Annual Report • Apr 26, 2017
Annual Report
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SalMar is one of the largest and most cost efficient Salmon producers in the world. 4 >
For SalMar, 2016 was a very good year. 7 >
"Passion for Salmon" is our vision. 8 >
12 >
The pilot Ocean Farm installation is currently under construction, and the aim is to place it in position and transfer fish into its net pens in the third quarter 2017. 14 >
The fish is sold as a wide range of products. 16 >
Smolts, farming, industry and market. 20 >
SalMar's corporate culture is constantly evolving, and builds on the success factors that have been cultivated within the company since its inception in 1991. 22 >
Passion for SalMon Our vision. 24 >
We shall protect the environment and ensure it is managed in a way that will benefit future generations. 27 >
Corporate Governance
Good corporate governance strengthens public
confidence in the company.
31 >
The management Trond Williksen, Trond Tuvstein, Gustav Witsøe, Olav-Andreas Ervik, Eva Haugen og Tom Aleksandersen. 38 >
SalMar holds quarterly presentations open to the public. 40 >
For SalMar, 2016 was its best year to date. 43 >
benefits payable to senior executives Statement regarding the determination of salary and other benefits payable to senior executives of SalMar ASA for 2017. 56 >
SalMar ASA financial account 98 >
Statement of responsibility 113 >
Auditors report 116 >
ONE OF THE LARGEST AND MOST COST EFFICIENT SALMON PRODUCERS IN THE WORLD – Passion for Salmon
SalMar is one of the world's leading producers of Atlantic salmon and is integrated from broodstock, roe and smolt to value added products and sales. SalMar have significant farming operations in both Central and Northern Norway, as well as in Scotland through 50 % ownership in Scottish Sea Farms and 34 % in Arnarlax Hf. SalMar also operate a comprehensive harvesting and VAP facility in Central Norway at the company's headquarter at InnovaMar on Frøya and on Vikenco at Aukra.
SalMar holds quarterly presentations open to the public. The presentations will take place at 08.00 CET at Hotel Continental in Stortingsgaten 24/26 in Oslo, Norway.
The annual general meeting will be held at Frøya. Please note that the dates are subject to change. Changes will be communicated.
Operating revenue and Operational EBIT NOK mill.
Balance sheet and Equity NOK mill.
SalMar Central Norway
SalMar Northern Norway
Arnarlax Hf (34 % share)
Segment Villa Organic
Scottish Sea Farms Ltd (50 % share)
Harvest volume 1000 tons - gutted weight
1000 tons – product weight
Other - Portions - Fillets 1000 tons – product weight
| Operating revenues and operating profit NOK mill . |
2016 | 2015 | 2014 | 7 |
|---|---|---|---|---|
| Operating revenues | 9 030 | 7 326 | 7 186 | |
| Operational EBIT | 2 432 | 1 404 | 1 879 | |
| Operating margin | 27 % | 19 % | 26 % | |
| Operating profit | 3 086 | 1 444 | 1 647 | |
| Profit before tax | 3 342 | 1 384 | 1 629 | |
| Profit margin | 37 % | 19 % | 23 % | |
| Net profit for the year | 2 651 | 1 129 | 1 215 | |
| Earnings per share | 23,5 | 9,8 | 10,6 | |
| Balance sheet NOK mill . |
2016 | 2015 | 2014 | |
| Non-current assets | 7 008 | 5 954 | 5 455 | |
| Current assets | 6 393 | 4 982 | 4 669 | |
| Total assets | 13 402 | 10 935 | 10 124 | |
| Equity | 6 681 | 5 227 | 5 137 | |
| Debt | 6 721 | 5 708 | 4 987 | |
| Total equity and debt | 13 402 | 10 935 | 10 124 | |
| Net interest bearing debt Equity share |
2 364,1 50 % |
2 619,5 48 % |
2 301,3 51 % |
|
| SALMAR ANNUAL REPORT 2016 – Passion for Salmon |
For SalMar, 2016 was a very good year. Profits rose to a level never previously achieved, driven by very high salmon prices in an unprecedented strong market. Substantial value was created for shareholders, employees and society. At the same time, the year was full of contrasts and unpredictable turns. While the strong market and record high profits coloured the company's external image, internally the organisation was working intensively to handle considerable fish health challenges as well as to take important steps to prepare the company for the future. It is therefore with great satisfaction we now have embarked upon a new year, strengthened in our conviction that these efforts has made the company better equipped than ever take on future opportunitites and challenges.
SalMar has been recognised as the most cost-effective publicly listed aquaculture company. This recognition has been achieved because we always have been able to work on our production costs and operate efficiently. This is an ability and a position we are determined to maintain. In today's situation, this place a particular demand on those of us who manage the company.
In 2017 our firm target is to reverse the rise in production costs.
In the financial year covered by this report, SalMar's financial value creation reached a level never previously achieved. The Group generated gross operating revenues of NOK 9,030 million, made an Operational EBIT of NOK 2,432 million and a net profit of NOK 2,651 million. The exceptionally high earnings in 2016 follow several years of very strong profitability, and demonstrate the financial potential that SalMar has after many years of expansion and positioning as one of the leading companies in the international salmon farming industry.
As in previous years, the rise in production costs can largely be explained by increased feed costs, direct and indirect costs linked to handling of the salmon lice situ ation, as well as other challenges relating to fish health. This comes on top of higher expenses derived from the growing complexity of the regulatory regime, in addition to a general slide in the cost development. Irrespective of its cause, the growth in costs represents a threat to the industry's competitiveness. Particularly it is a threat in times like now, when the consequences of cost growth are overshadowed by a hike in profits propelled by high prices. In such periods, both internal and external forces make it particularly challenging to maintain sufficient focus on and support for the measures that are necessary to reverse this trend. And the trend must be revesedif the industry is to realise its ambitions for growth and profit ability in the long term. The high level of profits enables us, once again, to pay a substantial dividend to our shareholders. At the same time as we undertake major forward-looking invest ments as well as building a robust financial balance to meet a future which will require financial strength. thinking, management and positioning.
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Unlike previous years, the experienced growth in profits was not directly linked to growth in underlying produc tion volumes combined with a strong consumer market. In 2016, the industry as a whole had a fall in output. This was the case for SalMar too, with Group harvesting vol umes ending at only 115,600 tonnes in the financial year. The decrease in the industry's total output, combined with a sharp increase in demand resulted in very strong salmon prices throughout the year. The weak NOK exchange rate, driven by a downturn in the oil sector, made the effects of the strong market even more apparent than normal. This is important to bear this in mind when assessing the real strength of the market we experienced in 2016.
The rising production costexperienced in recent years continued in 2016. This is a trend we are very dissatisfied not to have been able to reverse.
We must be able to separate good performance on the production and cost side from margins and profitability created by chance and circumstances that inflict on us from the outside.
In the long haul, it will be those companies which through dedication and sound decisions, best use the good times to position themselves for the future, that will emerge as winners. This is fundamental in SalMar's
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years. The change involved a transition away from using medicinal delousing methods, to the application of nonmedicinal methods (NMM). The majority of non-medicinal methods are still at the early stages of development, with clear elements of R&D. The outcomes and consequences we have seen through the year, including high mortality, must be seen in this perspective.
The general transition to non-medicinal methods that we saw in 2016 also represents a shift towards more sustainable solutions to the challenges posed by lice. For everyone, such a move should be welcomed.
SalMar has always been known as a company that breaks new ground in the development of modern salmon farming. This is a tradition that will be continued and reinforced in the years ahead.
The solutions to the challenges confronting the industry s will increasingly prove difficult to find in the traditional toolbox that the industry has used until now. The aquaculture sector has arrived at a point where the application of innovation and out-of-the-box thinking is a condition for further development and growth. Crucial to the success of such innovation is the ability to connect the knowledge and experience we have today with new technologies and production patterns in a way that they together, can shape tomorrow's fish farming industry.
In 2016, SalMar has been engaged in two major investment projects which will help to take the company into the future. One of these projects is a forward-looking investment in modern technology for the production of smolt. In 2017, we will complete construction of a new hatchery in Senja, with the capacity to produce up to 20 million smolt.
At the same time as 2016 has been characterised by strong profitability, the year has been very challenging on the biological side. The contrasts have been considerable. The biological challenges have particularly been hitting us in our Central Norway segment, where we had to deal with a significant outbreak of ISA as well as a very demanding salmon lice situation throughout the summer and autumn.
SalMar has a highly skilled and very experienced operational organisation. Through the continuous acquisition of new expertise, this organisation has developed considerable competence in the handling of various biological challenges. Such challenges have been, and will always be, part of the reality of fish farming. However, the size and intensity of the challenges that we encountered during a few hectic months in the summer of 2016 put the organisation to a severe test. In hindsight, we can record that both the ISA outbreak and the lice situation were handled very well given the prevailing circumstances. The difficulties were resolved by the entire organisation. The whole enterprise, both on land and at sea, came together to optimise the solution to a demanding situation. I would like to take this opportunity to express my gratitude for the sacrifices and hard work that the organisation did put in during the past year to optimise the company's operations and take care of and optimize value in all areas.
For years, the struggle to combat salmon lice has been the industry's biggest challenge. Like in many previous years, huge resources and efforts were devoted in 2016 to find means that could bring the sector closer to a solution. Like many others, I am of the opinion that there is no single solution to this challenge. What will ultimately succeed is a combination of different means, in which technology, biology, production processes and production paradigms all play a contributing role. Eventually such a multi-faceted approach will enable the sector to operate with no unfortunate impacts from or on salmon lice. Like many other companies, SalMar made significant changes in the way it dealt with salmon lice in 2016 compared with previous In Follafoss, a new extension will bring capacity at the facility to 20 million smolt. In total we are investing NOK 800 million in these two sites. In a first phase, our objective for the facilities is to secure control of our own production of high-quality smolt. Later, these investments will form the basis for further progress in production of larger smolt and smolt of varying sizes which, will enable a further optimisation and streamlining of today's already efficient production paradigm.
Throughout 2016, SalMar's subsidiary Ocean Farming has been working on the construction of the first prototype of SalMar's Ocean Farm. The construction project is now getting close to completion. Our vision, that SalMar will be the company which takes the salmon to the ocean , is about to be realised.
The Ocean Farm is scheduled to be completed and operational so that the first fish can be transferred to the installation in the early autumn of 2017. The facility underpins SalMar's drive and determination to lead the way in technologies for sustainable seafood production. The Ocean Farm is ground-breaking in this respect.
Although the conclusion of the construction project is a significant milestone for SalMar, it really represents just the first step in the long-term effort to develop Ocean Farming.
In SalMar, we have no illusions that this will be achieved without a struggle. On the contrary, we are prepared that it could be very challenging. This is also why we have
The experience and new response capabilities on NMM we have built through 2016 should make us better equipped to handle challenges with salmon lice in the coming years.
In many ways, it is now that the work actually begins, with the systematic accumulation of knowledge and adaptation of the technology to the physical elements aswell as to the salmon on the salmons terms in its own natural element.
put together a team of the most experienced and highly skilled employees we have to be responsible for operation of Ocean Farm in the critical first phase. We are also very pleased to be working in close cooperation with leading centres for maritime technology, in particular Kongsberggruppen, which are supporting us in the implementation and application of new, ground-breaking technology for open-ocean fish farming.
«Passion for Salmon» is our vision. It is our commitment, our shared focus on ONE SalMar and farming salmon on the salmon's own terms that will contribute to SalMar's further development and keep us moving forward.
We will become 'the world's best aquaculture company'. That is something we dare to say that we are aiming for, and are actually not far from realising. It will demand a lot from us, and success may be measured in many ways. We must be the best in terms of sustainability, fish welfare, technology, leadership, salmon lice management and a lot of other areas which are central for our business.
Together, this represents the very heart of SalMar: We farm our salmon on the salmon's terms, while our sales and processing operations maximise its value once it is brought ashore. This is a winning formula, which we have used for many years, and which will continue to be our foundation in the years to come.
Trond Williksen, President & CEO
SalMar was founded in February 1991 following the acquisition of a licence for the production of farmed salmon and a white fish harvesting/processing plant from a company that had gone into liquidation. These events took place during one of the most turbulent periods in the history of the Norwegian aquaculture industry, which subsequently also led to the collapse of the fish farmers' own sales organisation (Fiskeoppdretternes Salgslag AL) in November that same year. It was precisely this company's failure, and the so-called salmon mountain, that helped lay the foundations for the secondary processing operations which are a cornerstone of the SalMar story. Up until then the vast majority of Norwegian salmon had been exported as fresh or frozen round gutted fish. This was the start of a major restructuring of the Norwegian aquaculture sector, which gradually led to a substantial increase in its level of industrialisation.
SalMar is founded in Frøya in Sør-Trøndelag follow ing the acquisition of one licence for the production of farmed salmon and a harvesting/processing plant from a company that had gone into liquidation. The company's primary business was the processing of frozen salmon. This was the start of a major restructuring of the Norwe gian aquaculture sector, which gradually led to a substan tial increase in its level of industrialisation.
1992 Acquisition of two licences for the production of farmed salmon in Central Norway.
1995
Acquisition of Follasmolt AS in Verran, Nord-Trøndelag. Start of smolt production. Lease of Kjørsvik Settefisk's hatchery in Aure, Møre & Romsdal.
1997 Extension of the plant at Nordskaget in Frøya to increase processing capacity. • Kverva Holding AS becomes sole
owner of SalMar.
2000
Total volume harvested: 11,000 tonnes gutted weight. Establishment of operations outside of Central Norway through the acquisition of 49 % of the shares in Senja Sjøfarm AS in Troms. At that time Senja Sjøfarm had nine production licences and its own hatchery.
2001 Total volume harvested: 15,000 tonnes gutted weight. Establishment of operations outside Norway through Norskott Havbruk AS, a 50/50 joint venture with Lerøy Seafood Group. Norskott Havbruk AS is sole owner of Scottish Sea Farms Ltd, the UK's second largest salmon producer.
2005
Total volume harvested: 35,000 tonnes gutted weight. Divestment of operations SalMar does not con sider to be core businesses, including the production of herring, herring oil and fish meal. • Greater focus on core business activities, farming, harvesting and processing of salmon.
2006 Total volume harvested: 44,000 tonnes gutted weight. Kverva Holding AS sells 42.5 % of the company's shares to a limited number of Norwegian and international investors. • Acquisition of three new licenses in Nordmøre. • Acquisition of the remaining 51 % of the shares in Senja Sjøfarm AS, making SalMar sole owner of the company.
Total volume harvested: 64,000 tonnes gutted weight. SalMar shares floated on the Oslo Stock Ex change on 8 May 2007. Acquisition of Halsa Fiskeoppdrett AS (two licences) and Henden Fiskeoppdrett AS (two licences) in Møre & Romsdal. Acquisition of Arctic Salmon AS (four licences) in Nordreisa, Troms.
2008 Total volume harvested: 65,000 tonnes gutted weight. Acquisition of one licence in Central Norway (Møre & Romsdal) and one in Northern Norway (Troms). • Senja Sjøfarm AS is renamed SalMar Nord AS. The Com pany now includes all SalMar's operations in Troms. • Acquisition of 34 % of the shares in Volstad Seafood AS.
Total volume harvested: 77,000 tonnes gutted weight. Acquisition of the remaining 66 % of the shares in Volstad Seafood AS, making SalMar sole owner of the company.
2010
Total volume harvested: 79,000 tonnes gutted weight. Acquisition of 75.54 % of Rauma Gruppen AS. Broodfish, two hatcheries and eight fish farming licenses in Central Norway (Møre & Romsdal). • Acquisition of 23.29 % of the shares in the listed Faeroe Islands com pany Bakkafrost P/f. Acquisition of Stettefisk AS.
Total volume harvested: 104,000 tonnes gutted weight. Completion of the world's most innovative and efficient salmon harvesting and processing plant – InnovaMar. • Acquisition of Bringsvor Laks AS with two licences in Central Norway (Møre & Romsdal). • Acquisition of Krifo Havbruk AS with one licence in Central Norway (Trøndelag). • Leif Inge Nordhammer steps down as CEO and is replaced by Yngve Myhre on 6 June. • Acquisition of Villa Miljølaks AS with four licenses in Central Norway (Møre og Romsdal). • Acquisition of a further 1.5 % of the shares in Bakkafrost P/f, bringing SalMar's total sharehold ing to 24.8 %
2012 Total volume harvested: 116,100 tonnes gutted weight. Acquisition of 10 licenses in Northern Norway (Finnmark) from Villa Artic AS. • Acquisition of additional shares in Bakkafrost P/f, bringing SalMar's total sharehold ing to 25.21 %.
2013
Total volume harvested: 128,000 tonnes gutted weight. Acquisition of minority shares in SalMar Rauma AS. • Acquisition of 50.4 % of the shares in Villa Organic AS. • Divestment in Bakkafrost P/f. New share holding approximately 14.9 %. • Divestment of remaining 14.9 % of shares in Bakkafrost P/f. • Following the transaction SalMar has no shares in Bakkafrost P/f.
2014 Total volume harvested: 154,800 tonnes gutted weight. Yngve Myhre steps down as CEO and is replaced by Leif Inge Nordhammer on 20 January. Nordhammer pre viously served as SalMar's CEO for a period of 15 years until he stepped down in 2011. Acquisition of 8 green licenses.
Total volume harvested: 150,000 tonnes gutted weight. Principle approval of the ocean farming pilot. • Completion of acquisition that ensures an indirect stake of 22.91 % of the shares in the Icelandic farming company Arnarlax Hf.
2016
Total volume harvested: 129,600 tonnes gutted weight. On 28 February 2016, SalMar was awarded the first eight aquaculture development licences for Ocean Farming AS. • SalMar increased its indirect shareholding in the Icelandic aquaculture company Arnarlax Hf to 34 per cent through a series of acquisitions. • On 11 May 2016, the board an nounced that Trond Williksen would be taking over as CEO from Leif Inge Nordhammer. Mr. Nordhammer had himself requested leave to step down, having held the position for more than 17 years, spread over two periods. • Mr. Williksen took up the position on 14 November 2016.
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On 28 February 2016 the Norwegian Directorate of Fisheries awarded the first eight development licences to Ocean Farming AS, a part of the SalMar Group. This is a full-scale pilot project, in which SalMar is collaborating with other organisations within the aquaculture and offshore industries.
The pilot Ocean Farm installation is currently under construction, and the aim is to place it in position and transfer fish into its net pens in the third quarter 2017. The development licences have been granted for a period of seven years, but may be converted into ordinary production licences before that time if the objectives and the criteria stipulated by the Directorate of Fisheries have been met.
For SalMar, sustainable growth in the aquaculture industry depends on its ability to make use of new locations that offer good biological conditions for the farming of fish stocks – typically areas that are less affected by tidal currents and where the direction of currents is more constant. The project's objective is to develop technologies that will make this possible. Feasibility studies started in 2012, and over the past three years, various technical solutions have been evaluated. This has resulted in the design of a complete offshore fish farming installation. If successful, an initial, full scale pilot facility could help to resolve the aquaculture industry's currently limited opportunities for further growth.
The pilot installation will be equipped for the performance of R&D activities, with particular focus on biological conditions and fish welfare. In this way, it will help to promote the further advancement of the aquaculture industry through applied research and development. SalMar has been allocated a site at Frohavet, off the coast of central Norway, for this project. The objective is that operational experience gained from this pilot facility will be fed back into commercial production of this type of offshore fish farming installation.
The company behind Ocean Farm 1 is Ocean Farming AS, a subsidiary of the SalMar Group. Ocean Farming was established specifically to develop an offshore fish farming capability. Through the development and implementation of new technologies and the build-up of operational experience, Ocean Farming will acquire the specialist expertise needed for this next generation of fish farming facilities to achieve its full potential. Ocean Farming has received grants from Innovation Norway to help fund the concept development phase.
Ocean Farm 1 ushers in a new era in the history of salmon farming. It is based on the best that the Norwegian aquaculture and offshore technology sectors have to offer, and resolves many of the issues relating to sustainable growth that the aquaculture industry is facing.
Height: 68 m Diameter: 110 m Volume: 250,000 m3
When developing the concept's technical solutions, every fish farming process has been taken into account, and new approaches have been found for the various operating procedures. In addition to complying with the aquaculture industry's own fabrication standards, the regulations and standards applicable in the offshore oil and gas sector have also been used. The pilot facility is generic in its configuration, which means that while individual installations may have the same overall design, they must be certified/adapted to the prevailing weather and environmental conditions at their intended locations.
Ocean Farm 1 comprises a slack anchored, semisubmersible, rigid structure, with a high degree of flotational stability. It is intended for offshore installation in water depths of 100 to 300 metres. All fish handling operations can be performed on board, without recourse to external service vessels or equipment. In addition, the facility is equipped with one moveable and two fixed bulkheads so that it can be divided into three separate compartments, enabling different fish related operations to be performed. The installation is fully automated to eliminate heavy manual operations. Normally, a crew of 3-4 people will operate and monitor the facility. Risk analyses show that the potential for fish escapes is very low.
Creuna. Foto: Getty images
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The broodstock are the parent fish which provide the eggs and sperm (milt) required to produce new generations. The fertilised eggs take 60 days to hatch when placed in an incubator kept at eight degrees Celsius.
After 25-30 days in the incubator the eggs have developed to the stage where the eyes of the salmon are clearly visible as two black dots inside the egg
The egg hatches when the eggshell cracks open, liberating the baby fish (fry) inside. When it hatches the fry is attached to a yolk sac, which provides it with the sustenance it needs during its first few weeks of life. From now on the fish's growth and development will all depend on temperature.
When most of the yolk sac has been absorbed, the fry can be moved from the incubator into a fish tank. They are now ready for initial feeding. The water temperature is kept at 10-14 degrees Celsius, and the fry are exposed to dim lighting 24 hours a day. The initial feeding period lasts for six weeks. As they grow the fry are sorted and moved to larger tanks. Well ahead of their "smoltification" all the fish are vaccinated before being shipped by wellboat to the fish farm's marine net-pense.
The process whereby the juvenile fish transition from a life in freshwater to a sea-going existence is called smoltification. During this process the fish develop a silver sheen to their bellies, while their backs turn a blue-green colour. Their gills also change when the juvenile fish turns into a smolt.
The farming of fish for human consumption takes place in net-pens, large enclosed nets suspended in the sea by flotation devices. In addition to a solid anchorage, net-pens require regular cleaning and adequate measures to prevent the farmed fish from escaping. Growth in the net-pens is affected by feeding, light and water quality. Here too the fish are sorted as they develop and grow.
A year after transfer to the marine net-pens, the first fish are ready for harvesting. The fish are transported live by wellboat to the processing plant. There the fish are kept in holding pens, before being carefully transferred to the plant itself. The fish are killed and bled out using high tech equipment, and always in accordance with applicable public regulations. After harvesting the salmon is subject to various degrees of processing.
The fish is sold either as whole gutted salmon (fresh or frozen), fillets, in individual portions or a wide range of other products, which are distributed to markets around the world.
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No. of production facilities:
• 6 hatcheries, plus one under construction
• 1 lumpfish production unit
• 1 onshore facility for the production of roe Output:
25.6 million smolt, 24 million roe and 1.5 million lumpfish in 2016.
The facilities are distributed from Senja in the north to Sunnmøre in the south. Two of the facilities, Straumsnes Settefisk and Rauma Sætre AS, produce organic smolt, while the other facilities produce conventional smolt. Smolt vary in weight from 60-250 g.
The segment employs 82 people, many of whom are extremely experienced. A large proportion of the workforce are college-educated or have certificates of completed apprenticeship. The segment's staff are highly competent with regard to both day-to-day operations and development work/projects. The production of smolt is currently switching to the use of recirculated water (RAS). SalMar currently has this in place at its Follafoss facilities. The new capacity being built will employ RAS technology.
The segment has started work to expand two of its facilities:
• Troms Stamfiskstasjon, which will produce 15 million smolt. Construction started in the spring of 2015, with the first smolt due for delivery in the autumn of 2017. This facility will also play an extremely important role in SalMar's plans to achieve self-sufficiency in smolt in Troms and Finnmark.
• SalMar Settefisk's Follafoss facility, whose output will increase from 11.5 million to 20 million smolt. This new facility will go into operation in the autumn of 2017.
The success of SalMar's efforts to enhance the quality of the smolt it delivers is reflected in the steadily rising survival rate for smolt transferred to the sea.
SalMar's lumpfish production unit is located in Langstein. The facility currently has the capacity to produce 1.4 million vaccinated lumpfish. This capacity will gradually be increased through 2017 to reach around 3 million vaccinated lumpfish.
Located at Vågstranda in Romsdal, SalMar's onshore salmon roe production facility has the capacity to produce 60 million roe each year. However, current output stands at around 25 million roe. SalMar has its own breeding material: the Rauma stock.
FISH FARMING NORTHERN NORWAY (Troms and Finnmark) No. of licences: 32 Harvested volume in 2016: 45,200 tonnes gutted weight
SalMar Northern Norway currently holds 32 licences for the production of farmed salmon, as well as four jointly operated licences, making it the largest aquaculture enterprise in Troms and Finnmark. SalMar's Fish Farming Northern Norway segment has operations in 11 districts, stretching from Harstad in southern Troms to Sør-Varanger in Finnmark. Around 60 per cent of the segment's fish farms are located in Troms. Fish Farming Northern Norway harvests most of its output locally, and purchases harvesting services for a substantial portion of its volume in Skjervøy, Troms. The segment's administration is located at Finnsnes in Troms.
The segment currently has around 140 permanent employees, and plans to further expand its workforce in 2017 due to increased activity and output in the region. Following systematic efforts, Fish Farming Northern Norway has many qualified and highly experienced employees. Moving forward, the segment will continue to concentrate on R&D and increasing its fish farming expertise through a demonstration aquaculture facility, for which a licence has been granted.
The company's hatchery, which is located in Gjørvika, in Senja, halted production in 2016 while a new facility with the capacity to produce 15 million smolt is under construction. The new smolt facility will add a further 12,000 m2 to the facility, bringing its total area to 14,500 m2, and will base its production on the use of recirculated water (RAS). With a workforce of 13, the facility went into operation at the start of 2017, and is expected to be fully completed during the second quarter this year. It is scheduled to deliver its first smolt in the autumn of 2017.
Fish Farming Northern Norway has continued to develop a 'feed centre' in Lenvik. This provides joint surveillance and control of all the segment's sites from south Troms to Finnmark.
It is possible to produce more salmon in Norway, and Northern Norway has a strong potential for further growth. This region faces fewer challenges with respect to disease and salmon lice, and has excellent environmental conditions for sustainable production. The expansion of our smolt production in Senja is an important element in the segment's future growth.
FISH FARMING CENTRAL NORWAY (Møre & Romsdal, North and South Trøndelag) No. of production facilities: 68 Harvested volume in 2016: 70 500 tonnes gutted weight
Central Norway is the region in which the SalMar Group first established its business. Initially this was based on assets acquired from a company which had gone into liquidation, and which had one licence for the production of farmed salmon and a harvesting and processing plant in Frøya that was designed to handle white fish. Since then, both the Group as a whole and the segment have gone from strength to strength. With effect from 1 January 2015, SalMar Organic was merged into SalMar Farming AS, from which date it has formed the Rauma region within the company. Today, SalMar's Fish Farming Central Norway segment controls 68 production licences: 36 in Trøndelag and 32 in Møre & Romsdal. Rauma Stamfisk AS owns 4 licences. The segment also operates several R&D licences in collaboration with other companies.
SalMar is currently the world's largest producer of organic salmon. In recent years, organic salmon production has taken place in the Rauma region, with all salmon from the Rauma region being harvested at Vikenco AS in Aukra. In 2016, a total of 14,500 tonnes gutted weight were harvested in the region.
The bulk of SalMar's marine-phase fish farming operations are organised in SalMar Farming AS, and are located in central Norway, stretching from Nordmøre to the Namdal coast. Fish Farming Central Norway is divided into four regions, Rauma (Sunnmøre and Romsdal), south (Nordmøre), central (Frøya and Hitra) and north (Fosen and North Trøndelag). At the close of 2016, the segment employed some 370 people. The environmental conditions for salmon farming in this region are extremely good, with favourable sea temperatures all year round thanks to the Gulf Stream, a high water replacement rate and plenty of suitable locations.
SalMar's fish farms focus on cost-effective operation and maintain a high ethical standard with respect to animal husbandry. In order to contribute to SalMar reaching its goal of being the most cost-effective producer of farmed salmon, there is a continuous focus on sub-goals, such as achieving the fastest possible growth with the lowest feed factor. The company was quick to introduce its own standards and 'best practices' in order to secure increased efficiency. This involves, among other things, concentrating marinephase production at large, sustainable facilities stocked with the correct biomass volume and with a good environmental carrying capacity.
Volume sold: approx. 130,000 tonnes Output of processed products (product weight): approx. 36,000 tonnes
The Sales and Processing segment administers the Group's sales activities and onshore processing facilities. In 2016, the Sales department handled the sale of approx. 130,000 tonnes of salmon and other fish-based products. Sales are focused in the markets of Europe, Asia and the USA. The segment distributes salmon to more than 40 different countries. SalMar attaches considerable importance to positioning itself close to its markets. The segment therefore has permanently staffed sales offices in Japan, South Korea and Vietnam. A large part of the segment's downstream sales activities is organised through the sister company Insula AS.
InnovaMar is the SalMar Group's main salmon harvesting and processing facility, and is located at Nordskaget in Frøya. InnovaMar is an ultra-modern building covering some 17,500 m2, with an advanced equipment park for harvesting and filleting. In 2016, an extensive programme of upgrades was undertaken, and investments were made to increase capacity in support of the Group's downstream strategy. InnovaMar has the capacity to harvest 70,000 tonnes of salmon per year in one shift, of which a significant portion goes on to further processing before being shipped to customers and consumers worldwide. Through innovative use of production technology, the quality of the final product is enhanced, costs are reduced and the working environment for staff is improved. Through our part-ownership of Vikenco AS, we facilitate the harvesting of fish from Møre & Romsdal and the southern part of central Norway. In 2016, Vikenco and InnovaMar together produced just under 36,000 tonnes of processed products, measured by product weight. Fish produced by SalMar's Fish Farming Northern Norway segment is harvested largely by Lerøy Aurora AS under an industrial cooperation agreement.
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To be the most cost-effective salmon producer demands continuous improvement at all stages of the production process. This tenet is about daring to step into the unknown and develop a culture of winning, where performance is both measured and celebrated.
Although SalMar as a whole numbers more than 1000 people, it is vital to develop personal attitudes and an understanding that what happens is up to me and my function. It is therefore vital that everyone is familiar with our vision, objectives and values, and that we support each other for our common passion for salmon, and on our way to being at all times the lowest-cost supplier of farmed salmon.
To succeed as a team we must also develop the right attitudes towards, as well as respect and care for salmon,
This means that we will meet the expectations of others and demand high standards of each other, in accordance with our own SalMar standards. There are many 'suppliers' and 'customers' in the production chain, and it is only by treating each other with mutual respect that we will succeed.
Everyone who works for SalMar, regardless of position or place, has a duty to help come up with solutions and contribute to improvement processes. We will challenge existing practices and systems, we will jointly implement solutions, and we will talk to, not about, each other.
co-workers, customers, business associates and the environment. We must think for ourselves but act with loyalty, and always bear in mind that we are engaged in food production.
High ethical and moral standards form the basis for developing an even stronger focus on safeguarding the environment that we work in day to day, and that we are the temporary custodians of. We shall not deplete the environment, but ensure that we pass it on unimpaired to the next generation. This is our shared social responsibility, and everything we do must stand up to public scrutiny both today and in the future.
SalMar's corporate culture is constantly evolving, and builds on the success factors that have been cultivated within the company since its inception in 1991. Although the company's culture is affected by both external and internal framework conditions, it remains firmly anchored in a few overarching principles, in particular a strong focus on good husbandry, operational efficiency and safe food production.
Today, SalMar is one of the world's foremost producers of farmed salmon. Throughout its history company growth has gone hand in hand with outstanding financial per formance.
The aquaculture industry is developing rapidly, and the potential for further growth is enormous. However, at SalMar we are in no doubt that any growth must be sus tainable: environmentally, socially and financially.
In 2014, to reinforce our focus on the elements that have made SalMar the company it is today, we adopted a new vision that will henceforth guide our steps; « P a s s i o n f o r S a l m o n »
Although SalMar continues to pursue its stated aim of cost leadership, it is moving from a focus on outcomes to a focus on performance. We aim for excellence at all levels and in all aspects of our operation.
The new vision will underpin all activities and all actions within SalMar. All decisions relating to production will be made on the basis of our passion for salmon. The fish will be farmed in conditions most conducive to their wellbeing. We believe that the best biological results will pave the way for the best financial results, and thus safeguard our position as the most cost-effective producer of farmed salmon in the world.
This new vision and ambition depend on the existence of a winning culture throughout the organisation. The source of SalMar's corporate culture and the company's cultural tenets is our shared passion for salmon. These tenets underpin our vision and describe the attitudes and conduct expected of all employees.
Passion for Salmon
SalMar intends to secure long-term profitability and growth by operating all aspects of its fish farming and processing activities in a sustainable manner, and by acting as a responsible corporate citizen. For SalMar, sustainability means maintaining high ethical standards and helping to further raise awareness of the environment in which we work every day. We shall protect the environment and ensure it is managed in a way that will benefit future generations.
SalMar has a presence in local communities up and down the Norwegian coast, and therefore has an interest in the continuing welfare of many small towns and rural districts. For our employees, it is important that the local communities to which they belong have the necessary infrastructure and opportunities for an active social life outside of work. For SalMar, it is crucial that the Group is able to operate at sites affording good growing conditions for its fish stocks. SalMar is actively engaged in several local projects. It is also important for SalMar to have a presence in local arenas for the exchange of views and information, as well as participate in planning processes. Salmon farming must still be considered a young industry, and it is important to ensure that local decision-makers and the general public are well informed about its operations and development plans. By actively engaging in industry organisations and the public debate, SalMar contributes to important processes for sustainable development in Norway.
