August 20, 2012

An on-going strong increase in global supply and a sound rise in demand in most markets have been seen in Grieg Seafood's second quarter.

There was also positive biological and cost-side development in Norway and Canada but a weak result and high costs in Shetland due to poor biological production.

In the second quarter, Group EBIT before fair value adjustment of biomass was NOK13.7 million (US$2.3 million), compared with NOK142.9 million (US$24 million) in 2011. The harvest volume in second quarter was 15% higher at 16,437 tonnes.

Profits fell due to a decline in salmon prices from the second half of 2011. Realised prices in the second quarter were 24% lower on-year, while prices were relatively stable compared to first quarter 2012.

The market development in the second quarter was largely similar to the trend in the first three months of 2012, with supply-side growth remaining high, driven by Norway and Chile. Simultaneously, the market remained strong and, while prices in the second quarter were on a par with prices in the first quarter, they were substantially lower than in second 2011.

A negative EBIT before fair value adjustment of biomass of NOK27.4 million (US$4.6 million) in Shetland (UK) is very weak and unsatisfactory due to biological challenges seen in the first quarter. With a total EBIT before fair value adjustments of NOK3.1 million (US$524,000) per kilogramme, the three other regions record a satisfactory result, the company said.

This year's second quarter had a strong increase in global supply close to 30%, following the first quarter when the figure was 33%. This growth is expected to gradually slow in the second half of 2012 and should result in better market equilibrium towards the end of 2012 and into 2013.

The third quarter accounts will include a one-time charge related to identification of the IHN virus at Grieg Seafood British Columbiacand the subsequent culling of the fish at the Canadian plant.

The cost level in Grieg Seafood Hjaltland (UK) has been tremendously high in the first half of 2012, but is expected to be reduced from mid-August as harvesting commences from a new generation with a considerably lower cost level.

Grieg Seafood expects a harvest volume of 70,000 tonnes this year, compared with 60,082 tonnes in 2011. The harvested volume in the second half is expected to be 35,355 tonnes, up 4% on-year. This year's harvest volume has been slightly lower due to weaker production in Shetland and a market related shift of volumes to 2013 in BC.