2022 - CEO Letter

Creating durable and lasting values and sustainable growth imposes stringent requirements on AUSS and the Group in respect of corporate governance, finance, climate and environmental and social issues.

Dear stakeholders,

Over time Austevoll Seafood ASA (AUSS) has focused on building a strong organisation, ensuring that all participants in our group of companies (Group) have organisations well prepared to solve challenges and difficult and changing conditions. Following challenging years in 2020 and 2021 with many restrictions related to the covid 19 pandemic, restrictions were lifted during the first quarter of 2022. Special situations call for extraordinary efforts and put organisations to the test and we are proud of the effort, the flexibility and adaptability that our employees have shown during the challenging pandemic years.

2022 was a record year for the Group with an EBITDA in excess of NOK 6.8 billion including 50 % of Pelagia. 70% of our result came from our salmon and whitefish activity in Lerøy Seafood Group ASA (LSG), and 30 % came from the remaining pelagic activity in the Group achieving for the first time an EBITDA in excess of NOK 2 billion. We are pleased with the financial performance of all our pelagic activities in both South America and the North Atlantic.

In 2022, the salmon industry harvest volumes decreased by 1% to approx. 2.86 million tonnes, compared with 2.89 million tonnes in 2021. Harvest volumes in Norway decreased by 2.6%, and the average spot prices for 2022 were up 38.5% (NOK 79 per kg) compared with 2021 prices (NOK 57 per kg). LSG earnings were stronger than in 2021. However, LSG experienced a setback in terms of volumes harvested. From a harvest volume of 187,000 tonnes in 2021, LSG’s harvest volume of salmon and trout fell 6%, to 175,000 tonnes, in 2022. While LSG was able to reduce fish mortality in 2021 compared to 2020, this trend was reversed in 2022. Several projects and actions have been implemented to reduce mortality, increase growth speed, and reach LSG’s targeted harvest volume of 205,000 tonnes in 2025.

For whitefish, the total volume caught was 71,700 tonnes in 2022 which is on par with 71,500 tonnes in 2021. Despite the positive development in delivery prices achieved by the fishing fleet, the high raw material cost remains a major challenge faced by the onshore processing industry, impacting our results for whitefish activity as a whole in 2022. Earnings from the whitefish activity increased slightly in 2022 compared with 2021. In 2023, the quota for the important species of cod will be further reduced, and less availability of raw material is a challenge for our onshore operations.
In the South America region, 2022 was a mixed year for the Peruvian fishmeal industry. The total quota set was on a higher level compared with 2021. However, the industry was only able to catch 84% of the total quota. The Austral Group decreased raw material intake from 569,000 tonnes in 2021 to 424,000 tonnes in 2022.

Total fish landings in Chile from our purse-seiner fleet were higher last year than in 2021 due to the 15% increase in Total Allowable Catch (TAC), combined with additional high-seas quota being made available for purchase from operators within the South Pacific Fish Regional Organisation (SPRFMO). Total raw material intake by FoodCorp increased by 2%, from 105,000 tonnes in 2021 to 107,000 tonnes in 2022. The share of own catches also increased by 11%, from 72,000 tonnes in 2021 to 80,000 tonnes in 2022.

In respect of the pelagic operations in the North Atlantic region, since its inception in 2014 Pelagia has managed to add value to our raw material year by year – by utilising the fully integrated operational structure and expertise of the organisation. Total raw material intake for Pelagia in 2022 (excl. associates) was 1.2 million tonnes, in line with the 2021 level. Despite the level of raw material intake being on level with the previous year, gross revenues increased by 12% compared with 2021 and earnings were up by 67% due to better performance from all segments in the Pelagia Group.

Creating durable and lasting values and sustainable growth imposes stringent requirements on AUSS and the Group in respect of corporate governance, finance, climate and environmental and social issues. AUSS as a holding company has a limited footprint and our greatest opportunity to produce positive and reduce negative effects is through the participants in the Group. Our focus as a passionate owner of globally leading seafood companies is to be closely involved in the monitoring and business maintenance of our subsidiaries.

On 24 February 2022 we faced major geopolitical tensions with Russia’s invasion of Ukraine. It is a heart-breaking war, and we are concerned above all about the humanitarian consequences. The war has affected, and is continuously affecting the financial markets, currencies, logistics and availability and cost and flow of goods in every part of the Group’s value chain.

Industrial developments and employment in capital-intensive activities exposed to global competition such as fish farming, fisheries and related industries, are challenging and require predictability. Achieving such predictability requires all businesses and national political leaders, to pursue responsible long-term policies. The government’s proposal of 28 September 2022 concerning an excessive and debilitating tax related to use of natural resources on Norwegian aquaculture is an example of the irresponsible opposite and constitutes, in our opinion, a significant risk to the industry’s development and its ability to continue contributing to society. The proposal is, unfortunately, an example of introduction of a kind of political risk that we have not seen in Norway in modern times. The seafood companies must, as we see it, be allowed and enabled to retain their capital resources in line with other export industries if they are not to lose ground in international competition. The Norwegian parliament is expected to reach a decision before the summer. This decision will be of crucial importance to the seafood industry development in Norway. At stake is its ability to maintain its unique position as a Norwegian regional industry that is globally competitive and has the potential to safeguard employment and living conditions along the coast, also considering that Norway’s oil- and gas-related activities will eventually in the long run come to an end.

Finally, I want to thank all our employees for their hard work and sacrifices in 2022. The quality of our active ownership is dependent on the quality and commitment of the people working within the AUSS Group. Our strategy is to continue to grow and further develop our Group, together with our employees, within its current operating segments. I am grateful to all our employees for all their great and continued efforts over the years, and their trust, loyalty and devotion will continue to be the key factors in our success going forward.

Thank you.

Arne Møgster
CEO


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