The Group is extremely aware of the diverse nature of its social responsibilities: as an employer, an industrial processor, a producer of healthy food, a user of the natural environment, and as a custodian of financial and intellectual capital. We strive to fulfil our corporate social responsibilities, ensure that everything we do bears public scrutiny, and minimise the impact of our operations on the environment.
In 2016, SalMar continued to publish a separate sustainability report in compliance with the principles of the Global Reporting Initiative. For a more complete account of HSE, sustainability and social responsibility at SalMar, please see this report. The following text must therefore be seen as an overarching summary of selected issues discussed in that report, which is available in its entirety from SalMar's website www.salmar.no.
SalMar's code of conduct and social responsibility has been made known to all employees. The code of conduct, which covers, among other things, SalMar's policies on business ethics and corruption, the working environment and community relations, is intended to contribute towards the development of a healthy corporate culture and uphold the company's integrity. Internal training programmes also highlight how employees can report wrongdoing or other causes for concern. A high ethical standard in all aspects of our business is an absolute requirement, and constitutes the very foundation of SalMar's HSE strategy.
A set of corporate tenets has been drawn up. These tenets describe desired behaviours and provide a shared platform for the actions of all employees. It is the workforce that embodies and develops SalMar's corporate culture. The employees' commitment and positive attitudes have always played a key role in SalMar's success. These issues are discussed at the SalMar School's annual seminars.
For further details, please see page 5 of SalMar's sustainability report for 2016.
The code of conduct and corporate tenets may be obtained from SalMar's website www.salmar.no.
In addition to being measured and audited in accordance with
statutory regulations and the sustainability requirements of third parties and customers, SalMar has developed its own 'SalMar Standard' performance criteria for the various parts of its operation. The SalMar standard contains all the requirements with which the operation must comply, and describes how major work processes are to be checked by means of operational audits. The 'SalMar Standard' designation is awarded to those departments which score highly in internal audits.
For further details, please see page 19 of SalMar's sustainability report for 2016.
SalMar fully supports and respects the principles set out in the Universal Declaration of Human Rights by acting responsibly in all areas of its business. This means that the company respects labour rights, opposes any form of child labour, forced labour or discrimination, avoids corruption and is considerate of the environment.
SalMar's HSE activities are based on our values and strategic priorities. SalMar has drawn up a set of overarching objectives, with associated activities and action plans. On the basis of these overarching objectives, each individual division and department has drawn up its own local sub-goals. Management is committed to realising the goals that have been set.
In 2016, we continued to work on the development of an overarching platform for corporate governance. The system is specially adapted to SalMar's needs, and we have focused on creating a user-friendly solution with a clear reporting function that is used for evaluation in the appropriate arenas. Emphasis is placed on competence enhancement, surveillance and control of key figures and the evaluation of nonconformances. The system is an important tool in the day-today management of the company, and is a useful aid in the monitoring and management of risk.
Risk assessments are carried out in accordance with the Norwegian standard NS 5814, and result in the drawing up of contingency and action plans that are regularly reviewed. Senior personnel have environmental responsibility as part of their job descriptions, and HSE rules and regulations have been drawn up for all employees. All non-conformances are reported, dealt with and evaluated on an ongoing basis. Activities relating to the environment are followed up through systematic weekly and monthly reviews by Sal-Mar's management teams. The issue of sustainability, with particular emphasis on the working environment and human safety, is tabled for discussion annually by SalMar ASA's Board of Directors.
In addition to risk assessments, evaluations and the thorough analysis of incidents and non-conformances, employee training, internal audits, safety inspections and seminars for safety representatives are important measures to increase safety in the workplace. In 2016, senior executives and other key personnel throughout SalMar have undergone indepth training in risk assessment. Internal consultants are used actively to further raise the quality of the company's improvement efforts. All new employees receive HSE training through induction courses, operational seminars and the SalMar School.
In 2016, we worked to further develop our corporate governance platform (called EQS). The system is specially adapted to SalMar's needs, and we have focused on creating an effective and user-friendly reporting solution. The system has now become an important tool in the day-to-day management of the company, and is a useful aid in the monitoring and management of risk. We will continue developing this platform in 2017 to include additional opportunities for performance management and learning across the different units.
For further details, please see page 22 of SalMar's sustainability report for 2016.
SalMar's new employees receive HSE training though initiatives such as induction courses, operational seminars and the SalMar School. All employees have received training in how to report potential wrongdoing or other causes for concern, and know that internal whistleblowers are protected from any reprisals. The procedure for such notification is described in the corporate governance system, which is available to all employees.
For further details, please see page 22 of SalMar's sustainability report for 2016.
SalMar intends to be a safe place to work. The company works systematically with risk assessment and training to safeguard its employees.
For further details, please see page 21 of SalMar's sustainability report for 2016.
Systematic efforts are being made to implement preventive measures and, where necessary, adapt workplaces and workloads to the needs of individual employees.
The SalMar School comprises a series of workshops for all employees, which focus on relevant work-related topics as well as business ethics and attitudes. The SalMar School encourages and develops the entire workforce. By revitalising the SalMar School, the Group wishes to ensure the exchange of experience and knowledge between the various divisions. The risks associated with the various day-to-day operational activities at SalMar mean that training and the correct competences are vital. Training is given both on the job and in the form of external courses. Day-to-day follow-up and professional development within the individual's team of coworkers are nevertheless the most important sources of personal growth. impact on its surroundings. This includes the day-to-day actions of its employees, involvement in research and development, as well as collaboration with government and regulatory authorities, interest groups, other aquaculture companies and suppliers of goods and services. For further details, please see pages 18-28 in SalMar's s ustainability report for 2016. Aquaculture Stewardship Council-standard (ASC) SalMar is currently working to certify its sites in accordance with the ASC standard, which is considered the most stringent sustainability standard in the world. The main objective
The Group has published clear policies with respect to diversity and equality in its code of conduct. SalMar accepts no discrimination of employees, shareholders, board members, customers or suppliers on the grounds of ethnicity, nationality, age, gender or religion. Respect for the individual is the cornerstone of the company's policies.
For further details, please see page 21 of SalMar's sustainability report for 2016.
SalMar accepts no forms of corruption. No SalMar employee shall, directly or indirectly, offer, promise, give or receive any bribe, unlawful or inappropriate benefit or remuneration in order to achieve advantage for themselves or the company. As part of its anti-corruption measures, SalMar has adopted guidelines with respect to gifts. To date, SalMar has not been accused of or involved in any cases relating to any form of corruption or bribery. The board and management are not aware of any violations of the company's code of conduct in this respect.
Sickness absence fell sharply as a result of individual job facilitation and personal follow-up. The sickness absence rate in 2016 came to 5.25 per cent, compared with 7.47 per cent in 2015 and 5.79 per cent in 2014. The processing sector drives up the average, but here too the sickness absence rate is on a par with the industry as a whole. Short-term sickness absence in 2016 totalled 1.92 per cent, compared with 2.33 per cent in 2015 and 2.19 per cent in 2014. Long-term sickness absence totalled 3.33 per cent in 2016, compared with 5.14 per cent in 2015 and 3.60 per cent in 2014. considerable focus on the detail. Openness with regard to performance is an important part of the standard, and information is presented on an ongoing basis on our website www.salmar.no. This standard is helping SalMar to take a fresh look at how we do things and stretch ourselves still further to live up to one of our basic tenets: Sustainability in everything we do. For further details, see page 30 in SalMar's sustainability report for 2016.
SalMar works systematically to avoid having an undesirable
of the ASC standard is to ensure transparency, a reduced carbon footprint and compliance with corporate social responsibilities, as well as provide added value to the companies certified. So far, SalMar has achieved certification of eighteen sights, while two sites which had been certified have been delisted since production there has been discontinued.
The ASC standard is extremely demanding with regard to environmental burden, working environment, communication with stakeholders and transparency. In some cases the requirements are stricter than those laid down in Norwegian law. The ASC standard is difficult to achieve, since it requires substantial resources to be devoted to preparation and a
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SalMar ASA aims to maintain a high standard of corporate governance. Good corporate governance strengthens public confidence in the company and contributes to long-term value creation by regulating the reciprocal roles and responsibilities of shareholders, the Board of Directors and the company's management, over and above that which is stipulated in legislation and other statutory instruments.
Our vision is "Passion for Salmon". We focus on farming our stocks on the salmon's own terms, and on excellence at all levels and in every detail of our production.
SalMar's board of directors has overall responsibility for en suring that the company has adequate corporate govern ance. The company's board and management perform a thorough annual assessment of its principles for corporate governance.
SalMar is a Norwegian public limited company listed on the Oslo Stock Exchange. The company is subject to Section 3-3b of the Norwegian Accounting Act as well as the Oslo Stock Exchange's requirements for an annual statement of its principles and practices with respect to corporate govern ance. The Norwegian Corporate Governance Board (NUES) has drawn up a Norwegian Code of Practice for Corporate Governance (the "code of practice"). SalMar complies with the current code of practice, published 30 October 2014. The code of practice may be found at www.nues.no.
Application of the code of practice is based on the 'comply or explain' principle. In other words, companies must comply with the individual provisions of the code or explain why they have not done so.
The company issues a comprehensive annual statement of its principles for corporate governance in its annual report, and this information is available from www.salmar.no. The statement describes how SalMar has conducted itself with respect to the code of practice in 2016.
SalMar deviated from the code of practice with respect to
one chapter in 2016: • Senior executives on the board (Chapter 8).
SalMar's core values are based on such principles as equality, quality, care for the environment, focus on work tasks and continuous improvement. The core values are well embed ded in the day-to-day operation of the business. Through the SalMar School and day-to-day exposure to SalMar's corporate and performance culture, all employees are given encourage ment and opportunities for development. The SalMar School was set up in 2002 and has been further developed each year since then. The SalMar School has been important for the Group's strong corporate culture. For more information on the SalMar culture, please see the annual report and the company's website www.salmar.no.
SalMar has drawn up a code of conduct and social responsibil ity, whose purpose is to safeguard and develop the compa ny's values, create a healthy corporate culture and uphold the company's integrity. The code of conduct is also meant to be a tool for self-assessment and for the further development of the company's identity. All employees of the company are bound to comply with the ethical guidelines laid down in the code of conduct. The reporting of any wrongdoing or other causes for concern is covered by specific procedures, which also allow employees to report anonymously through an external channel. The code of conduct is available from the company's website www.salmar.no.
SalMar has a presence in many local communities. The Group is therefore extremely aware of the diverse nature of its social responsibilities: as an employer, an industrial proces sor, a producer of healthy food, as a custodian of financial and intellectual capital, and – not least- as a user of the natural environment. Increased biological control is one of the company's most important focus areas, and is a material prerequisite for long-term success. The company is, among other things, working actively to safeguard fish welfare and prevent salmon from escaping.
One of the company's most important tenets is 'We care'. This permeates the SalMar culture, and ensures a high degree of awareness among employees, both internally and externally, in the areas in which the company operates.
Deviations from the code of practice: None
SalMar is one of the world's largest producers of farmed salmon, and owns 100 licences for marine production of At lantic salmon in Norway. In addition, SalMar owns 50 per cent of Norskott Havbruk AS, which in turn owns 100 per cent of Scottish Sea Farms Ltd, the UK's second largest producer of salmon, with a capacity of 30,000 tonnes of harvested fish. SalMar also owns 34 per cent of the Icelandic aquaculture company Arnarlax Hf. SalMar has a substantial secondary processing business, which is co-located with its headquarters in Frøya.
SalMar ASA's objectives are defined in Article 2 of its articles of association:
"The objective of the company is fish farming, the process ing and trading of all types of fish and shellfish, and other financial activities related thereto. The company may, in accordance with directives from the relevant authorities, undertake general investment activities, including participation in other companies with similar or related objectives."
SalMar's Board of Directors has drawn up clear objectives and strategies for the Group. Each business area has developed its own goals in line with these, and strategic priorities have been defined. Within the framework of the above article, SalMar is currently engaged in broodfish and smolt produc tion, marine-phase farming, harvesting, processing and sale of farmed salmon and white fish.
The company's objectives and main strategies are further discussed in the annual report and can be found on the com pany's website www.salmar.no.
Deviations from the code of practice: None
Equity
As at 31 December 2016, the company's equity totalled NOK 6,680.8 million, which corresponds to an equity ratio of 49.9 per cent. The board considers SalMar's equity to be adequate in relation to the company's objectives, strategy and risk profile.
SalMar intends to provide shareholders with a competitive return on invested capital, taking into consideration the com pany's risk profile. Returns will be achieved through a combi nation of positive share price development and the payment of a dividend. The company plans to pay out surplus liquidity (funds not necessary for the company's day-to-day opera tions) in the form of a dividend or by means of a capital reduc tion with distribution to the shareholders. The company will at all times consider whether the available liquidity should be used for new investments or the repayment of debt instead of being paid out as dividend. Provided the Annual General Meeting (AGM) approves, the aim is to make annual payments of dividend. The company will also consider the buyback of treasury shares within the authorisation limits granted to the board by the AGM.
Based on the year-end financial results for 2016, the board has proposed payment of a dividend of NOK 12 per share. In terms of its financial performance, 2016 was a satisfac tory year for SalMar. The board considers SalMar's financial position to be extremely sound, and the company's financial capacity for further growth is deemed to be strong.
Authorisations granted to the board are normally time limited, and are valid only up until the next AGM.
The AGM of 7 June 2016 granted the board three authorisa tions, one to increase the company's share capital, one to buy back its own (treasury) shares, and one to issue convertible loans. The first two such authorisations were extensions of authorisations granted by the AGM in 2015, while the latter was new. In line with the Norwegian code of practice, each of the authorisations was considered separately.
The first authorisation allowed the board to increase the company's share capital by up to NOK 2,829,667.50, through the issue of up to 11,318,670 shares to finance investments and the acquisition of businesses through cash issues and contributions in kind.
The second authorisation allowed the board acquire treasury shares up to a maximum of 10 per cent of applicable share capital: in other words, up to 10,149,919 treasury shares, with a total face value of NOK 2,537,479.70. The authorisa tion could be used to purchase company shares in connection with the share-based incentive scheme for senior manage ment and as a means of returning value to existing share holders.
It follows from the purpose of the authorisations that the board may need to waive existing shareholders' preference rights, which is permitted under the terms of the authorisations concerned.
All board authorisations are valid up until the next AGM, which will be held on 6 June 2017.
Deviations from the code of practice: None
SalMar has only one class of shares and all shares have equal rights. Each share has a face value of NOK 0.25 and carries one vote.
As at 31 December 2016, SalMar ASA owned 984,368 treas ury shares, which accounts for 0.87 per cent of the compa ny's registered share capital. Transactions involving treasury shares are undertaken on the stock exchange or otherwise at the listed price.
In the event of not immaterial transactions with related par ties, the company shall make use of valuations provided by an independent third party.
The third authorisation allows the board to issue convertible loans for up to NOK 2,000,000,000 for the purpose of enabling the company, at short notice, to use such financial instruments as part of its overall financing requirement. In connection with the conversion of loans raised pursuant to this authorisation, the company's share capital may be increased by up to NOK 2,829,667.50, though with account taken of any capital increases undertaken pursuant to the authorisation to increase the company's share capital, such that the total capital increase for both authorisations combined may not exceed 10 per cent of the share capital. 5. Free transferability The company's shares are freely transferable on the Oslo Stock Exchange, and its articles of association do not contain any restrictions on the shares' transferability. Nor are there any restrictions on the buying and selling of shares by board members and members of company management, as long as the regulations governing insider trading are complied with. Deviations from the code of practice: None
In the event of capital increases based on an authorisation issued by a general meeting of shareholders, where the existing shareholders' rights will be waived, the reason for this will be provided in a public announcement in connection with the capital increase.
SalMar's code of conduct sets out what is required of employ ees with respect to loyalty, conflicts of interest, confidentiality and guidelines for trading in the company's shares. The code of conduct states that all employees must notify the board if they, directly or indirectly, have a material interest in any agreement entered into by the company. Board mem bers also have a duty to comply with the company's code of conduct.
The regulations governing the board's working practices provide guidelines for how individual directors and the CEO should conduct themselves with respect to matters in which they may have a personal interest. Among them is the stipu lation that each director must make a conscious assessment of his/her own impartiality, and inform the board of any possible conflict of interest.
Any transactions with related parties are discussed in Note 29 to the 2016 financial statements.
Deviations from the code of practice: None
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The company's highest decision-making body is the General Meeting of Shareholders.
General meetings of shareholders are open for participation by all shareholders. Pursuant to Article 7 of the company's articles of association, the Annual General Meeting must be held by the end of June each year in Oslo, Trondheim or Kverva in the municipality of Frøya.
The 2017 AGM will be held on 6 June at the company's head office in Frøya.
An invitation to attend the AGM or an EGM will be issued no later than 21 days prior to the date of the meeting.
In accordance with the company's articles of association, documents relating to matters to be addressed at a general meeting of shareholders may be made available on SalMar ASA's website. The same applies to documents which by law must be included in or attached to the invitation to attend the general meeting. If the documents are made available in this way, the statutory requirement with respect to distri bution to shareholders is not applicable. A shareholder may nevertheless ask to be sent documents relating to matters to be discussed at a general meeting by post. Case docu ments must contain all the documentation necessary to en able shareholders to take a standpoint on all matters to be addressed.
The deadline for notification of shareholders' intention to at tend a general meeting is stipulated by the board of directors in the invitation thereto, no less than five days prior to the date of the meeting. Shareholders may send notification of their attendance, using the form provided, by post or email to the company's account manager Nordea Bank Norge AS, or via the company's website www.salmar.no.
Shareholders are entitled to make proposals and cast their votes either in person or through a proxy, including a proxy appointed by the company. The proxy form also enables shareholders to grant a proxy vote for each individual agenda item.
The board determines the agenda for the meeting, and the main issues to be dealt with by the AGM are regulated by Article 9 of the company's articles of association. However, pursuant to section 5-11 of the Public Limited Companies Act, shareholders are entitled to have matters they them selves have tabled considered by the AGM.
The board of directors, Nomination Committee and the com pany's auditor will be represented at the AGM, which will nor mally be chaired by the Board Chair. The present Board Chair is a shareholder of Kverva AS, and is therefore not deemed to be independent under the provisions of the code of practice. Nevertheless, The board considers the Board Chair to be best suited to chair the AGM. In the event of any disagreement on individual agenda items where the Board Chair belongs to one of the factions, or for some other reason is not deemed to be impartial, a different person will be selected to chair the meeting in order to ensure independence with respect to the matters concerned.
The company will publish the minutes of general meetings of shareholders in accordance with stock exchange regulations.
Deviations from the code of practice: None
Article 8 of the company's articles of association stipulates that the Nomination Committee shall comprise a total of three people, who shall be shareholders or shareholders' rep resentatives. The Nomination Committee's composition shall be such that the interests of shareholders as a community shall be upheld, and the majority of committee members shall be independent of management and the board. The mem bers of the Nomination Committee, including its chair, are elected by the AGM for a term of two years. Members may be re-elected. To ensure continuity, members' terms of office shall not coincide. The remuneration payable to members of the Nomination Committee is determined by the AGM. A set of regulations governing the work of the Nomination Com mittee was adopted at the board meeting of 21 March 2007 and updated at the AGM in 2014.
As at 31 December 2016, the Nomination Committee com prises the following:
The Nomination Committee shall make a recommendation to the AGM with respect to candidates for election to the board of directors and Nomination Committee, as well as pro pose the remuneration payable to the members of the board and the Nomination Committee. In its work, the Nomination Committee shall take into consideration relevant statutory requirements with respect to the composition of the com pany's governing bodies, as well as principles for corporate governance laid down in the Norwegian Code of Practice for Corporate Governance drawn up by NUES. Proposals for members of the board and Nomination Committee should safeguard the shareholder community's interests and the company's need for competence, capacity and diversity. To achieve this the Nomination Committee may contact share holders and company directors.
The Nomination Committee draws up criteria for the selec tion of candidates for the board and Nomination Committee, in which both sexes should be represented. The Nomination Committee should, over time, balance the requirements for continuity and renewal in the individual governing body. Rel evant candidates must be asked whether they are willing to undertake the office of director or deputy director.
The committee should base its recommendations with respect to the remuneration payable on (a) information about the size of the remuneration paid to elected officers in other comparable companies, and (b) on the scope of work and the amount of effort the elected officers are expected to devote to the task on behalf of the company.
The Nomination Committee's recommendation to the AGM must be published in good time, so that it can be commu nicated to the shareholders before the meeting takes place. The recommendation shall accompany the invitation to at tend the AGM, no later than 21 days before the meeting takes place. The committee's recommendation shall contain information about the candidates' independence and compe tence, including age, education and work experience. If rele vant, notice shall also be given about how long the candidate has been an elected officer of the company, any assignments for the company, as well as material assignments for other group companies that may be of significance.
All shareholders are entitled to propose candidates for the board or other elected offices to the Nomination Committee. Such proposals must be submitted to the Nomination Com mittee no less than six weeks prior to the company's AGM. All proposals shall be sent by email to the Nomination Commit tee's chair. Contact details are available from the company's website www.salmar.no.
Deviations from the code of practice: None
The company does not have a Corporate Assembly.
Pursuant to Article 5 of SalMar's articles of association, the board of directors shall comprise five to nine members, to be elected by the AGM. The Board Chair is elected by the AGM. The company's current board is made up of seven members, including two employee representatives. Three of the com pany's directors are women, including one female employee representative. Women therefore comprise 43 per cent of the board, which is in line with the provisions of the Norwe gian Accounting Act.
The regulations governing the work of the Nomination Com mittee state that emphasis shall be placed on ensuring that members of the board have the necessary competence to carry out an independent assessment of the matters pre sented to it by management and of the company's business activities. Emphasis shall also be placed on ensuring that there is a reasonable gender balance and that directors are independent with respect to the company. The Nomination Committee's recommendation shall meet the requirements relating to board composition stipulated by applicable legisla tion and the regulations of the Oslo Stock Exchange. Board members are elected for a term of two years and may be re-elected. An overview of the individual directors' compe tence and background is available from the company's web site www.salmar.no. An overview of the individual directors' shareholdings in SalMar can be found in Note 16 to the 2016 financial statements. ties, tasks and administrative procedures. Furthermore, the board determines the Group's overall objectives and strategy, including the overall composition of the Group's portfolio and the business strategies of the individual business unit. The board has also prepared a set of instructions for the executive management team that clarifies its duties, lines of authority and responsibilities. The board shall approve the Group's plans and budgets, and shall. Proposals relating to targets, strategies and budgets are drawn up and presented by management. Strategy is normally discussed during the autumn, ahead of the Group's budget process. Within the area of strategy, the board shall play an active role in setting management's course, particularly with regard to organisational restructuring and/or operational changes.
Deviations from the code of practice:
Pursuant to the Norwegian Code of Practice for Corporate Governance, senior executives should not be members of the board of directors. Board member Gustav Witzøe is the founder of SalMar and a member of group management. However, the nomination committe considers that it is in the company's interests to avail itself of Gustav Witzøe's exten sive experience and considerable expertise as a director. De viation from the code of practice on this point has therefore been deemed acceptable. Gustav Witzøe is also the com pany's largest shareholder through his company Kverva AS, which owns 53.4 per cent of SalMar's shares.
SalMar's board of directors is composed such that it is able to act independently of any special interests. Board Chair Bjørn Flatgård also chairs the board of Kverva AS, and is therefore not deemed to be independent. The remaining directors, with the exception of Gustav Witzøe, who founded SalMar, are deemed to be independent of senior executives, material business associates and the company's largest shareholders. In matters of material importance in which the Board Chair is, or has been, actively engaged, another director is appointed to chair the board's deliberations. No such matters have been addressed during 2016. by telephone. The overall attendance rate at board meetings was 95 per cent. See also the table above for further details. The board makes an annual assessment of its own work and competence. An evaluation of this kind was last conducted in December 2016. Audit Committee Pursuant to the Public Limited Companies Act, SalMar has a board-appointed Audit Committee. The committee's main tasks are to prepare the board's follow-up of the financial
The board has overall responsibility for the management of the Group and the supervision of its day-to-day management and business activities. The work of the board is governed by a set of regulations which describe the board's responsibili -
| of board | |||||
|---|---|---|---|---|---|
| Board | Year first |
Current term |
meetings attended |
||
| members | Position | elected | ends | in 2016 | 35 |
| Bjørn Flatgård Board Chair | 2002 | 2017 | 8 av 8 | ||
| Gustav Witzøe | Director | 1991 | 2017 | 6 av 8 | |
| Kjell A. Storeide | Director | 2008 | 2018 | 7 av 8 | |
| Tove Nedreberg | Director | 2012 | 2018 | 8 av 8 | |
| Bente Rathe | Director | 2015 | 2017 | 8 av 8 | |
| Geir Berg | Empl.repr. | 2015 | 2017 | 8 av 8 | |
| M. G. Sandberg | Empl.repr. | 2015 | 2017 | 8 av 8 | |
The board meets as often as necessary to perform its duties. In 2016, the board held eight meetings, of which two were
No.
reporting process, monitor the Group's internal control and risk management systems, with respect to financial report ing and maintain an ongoing dialogue with the auditor. The Audit Committee held four meetings in 2016, with an overall attendance rate of 100 per cent.
As at 31 December 2016, the Audit Committee comprises the following:
Deviations from the code of practice: None
The board is responsible for ensuring that the company's risk management and internal control systems are adequate in relation to the regulations governing the business. The company's systems and procedures for risk management and internal control are intended to ensure efficient operations, timely and correct financial reporting, as well as compliance with the legislation and regulations to which the company is subject. Specific targets for the internal control effort within the company are drawn up, and are revised annually by SalMar's group management. The board reviews the com pany's risk management on an annual basis.
The most important risk factors for the company are biologi cal risk associated with the biological situation in its hatcher ies and sea farms, as well as the risk of fish escaping there from, and financial risk (foreign exchange, credit and interest rate risk). These risks are monitored and addressed by man agers at all levels in the organisation. For further information, please see the 2016 annual report and Note 2 to the 2016 financial statements.
It is the CEO's responsibility to ensure that the company operates in accordance with all relevant statutes and guide lines associated with operation of the Group's divisions. This also includes acquisition, operation and maintenance of fish farming equipment, as well as the handling of the company's biomass.
Internal control of financial reporting is achieved through day-to-day follow-up by management and process owners, and supervision by the Audit Committee. Non-conformances and improvement opportunities are followed up and correc tive measures implemented. Financial risk is managed by a central unit at head office, and, where appropriate, consid eration is given to the use of financial hedging instruments.
Follow-up and control of compliance with the company's val ues, code of conduct and guidelines for social responsibility is carried out by the line organisation and is part of day-today operations. Material risks and any changes in them are discussed at fortnightly management meetings.
The largest risk facing SalMar stems from the biological de velopment of its smolt and marine-phase fish stocks. The company has internal control routines that involve the sys tematic planning, organisation, implementation and evalu ation of the Group's activities in accordance with both the external regulatory framework and its internal ambitions for continuous improvement. Among other things, the company has drawn up uniform objectives for internal controls with respect to the working environment and personal safety, preventing fish from escaping, fish welfare, pollution, food safety and water resources. For further information, please see the annual report.
Deviations from the code of practice: None
The Nomination Committee's proposal for the remuneration payable to the board of directors is approved or rejected by the company's AGM. Directors' fees shall reflect the board's responsibilities, competence, time spent and the complexity of the business.
Directors' fees are not performance-related and contain no share option element. Additional information relating to directors' fees can be found in Note 24 to the financial state ments included in the 2016 annual report.
Director Gustav Wizøe is also a member of SalMar's group management, and is remunerated as an employee represent ative to the board.
Deviations from the code of practice: None
Pursuant to Section 6-16a of the Public Limited Companies Act, the board of directors has prepared a statement relating to the determination of salaries and other benefits payable to senior executives. This statement will, in line with the said statutory provision, be laid before the company's AGM each year.
The company's senior executive remuneration policy is based primarily on the principle that executive pay should be com petitive and motivating, in order to attract and retain key personnel with the necessary competence.
The statement refers to the fact that the board of directors shall determine the salary and other benefits payable to the CEO. The salary and benefits payable to other senior execu tives are deter-mined by the CEO in accordance with the guidelines laid down in the statement. Today's compensation scheme is divided into three and comprises a fixed salary, a performance-related bonus and a share-based incentive scheme in line with the board's authorisation.
At the 2016 AGM, the statement on executive remuneration was set forth as a separate case document, which is available from the company's website www.salmar.no. The AGM voted individually on the item relating to share-based remunera tion and the item relating to the guidelines for the determination of salary and other benefits to senior executives for the 2016 financial year.
The board's statement, as well as further details relating to the salary and benefits payable to the CEO and other senior executives, can be found in Note 24 to the financial state ments included in the 2016 annual report.
Deviations from the code of practice: None
Communication with shareholders, investors and analysts is a high priority for SalMar. The objective is to ensure that the financial markets and shareholders receive correct and timely information, thus providing the soundest possible founda tion for a valuation of the company. All market players shall have access to the same information, and all information is published in both Norwegian and English. All notices sent to the stock exchange are made available on the company's website and at www.newsweb.no.
SalMar seeks to comply with the Oslo Stock Exchange's recommendations on the reporting of information to investors on companies' websites, last updated on 10 June 2014. The company has, in line with the Norwegian Code of Practice for Corporate Governance, also adopted an 'IR Policy', which is available from the company's website. The CEO, CFO and IRO are responsible for communications with shareholders in the period between general meetings.
The company holds open investor presentations in associa tion with the publication of its year-end and interim results. These presentations are open to all, and provide an over view of the Group's operational and financial performance in the previous quarter, as well as an overview of the general market outlook and company's own future prospects. These presentations are also made available on the company's web site.
The company publishes its provisional year-end accounts by the end of February each year, and a complete set of financial statements, including an annual report, is made available at the latest three weeks before the date of the AGM, and no later than the end of April each year.
The company will continue to publish interim reports in line with the Oslo Stock Exchange's recommendation. Such in terim results will be published no more than 60 days after the close of each quarter.
SalMar will minimise its contacts with analysts, investors and journalists in the final three weeks before publication of its results. During this period, the company will hold no meet ings with investors or analysts, and will give no comments to the media or other parties about the Group's results and future outlook. This is to ensure that all interested parties in the market are treated equally.
Each year SalMar publishes a financial calendar indicating the dates of publication of the Group's interim reports, as well as the date of its AGM. The calendar is available from the Group's website www. salmar.no. It is also distributed as a stock mar ket notice and updated on the Oslo Stock Exchange's web site www.newsweb.no. The calendar is published before 31 December each year.
Deviations from the code of practice: None
Corporate Governance. The guidelines were adopted by the board at a meeting on 29 March 2011, and the board undertakes to act in a professional manner and in accordance with applicable legislation and regulations.
The guidelines shall ensure that the interests of shareholders are safeguarded, and that all shareholders are treated equally. Furthermore, the guidelines shall help ensure that company operations are not unnecessarily disturbed. The board will strive to provide shareholders will sufficient infor mation to enable them to make up their minds with respect to the specific bid.
If a takeover bid has been made, the board will make a state ment and at the same time assess whether to obtain a valu ation from an independent expert. The board will obtain an independent valuation if a major shareholder, board member, member of the management team, related party or any col laborator of such a related party, or anyone who has recently held one or more of the above-mentioned positions, is either the bidder or has a particular interest in the takeover bid.
The board will not seek to prevent any takeover bid, unless the board is of the opinion that such action is justified out of consideration for the company and the company's shareholders. The board will not exercise any authorisations or adopt other measures for the purpose of preventing the takeover bid. This stipulation may be waived with the approval of a general meeting of shareholders after a bid has been announced.
The board of directors has drawn up guidelines with respect to takeover bids, in line with the Norwegian Code of Practice for Deviations from the code of practice: None
Transactions which, in reality, involve the sale of the compa ny's business shall be laid before a general meeting of shareholders for approval.
Deviations from the code of practice: None
The company's auditor is appointed by the AGM and is independent of SalMar ASA. Each year the board of directors shall receive written confirmation from the auditor that the requirements with respect to independence and objectivity have been met.
Each year, the auditor shall draw up the main elements of a plan to carry out auditing activities, and the plan shall be made known to the board of directors and the Audit Commit tee. Furthermore, the auditor shall hold at least one meet ing each year without any representatives of the company's management being present.
The board shall inform the AGM of the remuneration payable to the auditor, broken down into an auditing and other ser vices component. The AGM shall approve the auditor's fees.
The company has drawn up guidelines for any work other than auditing to be carried out by the auditor or persons associated with the auditor. The auditor participates in board meetings in connection with consideration of the year-end accounts, and, at the same time as the board of directors, re views the company's internal control systems. This includes the identification of weaknesses and proposals for improve ment. The auditor will also attend the company's AGM.
| 37 | |
|---|---|
Trond Williksen President and CEO
With nearly 30 years of experience from different positions in the fisheries and aquaculture industries, Trond Williksen (53) most recently led the listed company AKVA Group ASA through a period of strong growth. Before this, Williksen held different management positions in the Aker Group's fisheries section, and worked as a KPMG consultant to the fisheries industries. Williksen started his career in the Norwegian Fishermen's Association, before joining first the aquaculture company Midt-Norsk Havbruk, and then Norske Fiskeoppdretteres Forening (currently Norwegian Seafood Federation). Trond Williksen is a university college graduate of Fisheries Economics from Bodø, Norway, and holds an MBA from the University of Washington.
Born: 1963 Shares: 0 RSU-Rights: 5 753 Olav-Andreas Ervik
Director Farming
Mr. Ervik started in the position as head of SalMar ASA´s Farming division August 2014. Before this Mr. Ervik held the position as General Manager in SalMar Farming AS. Mr. Ervik has held various positions in companies within the salmon farming industry since 1994, including Lerøy Midnor, Scottish SeaFarms and Lerøy Hydrotech.
