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Cermaq Optimistic After Q2, but Challenges Ahead


GENERAL - Cermaq has reported a second quarter earnings before interest and taxes (EBIT) pre fair value of NOK 81.4 million (loss of NOK 31.2 million). A higher profit was achieved in both EWOS and Mainstream.

EWOS returned an EBIT margin well above 2008 levels due to more favourable raw material price developments. Mainstream had better results following lower losses in Chile than in 2008 and improved profits in Canada and Norway, due to better sales prices.

Cermaq’s operating revenues in the quarter were NOK 2 170.0 million (NOK 2 182.1 million). Although the revenue for the quarter was at 2008 levels, the volumes for both EWOS and Mainstream were lower.

The volume reduction was compensated by higher unit sales prices in EWOS, partly as a result of currency translation effects to Norwegian kroner. In addition, higher sales prices for salmon gave increased revenues in Mainstream.

"I am pleased with the results, which show significant improvement for EWOS and also good results in Mainstream due to the strong market in the quarter. I am optimistic about the rest of 2009 and expect to see a continued improvement in operating performance for the group," says CEO Geir Isaksen.

EWOS EBIT pre fair value was NOK 54.7 million for the quarter (NOK 32.1 million). Despite the volume and revenue reduction, EBIT margin increased in the second quarter to 4.2 per cent (2.2 per cent).

In 2008, EWOS had a challenging year due to rising raw material costs through most of the year. With raw material prices at lower levels in 2009, EWOS has been able to establish much improved margins despite the impact of the reduced sales in Chile.

"EWOS has achieved a significant improvement so far in 2009. We expect to see a double digit increase in volumes in Norway in 2009 although the large reduction in Chile volumes is expected to reduce EWOS total sales volumes of feed with approximately 15 per cent," says CEO Geir Isaksen.

A major risk in EWOS in Chile is the possibility of a bad debt. Improvements were made in the quarter with a reduction in total receivable exposure of 20 per cent from the end of the first quarter, but there is still a significant risk that a customer defaults in the coming period.

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