Quarterly Report • May 9, 2018
Quarterly Report
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| Main figures 1) | Q1 2018 | Q1 2017 | 2017 |
|---|---|---|---|
| EUR million | |||
| 2) Operational revenue |
862.1 | 892.0 | 3 653.8 |
| Operational EBITDA 3) | 194.8 | 256.8 | 942.5 |
| Operational EBIT 3) | 157.6 | 219.8 | 792.1 |
| EBIT | 269.6 | 88.3 | 484.9 |
| Net financial items | -37.8 | 136.5 | 37.7 |
| Profit or loss for the period | 179.1 | 212.4 | 462.7 |
| Cash flow from operations | 191.8 | 247.8 | 632.4 |
| Total assets | 4 415.9 | 4 491.1 | 4 330.3 |
| NIBD 4) | 856.6 | 842.0 | 831.9 |
| Basic EPS (EUR) | 0.36 | 0.47 | 0.97 |
| Underlying EPS (EUR) 5) | 0.24 | 0.36 | 1.23 |
| Net cash flow per share (EUR) 6) | 0.21 | 0.39 | 0.74 |
| Dividend declared and paid per share (NOK) | 2.60 | 2.80 | 12.40 |
| ROCE 7) | 25.3% | 33.7% | 26.7% |
| Equity ratio | 53.1% | 47.9% | 53.5% |
| Adjusted equity ratio 8) | 50.8% | 45.1% | 51.7% |
| Harvest volume (GWT) | 81 212 | 83 768 | 370 346 |
| Operational EBIT per kg (EUR) - Total 9) | 1.94 | 2.62 | 2.15 |
| Norway | 2.26 | 2.52 | 2.20 |
| Scotland | 1.85 | 3.12 | 2.55 |
| Canada | 1.10 | 3.42 | 2.06 |
| Chile | 1.36 | 1.87 | 1.30 |
1) This interim report is unaudited. Please refer to part 4 of the Annual Report and the appendix to this quarterly report (available on-line on our web site) for detailed descriptions and reconciliations of Alternative Performance Measures (non-IFRS measures).
2) Operational revenue: Revenue and other income, including realized gain/loss from currency derivatives related to contract sales of Norwegian origin, and excluding change in unrealized salmon derivatives.
3) Calculated by excluding the following items from financial EBITDA/EBIT: Change in unrealized internal margin, change in unrealized gains/losses from salmon derivatives, net fair value adjustment on biomass, onerous contract provisions, restructuring costs, income from associated companies, impairment losses of fixed assets/intangibles and other non-operational items. Operational EBIT also includes realized gain/loss from currency derivatives related to contract sales of Norwegian origin. A reconciliation between Operational EBIT and financial EBIT is provided on the next page, and we also refer to the appendix to this quarterly report (available on-line) for further information. The largest individual difference between Operational EBIT and financial EBIT is usually the net fair value adjustment on biomass according to IFRS (and the related onerous contracts provision), which is a volatile figure impacted by estimates of future salmon prices as well as other estimates.
4) NIBD: Total non-current interest-bearing debt, minus total cash, plus current interest-bearing debt and plus net effect of currency derivatives on interest-bearing debt.
5) Underlying EPS: Operational EBIT adjusted for accrued interest payable, with estimated weighted tax rate - per share.
6) Net cash flow per share: Cash flow from operations and investments, net financial items paid and realized currency effects - per share.
7) ROCE: Annualized return on average capital employed based on EBIT excluding net fair value adjustment on biomass, onerous contract provisions and other non-operational items / Average NIBD + Equity, excluding net fair value adjustment on biomass, onerous contract provisions and net assets held for sale, unless there are material transactions in the period. 8) Adjusted equity ratio: Calculated by excluding net fair value adjustment on biomass and onerous contracts provision (both net after tax) from equity, and net fair value adjustment on biomass from sum of equity and liabilities.
9) Operational EBIT per kg including allocated margin from Feed and Sales and Marketing.
The Group's profits hinges on its ability to provide customer value from healthy, tasty and nutritious seafood, farmed both cost effectively and in an environmentally sustainable way that maintains a good aquatic environment and respects the needs of the wider society.
(Figures in parenthesis refer to the same quarter previous year.)
| (EUR million) | Q1 2018 | Q1 2017 |
|---|---|---|
| Operational EBIT | 157.6 | 219.8 |
| Change in unrealized margin | 4.4 | -1.8 |
| Gain/loss from derivatives | 6.3 | -6.3 |
| Net fair value adjustment on biomass including onerous contracts |
89.4 | -122.5 |
| Restructuring costs | -0.9 | -0.2 |
| Other non-operational items | 0.1 | 0.0 |
| Income from associated companies | 12.6 | -0.1 |
| Impairment losses on fixed assets/intangibles | 0.1 | -0.6 |
| EBIT | 269.6 | 88.3 |
Operational EBIT amounted to EUR 157.6 million. The decrease from the comparable quarter is mainly due to reduced market prices from record high levels. The contribution from Feed was EUR -4.3 million (EUR 0.1 million), and Farming contributed EUR 136.5 million (EUR 204.7 million). Markets contributed EUR 10.1 million (EUR 10.0 million) and Consumer Products contributed EUR 20.9 million (EUR 12.9 million).
Earnings before financial items and taxes (EBIT) came to EUR 269.6 million (EUR 88.3 million). EBIT is positively impacted by net fair value adjustment on biomass including onerous contracts of EUR 89.4 million (EUR -122.5 million), mainly due to higher prices at the end of the first quarter compared to the end of the previous quarter.
| (EUR million) | Q1 2018 | Q1 2017 |
|---|---|---|
| Interest expenses | -10.3 | -11.9 |
| Net currency effects | 4.1 | 1.1 |
| Other financial items | -31.5 | 147.3 |
| Net financial items | -37.8 | 136.5 |
Other financial items include a negative effect of increased fair value of the conversion liability component of convertible bond of EUR 35.3 million, mainly explained by the increase in the Marine Harvest share price.
| (EUR million) | Q1 2018 | Q1 2017 |
|---|---|---|
| NIBD beginning of period | -831.9 | -890.0 |
| Operational EBITDA | 194.8 | 256.8 |
| Change in working capital | 38.5 | 59.6 |
| Taxes paid | -50.5 | -59.7 |
| Other adjustments | 8.9 | -8.9 |
| Cash flow from operations | 191.8 | 247.8 |
| Net Capex | -76.7 | -57.0 |
| Other investments and dividends received | -8.7 | -10.0 |
| Cash flow to investments | -85.4 | -67.0 |
| Net interest and financial items paid | -6.9 | -4.7 |
| Other items | 8.4 | -10.0 |
| Net convertible bonds converted | 0.0 | 21.1 |
| Dividend / return of paid in capital | -132.5 | -142.8 |
| Currency effect on interest-bearing debt | -0.1 | 3.6 |
| NIBD end of period | -856.6 | -842.0 |
Cash flow from operations amounted to EUR 191.8 million (EUR 247.8 million). During the first quarter, there was a seasonal release of working capital, which was more than offset by tax payments.
Net Capex was EUR 76.7 million (EUR 57.0 million). The increase from the first quarter of 2017 is mainly due to the new feed factory in Scotland and investment in 2% fixed price MAB growth in Norway under the amended fish farming regulations.
Other investments include increased investment in DESS Aquaculture Shipping of EUR 10.5 million, partly offset by contributions from associated companies.
A quarterly dividend of EUR 132.5 million (EUR 142.8 million), as announced in the previous quarterly report, has been distributed as ordinary dividend.
| ATTRACTIVE FINANCIAL RESULTS |
|---|
| PROFIT |
| GUIDING PRINCIPLE | AMBITION | ACHIEVEMENT |
|---|---|---|
| Profitability | ROCE exceeding 12% | Q1 25.3% |
| YTD 25.3% |
||
| Solidity | Long term NIBD target: | March 31, 2018 |
| EUR 1 200 million | EUR 857 million | |
| Farming NIBD / kg EUR 2.0 | Farming NIBD / kg EUR 1.2 |
| Feed | Farming | Sales and Marketing | Other | Group 1) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Markets | Consumer Products |
|||||||||||
| EUR million | Q1 2018 |
Q1 2017 |
Q1 2018 |
Q1 2017 |
Q1 2018 |
Q1 2017 |
Q1 2018 |
Q1 2017 |
Q1 2018 |
Q1 2017 |
Q1 2018 |
Q1 2017 |
| External revenue | 1.2 | 5.0 | 22.9 | 7.6 | 349.5 | 449.8 | 488.5 | 429.5 | 0.0 | 0.0 | 862.1 | 892.0 |
| Internal revenue | 60.4 | 58.5 | 469.4 | 564.3 | 154.1 | 155.9 | 10.2 | 4.6 | 4.4 | 5.2 | 0.0 | 0.0 |
| Operational revenue | 61.6 | 63.6 | 492.4 | 571.9 | 503.6 | 605.7 | 498.7 | 434.1 | 4.4 | 5.2 | 862.1 | 892.0 |
| Operational EBIT | -4.3 | 0.1 | 136.5 | 204.7 | 10.1 | 10.0 | 20.9 | 12.9 | -5.7 | -8.0 | 157.6 | 219.8 |
| Change in unrealized margin | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 4.4 | -1.8 |
| Gain/loss from derivatives | 0.0 | 0.0 | -7.1 | 39.7 | -2.5 | 0.4 | 9.9 | -39.9 | 6.1 | -6.4 | 6.3 | -6.3 |
| Net fair value adjustment on biomass, onerous contract provisions |
0.1 | 1.4 | 89.3 | -123.9 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 89.4 | -122.5 |
| Restructuring costs | 0.0 | 0.0 | -0.9 | 0.0 | 0.0 | -0.1 | 0.0 | 0.0 | 0.0 | -0.1 | -0.9 | -0.2 |
| Other non-operational items | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 |
| Income from associated companies | 0.0 | 0.0 | 12.7 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -0.1 | -0.1 | 12.6 | -0.1 |
| Impairment losses of fixed assets | 0.0 | 0.0 | 0.0 | -0.6 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 | 0.1 | -0.6 |
| EBIT | -4.2 | 1.5 | 230.5 | 120.0 | 7.6 | 10.3 | 31.0 | -27.0 | 0.3 | -14.6 | 269.6 | 88.3 |
| Operational EBIT % | -6.9% | 0.2% | 27.7% | 35.8% | 2.0% | 1.6% | 4.2% | 3.0% | na | na | 18.3% | 24.6% |
1) Group adjusted for eliminations.
Marine Harvest monitors the overall value creation of the operations based on the salmon's source of origin. For this reason Operational EBIT related to our Feed and Sales and Marketing operations is allocated back to the country of origin. The table below and upcoming performance review provide information consistent with the value creation methodology.
