Bakkafrost Has Strong Q2

The company made an operational EBIT of DKK 126.9 million in Q2 2011, corresponding to an EBIT/kg of NOK 16.46.

The farming segment made substantial profit, but the VAP segment also contributed with a positive operational result.

Due to a decline in the market price at the end of Q2, the fair value adjustments on biological assets amounted to DKK -158.4 million. The result after tax was DKK -25.6 million for Q2 2011.

For the first half (H1) of 2011, operational EBIT was DKK 219.2 million, corresponding to an EBIT/kg of NOK 16.97. The result after tax amounted to DKK 77.9 million after a negative fair value adjustment of DKK 117.4 million.

The total harvested volume in Q2 2011 was 8,092 tonnes gutted weight (5,341 tonnes gutted weight in Q2 2010). In H1 2011, 13,552 tonnes gutted weight (11,085 tonnes gutted weight in H1 2010) were harvested.

Commenting on the results, CEO Regin Jacobsen says: "Bakkafrost obtained a good result for the quarter in a market with prices dropping. The operational performance was high and the veterinary situation is good. The salmon prices have been dropping through the quarter, but we believe the outlook is promising with increased production and a significant share of the harvest for 2011 already sold on satisfying long term contracts."

Outlook

Bakkafrost - Salmon Farming and VAP

The margins for first half of 2011 are the highest margins ever for Bakkafrost. During Q1 and Q2 2011, we have seen record high salmon prices, both on the spot market and for value added salmon products, combined with good biological results.

In the last weeks of Q2 2011 and in July/August 2011, we have seen salmon prices decrease significantly. But we believe that this level is sustainable for the industry and may have a positive impact on the ability to expand on existing and new markets and thus increase total demand for salmon.

Bakkafrost has ramped up the harvesting volumes during H1 2011. This has had a positive effect on the capacity utilisation and thus reduced costs per kg harvested salmon. In 2011, Bakkafrost expects to harvest 42,000 tonnes gutted weight (including minorities in Faroe Farming).

The expected harvesting in 2H 2011 is 26,500 tonnes gutted weight. We expect that the volumes harvested each quarter will increase from the level of 9,000 tonnes in Q2 2011 to around 11,000-14,000 tonnes each quarter going forward.

The company has further unused farming capacity beyond 2012, as Bakkafrost still has two farming sites not in use and space for increased biomass on other sites. The estimated smolt release is 10 million pieces for 2011, including two million pieces in Viking Seafood and Faroe Farming.

Havsbrn - Fish Feed

Following the acquisition of Havsbrn, Bakkafrost has expanded and improved its value chain with increased farming activities and an additional platform with production of fish meal and fish oil and own production of fish feed.

Havsbrn's production of fish meal and fish oil goes into its own production of fish feed. Havsbrn's main market for fish feed is sale to the Faroese farming industry, including Bakkafrost. The market outlook for Havsbrn's sale of fish feed is good.

The management and Board expects that the Faroese farming industry will increase its production in the coming years, from a production in 2010 of 39,100 tonnes to 57,000 tonnes in 2012, an increase of 46 per cent, which means an increase in the demand for fish feed. Havsbrn expects to sell around 72,000 tonnes of fish feed in 2011.

With this new platform of Havsbrn, Bakkafrost is less vulnerable to significant fluctuations in the salmon prices than companies with only farming and VAP activities.