Grieg Seafood ASA: GSF Q4 2010 Record quarter closes the best year ever

The Group's EBIT before fair value adjustments of biomass, increased in fourth quarter from NOK 62.9m in 2009 to NOK 246.9m in 2010. This includes a positive one-off item of NOK 72.4m related to the reversal of a previous write-down of license values in Finnmark. Operational EBIT (operating profit before reversal of previous write-down) before fair value adjustment of biomass thus increased from NOK 62.9m to NOK 174.5m. All regions recorded good improvement, reports www.megafishnet.com with reference to Grieg Seafood.

For the year as a whole, the EBIT before fair value adjustments of biomass increased from NOK 153.9m in 2009 to NOK 639.8m in 2010. Increased salmon prices, increased harvest volumes and improved biological performance were the drivers behind the improved profitability. Shetland recorded a particularly strong improvement. The relatively smaller improvement in Canada was due to lower realised price growth for the year as a whole as well as one-off costs related to reorganisation of a production area in the first quarter of 2010.

The company's good economic development has led to a substantial improvement in both solidity and liquidity. The cash flow from operations came to NOK 64.7m in the fourth quarter and NOK 594.7m for the year as a whole. The equity ratio increased from 38.5% at the end of 2009 to 48.9% at year-end 2010. Net interest-bearing debt totalled NOK 1 046.6m at the end of 2010, a reduction from NOK 1 373.6m in 2009.

The Board of Grieg Seafood will propose a dividend of NOK 1.35 per share for 2010. The Annual General Meeting will be held on 27 May 2011.

The Group's operational EBIT before fair value adjustments of biomass was 9.78 NOK/kg (3.95 NOK/kg). Rogaland achieved an EBIT of 9.73 NOK/kg (4.30 NOK/kg), while Finnmark had an EBIT of 11.43 NOK/kg (4.76 NOK/kg). The EBIT in Shetland reached 11.03 NOK/kg (5.90NOK/kg), while the EBIT in Canada increased to 4.95 NOK/kg (-1.63 NOK/kg).

In 2010 Grieg Seafood carried out two acquisitions in Scotland. This involved a total investment of NOK 39.5m and provides the company with an additional annual harvested volume of 3,000 tons. At the beginning of 2011, Grieg Seafood also acquired the remaining 51.3% of Erfjord Stamfisk AS in Norway.

The Group's total harvest volume rose in fourth quarter with in excess of 12% to 17,836 tons. The turnover increased with 38,5% to NOK 666.0m in the quarter.

Outlook

In accordance with existing production plans, Grieg Seafood expects to harvest 64,800 tons in 2011. This includes an increase of 1,800 tons attributable to the acquisition of Erfjord Stamfisk and is otherwise in accordance with previous guiding. The harvested volume in the first quarter of 2011 is expected to be 11,600 tons.

Under Grieg Seafood's hedging policy up to 50% of the expected harvest volume in Norway can be secured through fixed price contracts or financial price hedging contracts. Throughout 2010 Grieg Seafood had hedging contracts at relatively low price levels, which had a clearly negative impact on the operating profit in 2010. In 2011, Grieg Seafood has currently hedged approximately 9% of the expected harvest volume in Norway, of which the majority relates to price hedging in the second half of the year. The price level under the 2011 hedging contracts is considerably higher than the corresponding figure in 2010.

The weak catch in Peru during the last fishing season is likely to lead to higher raw material prices for fish meal and fish oil which are key ingredients in fish feed. Higher fish feed prices can therefore be expected throughout 2011.

The salmon market is expected to remain strong in 2011 and the improvement in the biological situation in Chile is likely to lead to higher supply from Chile from the end of 2011. At the same time, there is little indication of strong production growth in Norway in the next few years. Combined with continued good demand growth in the major salmon markets along with higher demand in emerging markets, this means that the market outlook for salmon is good in both the short and the longer term.