Other units reported Operational EBIT of EUR -5.7 million in the quarter (EUR -8.0 million in the comparable quarter, of which EUR -2.6 million related to foreign currency transactions against EUR recognized as income/cost in Marine Harvest ASA and Marine Harvest Markets Norway respectively).
| SOURCES OF ORIGIN | ||||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | Norway | Scotland | Canada | Chile | Ireland | Faroes | Other | Group |
| OPERATIONAL EBIT | ||||||||
| Farming | 101.8 | 11.1 | 6.1 | 11.0 | 5.9 | 0.5 | 136.5 | |
| Sales and Marketing | ||||||||
| Markets | 4.5 | 2.0 | 1.1 | 2.1 | 0.0 | 0.7 | -0.2 | 10.1 |
| Consumer Products | 12.6 | 3.0 | 0.0 | 3.7 | 0.4 | 0.0 | 1.2 | 20.9 |
| Subtotal | 118.9 | 16.1 | 7.2 | 16.8 | 6.4 | 1.2 | 1.0 | 167.6 |
| Feed | -3.3 | -1.0 | -4.3 | |||||
| Other entities 1) | -5.7 | -5.7 | ||||||
| Total | 115.6 | 16.1 | 7.2 | 16.8 | 6.4 | 1.2 | -5.7 | 157.6 |
| Harvest volume (GWT) | 51 050 | 8 691 | 6 592 | 12 392 | 1 457 | 1 030 | 81 212 | |
| Operational EBIT per kg (EUR) 2) | 2.26 | 1.85 | 1.10 | 1.36 | 4.37 | 1.19 | 1.94 | |
| - of which Feed | -0.06 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | -0.05 | |
| - of which Markets | 0.09 | 0.23 | 0.17 | 0.17 | 0.00 | 0.71 | 0.12 | |
| - of which Consumer Products | 0.25 | 0.34 | 0.00 | 0.30 | 0.30 | 0.00 | 0.26 | |
| ANALYTICAL DATA | ||||||||
| Price achievement/reference price (%) | 97% | 112% | 98% | 94% | na | 113% | 98% | |
| Contract share (%) | 40% | 67% | 0% | 20% | 84% | 0% | 37% | |
| Quality - superior share (%) | 92% | 96% | 86% | 87% | 93% | 89% | 91% | |
| Incident based mortality in Operational EBIT | -2.8 | -1.0 | -1.1 | -0.1 | -0.4 | 0.0 | -5.3 | |
| Incident based mortality per kg (EUR) | -0.05 | -0.11 | -0.16 | -0.01 | -0.28 | 0.00 | -0.06 | |
| GUIDANCE | ||||||||
| Q2 2018 harvest volume (GWT) | 52 000 | 9 000 | 9 500 | 9 300 | 1 500 | 700 | 82 000 | |
| 2018 harvest volume (GWT) | 242 000 | 47 000 | 43 000 | 52 500 | 7 500 | 8 000 | 400 000 | |
| Q2 2018 contract share (%) | 39% | 73% | 0% | 22% | 85% | 0% | 37% |
1) Corporate and Holding companies
2) Including Corporate and Holding companies
The salmon market continues to adapt to the higher price environment, and the demand response in several markets has been more positive than expected. Salmon prices increased in all markets compared to the levels seen towards the end of 2017. However, compared to the record high prices in the first quarter of 2017, the spot prices declined on average in the quarter.
Global harvest of Atlantic salmon amounted to 519,0000 tonnes in the first quarter, an increase of 11% compared to the same quarter in 2017. The increase in harvesting volumes was in line with the overall supply guidance.
| Supply | Q1 2018 | Change vs | 12 month | Q4 2017 |
|---|---|---|---|---|
| GWT | Q1 2017 | change | GWT | |
| Norway | 263 300 | 5.6% | 3.9% | 321 800 |
| Scotland | 31 100 | -13.1% | 5.8% | 40 300 |
| Faroe Islands | 16 500 | 5.8% | 7.3% | 18 500 |
| Ireland | 3 500 | 45.8% | 13.9% | 3 900 |
| Total Europe | 314 400 | 3.7% | 4.4% | 384 500 |
| Chile | 153 400 | 29.9% | 30.1% | 158 000 |
| North America | 30 800 | 2.0% | -1.3% | 39 800 |
| Total Americas | 184 200 | 20.2% | 22.0% | 197 800 |
| Australia | 13 200 | 6.5% | 20.6% | 16 400 |
| Other | 7 600 | 0.2% | 14.6% | 4 500 |
| Total | 519 400 | 10.5% | 10.2% | 603 200 |
Supply from Norway increased by 6% compared to the first quarter of 2017 which was less than expected. A cold winter in Norway with lower than expected sea water temperatures has resulted in less growth. Feed sales have as a result declined by 3% year-to-date. The Norwegian biomass has declined in recent months. At year-end it was up by 10% year-over-year, however, it has gradually declined to a growth of 6% year-over-year. This will have an impact on expected harvest volumes in the periods to come. Harvesting weights continue to recover in Norway which is positive from a biological point of view.
Harvest in Scotland declined by 13% compared to the first quarter of 2017 which was slightly more than expected. The biomass in Scotland is lower than last year, which led to reduced harvesting volumes. In addition, lower sea water temperatures have reduced biomass growth in the quarter. Volumes from the Faroe Islands increased by 6% in the quarter compared to the same quarter in 2017. In tonnage terms, the harvest volume was in line with guidance.
Volumes from Chile increased by 30% compared to the first quarter of 2017. The increase was more than expected and mainly driven by an algal bloom which caused many farmers to accelerate harvest. These preventive measures were successful, but also reduced the harvest potential in the periods to come.
In North America volumes increased by 2% which was less than guidance. On the West Coast of Canada, the biological performance during the fall of 2017 was challenging, which has impacted growth and reduced volumes suitable for harvest.
| Q1 2018 | Change vs | Q1 2018 | Change vs | |
|---|---|---|---|---|
| Reference prices | Market | Q1 2017 | NOK | Q1 2017 |
| 1) Norway |
EUR 6.25 | -14.1% | NOK 60.21 | -7.8% |
| Chile 2) | EUR 5.12 | -17.2% | NOK 40.13 | -23.0% |
| Chile, GWE 3) | USD 6.02 | -19.2% | NOK 47.21 | -24.9% |
| 4) North America |
USD 3.69 | -8.3% | NOK 28.96 | -14.8% |
| North America GWE 3) | USD 7.72 | -8.2% | NOK 60.54 | -14.7% |
1) NASDAQ average superior GWE/kg (gutted weight equivalent)
2) Urner Barry average D trim 3-4 lbs FOB Miami
3) Reference price converted back-to-plant equivalent in GWE/kg
4) Urner Barry average GWE 10-12 lbs FOB Seattle
In the market currency, EUR, prices in Europe decreased by 14% compared to the first quarter of 2017. Salmon prices decreased by 17% in Miami and 8% in Seattle in USD terms.
| Market | Q1 2018 | Change vs | 12 month |
|---|---|---|---|
| distribution | GWT | Q1 2017 | change |
| EU | 217 600 | 6.6% | 0.9% |
| Russia | 21 300 | 51.1% | 16.2% |
| Other Europe | 20 300 | 12.2% | 10.7% |
| Total Europe | 259 200 | 9.6% | 2.5% |
| US | 109 900 | 9.7% | 8.2% |
| Brazil | 24 500 | 20.1% | 9.9% |
| Other Americas | 28 600 | 15.8% | 7.9% |
| Total Americas | 163 000 | 12.2% | 8.4% |
| China/Hong Kong | 23 800 | 37.6% | 20.9% |
| Japan | 12 600 | -10.0% | -2.6% |
| South Korea/Taiwan | 14 300 | 38.8% | 26.3% |
| Other Asia | 20 400 | —% | 23.9% |
| Total Asia | 71 100 | 14.7% | 17.0% |
| All other markets | 28 500 | 2.2% | 3.7% |
| Total | 521 800 | 10.6% | 6.0% |
Global consumption increased by 11% in the first quarter compared with the same period in 2017.
Consumption in the EU increased by approximately 7% in the quarter. The demand response to reduced prices in the Fresh category across the major markets (France, Germany, UK) has been impressive. Volumes in the smoked category have in general stabilized, at higher retail prices. Italy and Spain also grew and the increased consumption we have witnessed in recent years continued. Russia significantly increased its imports of Chilean frozen salmon in the period.
US consumption increased by 10% compared with the same quarter in 2017. The annual consumption of Atlantic salmon in the USA exceeded for the first time ever 400,000 tonnes GWT. As supply from Chile has recovered, their exports to Brazil has significantly increased, at higher prices sequentially.
Consumption in the Asian market increased by 15% in the quarter compared to the same period last year. The developments in the Chinese/Hong Kong markets and South Korea/Taiwan were particularly favorable in the period.
Revenues in the first quarter were distributed as shown in the graph below. Europe is by far the largest market for Marine Harvest with 69% (68%). France, Germany and the UK are the main markets for our products.
The Group's main species is Atlantic salmon. Revenues for our external sales channels in Sales & Marketing were distributed across product categories as follows:
Fresh bulk salmon represented 35% (46%), while smoked/ marinated and elaborated salmon together accounted for 53% (44%).
In the first quarter we continued our efforts to further develop products and brands.
Consumer Products Europe has received notable recognition for its product development efforts. The Topped Salmon Tournedos product from Marine Harvest Pieters was nominated as a finalist by the organizers of the Brussels Seafood Excellence Global Award 2018. Likewise, the Hot Smoked Salmon product from Marine Harvest Pieters was nominated by an expert panel for the 2018 Innovation Award for the Belgian market.
In the US, volumes grew for the Ducktrap brand in the first quarter of 2018 compared to the first quarter of 2017 on strong Easter sales. In July, Ducktrap plans to open its second factory in Maine,
next door to the current facility. Before the end of 2018, Marine Harvest USA will move its activities in Miami to a new plant. The new plant will be more than twice as large as the current site. Our plants in North America continue to experience demand-driven volume growth. US consumers are responding very well to a wide range of value-added products from Marine Harvest, including pre-packed products.
In Asia, volume for our Mowi brand has increased in the first quarter of 2018 compared to the first quarter of 2017 on strong demand. Promotions have contributed to the positive development for this premium brand.
From the first quarter of 2018, we have changed our reporting of price achievement to exclude margins from Feed and Consumer Products. Comparison figures are re-presented accordingly.
Market prices have been reduced compared to the record high levels of Q1 2017, with the global reference price 20% lower in the first quarter of 2018.
Reference price for salmon of superior quality vs. price achieved in Norway, Scotland, Canada, Chile and Faroes.
The combined global price achieved was 2% below the reference price in the period. In the first quarter of 2017, the global price achieved was 7% below the reference price. Achieved prices were positively impacted by contract prices.
| Markets | ||||
|---|---|---|---|---|
| Q1 2018 | Norwegian | Scottish | Canadian | Chilean |
| Contract share | 40% | 67% | 0% | 20% |
| Quality - superior share | 92% | 96% | 86% | 87% |
| Price achievement | 97% | 112% | 98% | 94% |
Average price achievement is measured against reference prices in all markets (NASDAQ for Norwegian, Scottish and Faroese salmon, and Urner Barry for Chilean and Canadian salmon).
| EUR million | Q1 2018 | Q1 2017 |
|---|---|---|
| Operational EBIT | 115.6 | 123.6 |
| EBIT | 178.9 | 63.5 |
| Harvest volume (GWT) | 51 050 | 49 026 |
| Operational EBIT per kg (EUR) | 2.26 | 2.52 |
| - of which Feed | -0.06 | 0.00 |
| - of which Markets | 0.09 | 0.10 |
| - of which Consumer Products | 0.25 | 0.20 |
| Price achievement/reference price | 97% | 91% |
| Contract share | 40% | 54% |
| Superior share | 92% | 94% |
Operational EBIT amounted to EUR 115.6 million (EUR 123.6 million) in the first quarter, the equivalent of EUR 2.26 per kg (EUR 2.52). The profitability of the three regions in Marine Harvest Norway varied: EUR 1.86 per kg in Region South, EUR 2.31 per kg in Region West and EUR 2.52 per kg in Region North. The positive effects of reduced costs partly offset the negative effect of reduced prices compared to the first quarter of 2017.
