Leroy Seafood Group — Earnings Release 2017

Nov 9, 2017

Lerøy Seafood Group ASA : Q3 2017 Results

Lerøy Seafood Group ASA : Q3 2017 Results

GOOD EARNINGS FROM HIGH HARVEST VOLUME

In Q3 2017, Lerøy Seafood Group (LSG) reported operating profit before fair

value adjustment related to biological assets of NOK 861 million in Q3 2017,

compared with NOK 481 million in Q3 2016. This corresponds to operating profit

before fair value adjustment related to biological assets for Q3 2017 of NOK

17.4 per kg against NOK 14.8 per kg in Q3 2016.

* We have achieved the highest revenue and the highest operating profit ever

to be reported by the Group in a third quarter, confirms CEO Henning

Beltestad. We are pleased with such a good result, but there still remains

plenty of room for improvement and this is where our focus lies," he

continues.

The Group reported revenue of NOK 4,373 million in Q3 2017, compared with NOK

4,268 million in the same period in 2016. The Farming segment harvested a total

of 46,000 tonnes gutted weight of salmon and trout in Q3 2017, up 45% from the

same period in 2016. The Group's profit before tax and fair value adjustment

related to biological assets was NOK 899 million in Q3 2017, compared with NOK

534 million in Q3 2016.

The Group reported revenue of NOK 14,057 million as of the third quarter 2017,

an increase of 14% on the equivalent period last year. Operating profit before

fair value adjustment related to biological assets was NOK 2,939 million as of

Q3 2017, compared with NOK 1,826 million as of Q3 2016. The profit before tax

and fair value adjustment related to biological assets as of Q3 2017 was NOK

3,033 million, compared with NOK 1,901 million for the same period last year.

At 30 September 2017, net interest-bearing debt was NOK 2,733 million and the

equity ratio was 57%.

THE WILD CATCH AND WHITEFISH SEGMENT

In October 2016, Lerøy Seafood Group obtained 100% ownership of both Havfisk ASA

(Havfisk) and Norway Seafoods Group AS (now Lerøy Norway Seafoods - LNWS). As a

result of this transaction, both companies were consolidated into Lerøy Seafood

Group as of 1 September 2016 and these companies comprise the Wild Catch and

Whitefish segment.

Havfisk's primary business is wild catches of whitefish. Havfisk has licence

rights to harvest just above 10% of the total Norwegian cod quotas in the zone

north of 62 degrees latitude, corresponding to more than 30% of the total quota

allocated to the trawler fleet.

Havfisk's total catch volume in Q3 2017 was 17,029 tonnes, compared with 17,189

tonnes in Q3 2016. The catch volume in Q3 2017 comprised 7,662 tonnes of cod,

3,436 tonnes of saithe and 2,464 tonnes of haddock. The catch distribution in Q3

2016 was 8,592 tonnes of cod, 3,445 tonnes of saithe and 977 tonnes of haddock.

When compared with Q3 2016, the prices for cod and haddock were up 2% and 26%

respectively, while the price for saithe was down 26%. Remaining quotas for cod,

haddock and saithe as of Q3 2017 are approximately 15,000 tonnes against

approximately 12,000 tonnes in Q3 2016.

LNWS's primary business is processing wild-caught whitefish. The company has use

of eight processing plants in Norway, five of which are leased from Havfisk.

LNWS is the largest purchaser of cod from the coastal fishing fleet in Norway.

The total contribution to operating profit made by these two companies in Q3

2017 was NOK 62 million.

* "We are looking forward to generating lasting values by developing the Wild

Catch segment together with our employees both on and offshore," confirms

CEO Henning Beltestad. "In order to succeed, we need good, predictable

framework conditions, based on a fundamental understanding of what is

required to create and sustain jobs and values," explains the CEO. "I have

faith that the Norwegian authorities recognise this, and trust that they

will now allow us to develop our business without interruption in the years

to come," says Henning Beltestad.

