Leroy Seafood Group — Earnings Release 2016

May 12, 2016

Lerøy Seafood Group ASA : Q1 2016 Results

Lerøy Seafood Group ASA : Q1 2016 Results

RECORD PRICES GENERATE RECORD OPERATING PROFIT

Lerøy Seafood Group (LSG) posted an operating profit before fair value

adjustment of biomass of NOK 584 million in Q1 2016, compared with NOK 404

million in Q1 2015. This is equivalent to operating profit before biomass

adjustment of NOK 15.3 per kg compared with NOK 11.5 per kg in the same period

last year.

"The price for Atlantic salmon has been high in the first quarter, and prices

for trout have also improved significantly from 2015. With realised prices as

the key driver, operating profit for the first quarter of 2016 is the highest in

the Group's history. We're satisfied with the earnings level, but see many areas

where we can improve. These are our core focus" says CEO Henning Beltestad.

In Q1 2016, Lerøy Seafood Group reported revenue of NOK 3,815 million, compared

with NOK 3,268 million in the same period in 2015. Compared with Q1 2015, the

Group's slaughter volumes of salmon and trout increased by 9%. The Group's

profit before tax and before fair value adjustment of biomass was NOK 592

million in Q1 2016, compared with NOK 390 million in Q1 2015.

Net interest bearing debt was reduced by NOK 502 million in the quarter, and was

NOK 2.092 million the 31 March 2016. The equity ratio end quarter was 57%

FISH FARMING SEGMENT - HIGH PRICES RESULTS IN HIGH EARNINGS

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

segment increased from NOK 322 million in Q1 2015 to NOK 522 million in Q1

2016. The Farming segment harvested a total of 38,163 GWT salmon and trout in Q1

2016, up 9% from the same period in 2015. EBIT/kg increased from NOK 9.2 per kg

in Q1 2015 to NOK 13.7 per kg in Q1 2016.

In Q1 2016, Lerøy Aurora achieved operational EBIT per kg of NOK 21.9. Lerøy

Midt and Lerøy Sjøtroll are reporting EBIT per kg of NOK 14.6 and NOK 9.1

respectively for the same period.

"We have significantly reduced the number of treatments in 2016 compared with

the same periods in 2014 and 2015, and we are more confident that the measures

taken and investments made will prove effective," says CEO Henning Beltestad.

"At the same time, we're still in a transitional phase, with extraordinarily

high direct and indirect costs linked to treatment as well as increasing cost

linked to prevention. We expect treatment costs to fall through 2016."

"However, despite this positive development, we are concerned about some aspects

of the future framework regulation that appears to be imposed on our industry,"

Beltestad continues. "The global growth in demand for seafood offers

considerable potential for value generation. It is important for Norway to

ensure that parts of this value generation can take place in Norway, and that

the Norwegian aquaculture industry has framework regulations which makes it

competitive also in the long term," he explains.

VAP SEGMENT - HIGH PRICES A CHALLENGE

The revenue in the VAP segment is up 17% from NOK 425 million in Q1 2015 to NOK

498 million in Q1 2016. The operating margin is down from 4.3% in Q1 2015 to

2.7% in Q1 2016.

"High raw material prices are a challenge for the Group's processing activities,

and have had a negative impact on earnings in the segment in the first quarter.

We still think we are well positioned, and are working to adapt to the

expectation of permanently high raw material prices," says CEO Henning

Beltestad.

SALES & DISTRIBUTION SEGMENT - GOOD ACTIVITY, BUT HIGH PRICES A CHALLENGE

The revenue for the Sales & Distribution segment totalled NOK 3,617 million in

Q1 2016, up 18% on Q1 2015. The operating margin is down from 2.0% in Q1 2015 to

1.6% in Q1 2016.

"The Sales & Distribution segment also increased its revenue in the first

quarter of 2016," says CEO Henning Beltestad. "However, high prices mean

pressure on the operating margin, which is down slightly compared with the same

period last year. But there is still extensive unutilized capacity in several of

the Group's 'fish-cuts', and we see great potential to increase activities and

earnings within this part of the value chain in the years ahead."

MARKET AND OUTLOOK

The Group is in a transitional phase, with extraordinarily high direct and

indirect treatment costs, combined with increasing costs for prevention. The

Group has made substantial investments, including in the use of cleaner fish,

and it is seeing good results from this. A significant increased investment in

cleaner fish was initiated in 2013/2014, and it is only this year that does the

Group has had access to the volume of cleaner fish considered necessary.

However, the Group acknowledges that the farming of lumpfish remains in the

start-up phase and that provision must be made for unforeseen events. We believe

that there will be improvements both in production and in the use of lumpfish,

which will gradually have positive effects on the production of salmon and

trout. The Group is also investing in other tools to optimise production,

including mechanical cleaning and fresh water treatment. In the course of 2016,

the Group will have access to significantly greater well boat capacity, which

will increase the capacity to carry out fresh water treatment and provide

significantly greater capacity for mechanical cleaning. Costs in connection with

prevention will therefore increase in 2016, but the Group sees it as positive

that the number of treatments so far in 2016 has been considerably lower than in

the same periods of 2015 and 2014. The Group is therefore more confident that

the measures taken will prove effective, and that costs in connection with

treatment will fall in 2016 compared with previous years.

However, despite the positive development, the Group is concerned about some

aspects of the future framework regulations that appears to be imposed on the

Norwegian fish-farming industry.  It is of decisive importance for the future of

the industry that the authorities ensure that future framework regulations are

founded on fact-based knowledge. It is essential for the Norwegian fish-farming

industry that in 5-10 years' time it, too, has framework regulations in place

that allow it to be economically sustainable. The global growth in demand for

seafood offers considerable potential for value generation. From a social and

economic perspective, Lerøy Seafood Group believes it is important for Norway to

ensure that parts of this value generation can take place in Norway.

The Norwegian krone has weakened against key currencies. This dynamic is

positive for prices realised for salmon but also means - all other factors being

equal - higher feed prices. The best estimate continues to indicate that feed

costs for fish harvested in 2016 will increase compared with 2015, though the

Board of Directors still sees opportunities for cost reductions in other areas

during 2016.

The Group currently estimates a total harvest volume of 183,000 GWT for 2016,

including the share of LSG's volume from associates.

In view of the potential for better productivity and the positive market

outlook, the Board of Directors and management currently expect the Group's

earnings in 2016 to be considerably higher than last year.

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#2011768]