Born: 1976 Shares: 6 361 RSU-Rights: 10 762
Trond Tuvstein Chief Financial Officer
Trond Tuvstein was appointed as new CFO 15 October 2013. Tuvstein served as Head of Investor Relations in SalMar ASA from January 2012 until October 2013. Tuvstein therefore knows both SalMar and the aquaculture industry well. Mr. Tuvstein is certified public accountant, having completed a Master's degree in Accounting and Auditing at the Norwegian School of Economics and Business Administration (NHH) in Bergen. Mr. Tuvstein has extensive experience from the accounting industry. He has held leading positions in auditors PricewaterhouseCoopers and Systemrevisjon, among others.
Born: 1972 Shares: 15 955 RSU-Rights: 11 021 Eva Haugen has held the position as Director Quality Management/HSE since 2H 2013. Prior to this position Haugen has been the Head of Quality Management in the SalMar Group since 2005. Haugen has also worked as a quality manager at the factory in Nordskaget in the periods 2001 and 2004. She has several years of experience as a teacher in secondary school subjects such as aquaculture, science and biology. Haugen is a graduate from NTNU in the fields of chemistry, biology and education studies, and holds a degree in ecotoxicology and physiology in salmonids.
Born: 1971 Shares: 3 117 RSU-Rights: 6 803
Gustav Witzøe Director Processing and Sales
Eva Haugen Director Quality Management/HSE
Tom Aleksandersen Chief Strategy Officer (CSO)
Mr. Witzøe is the co-founder of SalMar ASA. He holds a degree in engineering. After several years as an engineer he co-founded BEWI AS, a company producing styrofoam boxes for the fish farming industry. Mr. Witzøe held the position as managing director of BEWI AS until 1990. Since Mr. Witzøe founded SalMar ASA in 1991 he has gained extensive experience in fish farming and processing. In addition to being a director of SalMar ASA, Mr. Witzøe is chairman of Egersund Fisk AS and is a director of Norskott Havbruk AS and Scottish Sea Farms Ltd.
Shares: Mr. Witzøe owns 90.85% of Kverva AS, which in turn owns 53.4% of the shares in SalMar ASA. Mr. Witzøe is also a director of Kverva AS. RSU-Rights: None
Tom Aleksandersen was appointed as Chief Strategy Officer 1 March 2015. Aleksandersen holds an MBA with specialization in Innovation and Implementation (1995), his main areas of expertise is: strategy, business development, cultural development and leadership training. Aleksandersen has extensive experience from working with strategic processes and organizational development from businesses in Central Norway, including several years of experience as a partner and head of BDO's consultancy department in Central Norway.
Born: 1971 Shares: 1 709 RSU-Rights: 9 310
| NAME | Shareholding 31.12.16 | Shareholding (%) |
|---|---|---|
| Kverva AS | 60 500 000 | 53,40 % |
| Folketrygdfondet | 8 304 705 | 7,33 % |
| State Street Bank and Trust Comp | 4 879 763 | 4,31 % |
| J.P. Morgan Chase Bank, N.A., London | 3 299 928 | 2,91 % |
| LIN as | 2 005 200 | 1,77 % |
| SalMar ASA | 984 368 | 0,87 % |
| J.P. Morgan Bank Luxembourg S.A. | 973 664 | 0,86 % |
| Clearstream Banking S.A. | 885 909 | 0,78 % |
| State Street Bank and Trust Comp | 836 144 | 0,74 % |
| State Street Bank and Trust Comp | 643 581 | 0,57 % |
| J.P. Morgan Chase Bank, N.A., London | 613 622 | 0,54 % |
| Pareto Aksje Norge | 611 744 | 0,54 % |
| J.P. Morgan Chase Bank, N.A., London | 592 728 | 0,52 % |
| RBC Investor Services Bank S.A. | 578 242 | 0,51 % |
| Euroclear Bank N.V. | 567 940 | 0,50 % |
| State Street Bank and Trust Comp | 531 114 | 0,47 % |
| Copper Rock Int Small Cap Fund | 516 992 | 0,46 % |
| KLP Aksjenorge Indeks | 464 154 | 0,41 % |
| J.P. Morgan Chase Bank, N.A., London | 463 638 | 0,41 % |
| State Street Bank and Trust Comp | 461 106 | 0,41 % |
| Total 20 largest shareholders | 88 714 542 | 78,30 % |
| Other shareholders | 24 585 457 | 21,70 % |
| Total | 113 299 999 | 100,00 % |
| Shareholders | 3 828 | |
| Total no. of shares | 113 299 999 |
Share price per 01.01.2016 was NOK 155.00 thus valuing SalMar at NOK 17 561 million. At year-end the share price was NOK 258.10 valuing SalMar at NOK 29 243 million.
As at 31 December 2016 SalMar ASA had 113.299.999 shares outstanding, with each share having a face value of NOK 0.25. As at 31 December 2016 the company had approx. 3 800 shareholders. The company's VPS number is ISIN NO 001-0310956. Account operator is Nordea Bank. The company's ticker on the Oslo Stock Exchange is SALM.
Communication with shareholders, investors and analysts is a high priority for SalMar. The objective is to ensure that the financial markets and shareholders receive correct and timely information, thus providing the soundest possible foundation for a valuation of the company. All notices sent to the stock exchange are made available on both the company's website, the Oslo Stock Exchange's www.newsweb.no site and though news agencies.
If you would like to subscribe to news from SalMar, please send an e-mail to [email protected] so that we can include your e-mail in our news distribution list.
SalMar holds quarterly presentations open to the public. The presentations will take place at 08.00 CET at Hotel Continental in Stortingsgaten 24/26 in Oslo, Norway. The annual general meeting will be held at Frøya. Please note that the dates are subject to change. Changes will be communicated.
Trond Tuvstein CFO Telephone: +47 918 53 139 [email protected]
Runar Sivertsen Head of Investor Relations Telephone: +47 960 97 000
42
SALMAR ANNUAL REPORT 2016 – Passion for Salmon
BJØRN FLATGÅRD Chairman of the Board
Mr. Flatgård is currently working as a professional director of several leading Norwegian companies and as an investor. From 1996 to 2007 he was Presi dent & CEO of Elopak ASA. Prior to that he was CEO of Nycomed Pharma and a member of the executive management of Hafslund Nycomed. Mr. Flatgård gained an MSc in Chemical Engineering from the Norwegian University of Sci ence and Technology in 1973 and a degree in Economics and Business Admin istration from the Norwegian School of Management BI in 1981. Mr. Flatgård joined SalMar's board of directors in August 2002, becoming chairman in 2006. Through his family company GloMar AS, Mr. Flatgård owns 2.38 % of the shares in Kverva AS, which in turn owns 53,4 % of the shares in SalMar ASA. Mr. Flat gård is also Chairman of Kverva AS.
Mr. Witzøe is the co-founder of SalMar ASA. He holds a degree in engineering. After several years as an engineer he co-founded BEWI AS, a company produc ing styrofoam boxes for the fish farming industry. Mr. Witzøe held the position as managing director of BEWI AS until 1990. Since Mr. Witzøe founded SalMar ASA in 1991 he has gained extensive experience in fish farming and process ing. In addition to being a director of SalMar ASA, Mr. Witzøe is chairman of Egersund Fisk AS and is a director of Norskott Havbruk AS and Scottish Sea Farms Ltd. Mr. Witzøe owns 90.85 % of Kverva AS, which in turn owns 53.4 % of the shares in SalMar ASA. Mr Witzøe is also a director of Kverva AS.
For SalMar, 2016 was its best year to date. Earnings were boosted by record-high salmon prices, which reached levels practically no one could have foreseen. At the same time, the challenges associated with the production of farmed salmon have never been great er. The situation was particularly demanding for the Central Norway segment. This had a negative impact on both production costs and the volume harvested.
Overall, SalMar harvested 115,600 tonnes in 2016, down 15 per cent on 2015. The SalMar Group gener ated NOK 9,030 million in gross operating revenues, a rise of 23 per cent compared with 2015. Operational EBIT leaped by 73 per cent from NOK 1,404 million in 2015 to NOK 2,432 million in 2016. Net profit for the year came to NOK 2,651 million.
The board of directors is very pleased with the 2016 result. The market has made strong headway, and consumers have remained willing to pay for salmon despite high prices through the year. On the whole, the operational challenges encountered have been handled satisfactorily.
Fish Farming Central Norway, the Group's largest fish farming segment, posted a satisfactory result, despite facing significant operational challenges. The transition to new delousing methods has been demanding and has driven up costs. Under the pre vailing circumstances, however, the change has been implemented satisfactorily.
Fish Farming Norther Norway boosted its operational EBIT by a massive 193 per cent. An increase in the harvested volume, combined with stable cost devel opments, allowed the benefits of high salmon prices to be exploited to the full. Access to production loca tions has been and remains a challenge in this region.
The results achieved by the Sales and Processing segment were strongly affected by losses associated with the contract portfolio. Although contract prices at the start of 2016 were well above those achieved in 2015, they failed to match the extremely strong rise in spot prices through the year. Framework condi tions for the operational activities at InnovaMar have also been demanding, due to the prevailing biologi cal challenges. Lower harvesting levels have affected earnings. High salmon prices, combined with poor quality raw materials, negatively affected the finan cial performance of secondary processing activities.
2016 also resulted in record earnings for Norskott Havbruk. The company achieved a steady reduction in production costs because it was able to deal suc cessfully with the biological challenges experienced in the various production regions. The company made a profit before tax of NOK 582 million. The subsidiary, Scottish Sea Farms Ltd, has gained access to addition al locations and has increased its production capacity, which will boost harvested volumes in Scotland going forward.
The Group expects to harvest a total of 131,000 tonnes of salmon in 2017, an increase of around 15,400 tonnes compared with 2016.
The board is proposing a dividend payment of NOK 12.00 per share on the basis of the year-end financial statements for 2016.
SalMar ASA is a Norwegian public limited company, whose shares are quoted on the Oslo Stock Exchange under the ticker SALM.
The Group is one of the world's largest and most efficient producers of Atlantic salmon, and is vertically integrated along the entire value chain from broodfish, roe and smolt to harvesting, processing and sales. At the close of 2016, SalMar had a total of 100 wholly owned licences for the pro duction of Atlantic salmon in Norway: 68 in central Norway (Møre & Romsdal, Sør-Trøndelag and Nord-Trøndelag), and 32 in northern Norway (Troms and Finnmark). The Group also has R&D/joint operating agreements linked to 10 R&D licenc es. SalMar has been awarded eight development licences for the realisation of its Ocean Farm concept. It was the first aq uaculture company to receive such development licences. In addition, the Group has a substantial harvesting and process ing capacity at InnovaMar in Frøya and Vikenco in Aukra.
SalMar owns 50 per cent of Scottish Sea Farms Ltd (through Norskott Havbruk AS), the UK's second largest producer of farmed salmon. In addition it has a 34 per cent shareholding in Arnarlax Hf, Iceland's largest producer of farmed salmon.
SalMar is headquartered in Frøya, Sør-Trøndelag, and the Group's registered address is Industriveien 51, 7266 Kverva.
It is SalMar's clearly expressed ambition to be the world's best aquaculture company.
SalMar's is "Passion for Salmon". SalMar puts a great deal of emphasis on farming our salmon stocks on the fishes' own terms and on outstanding performance in all aspects of the production. The vision puts human interests and motivation squarely at the heart of our operations, and is the core driver for ensuring operational efficiency, precision and perfor mance in everything SalMar do.
SalMar's business operations have two clearly defined stra tegic objectives, which underpin our strategic foundations:
On the farming side, we will produce our fish at the lowest cost by having the best operational efficiency.
On the sales and processing side, we will strive to achieve the best possible price for our salmon and ensure optimal yields.
These two goals have remained unchanged over many years, and have ensured that SalMar has maintained a leading posi tion in the global salmon industry. In the years to come, these goals will continue to underpin SalMar's strategic founda tions.
Ocean Farm. On 28 February 2016, SalMar was awarded eight aquaculture development licences for the offshore fish farm concept of its subsidiary Ocean Farming AS. This was a sufficient number for SalMar to move the project to the next phase. Ocean Farm 1 is therefore currently under construc tion in China. It will be positioned in Frohavet off the coast of Trøndelag early in the second half of 2017. The facility is a full-scale pilot that will allow many aspects of openocean salmon farming to be tested. Ocean Farm 1 will be the world's first offshore salmon farm. It builds on the same fundamental principles as the semisubmersible installations used in the oil sector. The project is a collaboration between leading firms and centres of expertise in the aquaculture and offshore industries.
Investments in increased smolt capacity. Construction of a new smolt production facility in Senja continued through out 2016. At the close of the year, the first roe were put in place, and the first smolt are expected to be delivered from the plant in the late summer of 2017. The facility will cost an estimated NOK 580 million and have a nominal annual pro duction capacity of 15 million smolt, some 4 million of which will weigh over 200g. Expansion of Fish Farming Central Nor way's main Follafoss hatchery got underway in the spring of 2016. The facility will have a nominal annual production ca pacity of approx. 20 million smolt, including the capability of delivering 4 million smolt weighing over 200g. The expansion is due to be completed in the summer of 2017. Initially, these two facility will secure complete control of SalMar's in-house production of high-quality smolt. They will also pave the way for growth in the production of large smolt.
Growth in Iceland. In June 2016, SalMar invested additional capital for growth in Iceland. Arnarlax Hf undertook a NOK 300 million share issue to acquire Fjardalax and become the largest licence owner in Iceland, as well as realising a further growth in production volume. The transaction meant that SalMar increased its indirect shareholding from 21 per cent to 34 per cent.
New CEO. On 11 May 2016, the board announced that Trond Williksen would be taking over as the Group's new CEO fol -
lowing Leif Inge Nordhammer's decision to step down. Mr. Nordhammer himself asked to be relieved of duty after hold ing the position of CEO for more than 17 years, divided into two periods. Mr. Williksen took up his position on 14 Novem ber 2016.
In March 2017, SalMar entered into a strategic partnership with Benchmark Holding PLC and its subsidiaries Salmobreed and Akvaforsk Genetics. The partnership signals a greater emphasis on SalMar's own Rauma broodstock. A joint ven ture, SalMar Genetic AS, has been established to produce roe for use in SalMar's salmon farming operations.
The Group generated gross operating revenues of NOK 9,029.8 million in 2016, compared with NOK 7,326.2 million in 2015. This corresponds to a rise of 23 per cent.
Excluding Norskott Havbruk, SalMar harvested a total of 115,600 tonnes, down from 136,400 tonnes in 2015. This corresponds to a decrease of approx. 15 per cent. Fish Farm ing Central Norway harvested 70,500 tonnes in 2016, com pared with 96,900 tonnes in 2015 – a decrease of 26,400 tonnes. Fish Farming Northern Norway increased its out put from by 5,700 tonnes from 39,500 tonnes in 2015 to 45,200 tonnes in 2016. Including SalMar's 50 per cent share of Norskott Havbruk, SalMar's overall harvested volume came to 129,600 tonnes in 2016.
The average price of salmon (NASDAQ) in 2016 came to NOK 62.7 per kg, compared with NOK 41.4 per kg in 2015. This corresponds to an increase of 51 per cent. The price rose steadily through the first half-year (from NOK 59 to NOK 65 per kg). It fell in the third quarter to around NOK 60 per kg, then picked up again in the fourth quarter to an overall aver age of NOK 67 per kg. The year's highest price was recorded in week 52 at NOK 79 per kg. Around 51 per cent of SalMar's total volume harvested in 2016 was sold under fixed-price contracts. These run for different periods, but not normally longer than 12 months. In general, the prices achieved un der such fixed-price contracts were significantly lower than
45
On the biological side, 2016 was an extremely challenging year. To enhance its delousing capacity, new non-medicinal methods were acquired and put into operation during the late winter period. The transition to new treatment methods, combined with the large numbers of salmon lice, was a challenging starting point for delivering historically good biological results. Furthermore, an outbreak of ISA was identified at one of our sites outside Frøya. This resulted in those fish stocks being harvested earlier than planned. In all, this resulted in a lower harvested volume in 2016 than in previous years. At the same time, the switch to new treatment methods was both resource-intensive and expensive. The need for a greater response capability increased the cost base for farming operations. The demanding biological situation also led to higher costs for onshore processing operations. Particular requirements with respect to handling (direct unloading from wellboats), combined with non-standard sizes and quality downgrades, affected operational efficiency and drove up costs. As a result, the cost of the harvested biomass was higher in 2016 than in 2015.
Operational EBIT for the SalMar Group came to NOK 2,431.6 million in 2016, compared with NOK 1,403.9 million in 2015. Operational EBIT is SalMar's most important measure of its performance under IFRS, since it shows the results of underlying operations during the period. Specific items not associated with underlying operations are presented on separate lines in the consolidated financial statements.
Fair value adjustments boosted profits by NOK 654.0 million in 2016. The corresponding adjustments in 2015 boosted profits by NOK 39.9 million. Fair value adjustments comprise adjustments in the fair value of the biomass, unrealise effects of forward currency contracts linked to future contract deliveries and financial salmon price derivatives (Fish-Pool), as well as provisions for loss-making contracts. Changes in the fair value adjustment of the biomass and unrealised positions on forward currency contracts have contributed a total of NOK 1,114.2 million. Changes in provisions for loss-making contracts and financial salmon price derivatives have had an opposite effect totalling NOK 460.3 million. Changes in prices towards the close of 2016, as well as higher stocks of fish held at sea, are the main reasons for the increase in the fair value of the biomass. This has also led to provisions for losses linked to fixed-price contracts and salmon derivatives.
SalMar made a consolidated operating profit of NOK 3,085.6 million in 2016, up from NOK 1,443.8 million the year before. From an operating point of view, SalMar's associates, i.e. companies in which SalMar's shareholdings give it a considerable influence, performed well. SalMar's share of the profits from these investments totalled NOK 286.8 million in 2016, most of which derives from Norskott Havbruk. The corresponding figure for 2015 was NOK 40.2 million.
Total interest and financial income for 2016 came to NOK 83.2 million, compared with NOK 4.2 million in 2015. The increase can be attributed primarily to changes in the classification of foreign exchange effects linked to sales in foreign currencies.
SalMar's total financial expenses for 2016 came to NOK 113.5 million, up NOK 9.0 million on the year before. In 2016, SalMar had a higher average interest-bearing debt than in 2015.
Net financial items for 2016 therefore came to NOK -30.4 million, such that profit before tax for the year totalled NOK 3,342.1 million, up from NOK 1,383.7 million in 2015. The tax expense for 2016 totalled NOK 691.1 million. This is NOK 436.2 million higher than in 2015, which can largely be ascribed to a higher taxable income.
SalMar made a net profit after tax for the year ending 31 December 2016 of NOK 2,651.0 million, compared with NOK 1,128.8 million in 2015.
SalMar had a positive cash flow from operating activities of NOK 2,724.6 million in 2016, compared with NOK 1,622.3 million in 2015. The largest positive items with no effect on cash flow comprise SalMar's share of the profits from associates, totalling NOK 286.8 million, and a change in fair value adjustments, totalling NOK 654.0 million. The largest negative item with no effect on cash flow comprises depreciation, amounting to NOK 358.0 million. Furthermore, the profit and loss item interest expenses has been reclassified to financing activities. During the period, SalMar reduced its working capital (change in trade receivables, inventory, trade payables, etc) by NOK 152.7 million. In 2016, SalMar paid NOK 291.0 million in corporation tax.
Net payments from investing activities totalled NOK 1,231.3 million in the period, compared with net payments of NOK 724.7 million in 2015. During the year, investments totalling NOK 1,096.8 million were made in intangible assets and property, plant and equipment. Investments in increased smolt capacity totalled NOK 440.2 million. This is part of the Group's value chain strategy, which means that SalMar will produce all the smolt transferred to its own sea farms. Construction of the Ocean Farm installation got underway in 2016, with respect to which a total of NOK 261.7 million has been paid out during the year. Furthermore, NOK 394.9 million has been spent on necessary maintenance investments. NOK 242.0 million in capital was allocated to further expansion in Iceland through participation in a share issue in Arnalax Hf. A total of NOK 100.8 million in dividends was received from associates.
In all, this gives SalMar a positive net cash flow for 2016 of NOK 2.1 million. This increased the Group's holdings of cash and cash equivalents to NOK 273.7 million at the close of the year. Unused drawing rights at the close of the year totalled NOK 3,116.0 million.
As at 31 December 2016, SalMar's balance sheet totalled NOK 13,401.7 million, an increase of NOK 2,466.4 million since the close of 2015.
The Group's intangible assets were reduced by NOK 2.7 million during 2016, due to a net change in capitalised costs linked to research and development projects. In all, the Group had capitalised intangible assets worth NOK 2,910.8 million at the close of 2016. Of this amount, the book value of 100 fish farming licences accounted for NOK 2,363.6 million.
Net payments from financing activities totalled NOK 1,491.2 million in 2016, compared with net payments of NOK 795.5 million in 2015. In 2016, SalMar paid its shareholders a dividend totalling NOK 1,125.9 million. Furthermore, credit facilities and amortising loans have been reduced by NOK 439.0 million during the year. A loan financing agreement was established with respect to the Ocean Farm project, which has resulted in a capital injection of NOK 175.0 million. Net interest and financing expenses amounting to NOK 106.3 million were paid in 2016. the close of the year, a provision of NOK 6.6 million had been made to cover unsecured claims, including own-risk liability with respect to credit insurance. At the close of 2016, the Group had equity totalling NOK 6,680.8 million, up from NOK 5,227.0 million at the close of 2015. Despite a rise in total capital, the equity ratio rose from 47.8 per cent at the close of 2015 to 49.9 per cent at the close of 2016.
The Group's non-current financial assets were worth a total of NOK 960.0 million at the close of 2016. This is an increase of NOK 323.8 million compared with 2015. In addition to an increase in the value of the Group's investment in Norskott Havbruk following record-high earnings in 2016, SalMar's investment in Arnarlax Hf has also increased.
At the close of the year, the Group's biological assets were worth a total of NOK 4,997.0 million. This corresponds to a rise of NOK 1,691.0 million compared with 2015. Measured in tonnes, fish stocks were 11 per cent higher at the close of 2016 than at the start of the year. The cost of producing the biomass rose by NOK 638.4 million, bringing total production costs to NOK 2,968.3 million. Fair value adjustment of the biomass at the close of the year totalled NOK 2,028.7 million, which is NOK 1,052.5 million higher than at the start of the year.
The combined book value of property, plant and equipment came to NOK 3,137.5 million at the close of the year, NOK 733.7 million more than the year before. The Group has several strategic growth investment programmes underway, to which a total of NOK 713.1 million has been allocated. In addition, maintenance investments totalling NOK 392.4 million have been made. Depreciation of property, plant and equipment came to NOK 353.8 million in 2016. The Group expects to pay NOK 423.2 million in corporation tax, based on its taxable income for 2016. The increase in the Group's assets during 2016 is attributable to an increase in equity of NOK 1,453.8 million, a reduction in interest-bearing debt of NOK 255.4 million and an increase in interest-free liabilities of NOK 1,268.0 million.
Net interest-bearing debt (interest-bearing debt minus cash and cash equivalents) totalled NOK 2,364.1 million at the close of the year, down from NOK 2,619.5 million at the close of 2015. In June 2014, the Group signed a new 5 years loan agreement with a consortium of Nordic banks. The financing agreement encompasses both operating credit facilities and acquisition credit, and gives the Group combined drawing rights totalling NOK 5,000 million. Apart from this main financing scheme, certain of the Group's subsidiaries have their own financing agreements, which collectively amounted to NOK 247.3 million in interest-bearing debt at the close of the year. Furthermore, the Group has ordinary leasing liabilities amounting to NOK 65.1 million. The Group's leasing agreement with respect to the InnovaMar building is, given its nature, classified as a financing agreement, the leasing liability in connection with which amounted to NOK 316.2 million at the close of the year. Next year's instalments on interest-bearing debt come to NOK 139.1 million.
The amount of capital bound up in trade receivables has been reduced. Total receivables have fallen from NOK 815.5 million at the start of the year to NOK 595.8 million at its close. This is due to the establishment during the year of agreements whereby those trade receivables that meet certain criteria are transferred successively to a credit institution. The bulk of the Group's receivables are covered by credit insurance. At Director/Employee representative Sandberg has worked for SalMar since 2014. She is currently head of Sustainability and Nutrition in the Biology Section at group level. She has experience from research and development assignments at Nutreco ARC, KPMG and SIN-TEF Fisheries and Aquaculture. She has a degree in agricultural science, majoring in aquaculture, from the Norwegian University of Life Sciences (UMB), and is currently a member of the board of the Fisheries and Aquaculture Industry's Research Fund.
Fish Farming Central Norway, the Group's largest fish-farming segment, posted strong results despite an operationally challenging year. The segment generated gross operating revenues of NOK 4,343.5 million in 2016, compared with NOK 3, 941,7 million in 2015. Operational EBIT came to NOK 1,770.2 million in 2016, compared with NOK 947.7 million in 2015.
KJELL A. STOREIDE, Director
MERETE GISVOLD SANDBERG
Mr. Storeide is a graduate of the Norwegian School of Economics and Business Administration (NHH) in Bergen. From 1990 to 2004 he was the CEO and co-owner of Stokke Gruppen AS. Mr. Storeide is chairman of several industrial companies in Norway. Mr. Storeide joined SalMar's board of directors in February 2008.
47
SALMAR ANNUAL REPORT 2016 – Passion for Salmon
Operational EBIT per kg gutted weight came to NOK 25.10 for the year as a whole, up from NOK 9.80 in 2015. The increase is attributable to a substantially higher salmon price. The segment achieved an average price rise per kg gutted weight of NOK 21.00. The cost of producing the harvested biomass was, on average, NOK 5.60 per kg higher than in 2015.
Operationally, 2016 was an extremely challenging year. Having developed a resistance to medicinal delousing treatments, lice numbers at the start of the year were high. New equipment was quickly acquired, and new treatment methods put into operation. The need for intensive delousing throughout the summer and autumn had major consequences for the segment's operational performance. In addition, the fish disease infectious salmon anaemia (ISA) was identified at one of the segment's largest fish farms in May 2016. The outbreak was dealt with in compliance with the regulations, and the biomass was harvested out. Because of this, the volume harvested in the second half-year was lower than expected. Combined with higher costs resulting from the introduction of new delousing methods, this led to a rise in the cost per kg harvested biomass. This segment undertakes the Group's entire production of organic salmon. As a consequence of the Norwegian authorities' failure to implement the EU's regulations for the organic production of food, parts of the EU market established trade barriers. This resulted in organic salmon having to be sold as conventional salmon at a lower price.
Fish Farming Central Norway harvested a total of 70,500 tonnes in 2016, compared with 96,900 tonnes in 2015. A total of 32,100 tonnes was harvested in the first half, and 38,400 tonnes in the second half.
The premature harvesting out of the spring generation (transferred to the sea in the spring of 2015), made it possible to produce more of the autumn generation (transferred to the sea in the autumn of 2015). At the close of the year, the standing biomass was 19 per cent higher than at its start. SalMar expects this segment to harvest around 85,000 tonnes in 2017, 21 per cent more than in 2016.
2016 was an extremely good year for Fish Farming Northern Norway. It enjoyed the full benefit of historically high salmon prices, achieved a 14 per cent increase in its harvested volume and kept its cost level unchanged from 2015. As a result, the segment posted record-high profits in 2016.
Fish Farming Northern Norway generated gross operating revenues of NOK 2,799.2 million in 2016, compared with NOK 1,646.9 million in 2015. Operational EBIT came to NOK 1,480.3 million in 2016, compared with NOK 505.8 million in 2015.
Operational EBIT per kg gutted weight came to NOK 32.80 in 2016, up from NOK 12.80 in 2015. The increase is attributable to substantially higher salmon prices; on average, the segment achieved a price rise per kg harvested salmon of NOK 20.30. Average production costs for the harvested biomass rose by a mere NOK 0.30 per kg compared with 2015.
In general, the salmon lice situation has been substantially better in this region than in central Norway. However, in certain regions of southern Troms, lice numbers have occasionally been challenging. The segment has built up its response capability, with new non-medicinal methods. Access to production locations has been and will remain a challenge for the segment. In the past couple of years, a total of 18 licences have been obtained in this region through the acquisition of Villa Organic. A restructuring process has been implemented to optimise production, by applying for an increase in the maximum allowable biomass (MAB) at existing sites, as well as gaining access to new locations. This latter has proved more demanding than initially anticipated.
Fish Farming Northern Norway harvested a total of 45,200 tonnes in 2016, compared with 39,500 tonnes in 2015. 60 per cent of the volume was harvested in the first half-year.
SalMar expects this segment to harvest around 46,000 tonnes in 2017, marginally up on 2016.
This segment is responsible for selling the entire Group's harvested volume. Salmon produced by the Group itself have been purchased at the market price. As a result of higher salmon prices, the segment's gross operating revenues rose from NOK 7,295.0 million in 2015 to NOK 9,035.8 million in 2016. Operational EBIT came to NOK -685.8 million in 2016, compared with NOK 72.6 million in 2015.
In 2016, around 51 per cent of the volume harvested was sold under fixed-price contracts significantly below the spot/ purchase price. This explains the segment's negative contribution to earnings. Fish sold in the spot market has provided satisfactory margins. Antibiotic-free Norwegian salmon and a weak NOK have made the industry more competitive in the American market. SalMar supplied a record-high volume to this market in 2016. Deliveries to this market are expected to continue in the years ahead.
A total of 95,900 tonnes of salmon was harvested at wInnovaMar in 2016, a decrease of 32,200 tonnes compared with 2015. The reduction in capacity utilisation has had a negative impact on profitability. Biological production determines the level of activity at InnovaMar. 2016 was therefore challenging. Substantial variations in harvested volume and
2016 was an extremely good year for Norskott Havbruk. The company increased its gross operating revenues by NOK 222.1 million, from NOK 1,498.5 million in 2015 to NOK 1,720.6 million in 2016. Lower costs and a slight rise in the harvested volume boosted Operational EBIT by NOK 352.3 million, from NOK 121.6 million in 2015 to NOK 473.9 million in 2016.
In total, the company harvested 28,000 tonnes in 2016, up from 27,000 tonnes the year before. The harvested volume in 2017 is expected to be around 30,000 tonnes.
Operational EBIT per kg gutted weight came to NOK 16.90 in 2016, up from NOK 4.50 per kg in 2015. The rise is attributable to higher salmon prices, but also reduced production costs. The company's board has decided to invest in a new hatchery. The facility is expected to cost GBP 35 million, and will have an annual production capacity of approx. 10 million smolt.
demands for direct unloading from wellboats have made it difficult to achieve cost-optimal operations. Despite this, however, the unit posted consistently good results. The processing activities also faced challenging framework conditions. Periodically poor quality raw materials result weakened efficiency, and volatile salmon prices make it hard to make a profit from secondary processing. As a result, the business made a negative contribution to the segment's earnings. Nevertheless, SalMar believes it is strategically important to process a relatively large proportion of the raw material in Norway. This increases the quality of the product sold to the customer, allows for the efficient handing of by-products and saves on haulage costs. Arnarlax Hf is recognised as an association, with SalMar's share (20.1 per cent in the first half and 34 per cent in the second half) of the company's profit or loss after tax (and fair value adjustment of the biomass) being recognised as financial income. SalMar's share of the company's profit after tax came to NOK 52.2 million in 2016. The parent company's financial statements and allocation of the profit for the year The parent company, SalMar ASA, is a shareholding and administrative entity. Group management and administrative resources are employed by this company. In 2016, it employed a total of 34 full-time equivalents.
Norskott Havbruk is recognised as an association, with Sal-Mar's 50 per cent share of the company's profit or loss after tax and fair value adjustment of the biomass being recognised as financial income. SalMar's share of the company's profit after tax in 2016 came to NOK 236.6 million, compared with NOK 41.4 million in 2015.
Arnarlax harvested its first salmon in 2016. By year-end it had harvested a total of 4,000 tonnes. Gross operating revenues came to NOK 247.4 million in 2016.
Operational EBIT in 2016 totalled NOK -1.7 million. The result was affected by the high costs of first-generation production, with a long production time, relatively high mortality rate and high processing and logistics costs. To this must be added non-recurring costs associated with the acquisition of Fjardalax. Towards the close of 2016, the company started harvesting its second generation of fish, ie fish transferred to the sea in 2015. This generation has a substantially lower production cost.
The company expects to harvest around 10,000 tonnes of salmon in 2017.
The company made a net profit for the year of NOK 2,337.9 million in 2016, compared with NOK 942.9 million in 2015. The bulk of its revenues are associated with investments in subsidiaries and associates. 2016 was a good year for the company's subsidiaries. As a result, NOK 2,522.6 million in dividends/ group contributions was recognised by SalMar ASA. Furthermore, the company has recognised NOK 100.8 million in dividends from its investments in the associate Norskott Havbruk. SalMar ASA administers the Group's main financing activities and received interest on loans to subsidiaries in the amount of NOK 67.8 million, while interest expenses relating to financing came to NOK 46.5 million.
SalMar ASA had capitalised assets worth NOK 7,634.6 million at the close of 2016. Non-current financial assets accounted for NOK 5,016.8 million of this amount, while loans to subsidiaries totalled NOK 2,583.6 million. Current receivables totalled NOK 2,595.5 million and mainly comprise dividends/ group contributions receivable from subsidiaries. The company had cash and cash equivalents totalling NOK 8.2 million at the close of the year. As at 31 December 2016, equity came to NOK 2,078.3 million, corresponding to an equity ratio of 27 per cent. Non-current liabilities comprise interest-bearing debt amounting to NOK 1,950.0 million. Current liabilities totalled NOK 3,606.3 million, of which dividend provisions accounted for NOK 1,347.8 million and group contributions owing to subsidiaries for NOK 2,157.5 million.
The board is proposing payment of a dividend of NOK 12.00 per share for the 2016 financial year. The board proposes the following allocation of the year's net profit:
Ms Nedreberg holds the position as CEO of Adresseavisen Gruppen AS and Adresseavisen AS. She has extensive experience at executive level from positions in large corporations, including board positions. Nedreberg has served on the board of SalMar since 31.05.2012.
GEIR BERG Director/Employee representative
Geir Berg has been employed at SalMar since March 2013. He has been Production Manager Fish Farming since May of that year. Mr. Berg has 20 years experience of working in the public sector and around 10 years from the private sector. Before joining SalMar he was an airport manager with Avinor. Mr. Berg has previously held both operational and administrative positions in a variety of business sectors.