Financial EBIT amounted to EUR 178.9 million (EUR 63.5 million).
Prices in the quarter were significantly lower than the all-time high levels in the first quarter of 2017. However, prices increased in the first quarter of 2018 compared to the fourth quarter of 2017, on strong demand and reduced estimated supply growth following a cold winter in Europe. The reference price for salmon of Norwegian origin decreased by 14% compared to the first quarter of 2017. The average reference price in the first quarter was EUR 6.25 per kg. The overall price achieved was 3% below the reference price in the quarter (9% below). Although negative in both quarters, contribution from contracts relative to the reference price improved in the first quarter of 2018 compared to the first quarter of 2017.
Marine Harvest had a contract share of 40% for salmon of Norwegian origin in the first quarter, compared to 54% in the first quarter of 2017.
Harvested volume in the first quarter was 51 050 tonnes gutted weight (49 026 tonnes gutted weight).
The cost level improved from the fourth quarter of 2017 by EUR 0.10 per kg. Compared to the first quarter of 2017, costs were reduced by EUR 0.37 per kg.
The biological cost of harvested fish decreased by 9% compared to the first quarter of 2017, mainly due to 15% lower feed costs and 11% lower health costs per kg. The reduction in feed costs per kg is a result of reduced feed prices and improved feed conversion ratios.
Lice is still a challenge for the Norwegian farming operations, particularly in combination with fish being weakened by other biological challenges. As in previous periods, sea lice mitigation costs have been high for the harvested generation, although health cost per kg in the quarter are the lowest since the first quarter of 2016. Sea lice levels in all regions were lower at the end of the first quarter of 2018 compared to the first quarter of 2017.
Incident based mortality losses in the amount of EUR 2.8 million have been recognized in the quarter, of which EUR 1.7 million is related to an incident at the freshwater site at Fjæra. Losses from incident-based mortality in the first quarter of 2017 amounted to EUR 5.8 million.
Costs for harvested fish are expected to increase somewhat in the second quarter.
1) As defined in the Annual Report 2017, section "Analytical information" p. 236: Total of feed cost and other seawater costs, before transportation to the processing plant.
______ _______________________________________________ ________________
| Regions EUR million |
South Q1 2018 |
Mid Q1 2018 |
North Q1 2018 |
Total Q1 2018 |
|---|---|---|---|---|
| Operational EBIT | 21.3 | 60.6 | 33.7 | 115.6 |
| Harvest volume (GWT) |
11 477 | 26 194 | 13 379 | 51 050 |
| Operational EBIT per kg (EUR) |
1.86 | 2.31 | 2.52 | 2.26 |
| Superior share | 92% | 91% | 93% | 92% |
| Regions EUR million |
South Q1 2017 |
Mid Q1 2017 |
North Q1 2017 |
Total Q1 2017 |
| Operational EBIT | 39.1 | 71.4 | 13.2 | 123.6 |
| Harvest volume (GWT) |
13 052 | 29 656 | 6 318 | 49 026 |
| Operational EBIT per kg (EUR) |
2.99 | 2.41 | 2.09 | 2.52 |
| EUR million | Q1 2018 | Q1 2017 |
|---|---|---|
| Operational EBIT | 16.1 | 55.4 |
| EBIT | 14.7 | 18.0 |
| Harvest volume (GWT) | 8 691 | 17 772 |
| Operational EBIT per kg (EUR) | 1.85 | 3.12 |
| - of which Markets | 0.23 | 0.19 |
| - of which Consumer Products | 0.34 | 0.10 |
| Price achievement/reference price | 112% | 96% |
| Contract share | 67% | 41% |
| Superior share | 96% | 96% |
Financial results
Operational EBIT amounted to EUR 16.1 millionin the first quarter (EUR 55.4 million), the equivalent of EUR 1.85 per kg (EUR 3.12). The effects of higher achieved prices and increased margin from Consumer Products on salmon of Scottish origin were more than offset by lower harvest volume and cost increases.
Financial EBIT amounted to EUR 14.7 million (EUR 18.0 million).
Achieved prices were stable in the first quarter of 2018 compared to the first quarter of 2017. The overall price achieved was 12% above the reference price in the quarter (4% below). The relative improvement in price achievement is mainly due to higher contract prices. Contribution from contracts relative to the reference price was positive in the first quarter of 2018, but negative in 2017.
Compared to the fourth quarter of 2017, achieved prices increased by 9% in the first quarter on strong demand and reduced estimated supply growth.
The first quarter harvest volume was 8 691 tonnes gutted weight which is a significant decrease from the corresponding quarter in 2017 (17 772 tonnes). This was due to lower opening biomass, as a consequence of biological challenges and lower production, and timing of smolt stockings.
Although reduced from the fourth quarter of 2017, the cost level per kg harvested increased in the first quarter of 2018 compared to the first quarter of 2017. This was due to mortality, negative scale effects from lower volumes and harvesting from lower performing sites than in the comparable quarter.
Biological costs per kg increased by 43% in the first quarter of 2018 compared to the corresponding quarter of 2017, mainly due to increased health costs, mortality and negative scale effects.
Incident based mortality of EUR 1.0 million (EUR 0.7 million) was recognized due to anaemia and fish damaged in a storm.
Sea lice levels at the end of the quarter were higher than at the end of the comparable quarter of 2017.
Production in the first quarter has been adversely impacted by low seawater temperatures and storms. The biological performance has been challenging for our Scottish operations during the last quarters on low volumes and lower performing sites. This situation is not expected to improve significantly in the next quarter. Accordingly, costs are expected to remain high also in the second quarter of 2018.
| EUR million | Q1 2018 | Q1 2017 |
|---|---|---|
| Operational EBIT | 7.2 | 30.2 |
| EBIT | 19.4 | 12.8 |
| Harvest volume (GWT) | 6 592 | 8 852 |
| Operational EBIT per kg (EUR) | 1.10 | 3.42 |
| - of which Markets | 0.17 | 0.17 |
| - of which Consumer Products | 0.00 | 0.00 |
| Price achievement/reference price | 98% | 98% |
| Contract share | 0% | 0% |
| Superior share | 86% | 89% |
Financial results
Operational EBIT amounted to EUR 7.2 million in the first quarter (EUR 30.2 million), the equivalent of EUR 1.10 per kg (EUR 3.42). The decrease in Operational EBIT compared to the first quarter of 2017 is due to lower prices and volumes, and increased costs.
Financial EBIT amounted to EUR 19.4 million (EUR 12.8 million).
Spot prices for Canadian salmon in the first quarter were significantly reduced year-over-year due to recovery of volumes from Chile into the North American market. Market prices for fresh whole Canadian salmon decreased by 8% in the first quarter of 2018 compared to the first quarter of 2017, and the average price per lb gutted weight (Urner Barry 10-12 lb) was USD 3.69. However, sequentially prices increased by 14% in the first quarter of 2018 compared to the fourth quarter of 2017 on strong demand and reduced estimated supply growth.
Price achievement was 2% below the reference price in the first quarter of both 2018 and 2017. There were no contracts for salmon of Canadian origin in the first quarter of 2018 or 2017.
The cost level in the first quarter of 2018 was higher than in the comparable quarter of 2017 due to mortality, reduced growth and negative scale effects from lower volumes. Operational EBIT in the first quarter of 2018 was also negatively impacted by EUR 0.6 million related to the build-up and preparation phase for our East Canadian operations.
The biological costs per kg salmon harvested in the quarter increased by 15% due to reduced biological performance and increased spending in seawater production.
Sea lice levels at the end of the quarter were lower than the comparable quarter of 2017.
Incident based mortality of EUR 1.1 million was recognized in the first quarter due to culling of smolt (no incident based mortality in the first quarter of 2017).
Production has been lower than in the first quarter of 2017 as a result of mortality and lower opening biomass.
| Q1 2018 | Q1 2017 |
|---|---|
| 16.8 | 11.9 |
| 25.8 | 31.4 |
| 12 392 | 6 336 |
| 1.36 | 1.87 |
| 0.17 | 0.02 |
| 0.30 | 0.13 |
| 94% | 100% |
| 20% | 25% |
| 87% | 88% |
Operational EBIT amounted to EUR 16.8 millionin the first quarter (EUR 11.9 million), the equivalent of EUR 1.36 per kg (EUR 1.87). The increase in Operational EBIT compared to the first quarter of 2017 is driven by increased harvest volumes and reduced costs, partly offset by lower prices. Harvest volumes in the comparable quarter were negatively impacted by the toxic algal bloom incident in Region X in 2016.
Financial EBIT amounted to EUR 25.8 million (EUR 31.4 million).
The Urner Barry reference price for Chilean salmon was down by 17% compared to the first quarter of 2017 on increased supply. The average price per lb fillet in the quarter (Urner Barry D-trim 3-4 lb) was USD 5.12. However, sequentially prices increased by 8% from the fourth quarter of 2017 on strong demand and reduced estimated supply growth.
North America remains the most important market for salmon of Chilean origin. Price achievement for Chilean salmon was 6% below the reference price in the quarter (at the reference price in the first quarter of 2017). Price achievement was negatively impacted by quality downgrading.
The contract share was 20% in the quarter compared to 25% in the first quarter of 2017.
Harvested volume was 12 392 tonnes gutted weight in the first quarter (6 336 tonnes). The increase from the comparable quarter is due to a more normal harvest volume following the algal bloom, and also early harvesting due to increased sanitary pressure.
Costs have improved significantly in the first quarter of 2018 compared to the first quarter of 2017 on positive scale effects from higher volumes and a generally reduced cost level in our Chilean operations in the aftermath of the 2016 algal bloom.
Consequently, the biological costs per kg salmon harvested in the quarter decreased by 7% from the comparable quarter. Nonseawater costs also decreased significantly from the first quarter of 2017 due to lower incident based mortality, reduced overhead costs and positive scale effects.
Incident based mortality of EUR 0.1 million was recognized in the quarter (EUR 1.4 million).
Production has been higher in the first quarter of 2018 compared to the first quarter of 2017 due to higher opening biomass.
Sea lice levels at the end of the first quarter have increased compared to last year due to adverse environmental conditions.
Costs are expected to increase in the second quarter of 2018 on lower volumes.
| EUR million | Q1 2018 | Q1 2017 |
|---|---|---|
| Operational EBIT | 6.4 | 0.9 |
| EBIT | 11.3 | 13.4 |
| Harvest volume (GWT) | 1 457 | 633 |
| Operational EBIT per kg (EUR) | 4.37 | 1.48 |
| - of which Markets | 0.00 | 0.00 |
| - of which Consumer Products | 0.30 | 0.17 |
| Price achievement/reference price | na | na |
| Contract share | 84% | 86% |
| Superior share | 93% | 85% |
Operational EBIT amounted to EUR 6.4million in the first quarter (EUR 0.9 million), which was seasonally record high. At EUR 4.37, Operational EBIT per kg was all-time high (EUR 1.48 per kg).
Financial EBIT amounted to EUR 11.3 million (EUR 13.4 million).
The strong earnings in the quarter are explained by improved market conditions for organic salmon, reduced costs and one-offs related to sales of eggs.
The biological costs per kg harvested biomass decreased by 11% compared to the first quarter in 2017.
Harvest volume was 1 457 tonnes gutted weight in the first quarter (633 tonnes). The increase is due to volume carried over from the fourth quarter in order to gain more growth.
