Solid profit Growth in Grieg Seafood ASA

Grieg Seafood ASA

Press release

20. November 2008


Grieg Seafood ASA reported an operating revenue before biomass adjustments on 60, 3 million NOK, compared to 4,8 million NOK in third quarter 2007. The solid profit growth comes from better stability in the biological production and good prices especially in USA and Great Britain.

Grieg Seafood ASA reported an operating revenue before biomass adjustments on 60, 3 million NOK, compared to 4,8 million NOK in third quarter 2007. The solid profit growth comes from better stability in the biological production and good prices especially in USA and Great Britain.

–The operating revenue is the best achieved ever after the listing on Oslo Stock Exchange. The solid profit growth in revenue comes as a result of a very good salmon market in the period, especially in USA and in Great Britain, but also in EU. The biological production also shows a better stability that has lead to a strong improvement in revenues in Canada and Finnmark in the period, Morten Vike, CEO in Grieg Seafood, says.

Highlights– third quarter 2008
• Solid profit growth. EBIT before biomass adjustments increased to 60, 3 MNOK in the quarter compared to 4, 8 MNOK in Q3 2007.
• The group’s operating income increase to 436, 3 MNOK (+38%)
• Harvest volumes reached 13,510 tons (+25%) in the quarter. Expected harvest volume in 2008 of 54,000 tons.
• Underlying profit growth in 3 of 4 regions. Profitability in Rogaland still negatively influenced by the PD outbreaks in 2007/2008.
• The groups EBIT/kg before biomass adjustments increased from 0, 44 NOK/kg in Q3 2007 to 4, 46 NOK/kg. The EBITDA margin in period is 20, 3 %.

Results in third quarter 2008

The group’s operating income increased to 436,3 mill NOK in third quarter, an increase of 38 % compared to third quarter 2007. The corporate EBIT/kg before biomass adjustments increased from 0, 44 NOK/kg in Q3 2007 to 4, 46 NOK/kg. EBITDA margin in period is 20, 3 %.

The result from Rogaland is still negative influenced by the outbreaks of the pancrea disease (PD) in 2007/2008 that has resulted in high production costs and low augmentation. The revenues from the Shetlands are in the quarter characterized by low production as a result of low water temperatures.

The harvest volume in the quarter was 13,217 tons of gutted weight, an increase of 22 % from the same period last year. Expected guttered volume for 2008 is reduced to 54,000 tons (56,000). The cause of this is lower augmentation than expected in Norway and the Shetlands as a result of the PD-situation and also lower sea temperatures.

Funding and Capital

Grieg Seafood has identified an additional funding requirement in the area of 150-200 MNOK additional to the existing credit facilities to carry out the planned growth strategy. The company is in a constructive process with the banks to secure this additional financing. As banks in the present financial market situation will require additional security, the company’s two largest shareholders, Grieg Holdings and Halde Invest, has committed to provide a subordinated loan up to 100 MNOK to secure this additional financing.

As part of the discussion regarding extended credit facility, the bank syndicate has confirmed a waiver of the covenants of the existing loan agreement. This waiver will be valid through June 2010. As per today, the company considers it likely that it will be close to a breach in one of the covenants during parts of 2009. If the company will breach the original covenants, this will imply an increased interest cost of nearly 2 MNOK each quarter, during the period in which the covenant has been breached.

Outlook

– Grieg Seafoods organic growth strategy remains unchanged. Going forward, the company will increase the focus on realizing synergies and establish a more systematic approach to internal operational improvement projects aimed at reduced production cost and increased productivity, Morten Vike says.

The effort to improve profitability through strengthening the market orientation and prioritizing market segments, which will give a price premium, will continue.

The consequences of the financial crisis in terms of reduced demand and how this will influence the global demand for Atlantic salmon, is difficult to predict. One could expect a certain weakening of the market, even though the demand for food is considerably less vulnerable to the state of the economy than other consumer demand.

– The growth of supply in the salmon markets seem to be weaker than it has been before. This is due to the disease situation and weaker augmentation in some of the production divisions. This should contribute so the global market balance remains good, Vike says.

In 2009, harvest volumes are expected to reach 63,000 tons. To allow sufficient priority and focus on operations and profitability, the board of directors has decided to somewhat lower the growth rate. Expected harvest volumes in 2010 will be in the range of 70-75,000 tons. In the opinion of the board of directors, this revision of the growth rate will not be at the expense of the company’s 2010 profit. Focus on organic growth as a key shareholder value driver remains unchanged. The Group’s organic growth potential still corresponds to a capacity of more than 80,000 tons.


For further information, please contact:

CEO Morten Vike (Mobile phone: +47 994 911 65)


For further information, please see our website www.griegseafood.no