49
| • Dividend provision | NOK 1,347.8 million |
|---|---|
| • Transferred to other equity | NOK 990.1 million |
| • Total | NOK 2,337.9 million |
At the close of the year the company had distributable reserves of NOK 2,050.0 million.
The financial statements for 2016 have been prepared on the assumption that the company is a going concern, as stipulated in Section 3-3a of the Norwegian Accounting Act. With reference to the Group's financial results, financial position and forecasts for years to come, it is hereby confirmed that grounds for this assumption do exist. In the assessment of the board of directors, the Group's financial position is sound.
Risk management is a key function of the management team. The Group has systems and routines in place to moni tor important risk factors in all business areas, and particular emphasis is placed on the control and follow up of produc tion facilities in accordance with the quality handbook and defined operating standards.
It is the CEO's responsibility to ensure that the Group oper ates in compliance with all relevant legislation and operating guidelines for group entities. Follow-up and control of risk factors, as well as compliance with the Group's values and code of conduct, is carried out in the line organisation as part of day-to-day operations.
SalMar's most important operational risk relates to the bio logical development of its fish stocks, at both its hatcheries and sea farms. Even though SalMar develops and imple ments risk-reducing measures, the nature of the industry is such that the inherent biological risk will always be present. In recent years, the aquaculture industry has faced chal lenges associated with the increasingly widespread pres ence of salmon lice and greater prevalence of resistant lice (ie lice that have become less sensitive to the preparations and medicines which have been effective in the treatment of lice in recent decades). This has forced SalMar, along with the rest of the industry, to change the methods used to deal with the lice situation.
SalMar takes a holistic, strategic approach to biological risk, including lice, including preventive measures and activities designed to limit damage to its stocks. SalMar continuously makes operational assessments to protect the welfare of its fish.
Access to suitable production locations is a crucial preven tive measure. For SalMar, it is important that production take place in areas that have the capacity needed to sustainably produce the volumes involved. The Ocean Farm project could lead to new and better locations being used. Selective breed ing and the genetic development of a more robust salmon is another important preventive measure to reduce biological risk. Measures to reduce the length of time the fish spend at sea through the transfer of larger smolt, for example, repre sent a strategic focus area for SalMar.
Our operating procedures are designed to reduce biological risk. With respect to the lice situation, biological delousing methods involving the use of cleaner fish produced in-house is an extremely important measure. SalMar has invested heavily in a dedicated cleaner fish production facility at Langstein in Trondheimsfjord. Furthermore, substantial in vestments have been made in measures to prevent salmon lice entering the net-pens in the form of lice skirts. Vaccina tion against various fish diseases is also a key aspect of our operating procedures.
Over time, SalMar has built up an effective response capabil ity to deal with biological challenges. Our harvesting capacity at InnovaMar enables us to respond effectively. Furthermore, SalMar has good access to wellboat capacity. During 2016, a substantial delousing capacity was built up in the form of mechanical delousing equipment that also collects the lice to prevent reproduction. SalMar's goal is for its Central Norway segment to be able to delouse 80 per cent of its standing biomass within a period of 10-14 days.
It will always be necessary to use medication in connection with any form of biological production. However, such medi cation must be applied prudently to prevent the develop ment of resistance.
The follow up of internal controls associated with financial reporting is carried out through management's day-to-day supervision, the process owners' follow up and monitoring by the board's Audit Committee. Non-conformances and improvement areas are followed up and remedial measures implemented. Financial risk is managed by a central unit at head office, and financial hedging instruments are employed where they are considered appropriate.
The bulk of the Group's output is sold internationally, with accounts settled largely in EUR, USD, GBP and JPY. Changes in exchange rates therefore represent both a direct and indi rect financial risk for the Group. Sales in foreign currencies are hedged on the transaction date, while contract sales are hedged when the contract is entered into. The company uses forward contracts as hedging instruments. Foreign exchange exposure linked to the Group's costs is, however, more limited, since input factors and salaries are paid largely in NOK (Norwegian kroner). Use of forward currency contracts is de scribed in Note 11 to the financial statements.
The borrowing portfolio is currently at floating interest rates, which means that the Group is affected by changes in inter est rates.
The risk of a counterparty not having the financial resources to meet his obligations has, historically, been considered low, and SalMar's losses resulting from bad debts have been small. The Group has guidelines to ensure that sales are made only to customers who have not previously had material payment problems, and that outstanding sums do not exceed defined credit limits. Credit insurance is used in cases where counter party risk is not considered low.
The Group does not have any significant credit risk associ ated with an individual counterparty or counterparties which may be considered a group due to similarities in the credit risk they represent.
SalMar's entire business is related to salmon, and is therefore directly and indirectly affected by developments in salmon prices. The Group's profitability and cash flows are strongly correlated with movements in the price of salmon. Historical ly, salmon prices have been highly volatile seen in an annual, quarterly and monthly perspective. In 2016, the spot price of Atlantic salmon fluctuated between NOK 48.05 and NOK 79.22 per kg, measured weekly. The global salmon market is largely a fresh-fish market, where most of the fish harvested is sold immediately to processing companies or directly to the consumer. For several years, growth in demand has been relatively stable, while growth in supply has varied more sub stantially from year to year. In addition to planned output volumes defined by the number of smolt released, supply is also affected by a number of external factors. Fluctuations in sea temperatures, the spread of salmon lice and outbreaks of disease are all factors which, directly or indirectly, affect fish growth and thus supply. As a consequence, relatively substantial variations in supply may occur within short pe riods of time. With relatively stable demand, this can result in considerable price instability. SalMar sells a portion of its output through fixed-price contracts. The Group has drawn up guidelines for such contracts to limit exposure to salmon price volatility. It is the Sales and Processing segment which sells the entire Group's harvested volume. The impact of the Group's fixed-price contracts is therefore recognised in this segment's financial statements. Approximately 51 per cent of the Group's volume was sold under fixed-price contracts in 2016. Over the past few years, there has been a significant shift towards ever greater reliance on competence-driven devel opment, although experience-based knowledge still plays a key role. As a result, the industry is increasingly dependent on close cooperation with the public authorities, educational and R&D establishments, as well as sector-specific centres of expertise. SalMar has for some years been strengthening its relations with various research establishments and the sup ply industry. As before, the strategy behind our focus areas is embedded in the organisation through the SalMar School and other meeting places, such that both company-wide and department-specific issues are addressed. We continue to focus on smolt quality, salmon lice and biomass control, while genetics is an area to which greater emphasis is being given. In 2016, SalMar achieved promising results relating to biomass control, and we hope this will materialise in coming years. However, most resources have been devoted to our ongoing efforts to combat salmon lice, which will continue with undiminished vigour. In addition to collaborations with the supply industry, SalMar has high hopes for the newly established Salmon Lice Task Force, a research programme under the auspices of the Norwegian University of Science and Technology (NTNU) that will run for the next five years. The project is largely funded by the aquaculture industry in central Norway, and SalMar has been instrumental in building up the programme. For many years, SalMar has engaged in active partnerships
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
SalMar's objective is to have sufficient cash, cash equiva lents or medium-term credit facilities to meet its short-term funding requirement. The Group prepares rolling cash-flow forecasts to ensure that it has sufficient liquidity at all times. Furthermore, a flexible financing structure is maintained through established credit lines. Unused credit facilities are described in the comments on the Statement of Cash Flow.
The Group's equity ratio, its prospects for future profits and current credit facilities mean that the Group's liquidity risk is considered to be low.
with various R&D environments, including partnerships relat ing to the operation of R&D licences. The scale and profes sionalism of important development activities has increased and continues to do so. For SalMar it is important to be a pro fessional, but demanding partner, such that the outcomes of ongoing trials are as relevant as possible, while plans and protocols reflect the practicalities of commercial fish farming. SalMar has allocated personnel specifically to organising and assisting R&D environments involved in such collaborative efforts, while production staff are becoming increasingly experienced with regard to the best way to safeguard re search results in a busy working day. Proximity to the re search, and the opportunity to influence both its planning and its area of focus are important sources of motivation for SalMar. The development of vaccines, optimisation of the use of medication, feeding and nutrition, and technological challenges posed by large-scale operations are examples of important areas for this activity.
In recent years, SalMar, through its subsidiary Ocean Farm ing AS, has been working with leading international maritime environments to develop a new equipment concept that
BENTE RATHE Director
Ms Rathe has an extensive experience from both operational management and leading positions on the boards of many major Nordic companies. Ms Rathe has served on the board of SalMar since 03.06.2015.
will make it possible to site fish farms further out to sea and in more exposed locations. The design of this installa tion is based on advanced offshore concepts developed for the petroleum industry. It has been successfully tested at MARINTEK's marine laboratory. Through the development and realisation of new technology, as well as operational experience, Ocean Farming will acquire the particular com petence required for this next-generation of fish farming. Ocean Farming received grants from Innovation Norway during the project's feasibility study phase.
The new Ocean Farm installation will be extremely escapeproof, and the construction – as well as its siting in more exposed areas further out to sea – has the potential to reduce the biological challenges posed by disease and salmon lice.
On 28 February 2016 SalMar was awarded eight develop ment licences for Ocean Farming's offshore fish farming concept. SalMar now has a sufficient number of develop ment licences, and construction of Ocean Farm 1 is currently underway in China. The installation will be positioned in Fro havet, off the coast of Trøndelag, in the second half of 2017. Ocean Farm 1 is a full-scale pilot installation, where many aspects of salmon farming out at sea will be tested out.
Ocean Farm 1 will be the world's first offshore salmon farm. It builds on the same fundamental principles as the semisubmersible installations used in the oil sector. The project is a collaboration between leading firms and cen tres of expertise in the aquaculture and offshore industries.
It is SalMar's goal to secure long-term profitability and growth through sustainable aquaculture and processing activities, and by acting as a responsible corporate citizen. For SalMar, sustainability means doing business in an ethical manner and maintaining high moral standards, as well as contributing to even greater awareness of the environment in which we op erate every day. We will protect the environment and ensure that it is managed in a way that benefits future generations. As an employer, SalMar aims to provide a safe and developing workplace. The Group works continuously to enhance meas ures and processes associated with health, safety and the environment (HSE), as well as provide professional develop ment opportunities for managers and employees through, among other things, the SalMar School.
Pursuant to section 3-3c of the Norwegian Accounting Act, the board of directors has drawn up guidelines covering busi ness ethics and corporate social responsibility. These are available from the Group's website www.salmar.no. SalMar's activities in the area of social responsibility, including human rights, labour rights, the working environment, equality, dis crimination, anti-corruption and the external environment, are described in a separate section of this annual report on pages 27 to 29. . In addition, a separate corporate sustain ability report for 2016 has been published. This report is also available from the Group's website.
SalMar's shares traded at prices ranging from NOK 149.50 to NOK 275.90 in 2016. The final closing price on 30 December, the last day of trading in 2016, was NOK 258.10.
The Annual General Meeting of 7 June 2016 authorised the board to increase the company's share capital. The authorisa tion was an extension of one granted at the 2015 AGM.
The authorisation permits the board to increase the com pany's share capital by up to NOK 2,829,667.50 though the issue of up to 11,318,670 shares in order to finance invest ments and the acquisition of businesses through cash issues and contributions in kind, as well as reward senior executives participating in ongoing option programmes.
Given the purpose of the authorisation, the board of direc tors may need to waive the preference rights of existing shareholders. Such a move is allowable under the terms of the authorisation.
The AGM also authorised the board of directors to acquire the company's own (treasury) shares in an amount such that the total holding of treasury shares does not at any time exceed 10 per cent of the outstanding share capital. The authorisation may be used to purchase company shares in connection with stock option schemes for senior management and as a means of returning value to existing shareholders.
The board was also authorised to introduce a new sharebased incentive scheme for senior executives. The programme entitles participating employees to receive shares free of charge. Entitlements are accrued over a three-year period. The new share-based incentive scheme is intended to be an annual programme, in which awards and performance criteria are determined each year. It was decided that the maximum number of shares under the 2016 scheme should not exceed 350,000. The board was authorised to draw up more detailed guidelines.
In addition, the board was authorised to take out a con vertible loan to enable the company to make use of such financial instruments as part of its overall financing at short notice. The authorisation applies to an overall loan of NOK 2,000,000,000. The capital increase resulting from conver sion may not exceed NOK 2,829,667.50, and must be seen in the context of the authorisation to increase the company's share capital, such that both authorisations may not exceed 10 per cent of the total number of shares in the company.
All authorisations granted to the board remain valid until the 2017 AGM, which will be held on 6 June.
On 16 December 2016, the board approved a share-based incentive scheme pursuant to the authorisation granted at the AGM. The final scheme adopted in 2016 encompasses 198,281 shares, and has a duration of three years.
SalMar ASA has one main shareholder, Kverva AS, which owns 53.4 per cent of the company's shares. Kverva AS is controlled by SalMar's founder Gustav Witzøe, who is also a member of the board of directors and of group management in his capacity as director of business development/processing.
The company's 20 largest shareholders own a total of 78.30 per cent of the shares. As at 31 December 2016, SalMar ASA was the sixth largest shareholder with a holding of 984,368 shares or 0.87 per cent. SalMar acquired no treasury shares in 2016.
The articles of association contain no stipulations limiting the transferability of the company's shares. Furthermore, the company is not aware of any agreements between share holders that limit the possibility of trading in or exercising voting rights with respect to shares.
The Group's board of directors comprises five members elected by the shareholders and two employee representa tives. Three of the board members are women, including one employee representative. Female representation among the shareholder-elected directors corresponds to 40 per cent, which is in compliance with Norwegian law.
At the Group's AGM on 7 June 2016, Kjell A. Storeide and Tove Nedreberg's terms as members of the board came to an end. Kjell A. Storeide and Tove Nedreberg were re-elected for a period of two years.
Information relating to the competence and background of the various board members is available from SalMar's website www.salmar.no.
term of two years.
Corporate governance SalMar complies with the legislation, regulations and recom mendations to which a public limited company is subject, in cluding Section 3-3b of the Norwegian Accounting Act on corporate governance, day-to-day obligations of a company listed on the Oslo Stock exchange and the current version of the Norwegian Code of Practice for Corporate Governance. These principles are discussed in detail in a separate chapter of the annual report. The price of Atlantic salmon (NASDAQ) rose steadily through the first half of 2016 (from NOK 48 per kg to NOK 76 per kg), and then fell through the third quarter to around NOK 52 per kg. However, in the fourth quarter, the price rose to a new record of almost NOK 80 per kg. The year's highest price was recorded in week 52 at NOK 79.22 per kg. Strong prices throughout 2016 pushed the yearly average to an unprec edented NOK 62.68 per kg, an increase of 51 per cent from 2015.
1 per cent or 1,000 tonnes, while output from the remaining markets rose by 2 per cent.
Altogether, Norwegian exports of Atlantic salmon totalled approx. 1,127,000 tonnes round weight in 2016, a 5 per cent decrease from 2015. However, substantially higher salmon prices boosted their value by 29 per cent. Norwegian salmon exports were worth almost NOK 61 billion in 2016, NOK 13.7 billion more than the year before. Norway exports 76 per cent of its volume to the EU, which received a combined total of 859,000 tonnes of Norwegian salmon. Poland increased its imports of Norwegian salmon by 1 per cent, while France reduced its imports of Norwegian salmon by 7 per cent. Over all, the Central Asian markets (Vietnam/China/Hong Kong) cut their imports by 5 per cent.
At the same AGM, Helge Moen and Endre Kolbjørnsen were re-elected as members of the Nomination Committee for a Markets Following increases in the global supply of Atlantic salmon of 9 per cent in 2014 and 4 per cent in 2015, output fell by 7 per cent in 2016. As a result, just under 2.2 million tonnes of Atlantic salmon was harvested worldwide in 2016. Norway reduced its overall output by 5 per cent or around 63,100 tonnes during the year. In Chile, the steady growth seen in previous years reversed, and the region's output of salmon fell by 16 per cent, corresponding to 93,800 tonnes. Output in North America rose by 6 per cent or around 9,100 tonnes during the period. The UK reduced its output by 4 per cent or 6,200 tonnes. Output from the Faeroe Islands decreased by At the close of 2016, the standing biomass in Norway stood at 699,000 tonnes round weight, down from 700,300 tonnes at the close of 2015. The biomass in the UK at the close of the year stood at 95,100 tonnes, up 10 per cent on the year before. Chile's biomass was down on 12 months before, and totalled 251,800 tonnes. The total biomass in the Faeroes was estimated at 52,000 tonnes at the close of 2016, a 19 per cent increase compared with a year before. Preliminary forecasts for 2017 (Kontali) indicate a global rise in output of around 2 per cent. The largest contributor is Chile, which is expected to increase its output by 3 per cent (17,500 tonnes). Output from Norway is expected to remain stable, with zero growth in 2017. Atlantic salmon farmers in both the UK and the Faeroes are expected to increase their output by 8 per cent, while producers in North America are expected to reduce their output by 4 per cent.
The NOK strengthened against the EUR, USD and GBP through 2016, which may have helped to reinforce the effect for customers who pay in local currencies. The EUR, GBP and USD strengthened by 5.82 per cent, 18.80 per cent and 2.63 per cent respectively during the period.
SalMar had direct sales to over 40 different countries in 2016. SalMar's most important regional markets in 2016 were Europe, with Poland, Lithuania and Germany as the largest national markets. The next largest market was Asia, with Japan, South Korea, Vietnam and Singapore as major individual markets. Following the discontinuation of sales to Russia in 2014, North America has become the third largest regional market, with the USA as the largest national market. SalMar achieved particularly strong growth in the American market in 2016.
| 53 | |
|---|---|
By means of hard work and dedication over many years, SalMar has built up a strong position in a growing aquaculture industry. Norway in general, and central Norway in particular, affords excellent natural fish farming conditions, and SalMar will continue to manage these resources in the best possible way for its shareholders, employees, customers and affected local communities.
Based on its strong competitive and financial position, the SalMar Group aims to retain its standing as one of the world's leading aquaculture companies, with further growth and improved profitability in 2017. The board is of the opinion that this is something SalMar is well positioned to achieve.
SalMar's share of the volume harvested by Norskott Havbruk (50 per cent) in 2017 is expected to total approx. 15,000 tonnes. In Iceland, Arnarlax, 34 per cent of which is owned indirectly by SalMar, expects to harvest 10,000 tonnes in 2017. Around 45 per cent of the volume is expected to be harvested in the first half of the year, with the remaining 55 per cent being harvested in the second half. At the time of writing, the contract rate for 2017 comes to just over 40 per cent of the expected volume. The average price and volume of the contract portfolio will remain relatively stable throughout 2017. Overall, the average price for 2017 is below the current Fish-Pool forward price.
Although considerable uncertainty attaches to an assessment of future circumstances, both on the market and production sides, the board considers the Group's outlook to be extremely bright.
The lice situation experienced by Fish Farming Central Norway remains challenging. The regulatory regime for the treatment of lice compels the industry to ensure that during the spring of 2017 there shall be no more than 0.2 louse per fish. This is to ensure that wild salmon have a safe journey on their way out to sea. Intensive delousing treatments makes farmed salmon less robust and increases the risk of mortality. The organisation's emergency response capability has therefore been put on high alert. This capability is costly, but necessary. SalMar is working continuously to be in a good position to deal with any biological challenges. This is achieved through investments in important tools, such as the capacity to produce larger smolt and so reduce the time the fish spend at sea, the use of cleaner fish as a delousing method, wellboats and mechanical equipment to provide sufficient delousing capacity, and, if necessary, sanitary harvesting. Follafoss in Trøndelag is being expanded, and investments are being made to increase cleaner fish capacity. In total, these investments amount to some NOK 260 million. Investment in the Ocean Farm installation will come to NOK 270 million in 2017. Further investments in mechanical delousing equipment are also planned. Total investments in 2017 are expected to come to NOK 850 million. From a financial performance point of view, 2016 was a very good year for SalMar. The board deems SalMar's financial position to be extremely robust and is therefore recommending a dividend of NOK 12.00 per share. In the opinion of the board, SalMar's financial capacity for continued growth is strong.
SalMar expects to harvest more fish in 2017 than in 2016. This is primarily due to the fact that SalMar had a larger number of individual salmon at its sea farms at the start of 2017 than it had a year before. Overall, fish stocks are 11 per cent higher. Based on 100 wholly owned licences and joint operation of 11 licences owned by collaborating partners, SalMar expects to harvest a total of 131,000 tonnes in 2017.
Feed is the most important cost component in the farming of salmon, accounting for 55-60 per cent of total production costs. So far, there are no indications of any material changes in feed prices for 2017 compared with 2016.
In total, this means that SalMar expects the cost price of the harvested biomass to be slightly lower in 2017 than in 2016.
SalMar has a high emergency response capacity on the harvesting side, so that extraordinary incidents can be dealt with in the prescribed manner. In addition, efforts are constantly being made to develop the most sustainable operating areas and the best locations. In this context the realisation of the Ocean Farm installation will be a historic milestone. The award of development licences was the trigger for this pilot project, in which SalMar is investing around NOK 690 million. SalMar is convinced that fish farming must be carried out on the fish's terms, and not be constrained by equipment limitations. The SalMar culture, expressed through our corporate tenets, is fundamental to the entire business, and our vision, a "Passion for Salmon", is the lodestone that guides us on our way towards realising our ambition of being the world's best aquaculture company. SalMar's employees are our most important resource in our quest for further success. Continuous development of the organisation is therefore a key focus area for the Group. The board would like to thank all the company's employees for their dedicated efforts, on which the SalMar Group's long-term success is based.
SalMar will continue its ongoing maintenance and upgrade investment programme, and expects to invest around NOK 275 million in this area in 2017. The bulk of this will be associated with marine-phase production. The investment in increased smolt capacity in Senja will be completed in 2017. At the same time, SalMar's main smolt production facility at
Gustav Witzøe
Director
Frøya, 20th of April 2017
Tove Elin Nedreberg Director
Geir Berg Director/Employee representative
Bjørn Flatgård Chair
Kjell A. Storeide Director
Bente Rathe Director
Trond Williksen President & CEO
Merete Gisvold Sandberg Director/Employee representative
55
criteria for the coming year. Variable salary increments under the scheme may not exceed 33% of the individual executive's basic salary. Within this framework, individual bonuses are determined on the basis of an overall assessment of contribution, performance, development and results achieved.
The intention is that the incentive scheme shall be continued with the establishment of annual programmes. The board will adjust these annual programmes as it deems necessary, and each individual programme will be submitted to the AGM for approval. A total of three programmes are in effect in 2017.
SalMar has a share-based incentive scheme for senior executives in the Group. The first such programme was approved by the AGM on 4 June 2014. The programme encompasses incumbents of senior positions and key individuals within the Group. The programme entitles the employee to receive shares free of charge. This entitlement accrues over a three-year period. The individual employee may be awarded share entitlements worth the equivalent of 6 months' salary. Accrual of 2/3 of the entitlements depends on the achievement of predefined performance criteria. The value of the shares released under the various programmes in an individual year may not exceed one full year's salary. ance pay of 6 to 12 months may be paid. Benefits-in-kind The Company shall not offer benefits-in-kind over and above these which are normal for senior executives in comparable companies. Other variable elements of remuneration In addition to that stipulated above, the Company may not offer senior executives any variable elements in the remuneration they receive or special benefits that supplement their basic salary.
Members of group management participate in the Group's
general pension scheme. The scheme is a defined contribution plan and lies within the framework stipulated in the Mandatory Occupational Pensions Act.
In principle, senior executives must serve a 6-month period of notice. In selected cases, and depending on the position, sever-
The Company's senior executive remuneration policy for the 2016 financial year has been carried out in accordance with the statement for 2016 adopted by the AGM on 7 June 2016.
Pursuant to section 6-16a of the Public Limited Companies Act, the board of directors of SalMar ASA (the Company) has issued the following statement containing guidelines for the determination of salary and other benefits payable to the Company's CEO and other senior executives (collectively termed "senior executives") in the 2017 financial year. The statement was approved by the board of directors of SalMar ASA on 20 April 2017. In accordance with the provisions of sections 6-16a and 5-6(3), the guidelines will be submitted to SalMar ASA's Annual General Meeting (AGM) on 6 June 2017 for a consultative vote, with the exception of clause 3 "Share-based incentive schemes", which will be submitted to the AGM for approval.
The guidelines in clause 3 "Share-based incentive schemes" are binding on the board. The remaining guidelines are not binding, though any deviations therefrom must be decided by the board. In the event of any such decision, the reason for deviating from the guidelines must be noted in the board meeting's minutes.
The board of directors determines the salary and other benefits payable to the CEO. The CEO determines the salary and other benefits payable to other senior executives. The board shall exercise general oversight of the remuneration paid to other senior executives, and may issue more specific guidelines for the remuneration of other senior executives in addition to those presented below. If the CEO wishes to offer remuneration to senior executives that exceeds such more specific guidelines, a proposal therefor shall be submitted to the board of directors for approval.
The Company's senior executive remuneration policy is based on the following main principles:
On the basis of these main principles, the board has drawn up the following remuneration structure for the company's senior executives.
Basic salary is the main element in the executive's compensation package. Basic salary shall correspond to the going rate in the market, and shall reflect the individual position's duties and level of responsibility.
SalMar has a bonus scheme for group management that is determined by the board of directors. The board carries out an annual assessment of the scheme and determines the bonus
Once harvested, the salmon is processed to varying degrees, transforming it into a great many different products.
59
| OPERATING REVENUES AND OPERATING EXPENSES | NOTE | 2016 | 2015 |
|---|---|---|---|
| Sales revenues | 11, 23 | 8 963 239 | 7 303 506 |
| Other operating revenues | 8 | 66 575 | 22 696 |
| Total operating revenues | 9 029 814 | 7 326 202 | |
| Change in stocks of goods in progress and finished goods | -395 871 | -246 712 | |
| Cost of goods sold | 4 396 689 | 3 809 523 | |
| Payroll costs | 19,24,25 | 861 534 | 765 881 |
| Depreciation of PP&E and intangible assets | 4,5 | 358 020 | 307 280 |
| Write-downs of PP&E | 4,5 | 0 | 14 169 |
| Other operating expenses | 5,12,21,24,26 | 1 377 795 | 1 272 186 |
| Total operating expenses | 6 598 168 | 5 922 328 | |
| Operational EBIT | 2 431 647 | 1 403 873 | |
| Fair value adjustments | 14 | 653 955 | 39 932 |
| Operating profit | 3 085 602 | 1 443 805 | |
| Income from investments in associates | 9 | 286 844 | 40 242 |
| FINANCIAL ITEMS | |||
| Interest income | 5 014 | 3 477 | |
| Financial income | 78 142 | 685 | |
| Interest expenses | 17 | 106 328 | 98 780 |
| Financial expenses | 7 193 | 5 744 | |
| Net financial items | -30 366 | -100 362 | |
| Profit before tax | 3 342 080 | 1 383 686 | |
| Tax | 18 | 691 090 | 254 891 |
| Net profit for the year | 2 650 990 | 1 128 795 | |
| COMPREHENSIVE INCOME | |||
| Items which may subsequently be reclassified to profit & loss | |||
| Translation differences and items of comprehensive income in associates | -105 325 | 58 475 | |
| Translation differences in subsidiaries | -2 056 | 4 705 | |
| Cash flow hedging after tax | 11 516 | 0 | |
| Total comprehensive income for the year | 2 555 125 | 1 191 975 | |
| Allocation of the year's net profit: | |||
| Non-controlling interests | 6 | 13 910 | 25 506 |
| Shareholders in SalMar ASA | 2 637 079 | 1 103 289 | |
| Allocation of the year's total comprehensive income: | |||
| Non-controlling interests | 6 | 13 910 | 25 506 |
| Shareholders in SalMar ASA | 2 541 214 | 1 166 469 | |
| Earnings per share | 28 | 23,51 | 9,85 |
| Diluted earnings per share | 28 | 23,43 | 9,83 |
NOK 1000
| ASSETS | NOTE | 2016 | 2015 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| INTANGIBLE ASSETS | |||
| Licences, patents, etc | 4,20 | 2 464 332 | 2 466 171 |
| Goodwill | 4 | 446 465 | 447 372 |
| Total intangible assets | 2 910 796 | 2 913 542 | |
| PROPERTY, PLANT & EQUIPMENT | |||
| Land, buildings & other real property | 5,20 | 882 066 | 617 182 |
| Plant, equipment & operating consumables | 5,20 | 1 981 840 | 1 546 727 |
| Vessels, vehicles, etc | 5,20 | 273 616 | 239 863 |
| Total property, plant & equipment | 3 137 522 | 2 403 772 | |
| NON-CURRENT FINANCIAL ASSETS | |||
| Investments in associates | 9 | 908 400 | 627 681 |
| Investments in shares & other securities | 10 | 289 | 289 |
| Pension fund assets | 10,12,19 | 1 379 | 1 397 |
| Other receivables | 10,12,24 | 49 949 | 6 840 |
| Total non-current financial assets | 960 017 | 636 206 | |
| Total non-current assets | 7 008 335 | 5 953 521 | |
| CURRENT ASSETS | |||
| Biological assets | 13,20 | 4 997 001 | 3 306 052 |
| Other inventory | 13,20 | 224 783 | 328 216 |
| Total inventory | 5 221 784 | 3 634 268 | |
| RECEIVABLES | |||
| Trade receivables | 10,12,20 | 595 773 | 815 540 |
| Other receivables | 10,11,12 | 302 078 | 258 288 |
| Total receivables | 897 852 | 1 073 828 | |
| BANK DEPOSITS, CASH & CASH EQUIVALENTS | 10,15,17 | 273 715 | 273 696 |
| Total current assets | 6 393 351 | 4 981 792 | |
| TOTAL ASSETS | 13 401 686 | 10 935 313 | |
| TOTAL ASSETS | 13 401 686 | 10 935 313 | |
|---|---|---|---|
| Total current assets | 6 393 351 | 4 981 792 | |
| BANK DEPOSITS, CASH & CASH EQUIVALENTS | 10,15,17 | 273 715 | 273 696 |
| Total receivables | 897 852 | 1 073 828 | |
| Other receivables | 10,11,12 | 302 078 | 258 288 |
| Trade receivables | 10,12,20 | 595 773 | 815 540 |
| RECEIVABLES | |||
| Total inventory | 5 221 784 | 3 634 268 | |
| Other inventory | 13,20 | 224 783 | 328 216 |
| Biological assets | 13,20 | 4 997 001 | 3 306 052 |
| CURRENT ASSETS | |||
| Total non-current assets | 7 008 335 | 5 953 521 | |
| Total non-current financial assets | 960 017 | 636 206 | |
| Other receivables | 10,12,24 | 49 949 | 6 840 |
| Pension fund assets | 10,12,19 | 1 379 | 1 397 |
| Investments in shares & other securities | 10 | 289 | 289 |
| Investments in associates | 9 | 908 400 | 627 681 |
| NON-CURRENT FINANCIAL ASSETS | |||
| Total property, plant & equipment | 3 137 522 | 2 403 772 | |
| Vessels, vehicles, etc | 5,20 | 273 616 | 239 863 |
| Plant, equipment & operating consumables | 5,20 | 1 981 840 | 1 546 727 |
| Land, buildings & other real property | 5,20 | 882 066 | 617 182 |
| PROPERTY, PLANT & EQUIPMENT | |||
| Total intangible assets | 2 910 796 | 2 913 542 | |
| Goodwill | 4 | 446 465 | 447 372 |
| Licences, patents, etc | 4,20 | 2 464 332 | 2 466 171 |
| INTANGIBLE ASSETS | |||
| NON-CURRENT ASSETS |
as at 31 December NOK 1000 61
as at 31 December NOK 1000
| EQUITY AND LIABILITIES | NOTE | 2016 | 2015 |
|---|---|---|---|
| EQUITY | |||
| PAID-IN EQUITY | |||
| Share capital | 16 | 28 325 | 28 325 |
| Treasury shares | -246 | -295 | |
| Share premium fund | 415 286 | 415 286 | |
| Other paid-in equity | 85 673 | 57 768 | |
| Total paid-in equity | 529 037 | 501 084 | |
| RETAINED EARNINGS | |||
| Distributable reserve | 6 069 363 | 4 646 272 | |
| Total retained earnings | 6 069 363 | 4 646 272 | |
| NON-CONTROLLING INTERESTS | 6 | 82 432 | 79 684 |
| Total equity | 6 680 833 | 5 227 039 | |
| LIABILITIES | |||
| NON-CURRENT LIABILITIES | |||
| Deferred tax | 18 | 1 495 301 | 1 230 815 |
| Debt to credit institutions | 2,10,17,20 | 2 079 001 | 2 371 338 |
| Leasing liabilities and other non-current liabilities | 2,5,10,17,20 | 360 556 | 381 849 |
| Total non-current liabilities | 3 934 858 | 3 984 001 | |
| CURRENT LIABILITIES | |||
| Debt to credit institutions | 2,10,17,20 | 198 613 | 140 421 |
| Trade payables | 10,17 | 1 199 402 | 649 274 |
| Tax payable | 18 | 423 223 | 292 320 |
| Public charges payable | 189 136 | 153 262 | |
| Other current liabilities | 10,11,22 | 775 622 | 488 996 |
| Total current liabilities | 2 785 995 | 1 724 273 | |
| Total liabilities | 6 720 853 | 5 708 274 | |
| TOTAL EQUITY AND LIABILITIES | 13 401 686 | 10 935 313 | |
as at 31 December NOK 1000
| NOTE | 2016 | 2015 | |
|---|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES: | |||
| Profit before tax | 3 342 080 | 1 383 686 | |
| Tax paid in the period | 18 | -291 049 | -315 132 |
| Depreciation and write-downs | 4, 5 | 358 020 | 321 449 |
| Options charged to expenses | 24,25 | 27 905 | 22 933 |
| Share of profit/loss from associates | 9 | -286 844 | -40 242 |
| Gains/losses on exit of subsidiaries | 8 | -26 562 | 0 |
| Gains/losses on sale of non-current assets | 5 | 973 | 893 |
| Gains/losses on sale of non-current financial assets | 0 | 117 | |
| Change in fair value | 14 | -653 955 | -39 932 |
| Change in inventory/biological assets | -534 980 | -165 868 | |
| Change in trade receivables | 219 008 | 72 679 | |
| Change in trade payables | 550 233 | 239 789 | |
| Change in other time-limited items | 19 770 | 141 921 | |
| Net cash flow from operating activities | 2 724 599 | 1 622 292 | |
| CASH FLOW FROM INVESTING ACTIVITIES: | |||
| Receipts from sale of property, plant & equipment | 5 | 2 298 | 0 |
| Payments for purchase of property, plant & equipment and intangible assets 4, 5 | -1 096 824 | -726 677 | |
| Exit of subsidiaries - cash effect | 8 | 4 444 | 0 |
| Payments for purchase of shares and securities | 9 | -200 000 | -43 394 |
| Dividend from associates | 9 | 100 800 | 46 000 |
| Lending to third parties | -42 000 | 0 | |
| Net receipts/payments from change in non-current financial assets | 0 | -674 | |
| Net cash flow from investing activities | -1 231 282 | -724 745 | |
| CASH FLOW FROM FINANCING ACTIVITIES: | |||
| New long-term borrowings | 17 | 175 000 | 700 000 |
| Repayment of long-term borrowings | 17 | -498 505 | -152 062 |
| Net change in overdraft | 17 | 59 480 | -123 149 |
| Interest received | 5 014 | 3 477 | |
| Interest paid | 17 | -106 328 | -98 780 |
| Payment of dividend | -1 125 903 | -1 124 900 | |
| Other changes | 0 | -107 | |
| Net cash flow from financing activities | -1 491 242 | -795 521 | |
| Net change in bank deposits, cash & cash equivalents | 2 075 | 102 027 | |
| Foreign exchange effects | -2 057 | 4 705 | |
| Bank deposits, cash & cash equivalents as at 1 Jan | 273 696 | 166 963 | |
| Bank deposits, cash & cash equivalents as at 31 Dec | 273 715 | 273 696 | |
| Unused drawing rights | 17 | 3 116 000 | 2 535 000 |
Restricted funds account for NOK 187,028,000 of the company's total cash & cash equivalents of NOK 273,715,000. See Note 15 for further details.