Costs are expected to increase in the second quarter of 2018.
| Q1 2018 | Q1 2017 |
|---|---|
| 1.2 | 5.2 |
| 7.2 | 3.2 |
| 1 030 | 1 148 |
| 1.19 | 4.51 |
| 0.71 | 0.00 |
| 0.00 | 0.03 |
| 113% | 99% |
| 0% | 5% |
| 89% | 84% |
Operational EBIT amounted to EUR 1.2 million (EUR 5.2 million), which was EUR 1.19 per kg (EUR 4.51 per kg).
Financial EBIT amounted to EUR 7.2 million (EUR 3.2 million).
The decrease in Operational EBIT compared with the first quarter of 2017 is explained by a combination of lower prices and higher costs.
The volumes were harvested in the two first months of the quarter when prices were lower than in March. This impacted earnings negatively. The biomass harvested in the first quarter had relatively low average weights due to biological challenges, and this also had an adverse impact on achieved prices.
| EUR million | Q1 2018 | Q1 2017 |
|---|---|---|
| 1) Operating revenues |
498.7 | 434.1 |
| Operational EBIT 2) | 20.9 | 12.9 |
| Operational EBIT % | 4.2% | 3.0% |
| EBIT 3) | 21.1 | 12.9 |
| Volume sold (tonnes product weight) | 39 928 | 33 148 |
1) The reporting segment has been changed to include VAP in Asia and Americas. See below. 2) Operational EBIT for salmon in Consumer Products is also included in the results per country of origin.
3) After elimination of unrealized gain/loss on group-internal hedging contracts.
To date, the Consumer Products reporting segment has only included Consumer Products Europe. From the first quarter of 2018, Consumer Products also includes the value-added operations in Asia and Americas. These operations were previously included in the Markets reporting segment. Comparison figures have been re-presented accordingly. Total figures for Sales & Marketing remain unchanged.
Operational EBIT for Consumer Products was EUR 20.9 million (EUR 12.9 million), of which Consumer Products Europe contributed EUR 15.2 million (EUR 10.1 million). The earnings are record high for a first quarter. The Operational EBIT margin was 4.2% (3.0%). Adjusted for trading and bulk activities the Operational EBIT margin was 4.8% (2.9%).
Financial EBIT2) amounted to EUR 21.1 million (EUR 12.9 million).
Consumer Products' operating revenues were EUR 498.7 million (EUR 434.1 million) in the quarter. Average price achieved per sold volume decreased somewhat year-over-year on the back of lower salmon prices.
Total volume sold was 39 928 tonnes product weight (33 148), which is equivalent to an increase of as much as 20.5%.
In Europe, volumes increased for both Fresh and Chilled, with positive developments particularly in the French, German and Eastern European markets. For Fresh, increased volumes, promotions and operational improvements are the main contributors to the positive development in Operational EBIT compared to the first quarter of 2017. In our Chilled operations in Europe, earnings improved on strong volumes and reduced raw material costs. A contributor to the strong results was the Easter holiday. This is a high season for our Chilled products, and last year Easter was in the second quarter.
In Asia, volumes in our value-added operations were stable compared to the first quarter of 2017. Earnings improved compared to the first quarter of 2017 on successful promotions and seasonal sales, and reduced raw material costs.
For Fresh in the Americas, volumes increased after the opening of the Dallas plant and the introduction of our products in several new retailer chains. Earnings in the comparable quarter were impacted by the start-up phase of the Dallas plant. Volumes and earnings for Chilled in the Americas were positively affected by the Lent season and the Easter holiday.
| Consumer Products | Q1 2018 | ||
|---|---|---|---|
| EUR million | Fresh | Chilled | Total |
| Volume sold (tonnes prod wt) | 19 679 | 20 249 | 39 928 |
| Operational revenues | 241.5 | 257.2 | 498.7 |
| Operational EBIT | 12.0 | 8.9 | 20.9 |
| Operational EBIT % | 5.0% | 3.5% | 4.2% |
| Consumer Products | Q1 2017 | ||
|---|---|---|---|
| EUR million | Fresh | Chilled | Total |
| Volume sold (tonnes prod wt) | 17 430 | 15 718 | 33 148 |
| Operational revenues | 221.7 | 212.5 | 434.1 |
| Operational EBIT | 8.0 | 4.9 | 12.9 |
| Operational EBIT % | 3.6% | 2.3% | 3.0% |
| Consumer Products | Q1 2018 | |||
|---|---|---|---|---|
| EUR million | Europe | Americas | Asia | Total |
| Volume sold (tonnes prod wt) | 34 360 | 2 911 | 2 657 | 39 928 |
| Operational revenues | 419.0 | 42.3 | 37.4 | 498.7 |
| Operational EBIT | 15.2 | 3.3 | 2.4 | 20.9 |
| Operational EBIT % | 3.6% | 7.7% | 6.6% | 4.2% |
| Consumer Products | Q1 2017 | |||
|---|---|---|---|---|
| EUR million | Europe | Americas | Asia | Total |
| Volume sold (tonnes prod wt) | 28 281 | 2 018 | 2 849 | 33 148 |
| Operational revenues | 356.8 | 35.1 | 42.2 | 434.1 |
| Operational EBIT | 10.0 | 0.8 | 2.2 | 12.9 |
| Operational EBIT % | 2.8% | 2.2% | 5.1% | 3.0% |
| EUR million | Q1 2018 | Q1 2017 |
|---|---|---|
| Operating revenues | 61.6 | 63.6 |
| Operational EBIT | -4.3 | 0.1 |
| Operational EBIT % | -6.9% | 0.2% |
| EBIT | -4.2 | 1.5 |
| Feed sold volume | 54 440 | 49 042 |
| Feed produced volume | 72 224 | 51 699 |
Operational EBIT for Feed is also included in the results per country of origin (currently only Norway).
Operational EBIT was EUR -4.3 million (EUR 0.1 million) in the first quarter of 2018. The first quarter is traditionally a low season for our feed operations. Furthermore, Operational EBIT was adversely impacted by the construction phase of the new feed plant in Scotland.
Financial EBIT amounted to EUR -4.2 million (EUR 1.5 million).
Operating revenues were EUR 61.6 million in the first quarter (EUR 63.6 million). Prices were significantly lower than in the first quarter of 2017, although improved from the end of 2017. Feed prices are set at market terms and benchmarked against third parties. As the largest buyer of salmon feed globally, we are able to efficiently benchmark our own feed prices against third party suppliers.
Volumes sold in the first quarter were 54 440 tonnes, compared to 49 042 tonnes in the first quarter of 2017. This accounted for 90% of total feed delivered to our Norwegian farming operations, compared to 91% in the first quarter of 2017. In order to prepare for the peak season, produced volume exceeded sold volume in the quarter.
The price reduction from the comparable quarter has more than offset the effect of somewhat lower costs. In addition, Operational EBIT was negatively impacted by the construction phase of the new feed plant in Scotland.
We continue to develop our range of products to reduce the dependency on third party feed purchases.
Construction of our new feed plant in Scotland is on-going, and the plant is scheduled to be completed in the latter part of the fourth quarter of 2018 after some delays due to construction permissions now in place.
Our operations and long-term profitability ultimately depend on sustainable and environmentally responsible interactions with the natural environment. We rely on qualified personnel to maintain fish health, avoid escapes and minimize the environmental impact of our operations.
Marine Harvest has a target of zero fish escapes and is constantly striving to prevent escapes and improve methods, equipment and procedures that can minimize or eliminate escapes. Unfortunately, there were 2 escape incidents in the first quarter; 1 in Norway with 54 000 escaped fish and and 1 in Scotland with 12 escaped fish. In the first quarter of 2017, there were 2 escape incidents; 1 in Norway with 1 escaped fish and 1 in Canada with 2 escaped fish.
Pancreas Disease (PD): 8 new sites were diagnosed with PD in the first quarter; 6 in Norway and 2 in Ireland. In the first quarter of 2017, 3 new sites were diagnosed with PD.
Amoebic Gill Disease (AGD): High presence of a microscopic amoeba named Paramoeba perurans can cause AGD, with elevated mortality and reduced performance. Since 2013, the amoeba has also been found in Norway. The presence of the amoeba increases with higher seawater temperatures. Treatments were carried out in several of our farming entities. Marine Harvest's fish health teams and seawater production departments take immediate action when AGD appears.
Infectious Salmon Anaemia (ISA): No new sites were diagnosed with ISA in the first quarter of 2018 or 2017. Our monitoring and surveillance continues and we maintain strict measures to immediately harvest out sites with ISA according to regulatory requirements.
Pasteurella skyensis: This is a bacteria that can cause mortality in Atlantic salmon. It was first identified around the mid-1990s, localized around the Isle of Skye in Scotland, and has historically also been reported in Norway in lumpsuckers. The bacteria is causing disease primarily in the period April-October, but has also caused mortality in our Scottish farming operations in the first quarter. There is no vaccine and control is achieved by use of licensed antibiotics and increased biosecurity.
Marine Harvest actively works to reduce the sea lice load in all farming units. Except for Chile and Scotland, all entities reported lower sea lice levels at the end of the first quarter of 2018 compared to the end of the first quarter of 2017.
In Norway and Scotland, the share of fish undergone medicinal treatments against sea lice decreased in the first quarter of 2018 compared with the first quarter of 2017, while it increased in Chile and was stable in Canada. The capacity of non-medicinal solutions has increased in the operating units, reducing the overall dependency on medicinal treatments. Extensive development and testing of non-medicinal tools and methods continues in collaboration between Marine Harvest's Global R&D and Technical department and operating units.
SRS (Salmonid Rickettsial Septicaemia) is still a concern for salmon farming in Chile. SRS is caused by an intracellular bacterium which occurs mainly in Chile. SRS is treated using licensed antibiotics. In the first quarter, treatment was carried out at several sites in Chile. Mortality caused by SRS is still a major challenge in Chilean salmon farming. Reported mortality due to SRS in the first quarter was at a lower level than in the comparable quarter last year. Marine Harvest continues to assess the effect of a new SRS vaccine under commercial conditions.
Marine Harvest focuses on preventing the development and spread of infectious diseases. If fish get infected, they are treated with approved medicines. In the first quarter, our use of antibiotics was 81.3 grams per ton biomass produced, which is an increase from the first quarter of 2017. 73.3 grams are related to our Chilean farming operations (68.5 grams in the first quarter of 2017), and treatment of SRS in Chile remains our primary reason for the use of antibiotics.
As of the close of the first quarter of 2018 we had 70 sites certified (47 in Norway, 17 in Canada, 4 in Ireland, 1 in Scotland and 1 in Faroes).
Several additional sites have been audited and are expected to be certified in 2018. Marine Harvest is taking the lead in ASC implementation and we are committed to demonstrate an environmentally responsible development in our organization.
For further information regarding sustainability and biological risk management, reference is made to the Annual Report.
| GUIDING PRINCIPLE - ISSUE | AMBITION | Q1 2018 Achievement |
|---|---|---|
| Ensure sustainable wild-farmed interaction in the farming activity |
Zero escapes | Two escape incidents and 54 012 fish lost (two incidents with 3 fish lost in the first quarter of 2017) |
| Ensure healthy stocks minimizing diseases and losses in the farming activities |
Monthly survival rate of at least 99.5% within 2020 |
Average monthly survival rate in the quarter of 98.8% (99.0% in the first quarter of 2017) |
The safety, self-respect and personal pride of our employees cannot be compromised if Marine Harvest is to succeed as a company and maintain good relationships with local communities.
