group’s long term investments in downstream markets. We have an excellent position to continue to build on in the years to come, states CEO Henning Beltestad.

  • In second quarter 2021 the Group’s increased ownership in Seafood Danmark from 33% til 78% was approved by competition authorities. Seafood Danmark is a well run company, and we are looking forward to continue to develop the operations together with the local management, says Beltestad

Market and outlook

Price developments for Atlantic salmon have again been very volatile at the start of 2021, substantially influenced by the repercussions of the COVID-19 pandemic. It is not possible for the management and Board of Directors to form any precise opinion on the duration or consequences of the pandemic, but the growth in volume on the grocery market does provide grounds for optimism. There are indications that seafood is gaining in popularity with consumers, and we are therefore optimistic with a view to the underlying future developments in demand for seafood, and consequently for the Group’s operations and value creation.

The Group’s production of redfish currently takes place mainly in Norway. Norwegian and global salmon and trout production are experiencing relatively modest growth, which – combined with a weaker Norwegian krone – has resulted in very high prices. This provides an incentive to start production of salmon in new areas using alternative technologies. These incentives have existed for several years now, but with long lead times for developing the industry, Norwegian production in marine fish farms has maintained its predominant position. The harvest volume from land-based production of salmon remains insignificant on the end markets. The market share for Norwegian Atlantic salmon may, in the long term, be affected by production of salmon and trout in new regions and locations. Through business development, investments and a clear operational focus on competitiveness, the Group shall ensure that its value chain stands strong in the face of competition in the years to come. In addition to the development of existing farming operations, the Group is accumulating knowledge and/or competencies within both land-based and offshore salmon production.

In recent years, Lerøy has made significant investments in several parts of the value chain, including the construction of facilities for smolt/post-smolt capacity in all the Group’s regions. Lerøy Sjøtroll’s Kjærelva facility is now completed and has an annual biomass production of around 4,000 tonnes. Lerøy Aurora completed the final construction stage of a new smolt facility in Laksefjord in Q4 2020, and the facility is expected to reach full utilisation in 2021. Lerøy Midt can report that the second stage of development of the Belsvik facility is going to schedule. The plan is for completion by the start of 2022, and the facility will produce around 5,000 tonnes of biomass. The Group’s investments in improved smolt production and post-smolt production, combined with a number of other initiatives, will support the Group’s ambition for continued growth in volume and improved competitiveness by means of a reduction in production costs.

The Group’s substantial investments in post-smolt facilities have not only increased the Group's annual harvest volume by means of improved utilisation of existing assets, but also provided significant competencies related to RAS technology. This is in the main the same technology used in full-scale land-based production of salmon. The Group is now negotiating for a possible further development of a new RAS facility in the region of Vestland. The plans are initially to develop the facility in three stages. The first and second stages represent further increases in the Group’s post-smolt production. The final stage will also provide facilities for post-smolt production, but may be used for salmon production up to harvest size. The newly acquired industrial site, including the links to the Group’s farming operations in West Norway, could potentially improve interaction between sea and land. If applicable, the lessons learned may alternatively be exploited at some point in the future to realise land-based projects in other regions. The development will take place in stages, but initial estimates indicate that the first stages will represent estimated costs of around NOK 1 billion. The development is projected to provide an annual increase in production in the sea of 8,000-10,000 GWT. Construction work is scheduled for completion in 2023.

The Group can report significant improvements in production in the sea in 2020. The harvest volume was up from approx. 158,000 tonnes in 2019 to 171,000 tonnes in 2020. Moreover, standing biomass increased from 111,000 tonnes at year-end 2019 to 119,000 tonnes at year-end 2020. The first months of 2021 were cold, negatively affecting growth conditions, but the Group maintains its projections of a harvest volume for 2021, including associates, of 205,000-210,000 tonnes. Ongoing investments and additional improvement initiatives will provide further growth in the years to come.

For the Group, the aim is clear – for this growth, combined with other improvement measures, to provide reductions in the Group’s release from stock costs for salmon and trout in 2021 and the following years.

The cold winter has also had an impact on the development of winter ulcers, which will affect the Group’s prices realised in the second quarter.

The Group has made substantial investments in whitefish in recent years. One new vessel was added to the fleet in 2018 – Nordtind – and another in early 2020 – Kongsfjord. Further improvements to fish quality were established as important design criteria for Kongsfjord. Consumers’ expectations and quality requirements continue to increase, making high quality and competitiveness key factors for success when competing to attract consumers.

The whitefish industry, also including land-based operations, has suffered significantly from the impact on demand of COVID-19 at the start of 2021. It is naturally not possible for the Group to know how long the restrictions will last, but Lerøy’s long-term plans remain the same. The work on and investments in making the factories less seasonally dependent continue, along with well-organised and meticulous work on making improvements to each unit. We believe that this process will generate results with time.

The Group’s quotas for 2021 are up 17% for cod, up 22% for haddock, up 16% for saithe north of 62 degrees, and down 43% for saithe south of 62 degrees.

Lerøy works to develop an efficient and sustainable value chain for seafood. This not only provides cost-efficient solutions, but also quality, availability, a high level of service, traceability, and competitive climate-related and environmental solutions. Investments in recent years in, e.g., a new industrial facility for Lerøy Midt, a new factory in Stamsund and new factories in Spain and the Netherlands, now commissioned, will represent a positive contribution in the years to come. The management and Board of Directors are confident that Lerøy has a good starting point for continued profitable growth and development of Group operations.

In Q2 2021, the Group has increased its shareholding in the company Seafood Danmark from 33% to 78%. This is the result of a long-term relationship between the parties, and Lerøy looks forward to having this company as an integrated part of the Group. Seafood Danmark’s collaboration with demanding customers has afforded them a strong position on the Danish seafood market, but the company is also active on other central markets. Thanks to its well-established organisation, Seafood Danmark will strengthen Lerøy’s downstream operations. The company has local management who have demonstrated strong operations and good earnings over several years. The company reported operating profit of approx. DKK 70 million in 2020.

The Group’s products are healthy and good. Production is sustainable, from a financial, climate and environmental perspective. The management and Board of Directors continue to expect good underlying growth in demand in the years ahead. It is not possible for the management and Board of Directors to estimate how long the COVID-19 pandemic will last, but we are confident in assuming that demand will with time return to historic levels and continue to develop from there.

The Board of Directors underlines that uncertainties related to assessments of future developments are much higher than normal, but current estimates are for earnings to be negatively impacted by the effect on demand of the COVID-19 restrictions for some time to come. At the same time, the Board is of the opinion that the Group's underlying development is positive, and that Lerøy has an excellent position for improved profitability in 2021 when compared with 2020. The Group currently expects earnings in Q2 2021 to be better than in the first quarter of the year.

The Board of Directors and corporate management would like to thank all the Group’s employees for their hard work to date during the COVID-19 pandemic.

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

Lerøy Seafood Group

Lerøy Seafood Group ASA is a global seafood corporation with its head office in Bergen. The Group’s approx. 5,000 employees handles between 350,000 and 400,000 tonnes of seafood every year via our value chain, corresponding to around 5 million meals every day. The Group has a vertically integrated value chain for redfish and whitefish, and significant activities using third-party products.

The Group’s values – open, honest, responsible and creative – shall represent the very foundations of everything we do, and we work hard to achieve our goal of creating the world’s most efficient and sustainable value chain for seafood.


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