AKVA Group — Interim / Quarterly Report 2010

Oct 28, 2010

AKVA GROUP

Quarterly report Nr 3 – 2010

Third quarter report 2010

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AKVA GROUP

Highlights

• Operating revenues in 3Q were 212.3 MNOK versus 139.8 MNOK last year. Year to date operating revenues were 546.6 MNOK versus 456.5 MNOK last year.
• Operating profit was 10.2 MNOK in 3Q compared to 7.4 MNOK in 3Q last year. Last year's figures were positively affected by one-off items amounting to net 6.7 MNOK.
• Implementation of measures to reduce costs and improve earnings continues.
• The order backlog at the end of 3Q was 270 MNOK versus 203 MNOK at the end of 3Q last year.

In the comments below on the financial accounts, the 2009 figures are presented in parentheses following the 2010 stated values when included. From the change in the group structure that was implemented in the second half last year with a flatter structure, the group does no longer operate according to the split between the two former operational segments OPTECH and INTECH.

AKVA group supply technology for complete cage based fish farms.

Operations and profit

Operating revenues in 3Q were 212.3 MNOK (139.8 MNOK) with an EBITA of 10.2 MNOK (7.4 MNOK). Last year's figures were positively affected by one-off items amounting to net 6.7 MNOK related to profit from the sale of Surefish 11.7 MNOK and restructuring provisions of 5.0 MNOK. Margins on projects were negatively affected by higher costs on barge, cage projects and product mix. The group continues to work on reducing the cost base as well as improving precision and quality in the deliveries. Focus will be to strengthen AKVA group's position in the established markets and efforts into Asia will be limited towards more selected projects rather than having presence in many markets.

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AKVA GROUP

The depreciations in 3Q were 8.1 MNOK (8.0) resulting in an EBIT of 2.1 MNOK (-0.6). Net financial items were -3.7 MNOK (-3.1). The increase is related to currency loss. Profit before tax in 3Q was -1.7 MNOK (-3.7) and net loss -1.5 MNOK (0.4) after allowing for taxes of -0.1 MNOK.

YTD operating revenues were 546.6 MNOK (456.5) with and EBITDA of -1.2 MNOK (4.5). Depreciations and amortizations amounted to 23.2 MNOK (23.7) resulting in an EBIT of -24.4 MNOK (-19.2). YTD profit before tax was -31.7 MNOK (-26.7) after allowing for net financial items of -7.3 MNOK (-7.5). Net profit for the nine months period was -23.1 MNOK (-17.6).

Hardware includes Cages, barges, feed systems and other technology to operate fish farms. Recirc includes the delivery of systems for recirculation of water in land based farms. Software is software solutions and professional services related to this.

Balance sheet and cash flow

Working capital in the group balance sheet, defined as non-interest bearing current assets less non-interest bearing current liabilities was 114.6 MNOK down from 120.0 MNOK from the beginning of the year and down from 127.5 MNOK from end of 3Q last year. Focus is maintained on containing the working capital.

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AKVA GROUP

Net interest-bearing debt amounted to 156.4 MNOK at the end of 3Q versus 141.9 MNOK at the beginning of the year. Gross interest bearing debt amounted to 206.5 MNOK versus 200.0 MNOK at the beginning of the year. Cash and unused credit facilities amounted to 65.0 MNOK. Total assets and total equity amounted to 669.1 MNOK and 233.0 MNOK respectively, resulting in an equity ratio of 34.8%.

Investments in the first nine months amounted to 14.2 MNOK whereof 5.3 MNOK is capitalized R&D expenses in accordance with IFRS.

A waiver extending through 4Q 2010 relating to the financial covenants of the major credit facilities and loans was agreed with the company's main bank in 2Q.

AKVA group supply technology for complete land based fish farms.

Shareholder issues

Earnings per share for 3Q 2010 were -0.09 NOK (0.02). The calculation is based on 17.222.869 shares average.

In August Mr Knut Molaug stepped down from his position as CEO for AKVA group ASA. There is an ongoing search for a new CEO, meanwhile the CFO Morten Nærland is the acting CEO of the group.

Market and future outlook

The order inflow during 3Q was marked by the holiday season in Norway and the UK although with a recovery seen towards the end of the quarter. The Norwegian salmon farming industry is still enjoying sound salmon prices but to balance the equation there are also challenges as to sea lice situation, disease issues and uncertainty related to the general regulatory framework for the industry. The latter might well contain investments.

During 3Q the incipient recovery of the Chilean market became more evident showing a sound order inflow, also going into 4Q. The other markets also seem to be developing fairly well with a scent of a positive sentiment.

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AKVA GROUP

In October AKVA group signed a contract with National Prawn Company in the Kingdom of Saudi Arabia for delivery of a pre-grow-out system for production of Yellowtail Kingfish for a value of 21 MNOK. The contract was part of Letter of Intent that was signed in March 2009 and will be delivered during the first half of 2011.

The order backlog was at the end of 3Q 270 MNOK versus 203 MNOK at the end of 3Q last year. Several projects to improve gross margin and reduce the fixed cost base are ongoing, but the full effect will come through in the first half of 2011.

