Cermaq ASA : Cermaq with satisfactory third quarter result despite challenging salmon market

Cermaq reported an EBIT pre fair value and biomass write-down for third quarter 2012 of NOK 232 million (NOK 348 million). Solid results in EWOS, particularly due to high volume and capacity utilisation in Norway, compensated for low salmon prices and biological challenges in Mainstream, according to Cermaq ASA.

Third quarter 2012 EBIT pre fair value and biomass write-down was NOK 232 million compared to NOK 348 million for third quarter 2011.Following write-downs in Canada due to the IHN virus outbreak and in Norway from the PD outbreak, EBIT pre fair value for the quarter was NOK 180 million.

- This is in total a satisfactory result based on the current challenging salmon market, says CEO Jon Hindar. The underlying operational farming cost has been stable with a reduction in Mainstream Norway, which previously was communicated and expected. EWOS is at the same time demonstrating its capability of optimising the production capacity in a peak production period, CEO Jon Hindar continues.

EWOS sold 388 thousand tonnes of fish feed in third quarter 2012, an increase of 5 percent, compared to third quarter 2011. The growth was due to a volume increase in Norway of 16 percent. In other regions, volume came down while maintaining stable market positions. EWOS Norway's capacity expansion project last quarter has been essential for managing its all-time high volume in third quarter 2012. EBIT pre fair value increased to NOK 346 million in third quarter 2012 from NOK 290 million in the corresponding quarter last year.

- EWOS has demonstrated a strong performance this quarter. In addition to harvesting from the timely capacity expansion in Norway, the results illustrate the importance of having strong competence and capacity within optimal sourcing and composition of raw materials, says CEO Jon Hindar.

Mainstream Norway reported an EBIT pre fair value of NOK 10 million (loss of NOK 10 million), excluding the NOK 20 million biomass write-down due to PD. EBIT pre fair value per kilogram, gutted weight, was NOK 0.8 (negative NOK 1.2). The EBIT per kilogram for Nordland was NOK 2.0 (NOK 2.3) and Finnmark was negative NOK 2.4 (negative NOK 25.6). The production cost in both regions came down compared to second quarter 2012, but a 4 thousand tonnes lower sales volume compared to previous estimates had a negative impact on the cost per kilogram for Finnmark in the quarter.

Mainstream Canada's EBIT pre fair value, was a loss of NOK 26 million (profit of NOK 7 million), excluding the NOK 33 million biomass write-down due to IHN. The corresponding EBIT pre fair value per kilogram, gutted weight, was negative NOK 4.6 (positive NOK 1.1). The reduction in profit was mainly caused by lower prices. Severe algae bloom and low dissolved oxygen levels resulted in a NOK 4 million additional charge in the quarterly result. Apart from the IHN outbreak and high algae bloom levels, the biological performance in Canada is good.

Mainstream Chile reported an EBIT pre fair value loss of NOK 57 million (profit of NOK 65 million). EBIT pre fair value per kilogram, gutted weight, was negative NOK 8.2 (positive NOK 7.7). For all species the prices were significantly lower compared to last year as well as against second quarter 2012. Production cost increased compared to third quarter last year, but came somewhat down compared to second quarter 2012. The biological performance is generally stable, although some increased SRS particularly on trout has been experienced. Mortality is considered at a manageable level reflecting the increased biomass from last year. The acquisition of Cultivos Marinos Chiloé was completed early October 2012 adding above 30 thousand tonnes of new capacity for Mainstream Chile.

- Our investment in increased capacity through the acquisition of Cultivos Marinos Chiloé is an important investment for Mainstream. We know that the short term results will be challenging, but we are confident that the combined operations will improve the flexibility and possibility for further improved operations in the longer run. I am impressed by the management team's immediate and swift definition and implementation of the integration plan, concludes CEO Jon Hindar.

Cultivos Marinos Chiloé will be included in Cermaq's reporting from fourth quarter 2012. Preliminary direct synergies have been estimated to around USD 6 million per year with full impact from 2014. In addition to increased production capacity, the acquisition will ensure improved flexibility in the combined farming business in Chile and support Mainstream's "four cornerstone" strategy for sustainable operations.