GSF - Report and presentation of Q3 2008

 

 

 

 

 

Grieg Seafood did in 3 quarter achieve an EBIT before IFRS adjustment of biomass of 60,3 MNOK, compared to 4,8 MNOK in 3 quarter 2007. This EBIT result is the best result achieved after the company was listed on the Oslo Stock Exchange. The Group's operating income increased to 436,3 MNOK in 3 quarter, an increase of 38% compared to the corresponding quarter last year. The Group's EBIT/kg before IFRS adjustment of biomass increased from 0,44 NOK/kg in 3 quarter 2007 to 4,46 NOK/kg in 3 quarter 2008. The EBITDA margin reached 20,3% in the quarter.

 

The strong improvement of the results is a result of a good market for salmon during the quarter, in particular in the USA and UK, but also the EU market. The biological production also shows better stability which has led to a strong improvement in the quarterly result for Canada and Finnmark respectively. The result in Rogaland continues to be negatively influenced by the outbreaks of PD in 2007/2008 which led to high production costs and slow growth in sea, also in 3 quarter. The result in the Shetlands (UK) is in the quarter influenced by low production due to low seawater temperatures.

The harvest volume was 13,510 GWT in the quarter, an increase of 25% vs. the corresponding period last year. Expected harvest volume for the full year 2008 is reduced to 54,000 tons (56,000 tons). The reason is lower than expected growth in Norway and the Shetlands due to the PD situation and lower seawater temperatures.

 

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 of 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, during the period in which the covenant has been breached.

 

Grieg Seafood's organic growth strategy remains unchanged. Going forward, the company will increase the focus on realising synergies and establish a more systematic approach to internal operational improvement projects aimed at reduced production costs and increased productivity. The effort to improve profitability through strengthening the market orientation and prioritising 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. Salmon is well established among consumers as healthy and tasty food. The relative pricing of salmon compared to other fish is also favourable.

 

The supply growth of Atlantic salmon seems to be clearly weaker than previously expected. This is due to the disease situation, in particular in Chile, but also in Norway, as well as lower seawater production (growth) in several of the production regions. Considering this, the market balance should remain good. However, this could have a different impact in different geographical markets.

 

The supply growth of Atlantic salmon seems to be clearly weaker than previously expected. This is due to the disease situation, in particular in Chile, but also in Norway, as well as lower seawater production (growth) in several of the production regions. Considering this, the market balance should remain good.

 

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, contact:

 

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

CFO Eirik Bloch Haugland (Mobile phone: +47 959 03 150)

 

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