Gustav Witzøe Director
Frøya, 20th of April 2017
Tove Elin Nedreberg
Director
Geir Berg Director/Employee representative
Bjørn Flatgård Chair
Kjell A. Storeide Director
Bente Rathe Director
Trond Williksen President & CEO
Merete Gisvold Sandberg Director/Employee representative
63
62
NOK 1000
| 2016 | NOTE capital | shares | Share Share Treasury premium fund |
Other | equity differences | paid-in Translation Distribut. Non-cont. reserve |
interests | Total equity |
|
|---|---|---|---|---|---|---|---|---|---|
| Equity as at 1 Jan 2016 | 28 325 | -295 415 286 | 57 768 | 9 164 4 637 108 | 79 684 5 227 039 | ||||
| Net profit for the year COMPREHENSIVE INCOME |
2 637 079 | 13 910 2 650 990 | |||||||
| Translation differences in associates | 9 | -105 325 | -105 325 | ||||||
| Translation differences in subsidiaries | -2 056 | -2 056 | |||||||
| Cash flow headging | 11 516 | 11 516 | |||||||
| Total comprehensive income | -2 056 | -93 809 | 0 | -95 865 | |||||
| Total comprehensive income for the year | -2 056 2 543 270 | 13 910 2 555 125 | |||||||
| TRANSACTIONS WITH SHAREHOLDERS | |||||||||
| Award of options | 25 | 27 905 | 27 905 | ||||||
| Deferred tax on options | 18 | 4 105 | 4 105 | ||||||
| Options redeemed | 25 | 49 | -49 | 0 | |||||
| Payment of dividend | 16 | -1 121 199 | -4 704 -1 125 903 | ||||||
| Exit non-controlling interests | -6 450 | -6 450 | |||||||
| Other changes | -981 | -8 | -989 | ||||||
| Total transactions with shareholders | 0 | 49 | 0 | 27 905 | 0 -1 118 124 | -11 162 -1 101 332 | |||
| Equity as at 31 Dec 2016 | 28 325 | -246 415 286 | 85 673 | 7 109 6 062 254 | 82 432 6 680 833 |
| 2015 | NOTE capital | Share Treasury premium shares |
Share fund |
Other | paid-in Translation Distribut. Non-cont. equity differences |
reserve | interests | Total equity |
|
|---|---|---|---|---|---|---|---|---|---|
| Equity as at 1 Jan 2015 | 28 325 | -325 415 286 | 34 834 | 4 458 4 594 077 | 60 614 5 137 268 | ||||
| Net profit for the year COMPREHENSIVE INCOME |
1 103 289 | 25 506 1 128 795 | |||||||
| Translation differences in associates | 9 | 58 475 | 58 475 | ||||||
| Translation differences in subsidiaries | 4 705 | 4 705 | |||||||
| Total comprehensive income | 4 705 | 58 475 | 63 180 | ||||||
| Total comprehensive income for the year | 0 | 0 | 0 | 0 | 4 705 1 161 764 | 25 506 1 191 975 | |||
| TRANSACTIONS WITH SHAREHOLDERS | |||||||||
| Award of options | 25 | 22 933 | 22 933 | ||||||
| Deferred tax on options | 18 | 1 398 | 1 398 | ||||||
| Options redeemed | 25 | 30 | -30 | 0 | |||||
| Payment of dividend | 16 | -1 120 000 | -6 436 -1 126 436 | ||||||
| Other changes | -100 | -100 | |||||||
| Total transactions with shareholders | 0 | 30 | 0 | 22 933 | 0 -1 118 732 | -6 436 -1 102 205 | |||
| Equity as at 31 Dec 2015 | 28 325 | -295 415 286 | 57 768 | 9 164 4 637 108 | 79 684 5 227 039 |
Notes to the financial statements
SalMar's lumpfish production facility is located in Langstein. The facility currently has the capacity to produce approx. 1.4 million vaccinated lumpfish. This capacity will increase in 2017 to around 3 million vaccinated lumpfish.
64
SALMAR ANNUAL REPORT 2016 – Passion for Salmon
SalMar ASA is registered and domiciled in Norway, and the company's shares are traded on the Oslo Stock Exchange. The company's head office is located in Frøya. The consoli dated financial statements were formally approved by the board of directors on 20 April 2017.
The most important accounting principles used in the prepa ration of the consolidated financial statements are presented below. These principles are applied in the same way in all the periods presented unless otherwise indicated.
The consolidated financial statements have been drawn up in accordance with IFRS and interpretations determined by the International Accounting Standards Board that have been approved by the EU.
The consolidated financial statements are based on the prin ciples of historic cost, with the exception of the following accounting items, which are recognised at fair value:
The consolidated financial statements include SalMar ASA and its subsidiaries as at 31 December 2016. The Group therefore controls an entity in which it has invested when, and only when, the Group:
− has power over the entity,
If the Group has a majority of the voting rights in an entity, the entity is presumed to be a subsidiary of the Group. To substantiate this presumption, and where the Group does not hold a majority of the voting rights, the Group considers all relevant facts and circumstances to evaluate whether the Group has control over the entity in which it has invested. This includes assessing the size of its shareholding, its voting share, the shareholder structure and its relative strength, as well as options controlled by the Group and shareholder agreements or other agreements. The assessment is per formed for each investment. A reassessment is performed when facts and circumstances indicate that changes have taken place in one or more of the controlling elements. As at 31 December, SalMar ASA had a majority of voting rights in all its subsidiaries.
The consolidated financial statements have been prepared in accordance with uniform accounting principles for similar transactions in all the companies included in the consolidated accounts. All material transactions and balances between group companies have been eliminated.
The acquisition method is used in connection with the
recognition of business combinations. Subsidiaries are consolidated from the date on which the Group achieves control, and are excluded from consolidation when control is ceded. This means that the acquired company's assets and liabilities are reported at fair value on the date of acquisi tion, with any excess value being classified as goodwill. The entity perspective is applied in connection with acquisi tions where control is established. The exception is goodwill, where for each acquisition it is optional whether to recognise only the controlling owner's share or 100 per cent. In those cases where the fair value of the acquired assets exceeds the amount paid, the difference is treated as income in profit and loss. Deferred tax is capitalised to the extent to which identifiable excess values ascribed to assets and liabilities lead to an increase or decrease in future tax payable when these differences are reversed in future periods. Deferred tax is capitalised and calculated using a nominal, undiscounted tax rate.
When shares are acquired in stages, the value of the assets and liabilities on the date the Group was formed is utilised. Later acquisition of assets in existing subsidiaries will not affect the value of assets or liabilities.
When the Group no longer has control, any remaining share holding is measured at fair value, with changes recognised in profit and loss. Fair value subsequently represents acquisi tion cost in future accounting periods, either as an invest ment in an associated company, jointly controlled entity or financial asset. Amounts which were previously recognised in comprehensive income relating to this company are treated as if the Group had divested the underlying assets and liabilities. This may mean that amounts which have previously been recognised in comprehensive income are reclassified to profit and loss.
The share of the profit or loss after tax attributable to noncontrolling interests is presented on a separate line after the Group's net profit for the year. The share of equity attributable to non-controlling interests is presented on a separate line under group equity.
Transactions with non-controlling interests in subsidiaries are recognised as equity transactions. In connection with the purchase of shares from non-controlling interests, the difference between the consideration paid and the shares' relative share of the book value of the subsidiary's net assets is recognised in the parent company's equity. Gains and losses deriving from the sale of shares to non-controlling interests is recognised correspondingly in equity.
The Group has investments in associates. Associates are entities over whose financial or operational management the Group has significant influence, but not control or joint control. Significant influence normally exists where the Group has 20-50 per cent of the voting rights.
Investments in associates are recognised in accordance with the equity method. The investment is recognised on the date of its purchase at acquisition cost, and the Group's share of profit/loss in subsequent periods is taken to income or expenses. The capitalised amount includes any implicit goodwill identified on the date of purchase.
The Group's share of the profit/loss from associates is recog nised in profit and loss and attributed to the book value of the investment. The Group's share of comprehensive income in the associate is recognised in the Group's comprehensive income and attributed to the investment's book value. Cor respondingly, the Group's share of sums recognised directly in equity in underlying investments is presented in the Group's statement of equity. Unrealised gains associated with trans actions with associates are eliminated in proportion to the Group's share of the business.
Should indications of impairment arise, the book value of the investment is written down. Any impairment in value is recognised in the share of profit/loss from associates in the financial statements. When the Group's share of losses exceeds the investment in an associate, its book value is written down to zero, and no further losses are recognised.
If an investment ceases to be an associate, such that the equity method no longer applies, the remaining shareholding is measured at fair value.
Revenues from the sale of goods are taken to income when both risk and control have been largely transferred to the customer. This will normally occur at the moment of delivery. Revenue is recognised at the value of the consideration when the transaction takes place.
Operating revenues are recognised less public charges, dis counts, bonuses and other sales costs. The timing of the transfer of risk to the customer depends on the delivery terms stipulated in the sales contract. Delivery terms vary from country to country and from customer to customer.
Dividend is taken to income when the shareholders' right to receive a dividend has been authorised by the Annual General Meeting.
Operating grants are periodised and classified together with the revenue they are intended to augment or the expense they are intended to reduce. Investment grants reduce the asset's book value, and are taken to income through reduced future depreciation.
is divided into two regions: Fish Farming Central Norway and Fish Farming Northern Norway. These two are defined as separate segments which are reported and administered as such internally. In addition, a Sales & Processing segment reports separately.
Liquid assets consist of cash and bank deposits.
Assets which form part of the production cycle or fall due for payment within 12 months are classified as current assets. Other assets are classified as non-current assets. Liabilities which form part of the production cycle or fall due for pay ment within 12 months are classified as current liabilities. Other liabilities are classified as non-current.
The next year's instalment on long-term debt is classified as a current liability.
Changes in the fair value of biological assets are presented on a separate line under operating profit/loss, along with the unrealised value of Fish-Pool contracts and any change in the unrealised value of forward currency contracts that have been entered into to hedge future deliveries. Operating profit/loss is reported before fair value adjustment of the biomass in order to show the Group's underlying sales perfor mance during the period.
Operating segments are reported in the same way as they are reported internally to the company's highest decisionmaking bodies. The company's highest decision-making body, which is responsible for the allocation of resources and the evaluation of the operating segments' earnings, is defined as group management. The Group has two business activi ties: the farming of salmon and trout on the one hand, and its processing and sale on the other. The fish farming segment the balance sheet. See Note 11 for further details. The profit and loss account and balance sheet of group companies (none with hyperinflation) with a functional currency other than the presentation currency are translated thus:
The consolidated financial statements are presented in Norwegian kroner (NOK), which is both the parent company's functional currency and the Group's presentation currency.
Transactions in foreign currencies are translated into NOK at the time the transaction takes place. Realised foreign exchange gains/losses deriving from the settlement and translation of monetary items in foreign currencies at the rate in effect on the balance sheet date are recognised in profit and loss.
Any foreign exchange differences on monetary items that are part of the net investment in a foreign entity or on currency positions deemed to constitute cash-flow hedging are recognised in comprehensive income.
The fair value of currency hedging instruments is calculated on the balance sheet date at the market price for contracts with a similar maturity profile. Changes in the fair value of such instruments are recognised in profit and loss as a net financial item when they do not meet the requirements for hedge accounting. The exception is a change in the fair value of forward currency contracts which have been entered into to hedge future deliveries. These are recognised in profit and loss on the line for fair value adjustments. Financial deriva tives are classified as current assets or current liabilities in
a) The balance sheet is translated at the exchange rate in effect on the balance sheet date.
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Intangible assets that are purchased individually are capitalised at acquisition cost. Intangible assets acquired in connection with the purchase of a business entity are capitalised at acquisition cost when the criteria for separate posting are met.
Intangible assets with a limited economic lifespan are depreciated systematically. Intangible assets are written down to their recoverable value if the expected financial benefits do not cover their book value and any remaining production costs.
Costs relating to research and development are charged to expenses as they accrue. R&D costs are capitalised when specific criteria relating to future revenues are met. Capitalised R&D costs are recognised at acquisition cost, less accumulated depreciation and write-downs. Capitalised R&D costs are depreciated in a straight line over the asset's estimated period of use.
Breeding nuclei are capitalised at acquisition cost, less accumulated depreciation and write-downs.
Licences are capitalised at cost and are time limited. In connection with normal operations, licences are not subject to relinquishment requirements. Licences are therefore not depreciated, but are tested annually for impairment. Any excess value identified in connection with the acquisition of licence leasing agreements is capitalised as an intangible asset.
Prepaid leasing costs associated with partnership agreements are deemed to confer the right to use of an intangible asset and are classified as an intangible asset. Leasing costs are charged as expenses over the period of the lease.
When another business entity is taken over for a consideration that exceeds the value of the individual assets, the difference is recognised as goodwill in the balance sheet. Goodwill deriving from the purchase of subsidiaries is included under intangible assets, while goodwill deriving from the acquisition of associates is included under shares in associates. Goodwill is entered at historic cost, less accumulated depreciation up to 2004.
When assessing the need to write down licences and goodwill, these are assigned to relevant cash flow-generating entities or those groups which are expected to benefit from the acquisition. Write-downs are performed in accordance with an assessment of the recoverable value of each of the cash flow-generating entities to which the licences and goodwill are assigned. To identify the Group's cash flowgenerating entities the assets are grouped according to the lowest level to which separate and independent cash flows may be ascribed. Recoverable value is the higher of fair value, less sales costs and value in use. When assessing the sales value of licences, reference is made to similar transactions that have been undertaken. Value in use is calculated by estimating future cash flows for the next three years based on approved budgets and forecasts. Cash flows after three years are assumed to equal the expected rate of inflation. Cash flows are discounted by a rate of interest before tax which takes account of relevant market risk. If the calculated value in use is lower than the book value of the cash flowgenerating entity, goodwill is written down first and then other assets as required.
Property, plant and equipment are capitalised at acquisition cost, less accumulated depreciation and write-downs. Interest on building loans is part of acquisition cost. When assets are sold or divested, the book value is deducted and any loss or gain posted to profit and loss. Ordinary depreciation commences from the date on which the asset goes into normal operation, and is calculated on the basis of its economic lifespan. Depreciation is assigned in a straight line over the expected economic lifespan of the asset, taking into consideration its estimated residual value. If an asset comprises significant components with varying lifespans, these components are depreciated separately. The scrap value of the property, plant and equipment, as well as the depreciation period and depreciation method employed, are reassessed annually.
Facilities under construction are not depreciated. Depreciation is charged to expenses when the facilities are ready for use.
If the situation or circumstances indicate that the book value of an asset cannot be recovered, an assessment is made about whether to write down its value. If the recoverable value of a non-current asset is lower than its book value and the impairment is not expected to be temporary, the asset is written down to recoverable value. The recoverable value is the higher of net sales price and value in use. Value in use is the present value of the future cash flows which the asset will generate.
Financial instruments are classified in the following categories: fair value with changes in value posted to profit and loss, hold until maturity, loans and receivables, available for sale, and other liabilities.
Financial instruments at fair value in profit and loss Financial instruments at fair value in profit and loss are financial assets held for trading purposes. A financial asset is classified in this category if it has been acquired primarily for the purpose of generating a gain from short-term price fluctuations. Derivatives are classified as being held for sale unless they are part of a hedging scheme. Assets in this category are classified as current assets.
Financial assets at fair value in profit and loss are recognised at fair value upon acquisition and the transaction costs charged as expenses. Following their initial capitalisation financial assets are recognised at fair value in profit and loss.
Loans and receivables are non-derivative financial assets with fixed or determinable payments which are not traded in an active market. They are classified as current assets unless they fall due for payment more than 12 months after the balance sheet date. Loans and receivables are presented in the balance sheet as trade receivables and other receivables, as well as cash and cash equivalents.
Loans and receivables are capitalised initially at fair value plus transaction costs. In subsequent periods, loans and receivables are valued at amortised cost using the effective interest method, less any losses deriving from impairment. Due to immaterial transaction costs and short credit times, amortised cost equals nominal value less provisions for bad debts.
Borrowings are recognised at fair value when payment has been received, less transaction costs. In subsequent periods, borrowings are recognised at amortised cost calculated using the effective interest method. The difference between the amount of the loan received (less transaction costs) and its redemption value is posted to profit and loss over the term of the loan as part of the effective interest rate. Borrowing expenses are posted as deductions from the loan.
Financial assets available for sale are non-derivative financial assets which have been placed in this category by choice or because they do not belong in any other category. They are classified as non-current assets unless the investment falls due, or management intends to sell the investment, within 12 months of the balance sheet date.
Financial assets available for sale are recognised at fair value, with any changes in fair value, apart from impairment loss, being recognised in comprehensive income. Impairment losses are recognised in profit and loss. When securities classified as available for sale are sold or written down, the entire change in value that has been recognised in comprehensive income is reclassified as a financial item and posted to ordinary profit and loss.
Financial assets and liabilities are offset and presented net in the balance sheet when an enforceable offsetting entitlement exists and there is an intention to settle net or realise the asset and settle the liability at the same time.
Realised Fish-Pool contracts are classified as operating items and unrealised changes in the value of Fish-Pool contracts are classified as part of the fair value adjustment of the biomass. Derivatives held for trading are classified as current assets or current liabilities.
Inventory consists of feed, packaging materials, roe, fry, live fish held in sea farms and processed fish. Stocks of feed, packaging materials, roe, smolt and processed fish are valued at the lower of cost and net realisation value. The cost price of goods produced in-house is the full production cost. The FIFO-principle is used in connection with the periodic assignment of inventory costs. Net realisation value is estimated sales price, less variable finishing and sales costs. Live fish held in sea farms are recognised at fair value. Stocks of finished goods/frozen fish are valued at the lower of cost (fair value at harvesting less sales costs) and net realisation value.
Biological assets (biomass) comprise salmon roe, smolt and fish in the sea. Roe and smolt are valued at cost.
Derivatives are capitalised at fair value on the date the derivative contract was entered into, and thereafter at the fair value in effect in subsequent periods. The way associated gains or losses are accounted for depends on the extent to which the derivative is designated as a hedging instrument, and if so what kind of hedging instrument. The Group classifies derivatives designated as hedging instruments as hedging of the fair value of a capitalised asset, liability or unrecognised binding pledge (fair value hedging). Derivatives not designated as hedging instruments are recognised at fair value in profit and loss. for accounting purposes as the Group's own fish, since the Group bears the risk associated with farming the fish. Principles for recognition of incident-based mortality Incident-based mortality is recognised at sites which, in one period, have a 3 per cent mortality rate caused by an individual incident, or if mortality caused by the same incident over several periods exceeds 5 per cent. The assessment relates to the number of fish, and is made at the site level.
Fish held in sea farms are measured at fair value. The difference between the fair value of the fish and the associated cost price is recognised under fair value adjustments in profit and loss.
The best estimate of the fair value of fish with a live weight of under 1 kg is accumulated cost, while for harvestable fish with a live weight of more than 4 kg the fair value adjustment of the biomass is set to expected net profit/loss. For fish of between 1 kg and 4 kg live weight the net expected profit/ loss at harvest is equally distributed over the growth period. The fair value of the biomass is calculated on the basis of market price for the relevant weight class on the balance sheet date, corrected for sales costs, including harvesting costs and wastage. The market price is adjusted for quality variations. The sales prices used are based on external forward prices and/or the most relevant price information available for the period in which the fish will be harvested.
Biological assets measured at fair value are recognised in Level 3, ie where valuation is based on factors that do not derive from observable markets. See Note 2 for further details. Valuation of the biomass takes place quarterly, and is reviewed and quality assured at group level. Valuation is performed for each segment down to the individual site.
Biomass farmed as part of partnership agreements is treated
Directly recognised incident-based mortality is included in the cost of goods sold, unless the mortality is due to circum-
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stances which would indicate presentation on the line for exceptional biological events. No costs relating to incidentbased mortality were recognised in 2016.
The Group classifies exceptional biological events on a separate line in profit and loss.
SalMar's assessment of exceptional biological events relates to the following specific events:
In connection with the culling of salmon stocks at the orders of the regulatory authorities, the amount charged to expenses comprises the full production cost of the culled stock, plus costs incurred in connection with the clean-up and closure of the site. In the event of escaped fish, the amount charged to expenses corresponds to the full production cost of the escaped fish, plus costs incurred in connection with their recapture.
The Group enters into sales contracts for salmon products on an ongoing basis. The contracts involve physical settlement, and deliveries associated with the contracts form part of the Group's normal business activities. The contracts contain no built-in derivative elements. A provision is made with respect to fixed-price contracts resulting in an obligation on the part of the Group to sell harvestable fish at a lower price than that which forms the basis for an estimation of the fair value of the biomass. The impact on profit and loss for the year is posted to 'Fair value adjustments'.
Ordinary shares are classified as equity. Transaction costs directly related to equity transactions are recognised directly in equity, less tax. If a group company purchases shares in the parent company, the consideration paid for such treasury shares, including any transaction costs – less tax – is recognised as a reduction in equity (allocated to the parent company's shareholders) until the shares are cancelled or resold. If treasury shares are subsequently sold, the consideration received, less direct marginal transaction costs and associated tax effects, is recognised as an increase in equity allocated to the parent company's shareholders.
The tax expense is matched against the profit/loss before tax and comprises tax payable (tax on the year's direct taxable income) and changes in net deferred tax. Tax is recognised in profit and loss unless it refers to items which are posted in comprehensive income or are taken directly to equity. In this case tax is included in the net amount posted in comprehensive income or taken directly to equity.
Tax payable for the period is calculated in accordance with the tax legislation and regulations issued, or largely issued, by the tax authorities on the balance sheet date.
Deferred tax in the balance sheet is a nominal amount calculated on the basis of temporary differences between accounting and tax values, as well as any tax loss carried forward at the end of the financial year. Deferred tax assets are capitalised when the probability that a taxable income will be made, which will allow the asset to be utilised, can be documented. Deferred tax assets and liabilities are presented net in the balance sheet.
Deferred tax is calculated on the difference between the accounting and taxable values of licences.
The Group has a defined-contribution pension scheme for its employees. Contributions are recognised as payroll costs as and when the liability to make such contributions accrues. Prepaid contributions are recognised as an asset to the extent that the contribution may be refunded or used to reduce future contributions. Once the contributions have been paid in, the Group has no further payment liability.
The Group operates a share-based incentive scheme in which the companies receive services from the employees in return for equity instruments (RSU entitlements) in the Group. The fair value of the services the entities received from employees in return for the RSU entitlements granted is recognised as a cost in profit and loss.
The fair value of RSU entitlements is set on the date they are awarded. The fair value of the RSU entitlements that are not at market terms is set as the share price on the date the award was made. The probability of the performance criteria being met is taken into account when assessing how many RSU entitlements will be redeemed. The fair value of the RSU entitlements that are at market terms is calculated on the basis of a Monte-Carlo simulation. The most important input data when calculating the value of these RSU entitlements are the share price on the date of the award, volatility, riskfree interest, expected dividend and vesting period.
The value thus set is posted to profit and loss periodically over the options' accrual period, with a corresponding increase in paid-in equity. The accrual period is the period from the establishment of the scheme until the options are fully vested. Employer's national insurance contributions are recognised over the expected accrual period.
A provision is recognised when, and only when, the company has a constructive liability (legal or self-imposed) deriving from an event which has occurred, and it is probable (more likely than not) that a financial settlement will take place as a result of that liability, and that the amount in question can be reliably quantified. Provisions are reviewed on each balance sheet date, and the level reflects the best estimate for the liability.
Operating assets which are leased on terms which transfer the bulk of the financial risk and control to the company (financial leasing) are recognised in the balance sheet as property, plant and equipment, and the corresponding leasing liability is included under non-current liabilities at the present value of the leasing payments. The asset is depreciated systematically and the liability is reduced by the leasing amount paid, less a calculated interest cost. The depreciation period is consistent with similar assets which are owned by the Group. Leasing payments with respect to operational leasing agreements are classified as operating expenses and are posted to profit and loss in a straight line over the term of the contract.
New information regarding the company's financial position on the balance sheet date which is received after the balance sheet date has been recognised in the year-end financial statements. Events after the balance sheet date which do not affect the company's financial position on the balance sheet date, but which will affect the company's future financial position are reported if material.
The Group's statement of cash flow shows a breakdown of the Group's overall cash flow into operating, investing and financing activities. The statement shows the individual activity's impact on liquid assets. Cash flow deriving from the acquisition and sale of businesses is presented under investing activities.
Preparation of the financial accounts in accordance with IFRS requires that management make evaluations, estimates and assumptions that affect the application of accounting principles and the book value of assets and liabilities in the balance sheet, as well as figures for revenue and expenses for the financial year. Estimates and their underlying assumptions are based on historical experience and other factors deemed relevant and probable at the time the evaluations are made. These evaluations affect the book value of the assets and liabilities where the valuation is not based on other sources. Estimates are reviewed continuously and final values and results may differ from these estimates. Changes in accounting estimates are included in the period in which the changes occur.
The evaluations and estimates deemed to be of greatest significance for the Group are as follows:
Live fish are measured at fair value. The difference between the fair value of the biological assets at the start of the period and at its close is recognised as a positive or negative adjustment. The estimate of fair value is based on market prices of the particular weight class on the balance sheet date. The sales prices used are based on external forward prices, contract prices and/or the most relevant information available for the period in which the fish is due to be harvested. The calculation of fair value is based on estimates for biomass volume, quality and normal production, harvesting and sales costs.
Fair value adjustment of the biomass based on these estimates has no impact on cash flow and does not affect Operational EBIT.
Other biological assets (roe and smolt) are valued at cost price, since little biological transformation has occurred.
In connection with an acquisition the cost price of the acquired entity must be allocated such that the opening balance in the Group's accounts reflects the estimated fair value of the acquired assets and liabilities. To determine the fair value at acquisition alternative methods are used to determine the fair value of assets for which there is no active market. Value in excess of that which can be attributed to identifiable assets and liabilities is recognised in the balance sheet as goodwill. If the fair value of equity in the acquired entity exceeds the consideration paid, the excess is immediately recognised as income. The allocation of cost price in connection with business combinations changes if new information is obtained with respect to the fair value on the date of takeover and assumption of control, no later than 12 months after the acquisition took place. See Note 7 'Business combinations' for further details.
Through its activities, the Group is exposed to various kinds of financial risk: market risk, credit risk and liquidity risk. The company's management assesses these risks on an ongoing basis and draws up guidelines for dealing with them. The Group makes use of financial derivatives to hedge against certain risks.
The Group has bank loans raised for the purpose of providing capital for investment in the company's business. In addition, the company has financial instruments such as trade receivables, trade payables, etc, which are ascribable directly to day-to-day business operations. For hedging purposes the company has certain forward currency contracts. The company does not make use of financial instruments, including financial derivatives, for the purpose of speculation.
Interest rate risk
Since the Group has no material interest-bearing assets, its profit/loss and cash flow from operating activities are largely independent of changes in market rates.
The Group's interest rate risk derives from long-term borrowings. Borrowing at floating interest rates represents an interest rate risk for the Group's cash flow, which is partly reduced by the opposite effect on cash equivalents which earn floating interest. Fixed-rate loans expose the Group to fair value interest rate risk. The borrowing portfolio is currently at floating interest rates, which means that the Group is affected by changes in interest rates. Loans are capitalised at amortised cost. Given the financial instruments in effect on 31 December 2016, a 0.5% rise in the rate of interest would reduce the Group's profit by NOK 13,189,000 (2015: 14,466,000), all other variables remaining constant.
The Group operates internationally, and is exposed to foreign exchange risk in several currencies. This risk is particularly relevant with respect to the USD, EUR, GBP and JPY.
Foreign exchange risk arises from future trading transactions, capitalised assets and liabilities, and net investments in foreign business operations. The foreign exchange risk associated with revenues and assets denominated in foreign currencies is partly hedged through the use of forward contracts and currency accounts. The use of forward currency contracts is described in Note 11.
Given the financial instruments in effect on 31 December 2016, a 10% fall in the value of the NOK would alter the Group's profit before tax by NOK 359,453,000 (2015: NOK 169,194,000). The Group's most important currencies are the USD, EUR, GBP and JPY. A 10% reduction in the exchange rate for each of these currencies as at 31 December 2016 would have had the following effect on the Group's profit before tax:
| EUR: TNOK 100 828 | |
|---|---|
| JPY: TNOK 16 522 | |
| GBP: TNOK 20 501 | |
| USD: TNOK 221 251 |
Note 2 – Financial risk management
The gross credit risk on the balance sheet date corresponds to the Group's receivables portfolio on the balance sheet date. See Note 12.
The risk that counterparties do not have the financial strength to meet their obligations is considered low, since, historically, losses due to bad debts have been small. The Group has no material credit risk relating to individual counterparties or counterparties which may be considered a group due to similarities in the credit risk. The Group has guidelines to ensure that sales are made only to customers that have not previously had material payment problems, and that outstanding balances do not exceed fixed credit limits. Part of the total accounts receivable is insured. meet its financial obligations as they fall due. Cash flow forecasts are drawn up on a regular basis and the Accounts Dept monitors rolling forecasts of the Group's liquidity requirements to ensure that the Group has sufficient cash equivalents to meet operational liabilities, as well as at all times having adequate flexibility in the form of unused credit facilities (see Statement of Cash Flow), such that the Group does not infringe borrowing limits or specific borrowing conditions (if relevant). The Group's objective is to have sufficient cash, cash equivalents or medium-term credit facilities to meet its borrowing requirements in the short term. See Note 17 for details of the Group's available credit facilities.
The company monitors its capital management on the basis of the covenants stipulated. These are based on equity ratio and the ratio of net interest-bearing debt to EBITDA. See Note 17 for further details.
Liquidity risk Liquidity risk is the risk that the Group will not be able to The table below details the Group's non-derivative financial liabilities classified by maturity structure. The figures presented in the table are undiscounted contractual cash flows. See Note 17 for details of the maturity structure.
As at 31 December 2016, the Group had an equity ratio of 49.9% (47.8% as at 31 December 2015). At the close
The objective of the Group's capital management is to safeguard the Group's continued operations in order to secure a return on investment for shareholders and other stakeholders, and maintain an optimal capital structure for reducing capital costs. By ensuring a good debt-to-equity ratio the Group will support its business operations, and thereby maximise the value of the Group's shares. of 2016, the Group had net interest-bearing debt of NOK 2,364,052,000 (2015: NOK 2,619,509,000). Assessment of fair value The table below shows financial instruments and liabilities at fair value in accordance with the valuation method. The various levels are defined as follows:
The Group manages and makes changes to its capital structure in response to an ongoing assessment of the financial conditions under which the business operates, and its short and medium-term outlook, including any adjustment in dividend payouts, buyback of treasury shares, capital reduction or issue of new shares. No changes were made in the guidelines covering this area in 2016. * Quoted price in an active market for an identical asset or liability (level 1) * Valuation based on observable factors, either direct (price) or indirect (deduced from price) other than a quoted price (used in level 1) for the asset or liability concerned (level 2) * Valuation based on factors which are not derived from observable markets (non-observable assumptions) (level 3)
The table below presents the Group's assets and liabilities measured at fair value. See Note 11 for details of forward contracts, Fish-Pool contracts and interest-rate swaps measured at fair value in level 2. See also Note 13 for details of biological assets measured at fair value in level 3.
| Maturity | Total | 2017 | 2018 | 2019 | 2020 | 2021 | After 2021 |
|---|---|---|---|---|---|---|---|
| Long-term debt | 2 196 976 | 117 975 117 975 1 771 100 | 21 100 | 21 100 | 147 728 | ||
| Interest on long-term debt | 104 490 | 39 575 | 37 391 | 19 907 | 3 320 | 2 930 | 1 367 |
| Financial leasing agreements | 381 312 | 21 158 | 17 634 | 14 289 | 14 143 | 11 290 | 302 798 |
| Interest on fin. leasing agreem. 486 853 | 42 609 | 42 006 | 41 365 | 40 618 | 39 735 | 280 520 | |
| Other non-current liabilities | 402 | - | 402 | - | - | - | - |
| Short-term credit facilities | 59 480 | 59 480 | - | - | - | - | - |
| Interest on short-term debt | 494 | 494 | - | - | - | - | - |
| Trade payables | 1 199 402 1 199 402 | - | - | - | - | - | |
| Total liabilities | 4 429 409 1 480 692 215 407 1 846 661 | 79 181 | 75 055 | 732 413 |
The fair value of trade receivables and trade payables is practically identical to their book value. Other liabilities are measured at amortised cost. The Group has 'current terms', which is is considered to be the same as the market rate on the balance sheet date. Seen Note 17 for further details of interest terms.