In the first quarter, the Group recorded 30 Lost Time Incidents (LTIs), which is a decrease from 36 in the first quarter of 2017. Measured in LTIs per million hours worked (rolling average), the figure has improved to 6.22 from 9.08 in the comparable quarter of 2017.
Absenteeism has also decreased to 5.2% from 5.8% in the same quarter of 2017.
The number of LTIs at Morpol has dropped by 50% in the last year. Morpol has increased its focus on safety over the last years. Their safety program includes an LTI elimination program, which includes new employee safety equipment and an in-house doctor.
| GUIDING PRINCIPLE - ISSUE | AMBITION | Q1 2018 Achievement |
|---|---|---|
| Safe jobs | No lost time incidents (LTI) | LTIs per million hours worked was 6.22. Programs are in place to reduce the number. |
| Healthy working environment | Absenteeism < 4% | Absenteeism of 5.2% in the quarter. |
We aim to continually deliver healthy, tasty and responsibly produced seafood to our customers to deliver long-term financial profitability.
New Fish & Chips concepts have been launched in the German and Norwegian markets, with breaded fish from Marine Harvest Sterk. Thanks to a sophisticated coating process, the breaded fillets are suitable to be sold in MAP packaging from the chilled fish shelves in the supermarket.
In order to highlight Marine Harvest Sterk's strong coating capabilities and the wide and attractive range of fish products they offer, a new web site has been launched at marineharveststerk.com. Marine Harvest Sterk offers a wide range of coated fish products which are either sold as premium frozen products or in MAP packaging. Thanks to this process the products keep their high scores on both food safety and sensory quality during the full length of its shelf life.
We are proud to announce that Marine Harvest Pieters's Hot Smoked Salmon was selected by an expert jury of HoReCa trade media as one of the nominees for the Food category in the Innovation Awards 2018 for the Belgian market. This demonstrates the quality of this popular product from our Marine Harvest Pieters plant.
| TASTY AND HEALTHY SEAFOOD PROVIDING CUSTOMER VALL |
|---|
| PRODUCT |
| GUIDING PRINCIPLE - ISSUE | AMBITION | Q1 2018 Achievement |
|---|---|---|
| Food quality and safety | Supply seafood with valuable health benefits for its quality and documented safety |
Health targets met |
| Product innovation | Marine Harvest wants to play an important role in the design and use of products to satisfy customer needs. |
Continuous effort with existing brands |
The amended fish farming regulations in Norway have given farmers in green production areas the opportunity to buy growth on existing licenses. Marine Harvest Norway's investment in the 2% fixed price part of the growth was described in the report for the fourth quarter. The remaining 4% growth will be sold through an auction process, as further described in a hearing consultation paper published by the Ministry. The Ministry has suggested an open, simultaneous auction process where prices and winners in each production area are decided through several rounds. The deadline for hearing responses expired on 18 April 2018 and we are currently awaiting further information from the Ministry.
As described in the report for the fourth quarter, the transaction is subject to approval by relevant competition authorities and customary closing conditions. In the beginning of May 2018, Marine Harvest and Northern Harvest submitted the information requested in the Secondary Information Request (SIR) by Canadian competition authorities. We are currently awaiting further information.
Status for the different concepts:
In February, Marine Harvest received planning permission for a new site off the north-east coast of the Isle of Rum, with a maximum standing biomass of 2 500 tonnes. This is the first new site in Marine Harvest Scotland since 2014.
DESS Aquaculture Shipping, the joint venture between Marine Harvest and SolstadFarstad, has entered into newbuilding contracts for two new wellboats and three service vessels in the quarter. The wellboats are expected to be delivered in the first half of 2020, and are sister vessels of those already under construction. The service vessels are expected to be delivered during the first half of 2019. All vessels have entered into long term contracts with Marine Harvest. With these new contracts, DESS Aquaculture Shipping has a total of ten vessels under construction: Six wellboats, one harvest vessel and three service vessels. The company has options for two additional wellboats.
In the first quarter of 2018, Marine Harvest increased its investment in DESS Aquaculture Shipping with EUR 10.5 million. Marine Harvest's total investments in the joint venture amounts to EUR 23.8 million.
Marine Harvest Norway has received permission to build a new smolt facility at Sandøra in Region North with an annual production capacity of approximately 1 800 tonnes. The building process is expected to commence in 2018, with estimated time of completion in 2020. The new smolt facility will replace the existing facility at Storbukt.
Marine Harvest plans to open a new plant in Shanghai, China, in 2018. The background for this is the re-opening of the Chinese market to Norwegian salmon producers. The Shanghai plant will come in addition to Marine Harvest's six existing plants in Asia: One in Taiwan, three in Japan, one in South Korea and one in Vietnam.
In the third quarter of 2018, Marine Harvest Sweden will open a new facility for production of fresh skin-packed products in Glommen. Glommen is located on the west coast of Sweden, close to several large Scandinavian cities.
Marine Harvest USA has signed a lease of a 9 800 m 2 plant in Medley, Florida, close to the international airport. The new plant will be more than twice as large as the current site, and will house both processing and distribution activities. The annual capacity of the new plant will be approximately 28 000 tonnes. Construction work to prepare the new site is scheduled for completion before the end of 2018.
On 4 May, Marine Harvest arranged its first Global Cleanup Day, where employees across the world joined in a common effort to clean local beaches. Plastic pollution has become one of the largest environmental problems we face today. Huge amounts of plastic waste are released to the oceans every day, impacting our waters and marine life. Marine Harvest depends on a healthy ocean. We will therefore do our part to reduce the use of plastic and make sure that our sites are clean. In 2018, Marine Harvest will be engaged in a number of different projects and initiatives related to plastic use and waste. First of these was the Global Cleanup Day.
Institutional Investor recently published its 2018 All-Europe Executive Team winners. Marine Harvest was amongst some companies being distinguished as "Most Honored" for its "corporate leadership and investor relations expertise". Marine Harvest received several awards and top rankings within the "Consumer: Food Producers" sector, both in the full sector ranking and the mid/small cap ranking.
On 12 March 2018, Marine Harvest repaid the NOK 1 250 million unsecured bond loan, issued in March 2013. The bond was repaid according to terms and has been delisted from the Oslo Stock Exchange.
Marine Harvest published its Annual Report for 2017 on 20 March 2018. Please refer to our web site at marineharvest.com for details.
The Board of Directors has decided to pay out a quarterly dividend of NOK 2.60 per share to the shareholders as ordinary dividends.
The results in the first quarter were encouraging and better than expected. Salmon prices increased in all markets compared to the levels seen towards the end of 2017. The recent positive demand response in several markets reminds us of the megatrends which supports the long-term outlook of increased salmon consumption. The overall result in the farming business unit was good and represents the majority of earnings in the group. Consumer Products had also a good quarter supported by continued operational improvements and Easter sales. Feed had a seasonal slow quarter and performance was therefore lower than in previous quarters.
The previously announced global cost savings program of EUR 50 million p.a. is well under way. The Board is impressed by the execution of the cost savings program to date.
Results in Farming Norway were good in the quarter. Despite reduced spot prices in the quarter compared to the same quarter last year, prices continued to rise from year-end 2017 levels. The Board is pleased with the reduced production cost for farming in the quarter. Lower feed costs and health costs are the main reasons for the cost reduction. Sea lice mitigation costs are still high in a historical context, however, they were the lowest since the first quarter of 2016. The company's strategy of focusing on nonmedicinal treatments continue, and the mix of farming sites treated with a combination of cleaner fish and mechanical solutions have reached a new high in 2018.
The winter in Norway has been unusually cold and sea water temperatures have been low. On an industry level, feed consumption and biomass growth have therefore been lower than expected. The biomass at year-end was up 10% year-over-year, however, in recent months it has gradually declined and by the end of March it was up by only 6% year-over-year. This will have an impact on industry harvest volumes in the periods to come. The harvest weights continue to recover in Norway which is positive from a biological point of view.
Notwithstanding Norway's natural comparative advantage in salmon farming the region has seen almost doubled cost over the past six years. Salmon farming is a global industry with increased geographical competition. In the wake of the aforementioned cost increases land based farming projects are now emerging in the US and Asia. Any uncertainty or increase in the total tax burden for Norwegian salmon will further increase the total cost and reduce Norway's competitiveness on the global scene accordingly. Hence, the Board strongly encourages the Norwegian government to evaluate the total burden of taxes and fees levied on the Norwegian salmon farming industry in the light of the global competitive situation.
Biology in Scotland continues to be challenging, however, the results in the quarter were satisfactory supported by good contract prices. The price achievement was significantly above the reference price, and the Board is pleased that the sales contracts contribute positively.
The Irish business entity had another great quarter. In the past twelve months, Marine Harvest Ireland, including contributions through the value chain, delivered an operational EBIT in excess of EUR 35 million on harvest volumes of ca 10,000 GWT of organic salmon. This is truly impressive and demonstrates the sound operations in Ireland and uniqueness of organic salmon.
Marine Harvest Faroes harvested low volumes in the quarter due to phasing and site structure, and is expected to harvest significantly more from summer onwards.
Results in Farming Chile were impacted by the lower salmon prices compared to last year, however, this was more than offset by higher volumes and generally lower cost. The Board expects costs to increase in the second quarter due to lower harvest volumes.
The results from our Canadian farming entity were impacted by lower salmon prices and higher costs. Last year Marine Harvest Canada recorded great results and second only to Marine Harvest Faroes, however, now they had the lowest contribution to the Group results on an EBIT/kg basis. Environmental circumstances were increasingly challenging in the second half of 2017, with frequent algal blooms, large amounts of jelly fish and low concentrations of dissolved oxygen at many sites, causing fish losses and reduced growth. This reduced fish size and harvest volumes in Q1 2018 and significantly increased cost-to-stock. The Board expects costs to remain elevated in the short-term.
Operational performance in Feed was seasonally low in the quarter. Feed production will increase going forward to satisfy increased feed demand. Construction of our new feed plant in Scotland is slightly delayed due to construction permissions now in place. The plant is expected to commence production during Q4 2018.
The Consumer Products operations continue to impress and delivered record high first quarter results. Operational improvements across many factories continue, and Easter sales facilitated a strong end to the quarter. 20.5% volume growth yearover-year is inspiring and shows the strong demand for value-added products. The volume growth would not have been possible if it had not been for Marine Harvest's downstream focus and Consumer Products led strategy. Marine Harvest owns and operates 27 value-added factories globally, and this will be further expanded in the periods to come. A new plant in Shanghai in China is planned for and is expected to open in 2018. The background for this is the re-opening of the Chinese market to Norwegian salmon producers. In addition, a new plant in Sweden, which will produce fresh skin-packed products, is expected to open in the third quarter 2018.
The consumption growth of salmon globally was strong in the period. Following the positive developments noted previously about China, the Board is encouraged that the Chinese consumption of salmon follows a trajectory of strong growth. In many other parts of Asia salmon consumption continue to grow by double digits. Buyers of fresh salmon in the EU, led by the major French, German and UK markets, have responded very well in recent quarters. Many market participants have been surprised by the positive demand response at reduced prices, and this has provided comfort from a pricing point of view. Although not all product categories, including chilled/smoked, in Europe have experienced reduced retail prices yet, promotional campaigns on the fresh side have been reinitiated in a forceful way.
