Highlights - fourth quarter 2011  

• Continued high supply growth reduced salmon prices in all markets in Q4 2011.
  
• EBIT before fair value adjustment of biomass was NOK -38.2m in 2011, including one-off items and write-downs in Finnmark and BC with in total NOK 33.2m in the quarter.
  
• Reduced cost of fish harvested in several regions, compared with Q3 2011.
  
• Good sales performance and earnings from the Norwegian sales company Ocean Quality AS in a demanding market.
  
• New funding of minimum NOK 400m being established. Final approval pending in one of the syndicate banks.
  
• Higher than normal seawater temperatures, combined with good biological development resulted in somewhat better seawater production than expected.
  
• Measures to reduce capital requirements - reduction in investments and reduced smolt entries.
   

Results fourth quarter 2011
Operating profit before fair value adjustments was a loss of NOK 38.7m, against a profit of NOK 246.9m last year.

The record-high supply growth continued into the fourth quarter of the year, further strengthened by good production conditions and high seawater temperatures. The lower salmon prices have started to be reflected in prices to the consumers, which contributed to good growth in demand in most markets, although the price reduction has still not been fully reflected in the end-user market.

The biological situation and the seawater production were good in all regions in the fourth quarter. Both of the Norwegian regions, as well as Canada, showed a clear improvement in seawater production in 2011, while Shetland was affected by a weak generation that was harvested in the first half-year, in addition to predator challenges which impacted negatively on seawater production.

In all regions, the cost of fish harvested in the fourth quarter was lower than in the preceding quarter. The Q4 results in Finnmark were charged with one-off costs of NOK 19.0m related to write-downs of biomass in two locations which had previously been affected by biological challenges, as well as write-downs of NOK 14.1m in BC related to an outbreak of furunculosis in the hatchery in Canada, reorganization of brood stock production and a write-down on frozen fish inventory. 

In fourth quarter the total harvested volume increased by 1.5% to 18 258 tons. Some planned harvesting volumes were deferred to 2012.

The Group's operational EBIT before fair value adjustments of biomass was -2.09 NOK/kg (9.78 NOK/kg). Rogaland achieved an EBIT of 1.29 NOK/kg (9.73 NOK/kg), while Finnmark had an EBIT of -5.55 NOK/kg (11.43 NOK/kg). The EBIT in Shetland reached -1.31 NOK/kg (11.03 NOK/kg), while in Canada the EBIT reached -1.27 NOK/kg in 2011 compared to 4.95 NOK/kg in 2011. The Norwegian sales company, Ocean Quality, achieved an EBIT of NOK 12.7 (2.8%). All figures are Q4 2011 figures on isolated basis.

At the end of the third quarter the equity ratio was 40.5% (48.9%), while net interest-bearing debt totalled NOK 1 444m (1 047m).

New funding is being established, under which Grieg Seafood will obtain an increased frame for funding of minimum NOK 400m, which will replace the short-term loan of NOK 200m from November 2011 at maturity. Approval of the final terms of the new funding is pending in one of the syndicate banks.

Outlook
Grieg Seafood expects to harvest 71 000 tons in 2012 under existing production plans. This is more than previously indicated due to deferred harvesting in Finnmark and Shetland in the fourth quarter of 2011 and corresponds to an increase of 18% compared with 2011. The harvested volume in the first quarter of 2012 is expected to be 15 100 tons.

Grieg Seafood approved measures aimed at lowering its capital requirement by reducing both the level of investment and the amount of smolt set out in the fourth quarter of 2011. Strong overall supply-side growth is expected in 2012, although the various forecasts are characterised by considerable variations. There has been a good increase in demand in response to lower prices which has absorbed the record-high increase in supply in the fourth quarter of 2011. The company will continue to maintain its focus on good biological production, measures to reduce costs and cash flow and liquidity in 2012.

As 2012 started, feed costs slightly lower thanks to a better trend in the cost of fish meal ingredients and a better catch in Peru.  

Further strong supply growth is expected in 2012 which is likely to result in weaker market balance and weaker prices than normal. Unusually good production conditions in the first part of the winter have added to the increased supply in the short term. 

Increased demand brought about by lower prices for the consumers has also broadened distribution in new markets has strengthened the trend, confirming the positive underlying demand for salmon. Market balance will gradually improve as supply growth diminished due to a lack of production capacity and lower prices.

For further information, please contact:

- CEO Morten Vike (cell phone: +47 994 911 65)
- CFO Atle Harald Sandtorv (cell phone: +47 908 45 252)

For more information, please see www.griegseafood.no.