In 2016, there were no changes in instruments classified in Level 3. The following tables presents the changes in instruments classified in Level 3 as at 31 December 2015:
| 31 Dec 2016 (NOK 1 000) | ||||
|---|---|---|---|---|
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Financial assets at fair value in profit and loss | ||||
| - Derivatives held for trading | - | 37 491 | - | 37 491 |
| Financial assets available for sale | ||||
| - Equity instruments | - | - | 289 | 289 |
| TOTAL assets | - | 37 491 | 289 | 37 779 |
| Liabilities | ||||
| Financial liabilities at fair value in profit and loss | ||||
| - Derivatives held for trading | - | 134 963 | - | 134 963 |
| Long-term debt to credit institutions | 2 079 001 | 2 079 001 | ||
| Leasing liabilities and other non-current liabilities | 360 556 | 360 556 | ||
| Short-term debt to credit institutions | 198 613 | 198 613 | ||
| TOTAL liabilities | - | 134 963 | 2 638 170 | 2 773 133 |
| 31 Dec 2015 (NOK 1 000) | ||||
| Assets | Level 1 | Level 2 | Level 3 | Total |
| Financial assets at fair value in profit and loss | ||||
| - Derivatives held for trading | - | 32 399 | - | 32 399 |
| Financial assets available for sale | ||||
| - Equity instruments | - | - | 289 | 289 |
| TOTAL assets | - | 32 399 | 289 | 32 687 |
| Liabilities | ||||
| Financial liabilities at fair value in profit and loss - Derivatives held for trading Long-term debt to credit institutions Leasing liabilities and other non-current liabilities Short-term debt to credit institutions TOTAL liabilities |
- - |
132 889 132 889 |
- 2 371 338 381 849 140 421 2 893 607 |
132 889 2 371 338 381 849 140 421 3 026 496 |
| Equity instruments | ||
|---|---|---|
| available for sale | Total | |
| Opening balance | 519 | 519 |
| Investments during the period | - | - |
| Sales during the period | -230 | -230 |
| Gains/losses recognised in profit and loss | - | - |
| Closing balance | 289 | 289 |
Operating segments are reported in the same way as they are reported internally to group management, which is responsible for allocating resources to and assessing the earnings of the operating segments.
The Group has two business activities: the farming of salmon and trout on the one hand, and its processing and sale on the other. The fish farming segment is divided into two regions: Fish Farming Central Norway and Fish Farming Northern Norway. These two are defined as separate segments which are reported and administered as such internally. In addition, a Sales & Processing segment reports separately.
With effect from 1 January 2016, as a result of an internal restructuring process, the former segment Fish Farming Rauma was merged into Fish Farming Central Norway to form one entity. Comparable figures for 2015 have been restated accordingly.
Group management evaluates the segments' performance on the basis of Operational EBIT, as well as exceptional biological events.
Depreciation and the realisation of excess value from tangible and intangible assets deriving from acquisitions are not allocated to the segments. Costs relating to options, nonrecurring events and R&D associated with jointly operated licences and non-recurring events are also included in the column for eliminations. at the same amount recognised in profit and loss. Assets and liabilities allocated to segments are not reported to group management.
Sales between segments are carried out in accordance with the arm's length principle. When revenues from external parties are reported to group management, they are measured In the past two years, the company has had no individual customers which accounted for more than 10% of the Group's sales revenues.
| 2016 NOK 1000 | Fish Farming Fish Farming Central Norway Nort. Norway Processing difference eliminations |
Sales & | GAAP- | Other/ | SalMar Group |
|
|---|---|---|---|---|---|---|
| External operating revenues | 19 727 | 181 403 8 828 684 | - | - 9 029 814 | ||
| Internal operating revenues | 4 323 727 | 2 617 829 | 207 133 | - -7 148 689 | - | |
| TOTAL operating revenues | 4 343 454 | 2 799 232 9 035 817 | - -7 148 689 9 029 814 | |||
| Depreciation | 218 359 | 72 477 | 60 243 | - | 6 941 | 358 020 |
| Operating expenses | 2 354 944 | 1 246 424 9 661 325 | - -7 022 546 6 240 147 | |||
| Operational EBIT | 1 770 151 | 1 480 331 -685 751 | - -133 084 2 431 647 | |||
| Fair value adjustments | - | - | - | 653 955 | - | 653 955 |
| Operating profit | 1 770 151 | 1 480 331 -685 751 | 653 955 -133 084 3 085 602 | |||
| Share of profit/loss from associates | 286 844 | |||||
| Net financial items | -30 366 | |||||
| Profit before tax | 3 342 080 | |||||
| Tax | 691 090 | |||||
| Net profit for the year | 2 650 990 | |||||
| Investments in PP&E | 707 293 | 344 333 | 40 779 | 0 | 1 919 1 094 324 | |
| Investments in business entities | 0 | 0 | 0 | 0 | 0 | 0 |
| Fish Farming Fish Farming | Sales & | GAAP- | Other/ | SalMar | ||
|---|---|---|---|---|---|---|
| 2015 NOK 1000 | Central Norway Nort. Norway Processing difference eliminations | Group | ||||
| External operating revenues | 4 833 | 153 307 7 168 062 | - | - 7 326 202 | ||
| Internal operating revenues | 3 936 897 | 1 493 593 | 126 951 | - -5 557 441 | - | |
| TOTAL operating revenues | 3 941 730 | 1 646 900 7 295 013 | - -5 557 441 7 326 202 | |||
| Depreciation | 171 576 | 72 803 | 57 251 | - | 5 650 | 307 280 |
| Write-downs | 1 942 | - | 1 227 | - | 11 000 | 14 169 |
| Operating expenses | 2 820 536 | 1 068 326 7 163 982 | - -5 451 965 5 600 879 | |||
| Operational EBIT | 947 675 | 505 771 | 72 553 | - -122 126 1 403 873 | ||
| Fair value adjustments | - | - | - | 39 932 | - | 39 932 |
| Operating profit | 947 675 | 505 771 | 72 553 | 39 932 -122 126 1 443 805 | ||
| Share of profit/loss from associates | 40 242 | |||||
| Net financial items | -100 362 | |||||
| Profit before tax | 1 383 686 | |||||
| Tax | 254 891 | |||||
| Net profit for the year | 1 128 795 | |||||
| Investments in PP&E | 412 773 | 258 708 | 23 049 | 0 | 7 603 | 702 132 |
| Investments in business entities | 0 | 0 | 0 | 0 | 0 | 0 |
75
| Other intangible |
||||
|---|---|---|---|---|
| NOK 1000 | Licences | Goodwill | assets | Total |
| Acquisition cost 1 Jan 2015 | 2 384 597 | 465 762 | 89 583 | 2 939 943 |
| Additions | 0 | 0 | 29 812 | 29 812 |
| Acquisition cost 31 Dec 2015 | 2 384 597 | 465 762 | 119 394 | 2 969 754 |
| Additions | 0 | 0 | 2 500 | 2 500 |
| Exit of subsidiaries | 0 | 907 | 1 000 | 1 907 |
| Acquisition cost 31 Dec 2016 | 2 384 597 | 464 855 | 120 894 | 2 970 347 |
| Acc. dep. and write-downs 1 Jan 2015 | 10 000 | 18 390 | 12 909 | 41 299 |
| Year's depreciation | 0 | 0 | 3 912 | 3 912 |
| Year's write-downs | 11 000 | 0 | 0 | 11 000 |
| Acc. dep. and write-downs 31 Dec 2015 | 21 000 | 18 390 | 16 821 | 56 211 |
| Year's depreciation | 0 | 0 | 4 238 | 4 238 |
| Exit of subsidiaries | 0 | 0 | 900 | 900 |
| Acc. dep. and write-downs 31 Dec 2016 | 21 000 | 18 390 | 20 159 | 59 550 |
| Book value as at 31 Dec 2016 | 2 363 597 | 446 465 | 100 735 | 2 910 796 |
| Book value as at 31 Dec 2015 | 2 363 597 | 447 372 | 102 573 | 2 913 542 |
| Book value as at 1 Jan 2015 | 2 374 597 | 447 372 | 76 674 | 2 898 643 |
| Economic life Depreciation plan |
Unlimited | Unlimited | 5-50 years Straight-line |
Under 'Other intangible assets', excess value associated with the purchase of breeding nuclei is depreciated over 50 years. The cost price for this was NOK 30 million, and the residual book value of breeding nuclei is NOK 26.1 million. Remaining items under 'Other intangible assets' are depreciated over 5 years. Of the total NOK 100.7 million recognised, capitalised R&D costs associated with the development of the Ocean Farm installation accounts for NOK 69.8 million. Depreciation of the capitalised costs commences when the project is completed. For further details, see below.
| Specification of fish farming licences 2016 NOK 1000 |
No. of licences |
Acquisition cost |
Book value 31.12.16 |
|---|---|---|---|
| Fish Farming Northern Norway | 32 | 849 193 | 844 193 |
| Fish Farming Central Norway | 68 | 1 535 404 | 1 519 404 |
| 100 | 2 384 597 | 2 363 597 | |
| Specification of fish farming licences 2015 | No. of | Acquisition | Book value |
| NOK 1000 | licences | cost | 31.12.15 |
| Fish Farming Northern Norway | 32 | 849 193 | 844 193 |
| Fish Farming Central Norway | 68 | 1 535 404 | 1 519 404 |
| 100 | 2 384 597 | 2 363 597 |
| Specification of goodwill 2016 NOK 1000 |
Acquisition year |
Acquisition cost |
Book value 31.12.16 |
|---|---|---|---|
| Fish Farming Northern Norway | 2006 | 95 114 | 95 114 |
| Fish Farming Central Norway | 1999-2014 | 357 818 | 351 351 |
| 452 932 | 446 465 |
| Specification of goodwill 2015 NOK 1000 |
Acquisition year |
Acquisition cost |
Book value 31.12.15 |
|---|---|---|---|
| Fish Farming Northern Norway | 2006 | 95 114 | 95 114 |
| Fish Farming Central Norway | 1999-2014 | 358 725 | 352 258 |
| 453 839 | 447 372 |
The Group has joint operational agreements/time-limited licences linked to 10 licences. In 2016, the Group was awarded 8 development licences for use in connection with its Ocean Farm project. See below for further details.
The Group has developed new technology for offshore fish farming. In 2015, it was decided to build of a pilot facility, and as at 31 December 2016, a total of NOK 340.7 million in construction costs have been capitalised, of which NOK 276.4 million were capitalised in 2016. A further NOK 69.8 million in development costs relating to the project have also been capitalised.
An updated estimate for investment prior to the expected completion of Ocean Farm 1 in 2017 comes to NOK 680 million. This is an increase of NOK 50 million compared with the original budget.
The Group expects to commence production at the facility in the autumn of 2017, and revenues from its output of fish are budgeted with effect from 2018. The Group has been awarded a location for the operation of its Ocean Farm, in addition to 8 development licences in February 2016. When assessing the project for impairment, the Group has presumed a harvested volume per generation of 8,000 tonnes, an average sales price of NOK 38.13 and a discount rate before tax of 8.97%. The conversion of development licences to ordinary production licences has also been included. This constitutes an investment cost of NOK 10 million per licence.
Based on the assessments made, there are no grounds for any write-down of capitalised assets relating to the development of the Ocean Farm installation.
SalMar has identified the Group's segments as cash-generating entities. On acquisition, goodwill and intangible assets are assigned to the cash-flow generating entities within the Group to which they are associated. Cash-generating entities are the lowest level at which independent cash flows can be identified, and are not at a higher level than the segments into which the Group divides its operations based on the geographic distribution of its marine-phase fish farms, ie Fish Farming Central Norway and Fish Farming Northern Norway, as well as Sales & Processing. For a specification of the book value of licences and goodwill by segment, see over. down the book value of fish farming licences as at 31 December 2016. Goodwill An estimate of value in use is applied when assessing the Group's goodwill for impairment. The last calculation of value in use was performed in 2014. Assessment has subsequently been made of the need for an updated calculation. In accordance with IAS 36.99, the Group has not done so, since the following factors indicate that there is very little likelihood that it would result in the recoverable amount being lower than book value.
The book value of the cash-flow generating entities is tested annually for impairment, or more frequently if there are indications that a write-down may be necessary. The book value of licences and goodwill respectively is compared with the recoverable amount. The recoverable amount is the higher of value in use and fair value less sales costs. An estimated sales value is employed to calculate the recoverable value. A write-down in performed if the book value is lower than the recoverable value. - Salmon prices have risen substantially, and expectations with respect to future prices are far above the price expectations in 2014. - Higher production costs, though margins are far above the break-even figures calculated in 2014. - Interest rates have fallen. When calculating value in use in 2014, the following assumptions and assessments were used:
The impairment test resulted in no requirement to write
Licences Fair value is used when assessing the Group's licences for impairment. With respect to the individual segments, the Group has capitalised licences worth on average NOK 22.3 million in the Central Norway segment and NOK 26.4 million in the Northern Norway segment. Impairment is not assessed at the individual licence level, but on a portfolio basis for each segment. An average of observable, historic transactions is used as a best estimate of fair value, with the value of transactions undertaken after 2014 coming to approx. NOK 60.0 million per licence. The assessment is based on Level 3 in the valuation hierarchy. Future net cash flows are estimated on the basis of the Group's budget and forecasts for the next three years. No real growth is assumed when calculating the terminal value, ie growth is stipulated at the expected rate of inflation. Value in use is calculated on the basis of a 6.55% return on investment after tax. As with all estimates, cash flow forecasts are sensitive to changes in underlying assumptions. Estimated value in use will be affected most strongly by the following assumptions: - Discount rate
77
Note 5 – Property, plant & equipment
| & other real | Land, buildings Plant, operating, equipment, |
Vessels and other |
of which leased |
||
|---|---|---|---|---|---|
| NOK 1000 | property | fixtures, etc operating assets | TOTAL operat. assets | ||
| Acquisition cost 1 Jan 2015 | 587 850 | 2 187 490 | 251 185 | 3 026 525 | 775 719 |
| Additions | 155 389 | 435 067 | 111 676 | 702 132 | 5 267 |
| Disposals | 0 | 807 | 447 | 1 254 | 168 |
| Acquisition cost 31 Dec 2015 | 743 239 | 2 621 751 | 362 414 | 3 727 404 | 780 817 |
| Additions | 293 936 | 692 094 | 108 295 | 1 094 324 | 102 |
| Disposals through exit of subsidiaries | 0 | 3 993 | 0 | 3 993 | 0 |
| Disposals | 2 081 | 35 490 | 3 988 | 41 559 | 980 |
| Acqusition cost 31 Dec 2016 | 1 035 094 | 3 274 362 | 466 721 | 4 776 177 | 779 939 |
| Acc. dep. & write-downs 1 Jan 2015 | 98 353 | 859 550 | 59 233 | 1 017 136 | 249 477 |
| Year's depreciation 2015 | 26 482 | 213 567 | 63 319 | 303 368 | 60 479 |
| Year's write-downs | 1 222 | 1 948 | 0 | 3 169 | 0 |
| Reversed depreciation | 0 | 41 | 0 | 41 | 0 |
| Acc. dep. & write-downs 31 Dec 2015 126 057 | 1 075 023 | 122 553 | 1 323 633 | 309 956 | |
| Year's depreciation 2016 | 28 987 | 252 375 | 72 419 | 353 782 | 51 951 |
| Reversed depreciation | 2 016 | 34 877 | 1 866 | 38 759 | 332 |
| Acc. dep. & write-downs 31 Dec 2016 153 028 | 1 292 521 | 193 106 | 1 638 655 | 361 574 | |
| Book value 31 Dec 2016 | 882 066 | 1 981 840 | 273 616 | 3 137 522 | 418 365 |
| Book value 31 Dec 2015 | 617 182 | 1 546 727 | 239 863 | 2 403 772 | 470 862 |
|---|---|---|---|---|---|
| Book value 1 Jan 2015 | 489 496 | 1 327 941 | 191 952 | 2 009 390 | 526 241 |
| Gains/losses on sale of non-current assets | 0 | 973 | 0 | 973 | |
| Annual lease of off-balance sheet | |||||
| operating assets | 24 462 | 15 969 | 293 631 | 334 062 | |
| Capitalised interest | 2 334 | 785 | 0 | 3 119 | |
| Economic life | 5-20 years | 3-10 years | 5-15 years | ||
| Depreciation plan | straight-line | straight-line | straight-line |
| Subsidiaries | (YES/NO) | office | share |
|---|---|---|---|
| SalMar Settefisk AS | YES | Kverva | 100,0 % |
| - Langstein Fisk AS | YES | Kverva | 100,0 % |
| - Straumsnes Settefisk AS | YES | Kverva | 100,0 % |
| - Villa Smolt AS | YES | Kverva | 100,0 % |
| Hitramat Farming AS | YES | Kverva | 51,0 % |
| SalMar Farming AS | YES | Kverva | 100,0 % |
| - Rauma Stamfisk AS | YES | Ørskog | 100,0 % |
| - Rauma Sætre AS | YES | Ørskog | 100,0 % |
| - Rauma Eik AS | YES | Ørskog | 100,0 % |
| - Vikenco AS | YES | Aukra | 51,0 % |
| Ocean Farming AS | YES | Kverva | 93,4 % |
| SalMar Nord AS | YES | Senja | 100,0 % |
| - Troms Stamfiskstasjon AS | YES | Senja | 100,0 % |
| SalMar AS | YES | Kverva | 100,0 % |
| - SalMar Japan KK | YES | Japan | 100,0 % |
| Non-controlling interests associated with subsidiaries |
Non-controlling interests' shareholding/ voting share |
Share of profit/ loss allocated to non-controlling interests |
Non-controllin interests' aggregated share of equity |
|---|---|---|---|
| Hitramat Farming AS | 49,0 % | 8 381 | 36 787 |
| Vikenco AS | 49,0 % | 6 075 | 45 645 |
| Ocean Farming AS | 6,6 % | - | - |
| Frøyas AS | -546 | - | |
| 13 910 | 82 432 |
Frøyas AS was sold in 2016. See Note 8 for further details.
The consolidated financial statements for 2016 cover the following subsidiaries:
Discount rate: the discount rate used reflects management's estimate of the risk specified for each cash-flow generating entity. The discount rate is set using the 10-year government bond rate in effect at the time of the assessment. The discount rate after tax is calculated at 6.55%. This corresponds to a pre-tax requirement of 8.97%.
EBIT(DA)/Margins: EBIT per kg is highly volatile with respect to changes in salmon prices, and has been higher than the historic average in recent years. Salmon price estimates are based on the actual long-term price level in the market in which the fish is sold. Estimates for production cost are based on historic figures, adjusted for known changes. Since the long-term net margin used in the assessment is deemed to be lower than last year's EBIT per kg, a normalised longterm EBIT per kg has been used.
Future output levels: future output levels are estimated on the basis of current production and harvesting plans, adjusted for expected increases in future output given current licences.
NOK 60,323,000 of the Group's leasing costs relating to offbalance sheet operating assets is recognised in other operating expenses. Other leasing costs are deemed to constitute part of the Group's cost of goods sold.
As at 31 December 2016, the company had capitalised NOK 1,020,624,000 in connection with an investment project that had not been completed and put into operation, and where depreciation had not begun. This breaks down as follows: NOK 449,904,000 in real property, NOK 559,915,000 in plant and equipment, and NOK 10,805,000 in vessels and other operating assets. As at 31 December 2016, capitalised leasing liabilities totalled NOK 381,312,000. Of the capitalised operating assets, NOK 12,046,000 was accounted for by plant and equipment, NOK 139,843,000 by vessels and other operating assets, and NOK 266,476,000 by land and buildings. All leasing agreements have been entered into at standard terms and conditions.
The assessment is based on a comparison of estimated future cash flows and the book value of each cash-flow generating entity. Sensitivity analyses are also carried out to assess estimated present values by looking at the change in salmon prices, production costs and, thereby, net margins and discount rates. The break-even level for EBIT per kg is NOK 5.23. The discount rate must increase by 2.9 percentage points before the calculated value would lead to the need for a write-down.
The Group continuously monitors its financial performance with respect to the long-term assumptions used to determine whether the assumptions in the basic model are still valid.
On the basis of the calculations made in 2014 and subsequent assessments, there are no grounds to write down the book value of goodwill as at 31 December 2016.
In 2013, the Group renegotiated the InnovaMar leasing agreement in connection with the sale of its shares in the company that owns the factory. The leasing period was extended from 15 to 20 years, with an option to extend after the expiry of the agreement in return for a reduced annual leasing cost. The lessor has, furthermore, the right but not the obligation to demand that SalMar, as tenant, acquires the property after the expiry of the agreement for the sum of NOK 70 million. The change in the terms of the leasing agreement means that the building and the leasing liability have been recognised in the balance sheet with effect from 1 October 2013. In total, the property was capitalised to the value of NOK 265.5 million as at 31 December 2016. The leasing liability is capitalised in the amount of NOK 316.2 million. The investment breaks down into the components building, technical installation and land. The portion allocated to buildings is depreciated over 30 years. Correspondingly, the portion allocated to technical installations is depreciated over 13 years. Land is not depreciated.
With effect from 31 March 2016, the Group has sold the entirety of its 66% shareholding in the subsidiary Frøyas AS to Insula AS. Kverva AS owns 91.76% of the shares in Insula AS and 53.4% of the shares in SalMar ASA, and is therefore deemed to be a related party to the Group.
The consideration paid for the shares in Frøyas AS is based on an earn-out model in combination with a cash sum. The fair value of the consideration is estimated at NOK 39.1 million. The entire cash component, amounting to NOK 20.0 million, was received in 2016.
At the time the transaction took place, the book value of Frøyas AS's equity was NOK 19.0 million, of which NOK 6.5 million was allocated to non-controlling interests. The exit of the subsidiary therefore resulted in a gain of NOK 26.6 million for the Group. The controlling interest's share of the gain has been classified as an operating revenue and recognised in profit and loss. The estimated fair value of the consideration has been updated as at 31 December 2016.
| Registered | Share | |||
|---|---|---|---|---|
| Company | office | Sector | holding | Voting share |
| Norskott Havbruk AS | Bergen | Fish farming | 50,00 % | 50,00 % |
| Salmus AS | Leirfjord | Fish farming | 50,00 % | 50,00 % |
| Kirkenes Processing AS | Molde | Harvesting of farmed salmon | 50,00 % | 50,00 % |
| Romsdal Processing AS | Kirkenes | Harvesting and processing | 44,45 % | 44,45 % |
| Trøndersk Kystkompetanse AS | Dyrvik | Competence development | 20,00 % | 20,00 % |
All associates are recognised in accordance with the equity method.
The Group has the following investments in associated companies:
Companies recognised in accordance
| with the equity method | Norskott Havbruk | Salmus AS | Other | TOTAL |
|---|---|---|---|---|
| Opening balance 1 Jan 2016 | 574 306 | 43 394 | 9 984 | 627 681 |
| Additions of shares | 0 | 200 000 | 0 | 200 000 |
| Debt conversion | 0 | 0 | 0 | 0 |
| Share of the year's profit/loss | 236 626 | 52 207 | -1 989 | 286 844 |
| Items of comprehensive income | -100 521 | -4 804 | 0 | -105 325 |
| Dividend received | -100 800 | 0 | 0 | -100 800 |
| Closing balance 31 Dec 2016 | 609 610 | 290 797 | 7 995 | 908 400 |
Since none of the Group's associates is listed on a stock exchange, no observable market values exist.
On 11 December 2015, the Group agreed to purchase 50% of the shares in Salmus AS. Salmus AS owned 53.05% of the shares in Kvitholmen AS, which in turn owned 86.38% of the shares in Arnalax Hf. At the time of the investment, the book value of Salmus AS's equity was NOK 47.1 million. SalMar paid a cash consideration of NOK 43.4 million for its investment. Excess values in the Group derive in their entirety from Arnalax Hf's fish farming licences.
Both Salmus AS and Kvitholmen AS are shareholding companies. Arnalax Hf is an aquaculture company located in Iceland. As at 31 December 2016, SalMar owns 50% of Salmus AS, while Haganes AS owns 31% and Edinborg AS 19%.
In connection with Arnarlax Hf's acqusition of shares in Fjardalax Hf, as well as the recapitalisation of further operations in the company, loans were granted to Salmus AS by its shareholders. SalMar's share of the total amount borrowed came to NOK 200 million. In connection with the loan, subscription rights independent of any specific consideration were issued for a sum corresponding to the amount of the loan. The loan is considered to form part of the total investment in Salmus AS. Including these subscription rights, SalMar's shareholding in Salmus comes to 69.35%. Ownership of Salmus is regulated by a shareholders' agreement. The owners of Salmus have pro rata representation on the company's board of directors, such that SalMar has 2 of 4 directors. The Board Chair does not have a casting vote. In the event of any disagreement between the shareholders, each of the parties may, pursuant to the shareholders' agreement, demand that the company be split up. As a result, SalMar is not deemed to have control of Salmus AS.
The recapitalisation of Arnarlax Hf was carried out via the holding company Kvitholmen AS. Following the share issue, Salmus AS has a 49.07 per cent shareholding in Kvitholmen AS. SalMar's indirect shareholding in Arnarlax Hf comes to 34.03% after the share issue.
Based on an overall assessment, in which size and complexity have been taken into consideration, Norskott Havbruk AS is deemed to be a material associate. Further information relating to this company may be found below.
Norskott Havbruk AS is located in Bergen and owns 100% of Scottish Sea Farms Ltd, the second largest aquaculture company in the UK, with operations in mainland Scotland and Shetland.
Norskott Havbruk is 50/50 owned by SalMar ASA and Lerøy Seafood Group ASA. The board of directors has 4 members, with each shareholder represented by 2 directors. The shareholders alternate in having the board's chair. Since neither of the company's owners has overall control, it is considered to be an associate.
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Operating revenues | 1 720 555 | 1 498 485 |
| Operating expenses | 1 246 649 | 1 376 914 |
| Fair value adjustments | 127 838 | -23 885 |
| Profit after tax | 477 608 | 82 816 |
| Current assets | 1 130 419 | 1 036 335 |
| Non-current assets | 875 983 | 880 285 |
| Current liabilities | 302 622 | 214 833 |
| Non-current liabilities | 479 810 | 552 783 |
| Equity | 1 223 970 | 1 149 005 |
| The Group's share of equity | 611 985 | 574 503 |
| Book value 31 Dec | 609 610 | 574 306 |
Norskott Havbruk AS had no contingent liabilities or capital liabilities as at 31 December 2016.
The following table shows a summary of financial information relating to Norskott Havbruk AS, based on 100% figures:
The following principles for the subsequent measurement of financial instruments have been applied to financial instruments in the balance sheet:
| NOK 1000 As at 31 Dec 2016 Assets |
Loans and receivables |
Assets at fair value in profit & loss |
Derivatives used as hedging instruments |
Available for sale |
TOTAL |
|---|---|---|---|---|---|
| Investments in share & other securities | - | - | - | 289 | 289 |
| Derivatives | - | 22 338 | 15 152 | - | 37 491 |
| Trade and other receivables | 853 493 | - | - | 19 097 | 872 590 |
| Bank deposits, cash & cash equivalents | 273 715 | - | - | - | 273 715 |
| TOTAL | 1 127 209 | 22 338 | 15 152 | 19 385 1 184 085 |
| NOK 1000 As at 31 Dec 2016 Liabilities |
Liabilities at fair value in |
Other financial liabilities at profit & loss amortised cost |
TOTAL |
|---|---|---|---|
| Borrowings | - | 2 256 858 | 2 256 858 |
| Financial leasing agreements | - | 381 312 | 381 312 |
| Derivatives | 134 963 | - | 134 963 |
| Trade payables and other liabilities, excl. statutory liabilities | - | 1 840 061 | 1 840 061 |
| TOTAL | 134 963 | 4 478 231 | 4 613 194 |
| NOK 1000 As at 31 Dec 2015 Assets |
Loans and receivables |
Assets at fair value in profit & loss |
Available for sale |
TOTAL |
|---|---|---|---|---|
| Investments in shares & other securities | - | - | 289 | 289 |
| Derivatives | - | 32 399 | - | 32 399 |
| Trade and other receivables | 996 942 | - | - | 996 942 |
| Bank deposits, cash & cash equivalents | 273 696 | - | - | 273 696 |
| TOTAL | 1 270 638 | 32 399 | 289 | 1 303 326 |
| NOK 1000 As at 31 Dec 2015 Liabilities |
Liabilities at fair value in profit & loss |
Other financial liabilities a amortised cost |
TOTAL |
|---|---|---|---|
| Borrowings | - | 2 480 832 | 2 480 832 |
| Financial leasing agreements | - | 412 776 | 412 776 |
| Derivatives | 132 889 | - | 132 889 |
| Trade payables and other liabilities, excl. statutory liabilities | 1 005 381 | 1 005 381 | |
| TOTAL | 132 889 | 3 898 989 | 4 031 878 |
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| NOK 1000 | Other | Other | Other | Other | ||
| Recognised fair value as at 31 Dec | receivables | current liabilities | receivables current liabilities | |||
| Forward currency contracts | 15 152 | -23 068 | 0 | -132 889 | ||
| Financial fish trading contracts (Fish-Pool) | 0 | -111 895 | 32 399 | 0 | ||
| Cross-currency interest rate swaps | 22 338 | 0 | 0 | 0 | ||
| Total | 37 491 | -134 963 | 32 399 | -132 889 |
The table below shows the company's forward currency contracts as at 31 December 2016. All contracts relate to the buying and selling of currencies against NOK. Forward contracts are entered into to reduce as far as possible exchange rate risk on outstanding trade receivables and purchase/sales contracts. The company has also entered into forward contracts to hedge contract deliveries relating to the construction of the Ocean Farm installation. Hedge accounting has been used with respect to these contracts. Forward currency contracts are recognised at fair value in the balance sheet. The value of forward contracts is calculated on the basis of estimated forward exchange rates for the currencies concerned, the term of the contract, agreed currency amounts and he spot rate on the balance sheet date. As at 31 December 2016, the fair value of forward contracts to which hedge accounting has been applied came to NOK 15,152,000. The fair value of forward contracts to which hedge accounting has not been applies came to NOK -23,069,000.
With effect from 1 January 2016, the Group has changed its classification of currency affects relating to the sale of foreign currencies. Previously, the realised effect of instruments was recognised in Operational EBIT (sales revenues). For 2015, the effect recognised in sales revenues was NOK 80,079 million. From 2016, sales transactions are recognised in profit and loss at the rate in effect on the date of the transaction. The entire realised effect of instruments in 2016 is therefore recognised as a financial item.
Financial fish sales/purchase contracts (derivatives) have been entered into on Fish-Pool. The derivatives are recognised at fair value in profit and loss. Settlement of the contracts is due to take place in 2017. The fair value of the Fish-Pool contracts is calculated on the basis of the agreed settlement price in the contract, the fair value of the fish on the balance sheet date and the contract's term. As at 31 December 2016, the fair value of purchase contracts is calculated at NOK 48,708,000, based on the market price in effect on the balance sheet date. Correspondingly, the fair value of sales contracts is calculated at NOK -160,603,000.
Realised Fish-Pool contracts are classified in profit and loss under Operational EBIT, while unrealised changes in the value of the Fish-Pool contracts are classified as part of the fair value adjustment.
Realised Fish-Pool contracts classified under operations came to NOK 154,689,000 in 2016 (2015: NOK 8,733,000).
During the period, a cross-currency interest rate swap agreement has been entered into whereby SalMar has received EUR 43,000,000 against a principal amount of USD 48,000,000. The agreement has a term of 2 years, and matures on 10 September 2018. The interest rate swap is recognised at fair value. As at 31 December 2016, this agreement has been recognised with a fair value of NOK 22,338 million.
Derivatives are measured at fair value. On the balance sheet date, these were recognised in the balance sheet as follows:
| Currency amount | Exchange rate | Book value/ Fair value |
||||
|---|---|---|---|---|---|---|
| Product | Type | Currency | (1000) | Term | interval | TNOK |
| Forward | Sale | EUR | 135 483 | Q1 2017 - Q2 2018 | 8,976-9,609 | 2 079 |
| Forward | Sale | JPY | 2 399 523 | Q1 2017 - Q1 2018 | 0,072-0,084 | 5 137 |
| Forward | Sale | GBP | 19 229 | Q1 2017 - Q1 2018 | 10,034-13,035 | -1 796 |
| Forward | Sale | USD | 261 775 | Q1 2017 - Q3 2018 | 8,137-8,742 | -28 046 |
| Forward | Buy | EUR | 1 189 | Q1 2017 | 9,2600 | -192 |
| Forward | Buy | JPY | 47 000 | Q1 2017 | 0,0810 | -251 |
| Forward | Buy | GBP | 8 | Q1 2017 | 10,7930 | -1 |
| Forward | Buy | USD | 94 | Q1 2017 | 8,6460 | 1 |
| Total liability | -23 068 | |||||
| Forward | Buy | USD | 27 742 | Q1 2017-Q3 2017 | 8,058-8,067 | 15 152 |
| As receivable | 15 152 |
The Group's receivables are measured at amortised cost. Receivables denominated in foreign currencies are valued at the daily rate. Book value equals fair value.