On the back of the reduced biomass in Norway and Chile, Kontali Analyse expects supply growth for 2018 to increase by 4%, which is down from 6% previously. The 12-month forward Nasdaq price is EUR 6.4 per kg, up from EUR 5.5 per kg since February 2018.
A quarterly dividend of NOK 2.60 per share will be paid as ordinary dividends.
Please refer to Highlights from the first quarter of 2018 (page 2).
Marine Harvest has not identified any additional risk exposure beyond the risks described in note 3 of this report and the 2017 Annual Report.
Reference is also made to the Planet section and the Outlook section of this report for other comments to Marine Harvest's risk exposure.
Bergen, May 8, 2018 The Board of Directors of Marine Harvest ASA
| Ole-Eirik Lerøy CHAIRMAN OF THE BOARD |
Lisbet K. Nærø DEPUTY CHAIR OF THE BOARD |
Cecilie Fredriksen | Paul Mulligan |
|---|---|---|---|
| Jean-Pierre Bienfait | Birgitte Ringstad Vartdal | Kristian Melhuus | |
| Lars Eirik Hestnes | Unni Sværen | Yngve Magnussen | Alf-Helge Aarskog CHIEF EXECUTIVE OFFICER |
| Unaudited, in EUR million | Note | Q1 2018 | Q1 2017 | 2017 |
|---|---|---|---|---|
| Revenue | 4, 5 | 862.4 | 893.7 | 3 649.4 |
| Cost of materials | -406.0 | -406.6 | -1 688.5 | |
| Net fair value adjustment biomass | 6 | 94.5 | -215.7 | -340.3 |
| Salaries and personnel expenses | -122.9 | -114.8 | -477.9 | |
| Other operating expenses | -128.0 | -123.6 | -555.0 | |
| Depreciation and amortization | -37.3 | -37.0 | -150.4 | |
| Onerous contract provisions | -5.1 | 93.2 | 119.8 | |
| Restructuring cost | -0.9 | -0.2 | -2.5 | |
| Other non-operational items | 0.1 | 0.0 | 0.3 | |
| Income from associated companies and joint ventures | 12.6 | -0.1 | 33.7 | |
| Impairment losses | 0.1 | -0.6 | -103.8 | |
| Earnings before financial items (EBIT) | 269.6 | 88.3 | 484.9 | |
| Interest expenses | 8 | -10.3 | -11.9 | -46.7 |
| Net currency effects | 8 | 4.1 | 1.1 | -8.8 |
| Other financial items | 8 | -31.5 | 147.3 | 93.2 |
| Earnings before tax | 231.8 | 224.8 | 522.6 | |
| Income taxes | -52.8 | -12.4 | -59.9 | |
| Profit or loss for the period | 179.1 | 212.4 | 462.7 | |
| Other comprehensive income | ||||
| Currency translation differences | -20.9 | -14.0 | -192.6 | |
| Currency translation associated companies | 2.0 | -1.4 | -12.1 | |
| Items to be reclassified to P&L in subsequent periods: | -18.9 | -15.4 | -204.7 | |
| Actuarial gains (losses) on defined benefit plans, net of tax | 0.0 | 0.0 | 5.3 | |
| Other gains and losses in comprehensive income | 0.0 | 0.0 | -0.8 | |
| Items not to be reclassified to profit and loss: | 0.0 | 0.0 | 4.5 | |
| Other comprehensive income, net of tax | -18.9 | -15.4 | -200.3 | |
| Total comprehensive income in the period | 160.2 | 197.0 | 262.4 | |
| Profit or loss for the period attributable to | ||||
| Non-controlling interests | 0.2 | 0.3 | 0.3 | |
| Owners of Marine Harvest ASA | 178.8 | 212.1 | 462.5 | |
| Comprehensive income for the period attributable to | ||||
| Non-controlling interests | 0.2 | 0.3 | 0.3 | |
| Owners of Marine Harvest ASA | 159.9 | 196.7 | 262.2 | |
| Basic earnings per share (EUR) | 9 | 0.36 | 0.47 | 0.97 |
| Diluted earnings per share (EUR) | 9 | 0.36 | 0.23 | 0.86 |
| Dividend declared and paid per share (NOK) | 2.60 | 2.80 | 12.40 |
| Unaudited, in EUR million | Note | 31.03.2018 | 31.12.2017 | 31.03.2017 |
|---|---|---|---|---|
| ASSETS | ||||
| Licenses | 627.0 | 615.2 | 763.3 | |
| Goodwill | 255.4 | 255.7 | 267.0 | |
| Deferred tax assets | 10.8 | 13.1 | 6.7 | |
| Other intangible assets | 25.5 | 26.1 | 31.5 | |
| Property, plant and equipment | 1 086.9 | 1 082.7 | 1 037.2 | |
| Investments in associated companies and joint ventures |
193.5 | 170.7 | 174.1 | |
| Other shares and other non-current assets | 3.3 | 3.3 | 3.6 | |
| Total non-current assets | 2 202.3 | 2 166.7 | 2 283.5 | |
| Inventory | 327.7 | 306.9 | 244.9 | |
| Biological assets | 6 | 1 287.5 | 1 200.5 | 1 352.5 |
| Current receivables | 510.1 | 583.9 | 516.3 | |
| Cash | 88.4 | 71.7 | 92.8 | |
| Total current assets | 2 213.6 | 2 163.0 | 2 206.5 | |
| Asset held for sale | 0.0 | 0.5 | 1.1 | |
| Total assets | 4 415.9 | 4 330.3 | 4 491.0 | |
| Equity | 2 342.4 | 2 314.2 | 2 151.4 |
|---|---|---|---|
| Non-controlling interests | 1.4 | 1.2 | 1.2 |
| Total equity | 2 343.8 | 2 315.4 | 2 152.6 |
| Deferred tax liabilities | 368.9 | 353.9 | 413.1 |
| Non-current interest-bearing debt | 943.7 | 773.3 | 798.8 |
| Other non-current liabilities | 123.4 | 87.9 | 291.2 |
| Total non-current liabilities | 1 436.0 | 1 215.2 | 1 503.0 |
| Current interest-bearing debt | 1.2 | 130.3 | 136.0 |
| Other current liabilities | 634.9 | 669.3 | 699.5 |
| Total current liabilities | 636.1 | 799.6 | 835.5 |
| Total equity and liabilities | 4 415.9 | 4 330.3 | 4 491.0 |
| 2018 | Attributable to owners of Marine Harvest ASA | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Unaudited, in EUR million | Share capital |
Other paid in capital |
Shared based payment |
Foreign currency translation reserve |
Foreign currency translation reserve associated companies |
Other equity reserves |
Total | Non controlling interests |
Total equity |
| Equity 01.01.2018 | 383.8 | 931.5 | 5.4 | 51.3 | -5.2 | 947.3 | 2 314.2 | 1.2 | 2 315.4 |
| Comprehensive income | |||||||||
| Profit | 178.8 | 178.8 | 0.2 | 179.0 | |||||
| Other comprehensive income | -14.7 | 2.0 | -6.2 | -18.9 | -18.9 | ||||
| Transactions with owners | |||||||||
| Share based payment | 0.7 | 0.7 | 0.7 | ||||||
| Dividend | -132.5 | -132.5 | -132.5 | ||||||
| Total equity end of period | 383.8 | 931.5 | 6.1 | 36.6 | -3.2 | 987.4 | 2 342.4 | 1.4 | 2 343.8 |
| 2017 | Attributable to owners of Marine Harvest ASA | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Unaudited, in EUR million | Share capital |
Other paid in capital |
Shared based payment |
Foreign currency translation reserve |
Foreign currency translation reserve associated companies |
Other equity reserves |
Total | Non controlling interests |
Total equity |
| Equity 01.01.2017 | 351.8 | 657.5 | 4.6 | 209.8 | 6.9 | 837.7 | 2 068.4 | 0.9 | 2 069.3 |
| Comprehensive income | |||||||||
| Profit | 462.5 | 462.5 | 0.3 | 462.8 | |||||
| Other comprehensive income | -158.5 | -12.1 | -29.6 | -200.3 | -200.3 | ||||
| Transactions with owners | |||||||||
| Share based payment | 0.8 | -5.5 | -4.7 | -4.7 | |||||
| Bond conversion | 32.0 | 596.5 | 628.5 | 628.5 | |||||
| Repayment of paid in capital | -322.5 | -317.8 | -640.3 | -640.3 | |||||
| Total equity 31.12.2017 | 383.8 | 931.5 | 5.4 | 51.3 | -5.2 | 947.3 | 2 314.2 | 1.2 | 2 315.4 |
| Unaudited, in EUR million | Q1 2018 | Q1 2017 | 2017 |
|---|---|---|---|
| Earnings before taxes (EBT) | 231.8 | 224.8 | 522.6 |
| Interest expense | 10.3 | 11.9 | 46.7 |
| Currency effects | -4.1 | -1.1 | 8.8 |
| Other financial items | 31.5 | -147.3 | -93.2 |
| Net fair value adjustment and onerous contracts | -89.3 | 122.5 | 220.5 |
| Income/loss from associated companies | -12.6 | 0.1 | -33.7 |
| Depreciation and impairment losses | 37.2 | 37.6 | 254.2 |
| Change in working capital | 38.5 | 59.6 | -114.6 |
| Taxes paid | -50.5 | -59.7 | -177.4 |
| Restructuring and other non-operational items | -0.9 | 1.2 | 1.4 |
| Other adjustments | -0.2 | -1.8 | -2.8 |
| Cash flow from operations | 191.8 | 247.8 | 632.4 |
| Proceeds from sale of fixed assets | 2.0 | 0.0 | 6.2 |
| Payments made for purchase of fixed assets | -78.6 | -57.0 | -254.9 |
| Proceeds from associates and other investments | 1.8 | 2.1 | 34.7 |
| Purchase of shares and other investments | -10.5 | -12.1 | -20.7 |
| Cash flow from investments | -85.4 | -67.0 | -234.7 |
| Proceeds from new interest-bearing debt | 37.9 | 0.0 | 308.2 |
| Down payment of interest-bearing debt | 0.0 | -42.0 | -42.0 |
| Net interest and financial items paid | -6.9 | -4.7 | -27.5 |
| Realized currency effects | 4.0 | -2.2 | -17.1 |
| Dividend paid to owners of Marine Harvest ASA | -132.5 | 0.0 | 0.0 |
| Repayment of paid in capital | 0.0 | -142.8 | -640.3 |
| Other financing items | 0.0 | 0.0 | -6.7 |
| Cash flow from financing | -97.5 | -191.7 | -425.5 |
| Change in cash in the period | 8.9 | -11.0 | -27.8 |
| Cash - opening balance 1) | 59.1 | 88.0 | 88.0 |
| Currency effects on cash - opening balance | -0.8 | 0.2 | -1.1 |
| Cash - closing balance 1) | 67.2 | 77.2 | 59.1 |
1) Excluded restricted cash
Marine Harvest (the Group) consists of Marine Harvest ASA and its subsidiaries, including the Group's interests in associated companies.
These interim financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) and as adopted by the European Union (EU). The interim financial statements do not include all of the information and disclosures required by International Financial Reporting Standards (IFRSs) for a complete set of financial statements, and these interim financial statements should be read in conjunction with the annual financial statements. The interim report is unaudited.
All significant accounting principles applied in the consolidated financial statements are described in the Annual Report for 2017 (as published on the Oslo Stock Exchange on March 20, 2018).
