Leroy Seafood Group — Earnings Release 2015

May 13, 2015

Lerøy Seafood Group ASA : Q1 2015 Results

Lerøy Seafood Group ASA : Q1 2015 Results

A GOOD, BUT MIXED RESULT FOR THE FIRST QUARTER OF 2015

In Q1 2015, Lerøy Seafood Group reported operating profit before fair value

adjustment of biomass of NOK 404 million, compared with NOK 550 million in Q1

2014. The result represents an operating profit before biomass value adjustment

of NOK 11.5 per kg, compared to NOK 16.5 in Q1 2014. The decline in operating

profit from Q1 2014 to Q1 2015 is attributed to lower prices realised and higher

release from stock costs.

In Q1 2015, Lerøy Seafood Group reported revenue of NOK 3,268 million, compared

with NOK 3,180 million in the same period in 2014. When compared with Q1 2014,

the Group increased its volume of harvested salmon and trout by 5%.

Net interest-bearing debt at 31 March 2015 was NOK 1,892 million and the equity

ratio was 55.5%.

The Board of Directors have proposed to the shareholders' meeting on 21 May

2015 a dividend payment of NOK 12 per share for 2014.

FARMING - WEAK QUARTER FOR TROUT

Lerøy Vest was awarded two R&D licences in Q1 2015. The company has also been

nominated for the acquisition of one new licence during the governmental green

licence allocation rounds. LSG has a total of 142 licences in Norway.

Operating profit before biomass adjustment reported by the Farming segment

amounted to NOK 322 million in Q1 2015, down from NOK 506 million in Q1 2014.

The Farming segment harvested a total 35,023 GWT of salmon and trout in the

first quarter, up 5% from the same period in 2014. EBIT/kg fell from NOK 15.2

per kg in Q1 2014 to NOK 9.2 per kg in Q1 2015.

Lerøy Aurora reported an operational EBIT per kg of NOK 14.9 in Q1 2015. The

EBIT/kg figures reported by Lerøy Midt and Lerøy Sjøtroll for the same quarter

are NOK 11.0 and NOK 3.5 respectively.

"The ban on imports of Norwegian salmon and trout into Russia, introduced on 7

August 2014, continues to have an impact on the markets. The volume of fish

formerly sold to Russia is now mainly channelled to Europe. As a result, the

growth in import on European main markets is much higher than the growth in

volume produced. This dynamic has had a particularly negative impact on trout

prices, although there was an improvement in prices by the end of the quarter,"

explains CEO Henning Beltestad.

"The Group has introduced a number of measures in 2014 and 2015 to reduce

production costs," he continues, with a special mention of the investments made

to increase supply of cleaner fish. "The Group can already report positive

results from individual facilities, and expects to see a positive development in

this area in 2015."

VALUE-ADDED PROCESSING/VAP - POSITIVE DEVELOPMENT

In recent years, Lerøy Seafood Group has invested significantly in increasing

its capacity for high value processed salmon and trout, as the investments in

Lerøy Fossen and Lerøy Smøgen where the capacity is doubled. The Group's work on

marketing, both with national and international customers, has resulted in

improvements to utilisation of total capacity. This, along with a satisfactory

development in prices, is the main factor behind the increase in revenue.

Revenue for this segment is up 16% from NOK 367 million in Q1 2014 to NOK 425

million in Q1 2015. The operating margin is up from 4.1% in Q1 2014 to 4.3% in

Q1 2015.

"The Group is satisfied with the segment's underlying development," explains CEO

Henning Beltestad in a comment, going on to add: "We expect to achieve a

continued increase in earnings from this segment by making even more extensive

use of capacity and improvements to operations."

SALES & DISTRIBUTION - VERY POSITIVE DEVELOPMENT

The Sales & Distribution segment reported revenue of NOK 3,076 million in Q1

2015, on a par with the figure reported for Q1 2014. At the same time, the

segment reported a positive development in margin, with operating margin up from

1.3% in Q1 2014 to 2.0% in Q1 2015.

"Sales & Distribution continuously target a position whereby they drive demand

for seafood, by launching new products and pioneering new markets. The segment

not only sells and distributes its own production of salmon and trout, but also

has a high level of sales activity in cooperation with third parties, ensuring a

wide product range for the Group within seafood," confirms CEO Henning

Beltestad.

He continues: "We aim to drive a 'revolution' in the distribution of fresh

seafood. We have made significant investments in industrial capacity in recent

years within processing units in several central parts of Europe, allowing us to

ensure fresh products, a high level of service and proximity to our customers.

We still have considerable potential to increase our level of activity and

earnings within our fish-cut facilities," confirms CEO Henning Beltestad.

MARKET AND OUTLOOK

The announced White Paper on the Norwegian aquaculture industry was published in

the first quarter of 2015. The Board of Directors is happy to see that the

Norwegian government has acknowledged the need for a long-term perspective

towards the development of important general conditions, but is surprised by the

proposed way forward - i.e. the Board is critical to both the level and

model/indicators proposed for use in order to control future growth. In

addition, the possible elimination of the current scheme for interregional

biomass limits will have a critical impact on the processing of salmon in

Norway. These factors, together with the Government's lack of understanding of

the benefits provided by and need for an average MAB scheme, will make it

increasingly difficult to develop our industry. It is sad to see that this White

Paper on aquaculture, the purpose of which is to lay the foundations for a

central industry with major potential for the future, is so dominated by concern

for "momentary" challenges. We hope that our national authorities agree with us

in that our industry's importance for society merits relative cost-benefit

considerations made on the basis of genuine knowledge rather than political

wheeling and dealing in order to gain popular appeal. Wise decision-making by

our politicians could have a decisive influence on our industry and society as a

whole. We have the documentation to support this claim, provided by the analysis

of the consequences of the political astuteness exercised when the resolution

was made ten years ago to replace the feed quotas with the current MAB scheme.

We believe that Norway cannot afford to ignore the opportunities provided by an

efficient, globally competitive and eco-friendly production of food from the

sea.

The ban on imports into Russia represents a significant, short-term challenge

for the Norwegian seafood industry, as it does for the industry in Russia and

some of its neighbouring states. The Group is working hard to increase sales to

alternative markets, but unfortunately there was little we could do to prevent

the import ban from continuing to have a negative impact on the prices realised

by the Group in the first quarter of 2015, and particularly for trout. Demand

for high-quality seafood is high, and clear trends can be identified that

substantiate increased demand for fresh products.

The Group currently estimates a total harvest volume of 181,500 GWT for 2015,

including the share of LSG's volume from associates.

Based on the report of the Board of Directors and the management's presentation,

the Board of Directors currently estimates that the Group will achieve a lower

operating profit before biomass adjustment in Q2 2015 when compared with Q2

Questions and comments may be addressed to the company's CEO, Henning Beltestad,

or to the CFO, Sjur S. Malm.

This information is subject of the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#1921115]