Low Salmon Prices Caused Weak Profitability

The strong increase in supply continued in the third quarter and has led to a further decline in salmon prices in all markets. With only a small proportion of Grieg Seafoods production covered by contracts in the third quarter, the company has been largely exposed to the spot market.

Cost of fish harvested was high in the third quarter as previously indicated. In both of the Norwegian regions the harvested fish had a low average weight which resulted in a corresponding high cost. In Shetland the cost of fish harvested was especially high for the weak 2009 (fall) generation which was harvested out in July.

In second quarter the total harvested volume increased by in excess of seven to 15,663 tons.

The Groups operational EBIT before fair value adjustments of biomass was -1.96 NOK/kg (7.20 NOK/kg). Rogaland achieved an EBIT of -0.66 NOK/kg (7.61 NOK/kg), while Finnmark had an EBIT of -5.50 NOK/kg (9.12 NOK/kg).

The EBIT in Shetland reached -3.50 NOK/kg (10.40 NOK/kg), while in Canada the EBIT reached -0.71 NOK/kg in 2011 compared to 3.89 NOK/kg in 2011. The Norwegian sales company, Ocean Quality AS, achieved an EBIT of NOK 11.3m (2.3 per cent). All figures are Q2 2011 figures on isolated basis.

At the end of the third quarter the equity ratio was 41 per cent (46 per cent), while net interest-bearing debt totalled NOK 1,219m (1 036m).

In October Grieg Seafood established a short-term loan facility for NOK 200m. At the same time, the NIBD/EBITDA loan covenant was waived until the end of 2012. The process of establishing a final new loan facility will continue.

Due to the low salmon prices and the market uncertainty, Grieg Seafood has implemented reduction in investments, reduced smolt entries and will continue reviewing further capital reduction measures.

Outlook

Grieg Seafood expects a harvested volume of 63,300 tons in 2011. This is in line with the previous guiding. In 2012 the harvested volume is expected to be 69,000 tons.