Two new accounting standards have been implemented with effect from 1 January 2018:
Significant fair value measurements in accordance with IFRS 13:
Biological assets are, in accordance with IAS 41, measured at fair value, unless the fair value cannot be measured reliably. Broodstock and smolt are measured at cost less impairment losses, as the fair value cannot be measured reliably. Fair value of biological assets is calculated based on a cash flow-based present value model, which does not rely on historical cost. Cash inflows are calculated as functions of estimated volume multiplied with estimated price. Fish ready for harvest (mature fish) is valued at expected sales price with a deduction of cost related to harvest, transport etc. Sales costs are not deducted. For fish not ready for harvest (immature fish), the model uses an interpolation methodology where the known data points are the value of the fish when put to sea and when recognized as mature fish.
In accordance with IAS 41.16, a provision for onerous contracts is recorded by assessing if there are contracts in which the unavoidable costs of meeting the Group's obligations under the contract (where fair value adjustment of biological assets is included in the unavoidable costs) exceed the economic benefits expected to be received.
Derivative financial instruments (including interest swaps, currency swaps and salmon derivatives) are valued at fair value on Level 2 of the fair value hierarchy, in which the fair value is calculated by comparing the terms agreed under each derivative contract to the market terms for a similar contract on the valuation date.
The conversion liability component is, subsequent to initial recognition, measured at fair value. The measurement is categorized into Level 2 in the fair value hierarchy, using a valuation technique based on observable data.
The preparation of financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting principles and recognized amounts of assets, liabilities, income and expenses. The most significant estimates relate to the valuation of biological assets and intangible assets. Estimates and underlying assumptions are reviewed on an ongoing basis, and are based on the management's best assessment at the time of reporting. All changes in estimates are reflected in the financial statements as they occur.
Marine Harvest is exposed to a number of risk factors: Operational risks, strategic risk, reporting risk and compliance risk. The Risk Management section in the Annual Report contains a detailed description of risks and mitigation actions.
For management purposes, Marine Harvest is organized into three Business Areas: Feed, Farming and Sales and Marketing. Feed and Farming are separate reportable segments. Sales and Marketing is divided in two reportable segments, Markets and Consumer Products.
The performance of the segments is monitored to reach the overall objective of maximizing the Operational EBIT per kg. Consequently, reporting is focused towards measuring and illustrating the overall profitability of harvested volume based on source of origin (Operational EBIT/kg).
The same accounting principles as described for the Group financial statements have been applied for the segment reporting. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions, and the measurement used in the segment reporting is the same as used for the actual transactions.
Unrealized internal margin from sale of fish feed from Feed to Farming is eliminated in the Group financial statements until the fish that consumed the feed is sold. In the segment reporting the internal profit is included for Business Area Feed.
| BUSINESS AREAS | Feed | Farming | Sales and Marketing | Eliminations | TOTAL | ||
|---|---|---|---|---|---|---|---|
| EUR million | Markets 1) | Consumer Products 1) |
|||||
| Q1 2018 | |||||||
| External revenue | 1.2 | 22.9 | 349.5 | 488.5 | 0.0 | 0.0 | 862.1 |
| Internal revenue | 60.4 | 469.4 | 154.1 | 10.2 | 4.4 | -698.4 | 0.0 |
| Operational revenue | 61.6 | 492.4 | 503.6 | 498.7 | 4.4 | -698.4 | 862.1 |
| Gain/loss from derivatives | 0.0 | 0.0 | -2.5 | 2.7 | 0.0 | 0.2 | 0.3 |
| Revenue in profit and loss | 61.6 | 492.4 | 501.0 | 501.3 | 4.4 | -698.2 | 862.4 |
| Operational EBITDA | -2.4 | 164.6 | 10.2 | 27.3 | -4.9 | 0.0 | 194.8 |
| Operational EBIT | -4.3 | 136.5 | 10.1 | 20.9 | -5.7 | 0.0 | 157.6 |
| Change in unrealized internal margin | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 4.4 | 4.4 |
| Gain/loss from derivatives | 0.0 | -7.1 | -2.5 | 9.9 | 6.1 | 0.0 | 6.3 |
| Net fair value adjustment on biological assets | 0.1 | 94.4 | 0.0 | 0.0 | 0.0 | 0.0 | 94.5 |
| Onerous contract provisions | 0.0 | -5.1 | 0.0 | 0.0 | 0.0 | 0.0 | -5.1 |
| Restructuring cost | 0.0 | -0.9 | 0.0 | 0.0 | 0.0 | 0.0 | -0.9 |
| Other non-operational items | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.1 |
| Income from associated companies and joint ventures | 0.0 | 12.7 | 0.0 | 0.0 | -0.1 | 0.0 | 12.6 |
| Impairment losses and write-downs | 0.0 | 0.0 | 0.0 | 0.1 | 0.0 | 0.0 | 0.1 |
| EBIT | -4.2 | 230.5 | 7.6 | 31.0 | 0.3 | 4.4 | 269.6 |
| Q1 2017 | |||||||
| External revenue | 5.0 | 7.6 | 449.8 | 429.5 | 0.0 | 0.0 | 892.0 |
| Internal revenue | 58.5 | 564.3 | 155.9 | 4.6 | 5.2 | -788.6 | 0.0 |
| Operational revenue | 63.6 | 571.9 | 605.7 | 434.1 | 5.2 | -788.6 | 892.0 |
| Gain/loss from derivatives | 0.0 | 39.4 | 0.4 | 0.0 | 1.6 | -39.7 | 1.7 |
| Revenue in profit and loss | 63.6 | 611.3 | 606.0 | 434.1 | 6.8 | -828.2 | 893.7 |
| Operational EBITDA | 2.0 | 232.2 | 10.1 | 19.6 | -7.1 | 0.0 | 256.8 |
| Operational EBIT | 0.1 | 204.7 | 10.0 | 12.9 | -8.0 | 0.0 | 219.8 |
| Change in unrealized internal margin | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -1.8 | -1.8 |
| Gain/loss from derivatives | 0.0 | 39.7 | 0.4 | -39.9 | -6.4 | 0.0 | -6.3 |
| Net fair value adjustment on biological assets | 1.4 | -217.1 | 0.0 | 0.0 | 0.0 | 0.0 | -215.7 |
| Onerous contract provisions | 0.0 | 93.2 | 0.0 | 0.0 | 0.0 | 0.0 | 93.2 |
| Restructuring cost | 0.0 | 0.0 | -0.1 | 0.0 | -0.1 | 0.0 | -0.2 |
| Other non-operational items | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Income from associated companies and joint ventures | 0.0 | 0.0 | 0.0 | 0.0 | -0.1 | 0.0 | -0.1 |
| Impairment losses and write-downs | 0.0 | -0.6 | 0.0 | 0.0 | 0.0 | 0.0 | -0.6 |
| EBIT | 1.5 | 120.0 | 10.3 | -27.0 | -14.6 | -1.8 | 88.3 |
| BUSINESS AREAS | Feed | Farming | Sales and Marketing | Eliminations | TOTAL | ||
|---|---|---|---|---|---|---|---|
| EUR million | Markets 1) | Consumer Products 1) |
|||||
| 2017 | |||||||
| External revenue | 20.3 | 80.2 | 1 671.0 | 1 882.3 | 0.0 | 0.0 | 3 653.8 |
| Internal revenue | 333.5 | 2 234.4 | 649.9 | 34.8 | 22.8 | -3 275.4 | 0.0 |
| Operational revenue | 353.8 | 2 314.6 | 2 320.9 | 1 917.1 | 22.8 | -3 275.4 | 3 653.8 |
| Gain/loss from derivatives | 0.0 | 57.7 | -5.7 | 0.0 | 4.0 | -60.5 | -4.4 |
| Revenue in profit and loss | 353.8 | 2 372.3 | 2 315.2 | 1 917.1 | 26.9 | -3 335.9 | 3 649.4 |
| Operational EBITDA | 16.3 | 772.5 | 59.5 | 102.4 | -8.3 | 0.0 | 942.5 |
| Operational EBIT | 8.5 | 660.5 | 59.0 | 75.9 | -11.8 | 0.0 | 792.1 |
| Change in unrealized internal margin | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 5.7 | 5.7 |
| Gain/loss from derivatives | 0.0 | 57.9 | -5.7 | -60.8 | -11.6 | 0.0 | -20.2 |
| Net fair value adjustment on biological assets | 1.1 | -341.4 | 0.0 | 0.0 | 0.0 | 0.0 | -340.3 |
| Onerous contract provisions | 0.0 | 119.8 | 0.0 | 0.0 | 0.0 | 0.0 | 119.8 |
| Restructuring cost | 0.0 | -0.8 | -0.1 | -1.4 | -0.2 | 0.0 | -2.5 |
| Other non-operational items | 0.0 | 0.3 | 0.0 | -0.1 | 0.0 | 0.0 | 0.3 |
| Income from associated companies and joint ventures | 0.0 | 34.2 | 0.0 | 0.0 | -0.5 | 0.0 | 33.7 |
| Impairment losses and write-downs | 0.0 | -103.1 | -0.2 | 0.1 | -0.5 | 0.0 | -103.8 |
| EBIT | 9.6 | 427.4 | 52.9 | 13.8 | -24.5 | 5.7 | 484.9 |
1) Until the first quarter of 2018 the Consumer Products reporting segment consisted of Consumer Products Europe. From the first quarter of 2018 Consumer Products also includes the value-added operations in Asia and Americas, that were previously included in the Markets reporting segment. In addition, Marine Harvest Czech Republic was moved from Markets to Consumer Products in the second quarter of 2017. Comparison figures have been restated accordingly.
| BUSINESS AREAS | Feed | Farming | Sales and Marketing | TOTAL |
|---|---|---|---|---|
| EUR million | ||||
| Q1 2018 | ||||
| Geographical markets | ||||
| Europe | 1.2 | 19.4 | 579.9 | 600.6 |
| Americas | 0.0 | 3.3 | 154.6 | 157.9 |
| Asia | 0.0 | 0.0 | 80.0 | 80.0 |
| Russia | 0.0 | 0.0 | 11.2 | 11.2 |
| Rest of the world | 0.0 | 0.2 | 12.2 | 12.3 |
| External operational revenue | 1.2 | 22.9 | 837.9 | 862.1 |
The main source of revenue for the Group is sales of Atlantic salmon, including elaborated products.
The business area Sales & Marketing represents the majority of the Group's external revenue. The revenue distribution for Sales & Marketing according to product categories was as follows in the first quarter of 2018 (first quarter of 2017): Fresh bulk 35% (46%), smoked/marinated 22% (18%), fresh MAP 13% (11%), fresh prepared 12% (11%), frozen prepared 5% (4%), frozen bulk 3% (1%) and other 10% (9%).