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Trade receivables | 602 388 | 826 701 |
| Provisions for bad debts | -6 615 | -11 161 |
| Other current receivables | 302 078 | 258 288 |
| Other non-current receivables | 51 328 | 8 237 |
| Total | 949 179 | 1 082 066 |
| Included in the item Other current receivables above are prepaid expenses in the amount of Included in the item Other current receivables above are derivatives in the amount of Included in the item Other current receivables above are VAT refunds due in the amount of |
39 099 37 491 179 609 |
52 725 32 399 173 165 |
| Included in the item Other non-current receivables above are the following, falling due for payment in more than one year Included in the item Other non-current receivables above are pension assets in the amount of |
49 949 1 379 |
6 840 1 397 |
Bad debts are classified as other operating expenses in profit and loss. Changes in provisions for bad debts and bad debts charged to expenses during the period are presented below.
| Provisions for bad debt 1 Jan | 11 161 | 12 188 |
|---|---|---|
| Provisions for bad debts 31 Dec | 6 615 | 11 161 |
| Change in provisions for bad debts during the period | -4 545 | -1 027 |
| 2015 | |
|---|---|
| 12 188 | |
| 6 615 | 11 161 |
| -4 545 | -1 027 |
| 393 | |
| -1 027 | |
| 751 | -634 |
| 2016 11 161 5 297 -4 545 |
As at 31 December, the company had the following trade receivables that had fallen due, but had not yet been paid:
See Note 2 for further details of the credit risk and foreign exchange risk associated with trade receivables.
| NOK 1000 | Total | Not due | <30 d | 30-45 d | 45-90 d | >90 d |
|---|---|---|---|---|---|---|
| 2016 | 602 388 | 524 780 | 34 931 | 3 279 | 7 359 | 32 039 |
| 2015 | 826 701 | 626 018 | 99 990 | 8 286 | 10 807 | 81 600 |
83
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Raw materials | 132 093 | 101 043 |
| Goods in progress (entirely biological assets) | 4 997 001 | 3 306 052 |
| Finished goods | 92 690 | 227 173 |
| Total | 5 221 784 | 3 634 268 |
Raw materials comprise mainly feed for smolt and marinephase fish production. It also includes raw materials for use in processing, as well as packaging. Stocks of biological assets are associated with SalMar's fish farming activities on land and at sea.
Finished goods comprises in its entirety whole salmon, fresh and frozen, as well as processed salmon products.
In the autumn of 2014, the Financial Supervisory Authority of Norway (FSAN) initiated an evaluation of selected aspects of the financial reporting of aquaculture companies listed on the Oslo Stock Exchange. The purpose of this process was to discover the extent to which the aquaculture companies report in a uniform and consistent manner in accordance with IFRS. The review resulted in a report from the FSAN dated 17 November 2015 (www.finanstilsynet.no). Based on the FSAN's findings, the enterprises concerned established an industry group whose purpose is to be a discussion forum for improving their financial reporting.
The industry group held several meetings during the autumn of 2015 and in 2016. The main goals of its efforts have been
SalMar has entered into an agreement with a financial institution for the buyout of trade receivables that meet certain specified criteria. SalMar transfers trade receivables that meet these criteria as and when they arise and receives immediate settlement thereof. Normally, the customer's payment would have taken 30-45 days to arrive. The financial institution assumes all material risk with respect to the receivable from the time of its transfer. The transfer of such receivables is deemed to be a transaction and is deducted from the balance sheet on the date it takes place. As at 31 December 2016, a total of NOK 432.9 million in outstanding receivables had been transferred and deducted from the balance sheet. The change in trade receivables deriving from this deduction is included in operating activities in the statement of cash flow.
as follows:
In relation to point 1 above, the companies have identified certain areas of improvement, and certain changes have been made to the model for the measurement of fair value and in the notes to the financial statements for the year ending 31 December 2015. Further improvements to the notes and accounting practices are planned to be implemented with effect from 2017.
In relation to point 2 above, work got underway in 2015 and has been continued in 2016. The industry group's goal is to have a harmonised model ready for implementation with effect from 2017.
The companies participating in the industry group are: Lerøy Seafood Group ASA, Grieg Seafood ASA, SalMar ASA, Cermaq Group AS, Bakkafrost P/f and Marine Harvest ASA.
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Biological assets 1 Jan | 3 306 053 | 3 114 684 |
| Increase due to production/purchase | 4 530 618 | 4 179 291 |
| Reduction resulting from sale/harvesting | -3 892 205 | -4 135 184 |
| Fair value adjustments 1 Jan (reversed) | -976 126 | -828 864 |
| Fair value adjustments 31 Dec (new) | 2 028 662 | 976 126 |
| Biological assets 31 Dec | 4 997 001 | 3 306 053 |
The most important parameters affecting the fair value of the biological assets presented above.
The model makes use of quarterly forward prices based on the estimated harvesting time for the biomass. As at 31 December 2016, a price interval of NOK 64.00 to NOK 73.50 per kg has been stipulated. A price sensitivity analysis as at 31 December 2016 gives the following effect on the Group's operating profit (NOK 1,000):
| Price change + NOK 1/kg | + 55 630 |
|---|---|
| Price change – NOK 1/kg | - 55 630 |
The Group's overall volume of biomass on the balance sheet date is also a material factor in an assessment of fair value. An overview of the Group's overall biomass and the size distribution within it is presented below. A sensitivity analysis of the biomass on the balance sheet gives the following effect on the Group's operating profit (NOK 1,000):
Change in biomass + 1% + 32 973 Change in biomass - 1% - 32 205
| 2016 | 2015 | |
|---|---|---|
| Biomass fish < 4 kg gutted weight (tonnes) | 73 490 | 61 136 |
| Biomass fish > 4 kg gutted weight (tonnes | 15 846 | 19 422 |
| Total biomass (tonnes) | 89 336 | 80 558 |
| Fair value adjustment fish < 4 kg gutted weight (NOK 1,000) | 1 501 634 | 610 425 |
| Fair value adjustment fish > 4 kg gutted weight (NOK 1,000) | 527 028 | 365 702 |
| TOTAL fair value adjustment of biological assets (NOK 1,000) | 2 028 662 | 976 127 |
| Cost price biological assets (NOK 1,000) | 2 968 339 | 2 329 925 |
| Book value of biological assets (NOK 1,000) | 4 997 001 | 3 306 052 |
Fish weighing more than 4 kg gutted weight are valued at the expected net profit/loss as indicated above.
As at 31 December 2016, the item "Bank deposits, cash & cash equivalents" included restricted tax deductions amounting to NOK 67,129,000 (2015: NOK 50,111,000). The Group had additional resticted funds associated with Fish-Pool contracts in the amount of NOK 119,899,000 (2015: NOK 25,480,000).
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Change in fair value of the biomass | 1 052 535 | 147 263 |
| Change in provisions for loss-making contracts | -315 985 | -91 932 |
| Unrealised change in value of Fish-Pool contracts | -144 293 | 56 092 |
| Unrealised change in value of forward currency contracts | 61 698 | -71 491 |
| Recognised fair value adjustments | 653 955 | 39 932 |
Fair value adjustments are part of the Group's operating profit/loss, but changes in fair value are presented on a separate line to provide a greater understanding of the Group's profit/loss on sold goods. The item comprises:
As at 31 December 2016, the parent company's share capital comprised:
| NOK 1000 | No. (stk) | Face value (NOK) | Book value |
|---|---|---|---|
| Ordinary shares | 113 299 999 | 0,25 | 28 325 |
| Shareholders | |||
| The 20 largest shareholders as at 31 December 2016 were: | |||
| No. | Shareholding Voting share | ||
| KVERVA AS | 60 500 000 | 53,40 % | 53,87 % |
| FOLKETRYGDFONDET | 8 304 705 | 7,33 % | 7,39 % |
| STATE STREET BANK AND TRUST COMP | 4 879 763 | 4,31 % | 4,34 % |
| JPMORGAN CHASE BANK, N.A., LONDON | 3 299 928 | 2,91 % | 2,94 % |
| LIN AS | 2 005 200 | 1,77 % | 1,79 % |
| SALMAR ASA | 984 368 | 0,87 % | 0,00 % |
| J.P. MORGAN BANK LUXEMBOURG S.A. | 973 664 | 0,86 % | 0,87 % |
| CLEARSTREAM BANKING S.A. | 885 909 | 0,78 % | 0,79 % |
| STATE STREET BANK AND TRUST COMP | 836 144 | 0,74 % | 0,74 % |
| STATE STREET BANK AND TRUST COMP | 643 581 | 0,57 % | 0,57 % |
| JPMORGAN CHASE BANK, N.A., LONDON | 613 622 | 0,54 % | 0,55 % |
| PARETO AKSJE NORGE | 611 744 | 0,54 % | 0,54 % |
| JPMORGAN CHASE BANK, N.A., LONDON | 592 728 | 0,52 % | 0,53 % |
| RBC INVESTOR SERVICES BANK S.A. | 578 242 | 0,51 % | 0,51 % |
| EUROCLEAR BANK N.V. | 567 940 | 0,50 % | 0,51 % |
| STATE STREET BANK AND TRUST COMP | 531 114 | 0,47 % | 0,47 % |
| COPPER ROCK INT SMALL CAP FUND | 516 992 | 0,46 % | 0,46 % |
| KLP AKSJENORGE INDEKS | 464 154 | 0,41 % | 0,41 % |
| JPMORGAN CHASE BANK, N.A., LONDON | 463 638 | 0,41 % | 0,41 % |
| STATE STREET BANK AND TRUST COMP | 461 106 | 0,41 % | 0,41 % |
| Total 20 largest shareholders | 88 714 542 | 78,30 % | 78,11 % |
| Total other shareholders | 24 585 457 | 21,70 % | 21,89 % |
| Total no. of shares | 113 299 999 | 100,00 % | 100,00 % |
* indirect ownership through the family-owned company GloMar AS, which holds shares in Kverva AS and includes shares owned and controlled by related parties.
** owned indirectly through Kvarv AS, the parent company in the Kverva Group. Kvarv AS owns 90.64 % of the shares in Kverva AS. Taking treasury shares in Kverva AS into account, the shareholding in the company comes to 96.20%. Kverva AS holds 53.40% of the shares in SalMar ASA, corresponding to a voting share of 53.87%. Gustav Witzøe controls 80% of the votes in Kvarv AS through his ownership of A-shares in the company, and owns 1 per cent of the company through his holding of B-shares.
SalMar ASA's CEO owned no shares in the company as at 31 December 2016.
| Name | Position | No. of shares | Shareholding |
|---|---|---|---|
| Bjørn Flatgård * | Board Chair | 1 525 162 | 1,35 % |
| Gustav Witzøe ** | Director | ** | |
| Geir Berg | Director/employee representative | 1 740 | 0,00 % |
| Merete G. Sandberg | Director/employee representative | 343 | 0,00 % |
The board has been authorised to raise the share capital by a maximum of NOK 2,830,000, through the issue of up to 11,318,670 shares. The authorisation is valid until the 2017 AGM or 30 June 2017 at the latest.
The board has also been authorised to acquire treasury shares with a face value of NOK 2,537,000, a total of 10,149,919 shares. The board's authorisation is valid until the 2017 AGM, or 30 June 2017 at the latest.
The board has also been authorised to issue convertible loans to enable the company to use such financial instruments as part of its overall short-term financing. The board's authorisation applies to a total loan amount of NOK 2,000,000,000.
This financing agreement covers all group companies with the exception of Vikenco AS and SalMar Japan K.K.
Estimated annual instalments on leasing liabilities in 2017 amount to NOK 21,158,000. Leasing agreements have an original term of 60-84 months, apart from the capitalised leasing agreement for the InnovaMar facility which has a term of 20 years.
See Note 2 for details of the maturity profile of the Group's liabilities.
In 2014, SalMar entered into a new borrowing agreement with a term of 5 years. The credit facility comprises a term loan of 1,000,000,000, which has a 10-year repayment profile maturing after 5 years. There is also an investment and acquisition facility in the amount of NOK 2,000,000,000, which has a 33-year repayment profile maturing after 5 years. No drawdowns on this facility had been made as at 31 December 2016. In addition to this, there is a revolving credit facility amounting to NOK 1,500,000,000 and an agreed operating credit capped at NOK 500,000,000. Interest is based on so-called "current terms". The most important financial covenants for the long-term financing of SalMar ASA are, respectively, a solvency requirement, which stipulates that the Group's recognised equity ratio shall exceed 35%, and a profitability requirement, which stipulates that the Group's net interest-bearing debt to EBIT-DA ratio shall, on average, not exceed 4.5. However, under the terms of the agreement, the company may have an NIBD/ EBITDA ratio of up to 6.0 for up to three quarters. Financing of trade payables The Group has entered into an agreement with the compa-
The capital increase resulting from conversion may not exceed NOK 2,830,000. The authorisation must be seen in conjunction with the authorisation to increase share capital, such that the total increase in capital for both authorisations combined may not exceed 10% of share capital. The authorisation permits existing shareholders' preference rights to be waived. The board's authorisation is valid until the 2017 AGM, or 30 June 2017 at the latest.
A dividend of NOK 12 per share has been proposed, totalling NOK 1,347,788,000 as at 31 December 2016. Dividend is not paid on treasury shares.
ny's feed suppliers to extend the credit given on feed orders. The feed supplier has agreed the discounting of the trade payable with the Group's bank. The liability springs from supply agreements containing provisions for variable credit times, and the terms obtained from the bank are not materially different from the tems which could have been obtained from the feed suppliers. As a result, the liability is classified as a trade payable, and the change is included in operating activities in the statement of cash flow. As at 31 December 2016, the Group owed its bank NOK 597,533,000 in connection with this type of financing.
| NOK | EUR | JPY | USD | GBP | Other | Total |
|---|---|---|---|---|---|---|
| -2 196 976 | ||||||
| -381 312 | -381 312 | |||||
| -59 480 | ||||||
| 273 715 | ||||||
| -1 905 142 | 90 018 | |||||
| -2 196 976 428 532 -2 149 755 244 613 |
90 018 90 018 |
12 100 | -16 551 -474 817 -16 551 -474 817 -4 451 -474 817 |
2 528 -89 190 2 528 -89 190 -2 637 768 17 002 2 528 -72 188 -2 364 052 |
The Group has a multicurrency group account scheme with a credit ceiling of TNOK 500,000. As at 31 December 2016, the Group had a net drawdown on the scheme in the amount of NOK 59,480,000. Deposits and drawdowns in different currencies relating to the group account scheme are recognised net in the Group's financial statements.
| NOK 1000 | ||
|---|---|---|
| Long-term interest-bearing debt | 2016 | 2015 |
| Debt to credit institutions | 2 196 976 | 2 480 429 |
| Leasing liabilities | 381 312 | 412 776 |
| Next year's instalment on long-term deb | -139 132 | -140 421 |
| Total long-term interest-bearing debt 31 Dec | 2 439 155 | 2 752 784 |
| Short-term interest-bearing debt Debt to credit institution |
59 480 | 0 |
| Next year's instalment on long-term debt | 139 132 | 140 421 |
| Total short-term interest-bearing debt 31 Dec | 198 613 | 140 421 |
| Total interest-bearing debt | 2 637 768 | 2 893 205 |
| Cash & cash equivalents | 273 715 | 273 696 |
| Net interest-bearing debt | 2 364 052 | 2 619 509 |
The book value of long-term debt is practically the same as fair value. Next year's instalments on bank loans and leasing agreements are classified as current liabilities in the balance sheet.
87
| NOK 1000 The year's tax expense breaks down as follows: |
2016 | 2015 |
|---|---|---|
| Tax payable | 423 223 | 292 320 |
| Change in deferred tax | 320 986 | 62 143 |
| Effect of change in tax rate | -56 462 | -90 796 |
| Tax paid abroad | 3 918 | 2 005 |
| Surplus/shortfall in tax provisions in previous years | -575 | -10 781 |
| Tax on ordinary profit | 691 090 | 254 891 |
| Tax payable in the balance sheet | 2016 | 2015 |
| Tax payable in the year | 423 223 | 292 320 |
| Tax payable in the balance sheet | 423 223 | 292 320 |
| Breakdown of temporary differences | 2016 | 2015 |
| Intangible and operating assets | 1 760 414 | 1 766 234 |
| Financial leasing | 17 454 | 33 560 |
| Inventory | 5 013 706 | 3 352 255 |
| Receivables | -408 | -5 243 |
| Other | -586 809 | -254 965 |
| Profit & loss account | 26 064 | 31 417 |
| TOTAL temporary differences | 6 230 421 | 4 923 259 |
| Deferred tax liabilities (+) / deferred tax assets (-) | 1 495 301 | 1 230 815 |
| Tax rate used when calculating deferred tax | 24 % | 25 % |
| Change in deferred tax in the balance sheet: | 2016 | 2015 |
| Deferred tax 1 Jan | 1 230 815 | 1 262 594 |
| Change in deferred tax in profit and loss | 320 986 | 62 143 |
| Change in deferred tax resulting from changed tax rate - effect recognised in profit and loss | -56 462 | -90 796 |
| Deferred tax associated with items recognised in comprehensive income | 3 637 | 0 |
| Deferred tax associated with equity transactions | -4 105 | -1 398 |
| Deferred tax associated with the exit of subsidiaries | -157 | 0 |
| Other changes | 587 | -1 728 |
| Deferred tax 31 Dec | 1 495 301 | 1 230 815 |
| Reconciliation from nominal to actual tax rates | 2016 | 2015 |
| Profit before tax | 3 342 080 | 1 383 686 |
| Expected tax at nominal tax rate | 835 520 | 373 595 |
| Effect of change in tax rate | -56 462 | -90 796 |
| Permanent differences (25%/27%) | -91 311 | -19 133 |
| Tax paid abroad | 3 918 | 2 005 |
| Surplus/shortfall in tax provisions in previous years | -575 | -10 781 |
| Calculated tax expense | 691 090 | 254 891 |
| Effective tax rate | 20,7 % | 18,4 % |
| Permanent differences apply to the following: | ||
| Option expenses | 6 976 | 6 192 |
| Options redeemed | -12 711 | -4 568 |
| Skattefunn (Norwegian tax refund scheme for R&D expenses) | -2 866 | -3 040 |
| Share of profit/loss from associates | -71 711 | -10 865 |
| Gain from exit of subsidiaries | -6 640 | 0 |
| Other | -4 359 | -6 851 |
Total -91 311 -19 133
The enterprise has a duty to provide an occupational pension scheme, under the Mandatory Occupational Pensions Act, and has a pension scheme that meets the requirements of this legislation.
In 2006, the Group switched from a defined-benefits pension plan to a defined-contribution pension scheme. Only those assets and liabilities associated with employees who were on sick leave or in receipt of disability benefits, in addition to the residual pensioners, remain in the defined-benefits scheme. As at 31 December 2016, the pension liability associated with the defined-benefits plan derives in its entirety from 7 pensioners.
Liabilities associated with the AFP early retirement scheme are not included in the Group's pension calculations. For account ing purposes, the scheme is deemed to be a multi-employer occupational pension plan. The Group is unable to identify its share of the scheme's underlying financial position and results with sufficient reliability, and therefore recognises it as a defined-contribution scheme. This means that liabilities in respect of the AFP scheme are not capitalised. Premiums paid into the scheme are charged to expenses as they accrue.
Total pension costs for the Group break down into two parts, one contribution-based and one benefits-based, as follows:
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Premiums paid into the defined-contribution scheme | 18 639 | 21 697 |
| Costs relating to the defined-benefits plan | 11 059 | 9 490 |
| Accrued employers' national insurance contributions | 1 905 | 1 875 |
| Year's pension costs, incl. employers' national insurance contributions | 31 602 | 33 062 |
Pension assets and liabilities recognised in the Group's balance sheet break down as follows:
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Capitalised pension assets associated with secured scheme | 1 379 | 1 397 |
| Recognised liabilities secured through liens, etc: | |
|---|---|
| NOK 1000 | 2016 |
| Short-term debt to credit institutions | 59 480 |
| Long-term debt to credit institutions | 2 196 976 |
| Leasing liabilities and other non-current liabilities | 381 312 |
| Total | 2 637 768 |
| Book value of assets pledged as security for recognised liabilities | 2016 |
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Short-term debt to credit institutions | 59 480 | 0 |
| Long-term debt to credit institutions | 2 196 976 | 2 480 429 |
| Leasing liabilities and other non-current liabilities | 381 312 | 412 776 |
| Total | 2 637 768 | 2 893 205 |
| Book value of assets pledged as security for recognised liabilities | 2016 | 2015 |
| Property, plant & equipment and licences | 5 501 119 | 4 775 556 |
| Inventory and biological assets | 5 221 784 | 3 634 268 |
| Trade receivables | 595 773 | 815 540 |
| Total | 11 318 676 | 9 225 364 |
As at 31 December 2016, the Group had issued no guarantees with respect to third parties.
The Group has also entered into a 10-year leasing contract with Romsdalsfisk AS, which expires 1 April 2017. The contract is for the lease of the Vikenco harvesting plant. The Group has a preferred right with respect to extending the lease. The leasing amount is divided into a fixed portion and a performance-related portion capped at NOK 300,000.
The Group has entered into a 5-year leasing contract with Wessel Invest AS, which expires 26 February 2020. The contract relates to the lease of Kjørsvik Settefisk's premises and includes the lease of water rights. Payments totalling NOK 6,978,000 were made in 2016 with respect to the leasing of the facilities and water rights. Wessel Invest AS is wholly owned by Gustav Witzøe and related parties. See Note 29 for further details .
| NOK 1000 | |
|---|---|
| NOK 1000 | Less than 1 year | 2-5 years | More than 5 years | Total |
|---|---|---|---|---|
| Total future leasing payments | 352 881 | 434 996 | 18 275 | 806 152 |
| 89 | |
|---|---|
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Accrued holiday pay | 70 878 | 66 333 |
| Accrued interest | 2 222 | 4 260 |
| Derivatives | 134 963 | 132 889 |
| Provisions for loss-making sales contracts | 442 110 | 126 125 |
| Provisions for future maintenance | 47 809 | 34 310 |
| Other accrued costs and provisions | 77 638 | 125 080 |
| TOTAL other current liabilities | 775 622 | 488 996 |
The Group's sales are primarily made through the subsidiaries SalMar AS and Vikenco AS.
| Group revenues by geographic market: | 2016 | 2015 |
|---|---|---|
| Asia | 20,6 % | 20,6 % |
| Russia | 0,0 % | 0,0 % |
| USA/ Canada | 16,6 % | 13,0 % |
| Europe, excl. Norway | 45,6 % | 50,8 % |
| Norway | 16,8 % | 15,4 % |
| Other | 0,4 % | 0,2 % |
| Total | 100,0 % | 100,0 % |
| NOK 1000 | ||
|---|---|---|
| Payroll costs | 2016 | 2015 |
| Salaries, incl. holiday pay and bonuses | 732 805 | 649 728 |
| Employers' national insurance contributions | 56 230 | 48 058 |
| Pension costs (see Note 19) | 29 697 | 31 187 |
| Options | 27 905 | 22 933 |
| Other benefits | 14 897 | 13 975 |
| Total | 861 534 | 765 881 |
No. of full-time equivalents employed during the financial year. 1 357,0 1 301,0
The remuneration (excl. VAT) paid to the Group's auditor breaks down as follows:
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Statutory auditing services | 1 353 | 1 348 |
| Other certification services | 190 | 143 |
| Tax advisory services | 14 | 34 |
| Other services | 55 | 94 |
| Refunded expenditures | 207 | 138 |
| Total | 1 818 | 1 756 |
| The Group's revenues by currency: | 2016 | 2015 |
|---|---|---|
| NOK | 2 525 172 | 2 032 702 |
| JPY | 338 976 | 357 565 |
| GBP | 436 191 | 499 458 |
| USD | 2 771 160 | 1 964 552 |
| EUR | 2 887 183 | 2 442 204 |
| SEK | 71 132 | 29 721 |
| Total | 9 029 814 | 7 326 202 |
| Loans to and sureties granted on behalf of employees: | Loans | Sureties |
|---|---|---|
| Employees | 1 421 | 0 |
| 2016 NOK 1000 Senior executives |
Salary | Bonus | Benefits- in-kind |
Accrued pension expenses exercised |
RSUs |
|---|---|---|---|---|---|
| Trond Williksen, CEO * | 398 | 0 | 1 | 0 | 0 |
| Leif Inge Nordhammer, CEO ** | 2 842 | 0 | 13 | 92 | 1 791 |
| Trond Tuvstein, CFO | 2 112 | 700 | 10 | 69 | 1 061 |
| Olav-Andreas Ervik, Director, Fish Farming | 1 979 | 700 | 10 | 62 | 1 018 |
| Gustav Witzøe, Director, Business Development | 992 | 323 | 8 | 52 | 0 |
| Eva Haugen, Quality Assurance/HSE/HR | 1 186 | 386 | 8 | 64 | 696 |
| Tom Aleksandersen, Director, Strategy & Org. Develop. | 2 155 | 713 | 11 | 68 | 445 |
Note 25 – Aksjeverdibasert avlønning * Took up position 1 March 2015
* Took up position 14 November 2016
** Stepped down 14 November 2016
| 2015 NOK 1000 Senior executives |
Salary | Bonus | Benefits- in-kind |
Accrued pension expenses exercised |
RSUs |
|---|---|---|---|---|---|
| Leif Inge Nordhammer, CEO | 2 940 | 0 | 8 | 128 | 621 |
| Trond Tuvstein, CFO | 1 772 | 400 | 8 | 69 | 362 |
| Olav-Andreas Ervik, Director, Fish Farming | 1 623 | 250 | 8 | 65 | 346 |
| Gustav Witzøe, Director, Business Development | 985 | 0 | 8 | 57 | 0 |
| Eva Haugen, Director, Quality Assurance/HSE/HR | 1 164 | 200 | 8 | 68 | 238 |
| Tom Aleksandersen, Director, Strategy & Org. Develop.* | 1 650 | 400 | 7 | 50 | 0 |
The Company's senior executive remuneration policy is based on the following main principles:
On the basis of these main principles, the board has drawn up the following remuneration structure for the company's senior executives:
Basic salary is the main element in the executive's compensation package. Basic salary shall correspond to the going rate in the market, and shall reflect the individual position's duties and level of responsibility.
SalMar has a bonus scheme for group management that is determined by the board of directors. The board carries out an annual assessment of the scheme and determines the bonus criteria for the coming year. Variable salary increments under the scheme may not exceed 33% of the individual executive's basic salary. Within this framework, individual bonuses are determined on the basis of an overall assessment of contribution, performance, development and results achieved. bution plan and lies within the framework stipulated in the Mandatory Occupational Pensions Act. Notice and severance pay In principle, senior executives must serve a 6-month period of notice. In selected cases, and depending on the position, severance pay of 6 to 12 months may be paid. Benefits-in-kind The Company shall not offer benefits-in-kind over and above
three-year period. The individual employee may be awarded share entitlements worth the equivalent of 6 months' salary. Accrual of 2/3 of the entitlements depends on the achievement of predefined performance criteria. The value of the shares released under the various programmes in an individual year may not exceed one full year's salary.
The intention is that the incentive scheme shall be continued with the establishment of annual programmes. The board will adjust these annual programmes as it deems necessary, and each individual programme will be submitted to the AGM for approval. A total of three programmes are in effect in 2017.
SalMar has a share-based incentive scheme for senior executives in the Group. The first such programme was approved by the AGM on 4 June 2014. The programme encompasses incumbents of senior positions and key individuals within the Group. The programme entitles the employee to receive shares free of charge. This entitlement accrues over a Other variable elements of remuneration In addition to that stipulated above, the Company may not offer senior executives any variable elements in the remuneration they receive or special benefits that supplement their basic salary.
Members of group management participate in the Group's general pension scheme. The scheme is a defined contri-
these which are normal for senior executives in comparable companies.
91
| Board of Directors NOK 1000 |
Directors' fees 2016 |
Directors' fees 2015 |
|---|---|---|
| Bjørn Flatgård, Chair | 320 | 480 |
| Gustav Witzøe | 100 | 150 |
| Kjell A. Storeide * | 250 | 375 |
| Tove Nedreberg ** | 235 | 353 |
| Merethe Helene Holthe | 0 | 200 |
| Bente Rathe *** | 200 | 125 |
| Pål Georg Storø, employee representative | 0 | 100 |
| Hanne Tobiassen, employee representative | 0 | 100 |
| Merete Gisvold Sandberg, employee representative | 100 | 50 |
| Geir Berg, employee representative | 100 | 50 |
* The fee includes NOK 50,000 in remuneration as chair of the Audit Committee. The corresponding amount in 2015 was NOK 75,000.
** The fee includes NOK 35,000 in remuneration as a member of the Audit Committee. The corresponding amount in 2015 was NOK 52,500.
*** The fee in 2015 includes NOK 25,000 in remuneration as a member of the Nomination Committee.
The stated directors' fees are amounts paid out and reported to the tax authoridies during the period. The payment profile for directors' fees was altered in 2015, and the fees stated for 2015 apply to 1.5 periods. The fees stated for 2016 apply to 1 period.
Directors' fees payable to employee representatives are stated above. Total remuneration from the Group to employee-elected members of the board of directors, including directors' fees as stated above and redeemed RSUs, is as follows:
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Merete Gisvold Sandberg | 1 190 | 883 |
| Geir Berg | 1 497 | 966 |
| Pål Georg Storø | 1 380 | |
| Hanne Kristine Tobiassen | 1 008 |
| Movements in the no. of outstanding RSUs: | 2016 | 2015 |
|---|---|---|
| As at 1 Jan | 577 214 | 364 860 |
| Awarded during the year | 198 281 | 325 464 |
| Reclaimed during the year | -195 713 | -119 919 |
| Lapsed during the year | -26 507 | -25 277 |
| Lapsed during the year due to performance criteria not being met | -44 126 | - |
| Dividend adjustment | 20 321 | 32 086 |
| As at 31 Dec | 529 470 | 577 214 |
Vesting period for the outstanding RSUs at the close of the year:
| Date awarded Vesting period | 2016 | 2 015 | |
|---|---|---|---|
| 03.12.2014 | 2014-16 | - | 126 288 |
| 03.12.2014 | 2014-17 | 117 825 | 126 345 |
| 21.12.2015 | 2015-16 | - | 108 143 |
| 21.12.2015 | 2015-17 | 106 664 | 108 201 |
| 21.12.2015 | 2015-18 | 106 700 | 108 237 |
| 16.12.2016 | 2016-17 | 66 071 | |
| 16.12.2016 | 2016-18 | 66 092 | |
| 16.12.2016 | 2016-19 | 66 118 | |
| 529 470 | 577 214 |
In accordance with the authorisation granted by the company's AGM, SalMar ASA's board of directors has introduced a share-based incentive scheme (Restricted Share Unit Plan) for senior executives and key personnel employed by the company and its subsidiaries. As at 31 December 2016, the plan encompasses up to 529,470 shares, and has a term of three years. The company's board members do not receive options. The company's liabilities under the plan will be covered by its existing holding of treasury shares.
Participants of the plan are granted Restricted Share Units (RSUs) free of charge. These will be released and transferred as shares to participants after an accrual period subject to predefined performance criteria. The shares are then transferred to the employee free of charge. The plan comprises three accrual periods of, respectively, one, two and three calendar years. Each accrual period covers 1/3 of the total annual RSUs in the plan. One RSU affords a contingent entitlement to one share. The award of RSUs in each of the three accrual periods rests on the following performance criteria:
1/3 of the RSUs will vest irrespective of the performance criteria.
1/3 of the RSUs will vest provided that SalMar achieves a better EBIT/kg ratio than other aquaculture enterprises listed on the Oslo Stock Exchange during the accrual period. - 1/3 of the RSUs will vest provided that SalMar's shares deliver a higher total shareholder return (TSR) than a defined group of comparable companies during the accrual period.
The plan stipulates that RSUs will vest only if the participant is still an employee of the Group. The total gains from released RSUs during the course of one calendar year may not exceed 100% of the participant's basic salary.
The fair value of the RSU entitlements that are at market terms is calculated on the basis of a Monte-Carlo simulation. The most important input data when calculating the value of these RSU entitlements are the share price on the date of the award, volatility, risk-free interest, expected dividend and accrual period. Based on the Monte-Carlo simulation, each RSU entitlement is worth NOK 260.72 (2015: NOK 110.57). In 2016, 195,713 RSUs were exercised. The market price per share at the time the RSUs were exercised was NOK 260.13. In 2015, 119,919 RSUs were exercised. The market price per share at the time the RSU's were exercised was NOK 141.47. The value of the RSUs is treated as a salary payment to the individual employee.
The fair value of RSU entitlements is calculated on the date they are awarded. The total fair value for the entitlements is capped at NOK 115,634,200 (2015: NOK 77,335,200). The cost is periodised over the accrual period, and a total of NOK 27,905,000 was charged to expenses in connection with the scheme in 2016 (2015: NOK 22,933,000). Provisions for employer's national insurance contributions linked to the scheme have also been made. The expense will become real to the extent that the performance criteria are met.