Oslo, 27 October - 2010
Board of Directors, AKVA group ASA

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AKVA GROUP

Main figures from financial accounts

| INCOME STATEMENT
(NOK 1000) | 2010
3Q | 2009
3Q | 2010
YTD | 2009
YTD | 2008
Total |
| --- | --- | --- | --- | --- | --- |
| OPERATING REVENUES | 212 321 | 139 801 | 546 640 | 456 465 | 599 345 |
| Operating costs excluding depreciations | 202 126 | 132 380 | 547 846 | 451 940 | 610 872 |
| OPERATING PROFIT BEFORE DEPRECIATIONS (EBITDA) | 10 195 | 7 421 | -1 206 | 4 524 | -11 527 |
| Depreciation | 8 123 | 8 043 | 23 163 | 23 674 | 30 866 |
| OPERATING PROFIT (EBIT) | 2 072 | -622 | -24 369 | -19 150 | -42 392 |
| Net interest expense | -3 211 | -3 270 | -8 424 | -7 525 | -8 781 |
| Other financial items | -534 | 196 | 1 079 | 6 | -830 |
| Net financial items | -3 745 | -3 074 | -7 345 | -7 519 | -9 611 |
| PROFIT BEFORE TAX | -1 673 | -3 696 | -31 714 | -26 669 | -52 003 |
| Taxes | -146 | -4 111 | -8 577 | -9 091 | -12 875 |
| NET PROFIT | -1 527 | 415 | -23 137 | -17 578 | -39 128 |
| Earnings per share | -0,09 | 0,02 | -1,34 | -1,02 | -2,27 |
| Average number of shares outstanding (in 1 000) | 17 223 | 17 223 | 17 223 | 17 223 | 17 223 |
| BALANCE SHEET
(NOK 1000) | 2010
30.9. | 2009
30.9. | 2008
31.12. |
| --- | --- | --- | --- |
| Intangible fixed assets | 239 383 | 244 385 | 243 920 |
| Fixed assets | 37 947 | 44 489 | 39 071 |
| Long-term financial assets | 983 | 1 069 | 1 069 |
| FIXED ASSETS | 278 314 | 289 943 | 284 061 |
| Stock | 139 106 | 121 667 | 116 248 |
| Trade receivables | 174 999 | 127 132 | 125 391 |
| Other receivables | 26 523 | 18 416 | 27 477 |
| Cash and cash equivalents | 50 108 | 51 569 | 58 161 |
| CURRENT ASSETS | 390 737 | 318 784 | 327 277 |
| TOTAL ASSETS | 669 050 | 608 727 | 611 338 |
| Paid in capital | 267 087 | 267 087 | 267 087 |
| Retained equity | -34 136 | 11 679 | -10 447 |
| TOTAL EQUITY | 232 951 | 278 766 | 256 640 |
| Other long term debt | 3 614 | 9 083 | 5 561 |
| Long-term interest bearing debt | 141 946 | 102 394 | 150 651 |
| LONG-TERM DEBT | 145 559 | 111 477 | 156 212 |
| Short-term interest bearing debt | 64 545 | 78 768 | 49 364 |
| Other current liabilities | 225 995 | 139 715 | 149 123 |
| SHORT-TERM DEBT | 290 540 | 218 483 | 198 487 |
| TOTAL EQUITY AND DEBT | 669 050 | 608 727 | 611 338 |

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AKVA GROUP

| CHANGES IN EQUITY
(NOK 1000) | 2010
3Q | 2009
3Q | 2010
YTD | 2009
YTD | 2009
Total |
| --- | --- | --- | --- | --- | --- |
| Book equity at the beginning of the period | 233 925 | 293 615 | 256 640 | 309 595 | 309 595 |
| The period's net profit | -1 527 | 415 | -23 137 | -17 578 | -39 128 |
| Gains/(losses) on cash flow hedges (fair value) | 983 | 381 | -1 233 | 767 | 20 |
| Dividend | - | - | - | - | - |
| Change in pension liability recorded against equity | - | - | - | - | 1 005 |
| Recording of option agreement | - | - | - | - | -223 |
| Translation differences | -430 | -15 645 | 680 | -14 018 | -14 630 |
| Book equity at the end of the period | 232 951 | 278 766 | 232 951 | 278 766 | 256 640 |
| CASH FLOW STATEMENT
(NOK 1000) | 2010
3Q | 2009
3Q | 2010
YTD | 2009
YTD | 2009
Total |
| --- | --- | --- | --- | --- | --- |
| Net cash flow from operational activities | 4 340 | 15 797 | -327 | 35 486 | 32 656 |
| Net cash flow from investment activities | -4 633 | -1 742 | -13 534 | -17 688 | -24 095 |
| Net cash flow from financial activities | -4 035 | -13 721 | 5 807 | -14 112 | 1 717 |
| Net cash flow | -4 327 | 334 | -8 053 | 3 685 | 10 277 |
| Cash and cash equivalents at the beginning of the period | 54 436 | 51 235 | 58 160 | 47 883 | 47 883 |
| Cash and cash equivalents at the end of the period | 50 108 | 51 569 | 50 108 | 51 569 | 58 160 |

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AKVA GROUP

AKVA group ASA,
Nordlysvn.4
P.O. Box 271,
N-4349 Bryne
Norway
Tel +47 51 77 85 00.
Fax +47 51 77 85 01.
E-mail: info@akvagroup.com
www.akvagroup.com

Other AKVA group offices:

AKVA group, Trondheim	Tel (+47) 73 84 28 00
AKVA group, Brønnøysund	Tel (+47) 75 00 66 00
AKVA group, Sandstad	Tel (+47) 72 44 11 00
AKVA group, Mo i Rana	Tel (+47) 75 13 95 00
AKVA group, Averøy	Tel (+47) 71 51 73 00
AKVA group, Denmark	Tel (+45) 755 13 211
AKVA group Chile, Puerto Montt.	Tel (+56) 65 250 250
AKVA group UK, Inverness.	Tel (+44) 1463 221 444
AKVA group North America, Campbell River, Canada	Tel (+1) 250 286 8802
AKVA group North America, Halifax, Canada	Tel (+1) 902 482 2663
AKVA group Turkey, Bodrum	Tel (+90) 252 374 6434

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