The Behavior of Operating Earnings in the Norwegian Salmon Farming Industry

It is well known that salmon aquaculture is a cyclical industry with substantial price volatility. However, limited attention has been given to the economic performance of the firms in the industry or their valuation. In this article we look closer at earnings before interest and tax (EBIT) in the Norwegian salmon farming industry. This is among the most common accounting measures of firm performance, and it is also used extensively in firm valuations. We find that the components of earnings have different time series behavior. Our empirical analysis shows that earnings from the Norwegian salmon farming industry can be characterized as a random walk. However, earnings/kg of fish sold is a more predictable variable and is mean reverting with clear cycles.