The business area Feed sells some feed to external parties. The business area Farming has external revenue of EUR 8.1 million (EUR 3.2 million) related to sales of Atlantic salmon, and also other revenue which includes insurance income and rental income from sales of surplus primary processing capacity.
| BUSINESS AREAS | Feed | Farming | Sales and Marketing | TOTAL |
|---|---|---|---|---|
| EUR million | ||||
| Q1 2017 | ||||
| Geographical markets | ||||
| Europe | 5.0 | 5.6 | 597.7 | 608.4 |
| Americas | 0.0 | 1.9 | 166.9 | 168.8 |
| Asia | 0.0 | 0.0 | 94.7 | 94.6 |
| Russia | 0.0 | 0.0 | 9.1 | 9.1 |
| Rest of the world | 0.0 | 0.1 | 11.0 | 11.1 |
| External operational revenue | 5.0 | 7.6 | 879.3 | 892.0 |
| EUR million | Norway | Scotland | Canada | Chile | Other | TOTAL |
|---|---|---|---|---|---|---|
| Fair value adjustment on harvested fish in the statement of comprehensive income | ||||||
| Q1 2018 | -92.8 | -11.3 | -15.9 | -11.8 | -7.1 | -139.0 |
| Q1 2017 | -176.6 | -69.0 | -34.9 | -14.6 | -4.5 | -299.6 |
| 2017 | -540.0 | -160.3 | -102.3 | -64.7 | -46.0 | -913.4 |
| Fair value adjustment on biological assets in the statement of comprehensive income | ||||||
| Q1 2018 | 155.8 | 10.9 | 28.1 | 20.7 | 18.5 | 234.0 |
| Q1 2017 | 10.5 | 17.2 | 17.8 | 35.1 | 16.5 | 97.1 |
| 2017 | 323.8 | 70.5 | 74.2 | 68.1 | 48.8 | 585.5 |
| Fair value adjustment on incident based mortality in the statement of comprehensive income | ||||||
| Q1 2018 | -0.2 | -0.2 | 0.0 | 0.0 | -0.3 | -0.6 |
| Q1 2017 | -3.5 | -8.8 | 0.0 | -0.9 | 0.0 | -13.2 |
| 2017 | -7.1 | -3.0 | 0.0 | -0.9 | -1.4 | -12.4 |
| Net fair value adjustment biomass in the statement of comprehensive income | ||||||
| Q1 2018 | 62.8 | -0.5 | 12.2 | 8.9 | 11.0 | 94.5 |
| Q1 2017 | -169.6 | -60.5 | -17.1 | 19.6 | 11.9 | -215.7 |
| 2017 | -223.3 | -92.7 | -28.1 | 2.5 | 1.5 | -340.3 |
| Volumes of biomass in sea (1 000 tonnes) | ||||||
| 31.03.2018 | 245.2 | |||||
| 31.12.2017 | 258.0 | |||||
| Fair value adjustment on biological assets in the statement of financial position | ||||||
| 31.03.2018 | ||||||
| Fair value adjustment on biological assets | 250.7 | 20.6 | 56.1 | 27.4 | 26.4 | 381.2 |
| Biomass at cost* | 906.2 | |||||
| Total biological assets | 1 287.5 | |||||
| 31.12.17 | ||||||
| Fair value adjustment on biological assets | 187.9 | 21.0 | 46.7 | 19.0 | 15.3 | 289.9 |
| Biomass at cost* | 910.5 | |||||
| Total biological assets | 1 200.5 | |||||
| * Includes costs related to seawater, freshwater, broodstock and cleanerfish | ||||||
| Reconciliation of changes in carrying amount of biological assets | ||||||
| Carrying amount 01.01.2018 | 1 200.5 | |||||
| Cost to stock | 282.7 | |||||
| Net fair value adjustment | 94.5 | |||||
| Mortality for fish in sea | -9.8 | |||||
| Cost of harvested fish | -268.9 | |||||
| Currency translation differences | -11.3 | |||||
| Total carrying amount of biological assets as of 31.03.2018 | 1 287.5 | |||||
| Price sensitivities effect on fair value | ||||||
| The sensitivities are calculated based on a EUR 0.1 change of the salmon price in all markets. | ||||||
| 9.3 | 1.1 | 2.1 | 1.9 | 0.8 | 15.2 | |
| Onerous contracts provision (included in other current liabilities in the statement of financial position) | ||||||
| 31.12.2017 | 1.3 | |||||
| Change in onerous contracts provision in the statement of comprehensive income | 5.1 | |||||
| Currency translation differences | — | |||||
| 31.03.2018 | 6.4 |
| EUR million | Q1 2018 |
|---|---|
| Incident-based mortality MH Norway | 2.8 |
| Incident-based mortality MH Scotland | 1.0 |
| Incident-based mortality MH Canada | 1.1 |
| Incident-based mortality MH Chile | 0.1 |
| Incident-based mortality MH Faroes | 0.0 |
| Incident-based mortality MH Ireland | 0.4 |
| Incident based mortality | 5.3 |
| Exceptional sea lice mitigation MH Norway | 16.3 |
| Sum exceptional items | 21.6 |
| EUR million | Notes | Q1 2018 | Q1 2017 | 2017 |
|---|---|---|---|---|
| Net interest expenses | -10.3 | -11.9 | -46.7 | |
| Net currency effect on long term positions | 2.0 | -1.1 | 25.0 | |
| Net currency effects on short term positions | -4.2 | 4.5 | -9.1 | |
| Net currency effects on short term currency hedges | 0.0 | -1.0 | -2.7 | |
| Net currency effects on long term currency hedges | 6.4 | -1.3 | -21.9 | |
| Net currency effects | 4.1 | 1.1 | -8.8 | |
| Change in fair value financial instruments | 3.7 | 5.3 | 14.5 | |
| Change in fair value conversion liability component of convertible bonds | 9 | -35.3 | 143.6 | 82.4 |
| Net other financial items | 0.0 | -1.6 | -3.8 | |
| Other financial items | -31.5 | 147.3 | 93.2 | |
| Total financial items | -37.8 | 136.5 | 37.7 |
Basic Earnings per share (EPS) is calculated on the weighted average number of shares outstanding during the period.
Convertible bonds that are "in the money" are considered to have a dilutive effect if EPS is reduced when assuming a full conversion into shares at the beginning of the period and reversing all its effects on earnings for the period. On the other hand, if the effect of the above increases EPS, the bond is considered anti-dilutive, and is then not included in diluted EPS. The adjustments to earnings are interest expenses, currency gains/losses and changes in fair value of conversion liability component, adjusted for estimated taxes. Average diluted number of shares is also affected by the share price based bonus call options to senior executives.
The conversion liability component on the 2015 convertible bond was "in the money" at the end of the reporting period, but the effect on EPS was anti-dilutive. The convertible bond is therefore not included in diluted EPS.
EUR million
| Statement of financial position | Statement of comprehensive income | ||||
|---|---|---|---|---|---|
| Non-current interest-bearing debt |
Conversion liability component |
Net interest expenses |
Other financial items |
||
| Initial recognition | |||||
| EUR 340 mill 2015-bond | 283.1 | 51.6 | |||
| Subsequent measurement | |||||
| Recognized 2015, 2016 and 2017 | |||||
| Interest effects | 23.2 | -24.1 | |||
| Change in fair value of conversion liability components | 24.3 | 24.3 | |||
| Net recognized 2015, 2016 and 2017 | -24.1 | 24.3 | |||
| Recognized Q1 2018 | |||||
| Coupon interest | -0.1 | ||||
| Amortized interest | 2.8 | -2.8 | |||
| Change in fair value of conversion liability components | 35.3 | 35.3 | |||
| Net recognized end of period | 309.1 | 111.2 | -2.9 | 35.3 |
The value of the debt liability component and conversion liability component was determined when the bond was issued. The fair value of the debt liability component was calculated using a market interest rate for an equivalent, non-convertible bond. The residual amount was the fair value of the conversion liability component at initial recognition. The carrying amount of the debt liability component of the convertible bond is classified as non-current interest-bearing debt, and the conversion liability component is classified as other non-current financial liabilities in the statement of financial position.
| No of shares | Share capital (EUR million) |
Other paid in capital (EUR million) |
|
|---|---|---|---|
| Share capital | |||
| Issued at the beginning of 2018 | 490 167 777 | 383.8 | 931.5 |
| New shares issued | 0 | 0.0 | 0.0 |
| Repayment of paid in capital | 0 | 0.0 | 0.0 |
| Issued at the end of period 1) | 490 167 777 | 383.8 | 931.5 |
1) At the end of period Marine Harvest ASA has a share capital of NOK 3,676,258,327.50 divided into 490,167,777 shares, each with a par value of NOK 7.50.
The group did not hold any treasury shares during the reporting period.
| Name of shareholder | No. of shares | % |
|---|---|---|
| Geveran Trading Co Ltd | 79 551 603 | 16.23% |
| Clearstream Banking S.A. | 32 936 624 | 6.72% |
| Folketrygdfondet | 29 118 893 | 5.94% |
| Jupiter European Fund | 11 595 670 | 2.37% |
| State Street Bank and Trust Comp | 9 994 948 | 2.04% |
| State Street Bank and Trust Comp | 9 272 686 | 1.89% |
| State Street Bank and Trust Comp | 9 002 475 | 1.84% |
| Citibank, N.A. | 8 896 638 | 1.82% |
| State Street Bank and Trust Comp | 8 784 048 | 1.79% |
| State Street Bank and Trust Comp | 6 350 211 | 1.30% |
| J.P Morgan Chase Bank, N.A., London | 6 137 585 | 1.25% |
| The Bank of New York Mellon SA/NV | 5 825 392 | 1.19% |
| J.P Morgan Chase Bank, N.A., London | 5 430 248 | 1.11% |
| The Northern Trust Comp, London Br | 4 866 712 | 0.99% |
| J.P Morgan Chase Bank, N.A., London | 4 594 811 | 0.94% |
| J.P. Morgan Bank Luxembourg S.A. | 4 243 467 | 0.87% |
| Citibank, N.A. | 4 000 000 | 0.82% |
| KLP Aksjenorge Indeks | 3 843 445 | 0.78% |
| Euroclear Bank S.A./N.V. | 3 512 005 | 0.72% |
| MSCO Equity Firm Account | 3 500 816 | 0.71% |
| Total 20 largest shareholders | 251 458 277 | 51.30% |
| Total other | 238 709 500 | 48.70% |
| Total number of shares 31.03.2018 | 490 167 777 | 100% |
This report may be deemed to include forward-looking statements, such as statements that relate to Marine Harvest's goals and strategies, salmon prices, ability to increase or vary harvest volume, production capacity, future capital expenditures and investments and the expected returns therefrom, trends in the seafood industry, restructuring initiatives, exchange rate and interest rate fluctuations, expected research and development expenditures, business prospects and positioning with respect to market, demographic and pricing trends, strategic initiatives, financial target (including ROCE and NIBD), planned operational expenses, product demand and trends, supply trends, expected price levels, and the effects of any extraordinary events and various other matters (including developments with respect to laws, regulations and governmental policies regulating the industry and changes in accounting policies, standards and interpretations) on Marine Harvest's business and results. Forward-looking statements are typically identified by words or phrases, such as "believe," "expect," "anticipate," "intend," "estimate," "may increase," "may fluctuate," "plan," "goal," "target," "strategy," and similar expressions or future or conditional verbs such as "may," "will," "should," "would," and "could." Forward-looking statements are Marine Harvest's current estimates or expectations of future events or future results. Actual results could differ materially from those indicated by these statements because the realization of those results is subject to many risks and uncertainties. Marine Harvest ASA's annual report contains additional information about factors that could affect actual results, including: changes to the price of salmon including the value of our biological assets; hedging risks; risks related to fish feed; economic and market risks; environmental risks; operational risks; risks related to escapes, disease and sea lice; product risks; risks related to our acquisitions; financing risks; regulation risks including relating to food safety, the aquaculture industry, processing, competition and anti-corruption; trade restriction risks; litigation risks; tax and accounting risks; strategic and competitive risks; and reputation risks. All forward-looking statements included in this report are based on information available at the time of the release, and Marine Harvest assumes no obligation to update any forward-looking statement.
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