Projections of global salmon supply for 2012 put main players in reduction mode

According to the latest forecast of Marine Harvest (the world's leading seafood company and largest producer of farmed salmon, with presence in 21 countries and about 5 000 permanent employees worldwide), strong increase in global supply of salmon will continue for the rest of 2011 and in 2012, reports  

Driven by the inertia of the planned production the giant headquartered in Bergen, Norway, and listed on the Oslo Stock Exchange will also contribute to the surplus trend this year with the expected harvest volume of 338 000 tonnes in 2011, of which 99 000 tonnes is expected to be harvested in the fourth quarter.

According to MH, a strong contract portfolio will however reduce the impact of low spot prices in the fourth quarter 2011.

While the demand stimulus from low prices can have a positive impact on spot prices the coming quarters, the concern says it must be prepared for a challenging market also in 2012. Along these lines, the company will reduce smolt stocking in 2011 and 2012 by 11.3 million smolt in total, reduce planned capex in 2012 by NOK 600 million to approximately 400 million and has initiated a group wide cost-program to preserve its financial strength. The company says it will also remain committed to exploit consolidation opportunities that may arise as a result of the challenging market conditions.

Third quarter results

According  to Marine Harvest, the Group achieved an operational EBIT of NOK 457 million in the third quarter of 2011, compared to NOK 759 million in the corresponding quarter of 2010. A high share of contracts at favourable prices reduced the impact on margins from a steep decline in spot prices. Marine Harvest has implemented several measures to prepare for a challenging market the coming quarters. Costs associated with reduced smolt stocking are expensed with NOK 56 million in the quarter.

Marine Harvest reported operational revenues and other income of NOK 3 636 million (NOK 3 632 million) in the third quarter of 2011. Harvest volumes were 83 076 tons compared to 64 034 tons in the third quarter of 2010. Net earnings in the period were NOK 18 million (NOK 670 million).

- Global supply increased by 19 percent in the third quarter, leading to a steep decline in spot prices in all key markets. Our strong contract portfolio reduced the impact on our margins this quarter. Marine Harvest Scotland delivered strong results also in this quarter, and VAP Europe improved their margins from previous quarters. We are now preparing the organisation for a challenging period, comments CEO of Marine Harvest ASA, Alf-Helge Aarskog.

Cash flow from operations amounted to NOK 261 million (NOK 599 million) in the third quarter of 2011. Net financial items amounted to NOK -28 million (NOK -104 million). Net financial items include interest expenses of NOK 105 million (NOK 97 million), and a positive change in the fair value of the conversion option of the convertible bond of NOK 232 million. Net interest-bearing debt increased to NOK 6 142 million (NOK 5 799 million at end of the second quarter).

The equity ratio was 47.3% at the end of the quarter (47.3% at end of the second quarter). Annualized ROACE was 11.5% (18.9%) and NIBD/Equity was 58.1%, compared to 55.9% at the end of the second quarter.

Marine Harvest Norway achieved an operational EBIT per kilo of NOK 5.92 (13.52) in the third quarter, while in Scotland and Canada reported operational EBIT per kilo was NOK 10.40 and NOK -7.44 respectively (10.93 and 2.74). Marine Harvest VAP Europe reported an operational EBIT margin of 3.7% (2.2%) in the third quarter of 2011, while Marine Harvest Chile achieved an operational EBIT per kg of NOK 5.79 (18.01).

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