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Cermaq Reports First Quarter Loss

NORWAY - Norwegian fish farming group Cermaq has reported a first quarter loss NOK 10.6 million.

The company said the loss was the result of lower salmon prices, higher costs in farming in Chile, and higher raw material costs in EWOS.

CEO Geir Isaksen said: "Salmon prices were lower in all markets in the first quarter, but our most important challenge remains production developments in Chile. Costs in Chile were high due to disease and slower growth and our highest priority is improving production conditions in the region. EWOS volume development was satisfactory in a challenging market but higher raw material costs reduced EBIT."

The Mainstream Group reported a first quarter EBIT pre fair value loss of NOK -15.9 million compared to a profit of NOK 181.4 million in the first quarter 2007.

Volumes were up 19 per cent, with the biggest increase in Norway. Average farming revenues in local currency were 12 per cent lower than in the first quarter 2007.

The company said that costs per kg were higher compared to the first quarter 2007 due to higher feed costs in general, and due to fish health problems in Chile. The exceptional cost of biomass write downs was NOK 28 million in the quarter.

Mainstream Chile saw reduced average prices for atlantics sold due to low harvest weights.

Prices in Japan for coho and trout were also low in the quarter. Costs of production per kilogram were significantly higher than in the first quarter 2007 due to lower growth, higher mortalities and an increase in the cost of feed. Work is underway to introduce better coordinated measures to improve the sanitary conditions in Chile.

Prices for Mainstream Canada were lower due to high volumes from the Chilean industry. Mainstream Scotland saw low sales prices in the quarter, and although costs for atlantics improved trout performance remained poor. Mainstream Norway's volumes increase by almost 60 percent for the period but profitability fell due to lower prices.

The EWOS Group achieved an EBIT of NOK 1.2 million in the first quarter 2008, compared to NOK 53.4 million in the first quarter 2007. Volumes were 3.5 per cent higher in the quarter.

The profit for the period reduced compared to the first quarter 2007 following sharp rises in raw material costs, particularly for fish oils and vegetable oils. EWOS market share was in the same range as for the same period in 2007.

The first quarter is typically a lower volume season for EWOS due to temperature conditions in the Northern hemisphere, the company said.

Cermaq's net interest bearing debt increased by NOK 12.5 million from the end of the fourth quarter 2007 to NOK 1 270.3 million at the end of March. The equity ratio at the end of the first quarter was 56.4 percent, down from 57.2 percent at the end of December 2007.

"First quarter 2008 was much weaker than we would like. But we have a strong belief that we will solve the sanitary issues in Chile and bring this industry back at a profitable level. It will take time, but Cermaq has a solid base in both feed production and fish farming and has strong and goal orientated research and development operations. Based on this I have strong confidence in the future success of the company," Geir Isaksen concluded.