THE world's biggest fish farmer, Marine Harvest, has recorded a sharp fall in profits on its Scottish business in the latest quarter after facing challenges, as the group noted biological issues will weigh on volumes this year.

The Norwegian giant said it made €30.8m (£28m) underlying profit on salmon of Scottish origin in the second quarter down 40 per cent on the €51.8m it achieved in the same period last time.

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The fall in profits followed a big drop in the volume of fish the group harvested in Scotland amid favourable market conditions.

In its quarterly results announcement Bergen-based Marine Harvest said the period featured “high prices in all markets on strong demand”.

The company noted: “Operationally the Scottish business unit has faced challenges with reduced volumes and increased feed and heath costs. Harvest volumes in 2018 are low for the Scottish business unit.”

Marine Harvest cut its estimate for total group harvest volumes in 2018 to 380,000 tonnes from 400,000 stating: “The reduction is driven by lower volumes in primarily Norway, Canada and Scotland as a consequence of biological issues.”

The update may cause concern in Scotland given the important role Marine Harvest plays in the economy of the Highlands and Islands. Marine Harvest employs around 1,250 people across sites on the west coast, the Outer Hebrides and Skye and a fish factory in Rosyth.

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In January Marine Harvest announced that 34 Scottish staff were being made redundant from its processing and farming operations as part of moves to ensure the business was sustainable.

However, Ben Hadfield, managing director of Marine Harvest Scotland, underlined the company’s commitment to the country yesterday.

Noting the company enjoyed a record performance in Scotland last year, he said the fall in volumes in the second quarter followed a reduction in the number of fish stocked in 2016. Salmon are farmed on a two-year cycle.

The company expects to increase harvest volumes in Scotland next year.

It opened a hatchery at Inchmore in the West Highlands in June, which replaced a much smaller facility.

The new unit will grow salmon from eggs into smolts, fry and parr which will be transferred to its 49 seawater fish farms and five freshwater loch sites to be grown into mature fish.

“The new hatchery is the latest stage in Marine Harvest Scotland’s expansion pans which includes the creation of new open sea fish farms in various locations in the Minch,” said the group.

Marine Harvest is also building an £80m feed plant at Kyleakin on Skye.

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Marine Harvest said: “With the increased smolt stockings in 2018 and opening of new farming sites, the positive scale effects are expected to bring costs down in 2019.”

Mr Hadfield said Marine Harvest was happy with the progress it has been making on the biological front in Scotland. The company has seen quite a substantial reduction in sea lice levels in the last 24 months.

Regarding 2018 volumes, he noted operations had been affected by Cardio Myopathy Syndrome, which is caused by a virus, and storms earlier in the year.

Marine Harvest expects to increase employee numbers as volumes rise.

Scottish harvest volumes fell 21per cent year on year in the second quarter, to 32,100 tonnes on the gutted weight equivalent basis.

The group said Scottish volumes developed more or less as expected. It cited lower opening biomass as a consequence of the timing of smolt stockings and the lower performance of the fish harvested in 2018.

Marine Harvest group grew earnings before interest and taxation to €255m in the second quarter from €176.1m.