Leroy Seafood Group — Earnings Release 2014

Feb 24, 2015

Lerøy Seafood Group ASA: Q4 2014 Results

Lerøy Seafood Group ASA: Q4 2014 Results

A RECORD-BREAKING YEAR FOR LERØY SEAFOOD GROUP

In Q4 2014, Lerøy Seafood Group reported operating profit before fair value

adjustment of biomass of NOK 435 million, compared with NOK 425 million in Q4

2013. During the fourth quarter, the Group realised a gain on the sale of assets

totalling NOK 42 million, of which the most significant proportion was from the

sale of shares in SalmoBreed AS. The result represents an operating profit

before biomass value adjustment of NOK 10.2 per kg, compared to NOK 10.3 in Q4

* The fourth quarter was challenging for certain parts of our operations, but

still marks the end of a very successful year. We are proud to be able to

say that the figures for 2014 will go down in the history of the Group as

our highest turnover, operating profit and pre-tax profit before fair value

adjustment of biomass ever, confirms CEO Henning Beltestad.

In Q4 2014, Lerøy Seafood Group reported turnover of NOK 3,261 million, compared

with NOK 3,230 million in the same period in 2013. When compared with Q4 2013,

the Group increased its volume of harvested salmon and trout by 3%.

For 2014 in total, the Group has reported turnover of NOK 12,579 million

compared with NOK 10,765 million in 2013. Operating profit before value

adjustment of biomass for 2014 as a whole was NOK 1,789 million compared with

NOK 1,626 million in 2013. The profit figure before tax and before value

adjustment of biomass in 2014 was NOK 1,817 million compared with NOK 1,630

million in 2013.

Net interest-bearing debt at 31 December 2014 was NOK 1,876 million and the

equity ratio was 54%.

The Board of Directors will recommend to the shareholders' meeting in 2015 a

dividend payment of NOK 12 per share for 2014.

FARMING -    CHALLENGING IN SOME REGIONS

The demerger of Villa Organic was completed in July 2014. As a result, Lerøy

Aurora has eight new licences to disposal with effect from July 2014. In

addition, Lerøy Aurora was awarded a demonstration facility licence in Q4 2014,

and now has a total of 26 licences. Moreover, Lerøy Vest has been nominated for

the acquisition of one new licence during the governmental green licence

allocation rounds.

Operating profit before fair value adjustment of biomass reported by the Farming

segment fell from NOK 333 million in Q4 2013 to NOK 299 million in Q4 2014. The

Farming segment harvested a total 42,479 GWT of salmon and trout in the fourth

quarter, up 3% from the same period in 2013. EBIT/kg fell from NOK 8.1 per kg in

Q4 2013 to NOK 7.0 per kg in Q4 2014. In total, the Farming segment realised

prices in Q4 2014 that were higher than those in Q3 2014, although this increase

was considerably lower than the increase in the salmon spot prices for the same

period.

Lerøy Aurora reported an operational EBIT per kg of NOK 13.9 in Q4 2014. The

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

are NOK 8.4 and NOK 0.0 respectively.

* The Q4 performance of the different regions in the Farming segment has been

very varied, in which is attributable to both realised prices and costs. The

Group is the largest producer of trout in the world, and the ban on imports

into Russia has had a particularly large impact on realised prices for

trout. Moreover, parts of the Group's operations have struggled with higher

costs due to increased biological challenges. The costs reported in Q4 were

lower than those in Q3, but significantly higher than what the Group sees as

a normal cost level, explains CEO Henning Beltestad.

* Nonetheless, we are fully confident that the initiatives and investments

made by the Group in 2014 will generate substantial improvements throughout

2015, he continues, then goes on to explain that the Group has particularly

high expectations that the considerable increase in the use of cleaner fish

will continue to provide positive results.

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. The Group's work on

market development together with good national and international customers, has

resulted in improvements to utilisation of total capacity. The turnover for this

segment is up 14% from NOK 382 million in Q4 2013 to NOK 437 million in Q4

2014. The operating margin is down from 7.5% in Q4 2013 to 7.2% in Q4 2014.

* The Group is satisfied with the underlying developments achieved by the

Value-Added Processing segment. We still have newbuilt capacity to fill, and

together with improved operations, we aim for increased earnings from the

VAP segment in 2015, says CEO Henning Beltestad.

SALES & DISTRIBUTION - POSITIVE DEVELOPMENT BUT SOME START-UP COSTS

The Sales & Distribution segment had a turnover of NOK 3,078 million in Q4

2014, on a par with the figure reported for 2013. At the same time, the segment

reported a positive development in margin, with operating margin up from 2.2% in

Q4 2013 to 2.7% in Q4 2014. Operating profit was up from NOK 69 in Q4 2013 to

NOK 82 in Q4 2014.

* Sales & Distribution play a very important role in the Group's ambition to

drive demand for seafood, by launching new products and pioneering new

markets. It is now evident that our vertical integration and increased level

of processing is boosting our competitive position in the global market,

confirms CEO Henning Beltestad.

* Following our strategy of market development, we have built a number of

"fish cuts" in end markets in recent years. This capacity is gradually

filled, but we still see major potential to increase activities and earnings

within this part of the value chain in the years to come, explains Henning

Beltestad.

MARKET SITUATION AND OUTLOOK

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. 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 having

a negative impact on the prices realised by the Group, particularly for trout,

in the fourth quarter. This will continue to be the case for the months to come.

* The import ban imposed by Russia is particularly difficult for the trout

market, but the recent investment in doubling the capacity for value added

processing of trout at Lerøy Fossen gradually makes us less dependent on the

Russian market as the new capacity is filled. We expect the market situation

to gradually return to normal, due to an underlying strong growth in demand,

and successful marketing initiatives, but also as a result of a change in

the global trade flows for salmon and trout. Demand for high-quality seafood

is high, and clear trends can be identified that substantiate increased

demand for fresh products, confirms CEO Henning Beltestad.

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

the share of LSG's volume from associates.

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

or to the CFO, Sjur S. Malm.

This information is subject to the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#1896564]