THE FARMING SEGMENT -  HIGHER VOLUME AND A SEASONAL PRICE FALL

The Farming segment reported operating profit before fair value adjustment

related to biological assets of NOK 715 million in Q3 2017, up from NOK 397

million in Q3 2016. As of Q3 2017, the harvest volume is 4% higher than in the

corresponding period in 2016. The Group currently expects the total harvest

volume in 2017 to be higher than in 2016. EBIT/kg increased from NOK 12.5 per kg

in Q3 2016 to NOK 15.5 per kg in Q3 2017.

In Q3 2017, Lerøy Aurora achieved operational EBIT per kg of NOK 23.7. Lerøy

Midt and Lerøy Sjøtroll are reporting EBIT per kg of NOK 14.7 and NOK 8.5

respectively for the same period.

* "The lack of growth in production together with a positive development in

demand and the weaker Norwegian krone have resulted in historically high

prices for salmon," explains CEO Henning Beltestad. "Throughout Q3 2017, a

seasonal increase in harvest volume in Norway has placed some pressure on

the spot prices for salmon and trout. Prices in the quarter have therefore

been on the decline," explains the CEO.

* "The release from stock costs in Q3 2017 are in total on par with those from

Q2 2017. We have a positive development in Central- and Northern Norway, but

have been affected by an acute situation for salmon in the county of

Hordaland," continues Henning Beltestad. "During the last part of the third

quarter, some of our localities in Hordaland had difficulties that required

action, including early harvest. This had a negative impact on profit in the

quarter. By the start of Q4 2017, the situation was back to normal but the

incident will, all other factors being equal, result in a somewhat lower

volume at the end of the year and the start of 2018," says Henning

Beltestad.

THE VAP, SALES & DISTRIBUTION SEGMENT (VAPS&D)

The VAPS&D segment reported revenue in Q3 2017 of NOK 4,289 million, up 8% when

compared with the same period last year. Operating profit before fair value

adjustment related to biological assets was up from NOK 90 million in Q3 2016 to

NOK 111 million in Q3 2017. This provides an operating margin before fair value

adjustment related to biological assets of 2.6% in Q3 2017.

* The CEO confirms that the level of activity during the quarter has been

good. He goes on to add: "The Group is very happy to have identified

positive synergy effects within marketing as a result of the acquisitions

made within whitefish."

MARKET AND OUTLOOK

The Norwegian fish farming industry, including LSG, is in a transitional phase

with extraordinarily high direct and indirect costs, due to biological

challenges, political decisions and regulations. Since 2013/4, the Group has

made substantial investments in its own production of cleaner fish. The Group

can now report very positive results with cleaner fish. However, as production

and utilisation of cleaner fish remain in the early stages, further improvements

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

These include a significant increase in capacity for mechanical cleaning and

fresh-water treatment in well boats. The challenge of excessive treatment of

fish has not yet been solved, but developments in 2017 have been positive. This

justifies an outlook for further improvements in production as we go forward

into 2018. The significant, long-term investments made by the Group within

several parts of the value chain shall ensure global competitiveness.

Developments within whitefish in 2017 have been positive, even though industrial

development and processing of whitefish in Norway remain difficult. This

situation is impacted by political framework conditions, but the Group has a

clear ambition to increase competitiveness in and earnings from whitefish, with

the prevailing conditions and by means of improved marketing and improvements to

operational efficiency.

In 2017, the Group expects to harvest 176,000 GWT of salmon and trout, including

its share of LSG's volume from associates and a catch volume of whitefish up

towards 70,000 tonnes.

The Group currently estimates a total harvest volume for salmon and trout of

approximately 180,500 GWT for 2018, including the share of LSG's volume from

associates.

On 12 October 2017, the Norwegian-Russian fisheries commission stipulated total

whitefish quotas for cod, haddock, Greenland halibut and redfish for 2018. The

total quota for cod is down 13% and the reduction in quota for haddock is 12%.

The quotas for Greenland halibut and redfish, however, are up 12.5% and just

over 9% respectively. The advice from the International Council for the

Exploration of the Sea (ICES) is for an increase of 15% for saithe north of 62

degrees latitude, and a 7% increase for saithe in the North Sea. The final

quotas per vessel are stipulated in November and December 2017.

The Board currently estimates that earnings in Q4 2017 will be on par with

earnings in Q3 2017, ensuring that the Group will achieve a record-high profit

in 2017.

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.