The fair value of the RSU entitlements that are not at market terms is set as the share price on the date the award was made. The probability of the performance criteria being met is taken into account when assessing how many RSU entitlements will be redeemed. The share price on the date of the 2016 award was NOK 261.60 (2015: NOK 148.00).
| Holding 01.01 |
Awarded | Reclaimed | Dividend adjustment |
Lapsed due to performance criteria not being met |
Lapsed due to resigna tion from position |
Holding 31.12 |
|
|---|---|---|---|---|---|---|---|
| Trond Williksen, CEO* |
- | 5 753 | - | - | - | - | 5 753 |
| Leif Inge Nordhammer, CEO ** |
18 795 | - | -6 886 | 728 | -1 113 | -11 524 | - |
| Trond Tuvstein, CFO |
11 245 | 4 108 | -4 089 | 434 | -677 | - | 11 021 |
| Olav-Andreas Ervik, Director, Fish Farming |
10 813 | 4 108 | -3 915 | 414 | -658 | - | 10 762 |
| Eva Haugen, Director, Quality Assurance/HSE/HR |
7 383 | 2 267 | -2 684 | 282 | -445 | - | 6 803 |
| Tom Aleksandersen, Director, Strategy & Org. Development 7 386 |
4 182 | -1 709 | 272 | -821 | - | 9 310 |
* Took up position 14 November 2016
** Stepped down 14 November 2016
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Maintenance | 238 182 | 208 509 |
| Operating equipment & consumables | 76 081 | 71 865 |
| Direct input factors | 229 185 | 209 462 |
| Freight & delivery costs | 550 778 | 559 532 |
| Other operating expenses | 283 569 | 222 817 |
| Total | 1 377 795 | 1 272 186 |
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Net profit for the year (controlling interest's share) | 2 637 079 | 1 103 289 |
| Average no. of shares outstanding as at 1 Jan | 112 119 918 | 111 999 999 |
| Effect of share issue | - | - |
| Effect of treasury shares allocated to employees (see Note 25) | 195 713 | 119 919 |
| Average no. of shares outstanding through the year | 112 152 537 | 112 019 986 |
| Diluting effect of RSU entitlements granted (see Note 25) | 398 961 | 242 128 |
| Average no. of diluted shares outstanding through the year | 112 551 498 | 112 262 114 |
| Earnings per share | ||
| Basic | 23,51 | 9,85 |
| Diluted | 23,43 | 9,83 |
Forsknings- og utviklingsutgifter inkluderer utgifter til forsknings- og administrasjonspersonell, utgifter til teknisk utstyr og anlegg, samt utgifter til eksterne forskningstjenester.
R&D costs include expenses relating to research and administrative personnel, technical equipment and facilities, and sums paid for external research services. The criteria for capitalisation are deemed to have been met with respect to the Group's salmon lice projects, as well as the Ocean Farm project (see Note 4). Other R&D costs are not deemed to have met the criteria for capitalisation, and those costs have therefore been charged to expenses. A total of NOK 63,696,000 in R&D costs was charged to expenses in 2016 (2015: NOK 47,203,000 ).
In 2016, Group companies took to income NOK 10,343,700 in Skattefunn contributions (2015: NOK 8,926,600). A further NOK 1,121,600 in grants relating to capitalised R&D costs has also been recognised. Skattefunn contributions relating to this type of project have been recognised as a reduction in the cost price of the capitalised asset concerned. The corresponding figure for 2015 was NOK 3,723,600.
In addition, an investment grant totalling NOK 10.5 million was received from Innovation Norway in 2016, in connecition with construction of the Ocean Farm installation. The entire amount of the grant has been recognised as a reduction in the capitalised amount allocated to the Ocean Farm installation.
The Group's parent company is SalMar ASA. The overall parent company is Kverva AS, which owns 53.4% of the shares in Sal-Mar ASA. The ultimate parent company is Kvarv AS, which prepares its own consolidated accounts in accordance with NGAAP. See Note 18 for further details.
| Transactions with related parties in 2016: | Sales Purchases | Liabilities | |||
|---|---|---|---|---|---|
| Associates of the SalMar Group | 138 | 3 096 | 139 | 132 | |
| Companies controlled by the parent company Kverva AS | 692 922 | 69 804 | 107 846 | 659 | |
| Associates of the parent company Kverva AS | 29 | 9 113 | 0 | 523 | |
| Companies controlled by Gustav Witzøe and related parties | 0 | 6 978 | 0 | 175 |
Transactions between the Group and related parties are undertaken on market terms and conditions. Dividends have also been received from associates. See Note 9 for further details.
In addition to the transactions stated above, the Group's shares in the subsidiary Frøyas AS were sold to the related party Insula AS in 2016. See Note 8 for further details.
Standards and interpretations that have been approved prior to the adoption of the consolidated financial statements, but which will come into effect at a future date, are listed below.
Only those standards expected to affect the Group's consolidated financial statements are presented. IFRS 9 Financial Instruments introduces new requirements with respect to the classification and measurement of financial assets. The standard continues the classification rules for financial liabilities, but alters the presentation of changes in value associated with own credit risk for liabilities that are voluntarily classified at fair value in profit and loss. A provisional analysis of the standard's effect on the Group has been carried out, and it is not expected to have any major impact on the Group's classification or result recognition. The standard is mandatory with effect from 1 January 2018. IFRS 16 Leases replaces the existing IFRS standard for leases, IAS 17 Leases. IFRS 16 sets out principles for measurement, recognition, presentation and disclosures relating to leasing agreements for both parties thereto, ie the customer (lessee) and the asset's owner (lessor). The new standard requires the lessee to recognise assets and liabilities for the majority of leasing agreements, which is a material change from today's principles. For the lessor, however, IFRS 16 continues the majority of the existing principles from IAS 17. In line with this, a lessor must still classify his leasing agreements as either operational or financial, and account for these two types of leasing agreements in different ways. An overview of all future leasing payments is given in Note 21. Expected implementation is 1 January 2019 at the earliest.
considered to have any material effect on the Group's principles for revenue recognition. Expected implementation is 1 January 2018 at the earliest.
IFRS 15 Revenue from Contracts with Customers is a new uniform standard for revenue recognition and replaces all existing standards and interpretations thereof. The standard applies to all revenue contracts and contains a model for the measurement and recognition of revenues deriving from the sale of certain non-financial assets. The standard is not Amendments to other standards and interpretations relate to standards and interpretations that are not relevant for the Group.
97
| OPERATING REVENUES AND OPERATING EXPENSES | Note | 2016 | 2015 |
|---|---|---|---|
| Sales revenues | 2 | 72 167 | 62 657 |
| Total operating revenues | 72 167 | 62 657 | |
| Salary and payroll costs | 3 | 52 358 | 41 362 |
| Derpreciation of property, plant & equipment | 4 | 3 966 | 2 720 |
| Other operating expenses | 3 | 93 056 | 72 940 |
| Total operating expenses | 149 380 | 117 021 | |
| Operating profit/loss | -77 214 | -54 364 | |
| FINANCIAL INCOME AND FINANCIAL EXPENSES | |||
| Income from investment in subsidiaries | 5 | 2 522 614 | 1 227 708 |
| Income from investment in associates | 6 | 100 800 | 46 000 |
| Interest received from group companies | 67 798 | 71 303 | |
| Other interest income | 2 148 | 1 102 | |
| Other financial income | 83 | 40 519 | |
| Interest paid to group companies | 9 863 | 4 442 | |
| Other interest expenses | 46 523 | 50 610 | |
| Other financial expenses | 3 617 | 14 368 | |
| Net financial items | 2 633 439 | 1 317 211 | |
| Ordinary profit/loss before tax | 2 556 225 | 1 262 847 | |
| Tax | 12 | 218 291 | 319 992 |
| Profit/loss after tax | 2 337 934 | 942 854 | |
| NET PROFIT/LOSS FOR THE YEAR | 2 337 934 | 942 854 | |
| ALLOCATIONS | |||
| Dividend provisions | 8,9 | 1 347 788 | 1 121 199 |
| Transferred to/from other equity | 9 | 990 147 | -178 345 |
| Total allocations | 2 337 934 | 942 854 | |
NOK 1000
| NON-CURRENT ASSETS | |
|---|---|
| INTANGIBLE ASSETS | |
| PROPERTY, PLANT & EQUIPMENT | |
| NON-CURRENT FINANCIAL ASSETS | |
| CURRENT ASSETS | |
| RECEIVABLES | |
| ASSETS | Note | 2016 | 2015 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| INTANGIBLE ASSETS | |||
| Deferred tax assets | 12 | 716 | 0 |
| Total intangible assets | 716 | 0 | |
| PROPERTY, PLANT & EQUIPMENT | |||
| Land, buildings and other real property | 4 | 2 159 | 2 216 |
| Plant, equipment and operating consumables | 4 | 11 323 | 13 569 |
| Total property, plant & equipment | 14 | 13 482 | 15 785 |
| NON-CURRENT FINANCIAL ASSETS | |||
| Investments in subsidiaries | 5, 14 | 1 982 877 | 1 140 717 |
| Loans to group companies | 7, 11, 14 | 2 583 596 | 2 165 911 |
| Investments in associates | 6 | 406 283 | 206 283 |
| Investments in shares and other securities | 10 | 10 | |
| Other receivables | 7 | 43 984 | 588 |
| Total non-current financial assets | 5 016 750 | 3 513 509 | |
| Total non-current assets | 5 030 949 | 3 529 294 | |
| CURRENT ASSETS | |||
| RECEIVABLES | |||
| Trade receivables | 14 | 29 | 42 |
| Short-term receivables from group companies | 11,14 | 2 579 935 | 1 409 895 |
| Other receivables | 14 | 15 546 | 14 553 |
| Total receivables | 2 595 510 | 1 424 490 | |
| BANK DEPOSITS, CASH & CASH EQUIVALENTS | 16 | 8 162 | 147 742 |
| Total current assets | 2 603 672 | 1 572 233 | |
| TOTAL ASSETS | 7 634 621 | 5 101 526 | |
as at 31 December NOK 1000
99
| EQUITY AND LIABILITIES | Note | 2016 | 2015 |
|---|---|---|---|
| EQUITY | |||
| PAID-IN EQUITY | |||
| Share capital | 8, 9 | 28 325 | 28 325 |
| Treasury shares | 9 | -246 | -295 |
| Share premium fund | 9 | 415 285 | 415 285 |
| Other paid-in equity | 9 | 79 075 | 50 667 |
| Total paid-in equity | 522 440 | 493 982 | |
| RETAINED EARNINGS | |||
| Other equity | 9 | 1 555 875 | 565 729 |
| Total retained earnings | 1 555 875 | 565 729 | |
| Total equity | 9 | 2 078 315 | 1 059 711 |
| LIABILITIES | |||
| Deferred tax | 12 | 0 | 152 |
| Total provisions | 0 | 152 | |
| OTHER NON-CURRENT LIABILITIES | |||
| Debt to credit institutions | 13,14 | 1 950 000 | 2 400 000 |
| Total other non-current liabilities | 1 950 000 | 2 400 000 | |
| CURRENT LIABILITIES | |||
| Debt to credit institutions | 13,14 | 38 641 | 0 |
| Trade payables | 5 483 | 4 525 | |
| Tax payable | 12 | 0 | 272 153 |
| Dividend | 8, 9 | 1 347 788 | 1 121 199 |
| Public charges payable | 44 446 | 37 119 | |
| Short-term payables to group companies | 11 | 2 157 518 | 196 357 |
| Other current liabilities | 12 432 | 10 310 | |
| Total current liabilities | 3 606 306 | 1 641 664 | |
| Total liabilities | 5 556 306 | 4 041 816 | |
| TOTAL EQUITY AND LIABILITIES | 7 634 621 | 5 101 526 |
as at 31 December NOK 1000
Gustav Witzøe Director
Frøya, 20th of April 2017
Tove Elin Nedreberg
Director
Geir Berg
Director/Employee representative
Bjørn Flatgård
Chair
Kjell A. Storeide Director
Bente Rathe Director
Trond Williksen President & CEO
Merete Gisvold Sandberg Director/Employee representative
| Note | 2016 | 2015 | |
|---|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES: | |||
| Ordinary profit before tax | 2 556 225 | 1 262 847 | |
| Tax paid during the period | 12 | -272 153 | -285 820 |
| Depreciation | 4 | 3 966 | 2 720 |
| Income from investments in subsidiaries | 5 | -2 522 614 | -1 227 708 |
| Income from investments in associates | 6 | -100 800 | -46 000 |
| Options charged to expenses | 3 | 4 139 | 3 801 |
| Change in trade receivables | 49 685 | 16 727 | |
| Change in trade payables | -7 997 | -5 595 | |
| Change in other time-limited items | 3 242 | -59 691 | |
| Net cash flow from operating activities | -286 307 | -338 719 | |
| CASH FLOW FROM INVESTING ACTIVITIES: | |||
| Payments for the purchase of property, plant & equipment | 4 | -1 663 | -7 563 |
| Change in intra-group balances | 11 | 760 996 | -13 647 |
| Net receipts of group contributions and dividends from subsidiaries | 5,11 | 1 061 153 | 1 085 478 |
| Receipts of dividends from associates and other investments | 6 | 100 800 | 46 000 |
| Net payments for the purchase of non-current financial assets | 6 | -200 000 | -43 394 |
| Payment of loans to third parties | -42 000 | 0 | |
| Net cash flow from investing activities | 1 679 286 | 1 066 874 | |
| CASH FLOW FROM FINANCING ACTIVITIES: | |||
| Long-term debt raised | 0 | 600 000 | |
| Long-term debt repaid | -450 000 | 0 | |
| Net change in overdraft | 38 641 | -75 202 | |
| Dividend (paid) | -1 121 199 | -1 120 000 | |
| Net cash flow from financing activities | -1 532 559 | -595 202 | |
| Net change in bank deposits, cash & cash equivalents | -139 580 | 132 952 | |
| Bank deposits, cash & cash equivalents as at 1 Jan | 147 742 | 14 790 | |
| Bank deposits, cash & cash equivalents as at 31 Dec | 8 162 | 147 742 | |
| Unused drawing rights | 2 811 359 | 2 500 000 | |
as at 31 December NOK 1000
101
103
The financial statements have been prepared in accordance with the Norwegian Accounting Act of 1998 and generally accepted accounting principles in Norway.
The accounting principles described below apply only to the parent company SalMar ASA. The notes relating to the SalMar Group are presented along with the Group's consolidated financial statements.
Preparation of the financial statements in accordance with generally accepted accounting principles requires that management make assessments, estimates and assumptions that affect the application of accounting principles, the recognised value of assets and liabilities in the balance sheet, revenues and expenses for the financial year, as well as information relating to uncertain assets and liabilities on the balance sheet date. Estimates and their underlying assumptions are based on historic experience and other factors which are deemed to be relevant and probable at the time the assessment is made. These assessments affect the book value of assets and liabilities where the valuation is not based on other sources. Estimates are assessed continually, and final values and results may deviate from these estimates. Changes in accounting estimates are recognised in the period in which the change takes place.
Assets intended for permanent ownership or use are classified as non-current assets. Other assets are classified as current assets and normally include items falling due for payment within one year, as well as items associated with the production cycle. The classification of current and noncurrent liabilities is based on the same criteria.
Non-current assets are valued at acquisition cost. If the recoverable portion of the non-current asset is lower than its book value, and the impairment is not expected to be temporary, the asset is written down to its recoverable value. Noncurrent assets with a limited economic life are depreciated systematically.
Current assets are valued at the lower of acquisition cost and fair value.
Other non-current liabilities are valued at par.
Revenue from the sale of goods is recognised when it is earned, ie when the majority of both the risk and control of the item sold has been transferred to the customer. This will normally be when the item has been delivered to the customer. Revenues are recognised at the value of the consideration payable at the time the transaction took place. Services are taken to income as they are performed.
Operating revenues are recognised less public charges, dis-
counts, bonuses and other sales costs.
Trade receivables and other receivables are recognised at par less provisions for bad debts. Provisions for bad debts are determined on the basis of an assessment of the individual receivable.
Items of property, plant and equipment are capitalised at historic cost price and are depreciated over the asset's expected lifespan. Costs directly relating to maintenance of property, plant and equipment are charged to operating expenses as they arise, while enhancements or improvements are added to the asset's cost price and depreciated in line with the asset itself. If the recoverable portion of an item of property, plant and equipment is lower than its book value, the asset is written down to its recoverable value. The recoverable value is the higher of net sales value and value in use. Value in use is the present value of future cash flows which the asset will generate.
Subsidiaries, associates and other shares classified as noncurrent assets are valued in accordance with the cost method. Subsidiaries are companies in which SalMar ASA has a controlling influence, as a result of either legal or actual control. In principle, a controlling influence is deemed to exist when the company's direct or indirect shareholding exceeds 50 per cent of the voting capital. Associates are companies in which SalMar has a considerable influence. Considerable influence is normally deemed to exist when the company owns 20-50 per cent of the voting capital. Investments are valued at the shares' acquisition cost unless a write-down has been necessary. Write-downs to fair value are performed when the impairment is due to reasons that are not deemed to be of a temporary nature and are required under generally accepted accounting principles. Write-downs are reversed when the reason for the write-down no longer applies.
Dividend and other payouts are recognised as other financial income. If the dividend exceeds the share of withheld profit/ loss after acquisition, the surplus amount represents a repayment of invested capital, and the payouts are deducted from the value of the investment in the balance sheet.
The company has a defined-contribution occupational pension scheme. Pension premiums are charged to expenses as they arise, and the Group has no other liabilities over and above this annual payment.
The company has share-based incentive schemes, under which the company receives services from the employees in return for equity instruments (RSUs). The fair value of the services rendered by the employees in return for the RSUs awarded is recognised as an expense, with a corresponding
increase in paid-in equity. The total amount charged to expenses over the vesting period is determined on the basis of fair value at the time the RSUs were granted, and the number of RSUs which are expected to accrue.
Fair value includes the effect of any market terms, but does not take account of the impact of any vesting terms that are not market terms. However, vesting terms that are not market terms affect the number of RSU that can be expected to be earned.
The total expense is periodised over the vesting period. On the balance sheet date, the company recalculates its estimates for the number of options that are expected to be earned. The company recognises the effect of any changes in the original estimates in profit and loss, with a corresponding adjustment in equity. The value of options relating to employees of subsidiaries is posted to investments in subsidiaries.
In 2016, 13 employees were awarded a total of 34,837 RSUs with respect to company shares, while 12 employees were awarded a total of 53,076 RSUs in 2015, and 11 employees were awarded a total of 50,106 RSUs in 2014. The RSUs are earned over a 3-year period from the date they were awarded, which was 3 December 2014, 21 December 2015 and 16 December 2016 respectively, with 1/3 vesting annually. The fair value of the cost to SalMar ASA is calculated on the date of the award and is periodised over the vesting period. The periodised expense in 2016 comes to NOK 4,138,700 (2015: NOK 3,800,700). A provision for employers' national insurance contributions on the expense has also been made.
Please see Note 24 to the consolidated financial statements for details of the share-based incentive schemes.
In the event of a decision to permit the cash settlement of options, the option liability will be reclassified from equity to The company's statement of cash flow shows a breakdown of the company's cash flow by operating, investing and financing activity. The statement shows the individual activity's impact on liquidity. The statement of cash flow has been drawn up in accordance with the indirect method.
liabilities. From the same date, the value of the option liability will be measured anew at the close of each period, with any changes recognised in profit and loss.
The tax expense is matched against profit/loss before tax. Tax relating to equity transactions is recognised in equity. The tax expense comprises tax payable (tax on the company's taxable income for the year as it appears in the income statement), and any change in net deferred tax. Deferred tax is calculated at the rate of 24 per cent on the temporary differences between accounting and tax values, as well as tax losses carried forward at the end of the financial year. Deferred tax liabilities and deferred tax assets are presented net in the balance sheet.
The parent company SalMar ASA is a holding company primarily engaged in the provision of administrative services to its subsidiaries. Consequently, the parent company's revenues derive solely from one business area, and are divided between revenues from intragroup services and other revenues as specified below.
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Revenues from provision of administrative services to group companies | 72 073 | 61 690 |
| Other revenues | 94 | 967 |
| Total | 72 167 | 62 657 |
| PAYROLL COSTS | 2016 | 2015 |
|---|---|---|
| Salaries, incl. holiday pay & bonuses | 36 664 | 29 139 |
| Employers' national insurance contributions | 5 472 | 3 881 |
| Pension costs | 1 170 | 1 156 |
| Options/RSU | 4 139 | 3 801 |
| Other benefits | 4 913 | 3 385 |
| Total | 52 358 | 41 362 |
No. of people employed (full-time equivalents) during the financial year 34 31
Remuneration paid to senior company officers and the auditor Please see Note 24 to the consolidated financial statements for details of the remuneration paid to senior executives. .
| NOK 1000 | 2016 | 2015 |
|---|---|---|
| Statutory auditing services | 200 | 201 |
| Other certification services | 93 | 14 |
| Tax advisory services | 3 | 0 |
| Other services | 53 | 53 |
| Refunded expenses | 159 | 43 |
| Total | 508 | 311 |
The fee paid to the auditor, excl. VAT, breaks down as follows: NOK 1000
| NOK 1000 | Real Operating equip property ment, fixtures, etc |
TOTAL | |
|---|---|---|---|
| Acquisition cost 1 Jan 2016 | 2 330 | 21 436 | 23 766 |
| Additions | 0 | 1 663 | 1 663 |
| Disposals | 0 | 0 | 0 |
| Acquisition cost 31 Dec 2016 | 2 330 | 23 099 | 25 429 |
| Acc. depreciation & write-downs 1 Jan 2016 | 114 | 7 867 | 7 981 |
| Year's depreciation | 57 | 3 909 | 3 966 |
| Acc. depreciation 31 Dec 2016 | 171 | 11 776 | 11 947 |
| Book value 31 Dec 2016 | 2 159 | 11 323 | 13 482 |
| Economic lifespan Depreciation plan |
No dep./3 years Straight line |
5-10 years Straight line |
|
| Annual leasing of off-balance sheet operating assets | 3 449 | 60 | 3 509 |
| Book | Book | |||
|---|---|---|---|---|
| COMPANY | Registered | Voting share/ | value | value |
| NOK 1000 | office | shareholding | 2016 | 2015 |
| SalMar Settefisk AS | Kverva | 100,0 % | 142 626 | 114 633 |
| SalMar Farming AS | Kverva | 100,0 % | 83 362 | 92 176 |
| SalMar Nord AS | Finnsnes | 100,0 % | 484 490 | 487 882 |
| SalMar AS | Kverva | 100,0 % | 1 177 936 | 357 479 |
| SalMar Tunet AS | Kverva | 100,0 % | 7 340 | 7 306 |
| Hitramat Farming AS | Hitra | 51,0 % | 28 785 | 28 785 |
| Ocean Farming AS | Kverva | 93,4 % | 58 329 | 52 447 |
| TOTAL subsidiaries | 1 982 877 | 1 140 717 | ||
| SalMar Farming AS SalMar Nord AS |
942 718 0 |
842 005 311 454 |
||
| SalMar Settefisk AS | 0 | 2 692 | ||
| SalMar Rauma AS | 0 | 71 556 | ||
| Total recognised group contributions from subsidiaries | 942 718 | 1 227 708 | ||
| SalMar ASA has recognised dividends from the following subsidiaries (NOK 1000): | 2016 | 2015 | ||
| SalMar Farming AS | 250 000 | 0 | ||
| SalMar Nord AS | 1 325 000 | 0 | ||
| Hitramat Farming AS | 4 896 | |||
| Total recognised dividends from subsidiaries | 1 579 896 | 0 |
Investments in subsidiaries are recognised in accordance with the cost method.
| Book | Book | |||
|---|---|---|---|---|
| COMPANY | Registered | Voting share/ | value | value |
| NOK 1000 | office | shareholding | 2016 | 2015 |
| Norskott Havbruk AS | Bergen | 50 % | 162 787 | 162 787 |
| Salmus AS | Leirfjord | 50 % | 243 394 | 43 394 |
| Trøndersk Kystkompetanse AS | Dyrvik | 20 % | 103 | 103 |
| TOTAL associates | 406 283 | 206 283 |
In 2016, SalMar ASA granted a NOK 200 million loan to Salmus AS in connection with the financing of a share issue in Arnarlax Hf. At the same time, SalMar ASA received subscription rights in Salmus AS, in consequence of which the NOK 200 million loan to Salmu AS is deemed to form part of SalMar's investment in the company. For further details of the investment in Salmus AS, please see Note 9 to the consolidated financial statements.
Investments in associates are recognised in accordance with the cost method.
| Note 7 – Receivables falling due more than one year hence | ||
|---|---|---|
| NOK 1000 | 2016 | 2015 |
| Other receivables | 43 706 | 149 |
| Loans to employees | 278 | 439 |
| Loans to group companies | 2 583 596 | 2 165 911 |
| COMPANY | Recognised | last year-end last year-end | Equity in Profit/loss in |
|---|---|---|---|
| NOK 1000 | dividend | finan. stat. | finan. stat. |
| Norskott Havbruk AS | 100 800 | 1 063 130 | 371 001 |
| Salmus AS | 0 | 46 480 | 190 |
| Trøndersk Kystkompetanse AS | 0 | 1 606 | -121 |
As at 31 December 2016, the company's share capital comprised:
| NOK 1000 | No. of shares (stk) Face value (NOK) | Book value | |
|---|---|---|---|
| Ordinary shares | 113 299 999 | 0,25 | 28 325 |
Please see Note 16 to the consolidated financial statements for details of the largest shareholders and senior executives' holdings of company shares.
A provision has been made with respect to a dividend payout of NOK 12 per share, totalling NOK 1,347,788,000 as at 31 December 2016. No provision is made for dividends on the company's own treasury shares.
| Share | Treasury Share premium | Other paid- | Other | Total | ||
|---|---|---|---|---|---|---|
| NOK 1000 | capital | shares | fund | in equity | equity | equity |
| Equity 31 Dec 2015 | 28 325 | -295 | 415 285 | 50 667 | 565 729 | 1 059 711 |
| Year's change in equity: | ||||||
| Profit/loss in the period | 0 | 0 | 0 | 0 | 2 337 934 | 2 337 934 |
| Dividend provision | 0 | 0 | 0 | 0 | -1 347 788 | -1 347 788 |
| Redeemed options | 0 | 49 | 0 | -49 | 0 | 0 |
| Option cost recognised in equity | 0 | 0 | 0 | 28 458 | 0 | 28 458 |
| Equity 31 Dec 2016 | 28 325 | -246 | 415 285 | 79 075 | 1 555 875 | 2 078 315 |
A share-based incentive scheme has been entered into with senior company executives. Please see Note 3 for further details. Provisions with respect to dividend payouts are set out in Note 8.
The company has a statutory obligation to provide an occupational pension scheme under the Compulsory Occupational Pensions Act, and has a pension scheme that meets the requirements thereof.
The company has no defined-benefits pension schemes.
Premiums under the defined-contribution scheme are charged to expenses as they fall due. In 2016, the gross amount of NOK 1,170,300 was charged to expenses in connection with the defined-contribution pension scheme (NOK 1,156,200 in 2015).
Other short-term receivables from group companies, which totalled NOK 2,579,935,000 as at 31 December 2016, includes group contributions in the amount of NOK 942,718,000 (2015: NOK 1,227,708,000). The figure as at 31 December 2016 also includes NOK 1,575,000,000 in other short-term receivables. The figure for 2015 also includes receivables from group companies participating in the group account scheme in the amount of NOK 112,271,000. Other short-term receivables over and above this were ordinary trade receivables.
| 2015 | |||
|---|---|---|---|
| 2 583 596 | 2 165 911 | 2 579 935 | 1 409 895 |
| 2 583 596 | 2 165 911 | 2 579 935 | 1 409 895 |
| Other short-term payables | |||
| 2016 | 2015 | 2016 | 2015 |
| 0 | 0 | 2 157 518 | 196 357 |
| 0 | 0 | 2 157 518 | 196 357 |
| 2016 | Non-current receivables 2015 Long-term debt |
Other short-term receivables 2016 |
| NOK 1000 | 2016 | Non-current receivables 2015 |
Other short-term receivables 2016 |
2015 |
|---|---|---|---|---|
| Group companies | 2 583 596 | 2 165 911 | 2 579 935 | 1 409 895 |
| Total | 2 583 596 | 2 165 911 | 2 579 935 | 1 409 895 |
| Long-term debt | Other short-term payables | |||
| NOK 1000 | 2016 | 2015 | 2016 | 2015 |
| Group companies | 0 | 0 | 2 157 518 | 196 357 |
| Total | 0 | 0 | 2 157 518 | 196 357 |
The NOK 2,157,518,000 in other short-term payables to group companies as at 31 December 2016 includes NOK 1,075,156,000 in group contributions payable (2015: NOK 171,451,000) and NOK 1,066,410,000 in payables to group companies participating in the group account scheme. The remaining short-term payables to group companies were ordinary trade payables.
| NOK 1000 | ||
|---|---|---|
| Breakdown of the year's tax expense | 2016 | 2015 |
| Tax payable | 218 789 | 318 445 |
| Change in deferred tax | -346 | 10 859 |
| Tax provisions (shortfall/excess) in previous years | -182 | -9 300 |
| Effect of change in tax rate from 25% to 24% | 30 | -12 |
| Tax on ordinary profit/loss | 218 291 | 319 992 |
| Breakdown of the year's taxable income | 2016 | 2015 |
| Profit before tax | 2 556 225 | 1 262 847 |
| Permanent differences | -1 682 321 | -43 132 |
| Change in temporary differences | 1 251 | -40 290 |
| Group contributions paid | -875 156 | -171 451 |
| Year's taxable income | 0 | 1 007 974 |
| Tax payable in the balance sheet | 2016 | 2015 |
| Tax payable on the year's profit/loss | 218 789 | 318 445 |
| Tax on group contributions paid | -218 789 | -46 292 |
| Tax payable in the balance sheet | 0 | 272 153 |
| Breakdown of temporary differences | 2016 | 2015 |
| Operating assets, incl. goodwil | 2 820 | 3 352 |
| Non-current financial assets | 25 | 6 |
| Profit & loss account | 109 | 137 |
| Other differences | -5 940 | -2 887 |
| TOTAL temporary differences | -2 985 | 608 |
| Deferred tax liabilities (+) / deferred tax assets (-) | -716 | 152 |
| Deferred tax recognised in equity | 553 | -235 |
| Reconciliation from nominal to actual tax rate | 2016 | 2015 |
| Profit before tax | 2 556 225 | 1 262 847 |
| Expected tax on income at nominal tax rate | 639 056 | 340 969 |
| Permanent differences (25%) | -420 580 | -11 646 |
| Tax provisions (shortfall/excess) | -185 | -9 331 |
| Estimated tax expense | 218 291 | 319 992 |
| Effective tax rate | 8,5 % | 25,3 % |
In 2014, SalMar entered into a new loan agreement with a 5-year term. The credit facility comprises a term loan amounting to NOK 1,000,000,000, which has a 10-year repayment profile, maturing after 5 years. In addition, there is an investment and acquisition facility amounting to NOK 2,000,000,000, which has a 33-year repayment profile, maturing after 5 years. As at 31 December 2016, no drawdowns had been made on this facility. Apart from this, there is a revolving credit facility amounting to NOK 1,500,000,000, as well as an operating credit capped at NOK 500,000,000. Interest rates are based on so-called 'current terms'.
The most important financial covenants for the long-term financing of SalMar ASA are, respectively, a solvency requirement, which stipulates that the Group's recognised equity ratio shall exceed 35%, and a profitability requirement, which stipulates that the Group's interest-bearing debt to EBITDA ratio shall, on average, not exceed 4.5. The agreement does, however, allow the Group to have an NIBD/EBITDA ratio of up to 6.0 for up to three quarters.
| Recognised debt secured through liens, etc | 2016 | 2015 |
|---|---|---|
| Short-term debt to credit institutions | 38 641 | 0 |
| Long-term debt to creadit institutions | 1 950 000 | 2 400 000 |
| Total | 1 988 641 | 2 400 000 |
| Book value of assets pledged as surety for recognised debt | 2016 | 2015 |
| Operating assets | 13 482 | 15 785 |
| Shares | 1 982 877 | 1 140 717 |
| Trade receivables | 29 | 42 |
| Receivables | 5 179 077 | 3 590 360 |
| Total | 7 175 465 | 4 746 903 |
Under the agreement with its bank SalMar has assumed a joint and several liability in connection with a group account overdraft scheme, limited upwards to NOK 500,000,000.
SalMar ASA has issued guarantees totalling NOK 17,000,000 on behalf of SalMar AS and NOK 80,000,000 on behalf of SalMar Farming AS with respect to a credit facility granted by SG Finans AS.
SalMar ASA has issued a guarantee for NOK 95,000,000 with respect to a long-term loan to SalMar AS and a guarantee for NOK 175,000,000 with respect to a long-term loan to Ocean Farming AS. Both loans have been granted by Innovation Norway.
SalMar ASA has issued a guarantee totalling NOK 5,000,000 to Nord-Trøndelag E-verk on behalf of SalMar Settefisk AS. The guarantee agreement was entered into on 1 January 2004, and is reduced by NOK 250,000 per year. As at 31 December 2016 the remaining amount guaranteed totalled NOK 1,750,000.
SalMar ASA has issued a guarantee to Nordskag Næringspark AS for any and all amounts which SalMar AS owes Nordskag Næringspark AS under the leasing agreement between SalMar AS and Nordskag Næringspark AS. The guarantee is valid during the leasing period, as stipulated in the leasing agreement, plus a further three months.
| Operating assets | ||
|---|---|---|
| Shares | ||
| Trade receivables | ||
| Receivables | ||
| Total |
SalMar ASA has issued a guarantee totalling NOK 23,606,000 to Billund Aquakulturservice Norge AS. The guarantee has been issued as surety for Troms Stamfiskstasjon AS's liabilities to its creditor in respect of a prime contract for the construction of a new smolt facility.
SalMar ASA has issued guarantees to four suppliers in connection with the construction of an offshore net cage for Ocean Farming AS. SalMar ASA guarantees that the suppliers shall receive full settlement of any amounts due in connection with agreements entered into. The suppliers for which guarantees have been granted are:
| contract value equals approx. NOK 40,000,000 |
|---|
| contract value equals approx. NOK 37,000,000 |
| guarantee capped at NOK 11,650,000 |
| guarantee capped at USD 38,412,000 |
Please see Note 2 to the consolidated financial statements for further details relating to the management of financial and market risks to which the company and the Group are exposed.
As at 31 December 2016, the item Bank deposits, cash and cash equivalents included restricted funds totalling NOK 6,578,000, all of which related to employees' PAYE tax deductions. The corresponding figure the year before was NOK 4,021,000.
111
Gustav Witzøe
Director
Frøya, 20th of April 2017
Tove Elin Nedreberg Director
Geir Berg
Director/Employee representative
Bjørn Flatgård Chair
Kjell A. Storeide Director
Bente Rathe Director
Trond Williksen
President & CEO
Merete Gisvold Sandberg Director/Employee representative
Industriveien 51, N-7266 Kverva , Norway Phone +47 72 44 79 00 Fax +47 72 44 79 01 www.salmar.no
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