A year of change, challenge and growth for Morpol

The year 2010 brought a major turning point in Morpol's history. The company started the year as privately owned and ended the year as a publically listed company on the Oslo stock exchange. The funding from new shareholders that the listing provided allowed us to expand our global sales and processing activities and additionally to expand into upstream salmon farming through acquisitions, reports www.megafishnet.com with reference to Morpol.

2010 was a year characterised by a balance of tight raw material supply and growing demand for salmon that saw the commodity fish prices exported from Norway rise to record levels. The global supply of salmon suffered as the Chilean industry continued its fight to recover from the catastrophic disease situation of recent years. For the first time, the global supply of salmon declined in 2010 and supply into the EU dropped by approximately four percent. The dramatic increase in raw material prices of salmon, the major cost for Morpol, impacted our profit margins during the year, despite the overall excellent performance in sales growth in our major markets. The company made every effort to offset the increased purchase price of salmon by increasing prices to our retail customer base; however it was not possible to mitigate completely for an overall 40 percent increase year on year in the raw material price.

With the Chilean industry recovering and a large increase in global supply forecast for the second half of 2011, we believe the salmon purchase price will fall accordingly, but will remain at high levels, a view shared by industry analysts, and margins will improve. Despite the severe challenges in 2010, Morpol was able to make positive EBIT margins and expand our market shares with annual volume growth of over 20 percent providing a solid platform entering 2011. The successful listing on the Oslo stock exchange in June and the buying of shares by many established investors in Scandinavia, London, Paris and the rest of Europe endorsed in a public way the Morpol story and it is the management's job to repay the faith by growing the business in a sustainable and profitable manner while making the key strategic goals visible to the investment community.

The main use of proceeds from the listing in June was pre communicated to the market as being for two main targets. The principle use of funds was to expand upstream in salmon farming by acquisition in Europe, and the second goal was to expand further the sales and processing activities with particular focus on UK and France.

In August and September Morpol successfully negotiated the purchase of four salmon farming businesses operating in Scotland, with the farming activities based mainly on the Orkney and Shetland Isles. Between them, these farms can supply about 30 percent of our current needs. In February 2011 the supply was augmented by the purchase of a salmon farming company in Norway, raising the captive raw material supply to close to 40 percent. Morpol has purchased some of the best performing salmon companies in Scotland and Norway with the view to using the companies to boost growth in our key sales markets. In September 2010 we purchased a UK smoked salmon processor that doubled our market share in that country. In combination, the breeding, hatchery, freshwater activities, sea sites and smoker in the UK make Morpol a uniquely integrated supplier of Scottish smoked salmon.

Morpol has not entered salmon farming to change the focus of the group; it is the intention of the company to remain a leading processor and global seller of quality salmon. The farming entities will provide a platform for expansion into key smoked salmon markets such as France, UK and Italy as well as expanding our portfolio of nonsmoked products to these and other markets such as the US and Germany.

I n the final months of 2010, Morpol refinanced the group by securing a five year debt facility with leading European banks. The funding gives Morpol the financial capacity to continue the strong growth into 2011 and beyond. Despite a challenging year, the Company believes it has taken the correct actions to take advantage of expanding markets and the eventual drop in raw material prices later in the year.

Given the advances achieved in 2010, and continuing in 2011, and the expected market developments, Morpol is well placed to further improve results in 2011 while continuing to grow the business in volume and geographical coverage.