Marine Harvest 2009 Annual Report

April 30, 2010 11:15
Marine Harvest achieved a net profit of NOK 1 302 million in 2009, a significant improvement compared to a net loss of NOK 2 852 million in 2008. The improved profitability was matched by a significantly stronger cash flow, a considerable reduction in net interestbearing debt and a substantial increase in company's equity ratio. Based on this development, the Board of Directors of Marine Harvest ASA (the Board) has proposed a dividend of NOK 0.35 per share, reports with reference to Marine Harvest.

Marine Harvest achieved these results after getting operational control in Chile, and to a large part, because of a strong demand for salmon in key markets combined with a tight global supply situation. In addition to this, it achieved operational improvements in Scotland, Norway and in VAP Europe.

The overall improvements in Marine Harvest's global operations are promising, but there is still room for further improvements and increased profitability. We would like to use this opportunity to highlight some of the areas we will focus on in the further development of Marine Harvest.

Improved profitability and growth in Norway In the beginning of 2010, Marine Harvest Norway embarked on a three year program to improve the freshwater operations. Through this program we will invest in both new and current freshwater sites, with the aim of reducing smolt costs, improving smolt quality and securing larger smolt stocking flexibility by producing more diverse sizes of smolt.

The Norwegian salmon farming industry has limited potential for growth with the current number of licenses and the regulatory framework for Maximum Allowable Biomass (MAB). Fortunately, Marine Harvest Norway has the potential to increase production within this framework. Hence, the company has decided to increase smolt stocking in Norway by 10 percent in 2010, to secure growth in 2011 and into 2012. The company is also exploring the potential for increased production within current MAB regulation by increasing the smolt size to reduce the grow-out time in sea-water, and hence increase output per license.

Rebuilding operations in Chile

The company's operations in Chile have been downscaled to a minimum activity level.

The process has been painful for everyone involved. In 2010, they expect to sell only 4 000 tons of salmon from Chile, whereas stocked a meager 2.2 million smolt in 2009 and expect to stock a maximum of 6.4 million smolt in 2010.

During the last part of 2009 and early 2010, the company has seen a significantly improved biological development in Chile, with low mortality and good growth. Permanent improvements in biological results and an improved regulatory framework are prerequisites for new investments in Chile. As theygradually rebuild heit operations in Chile, the company will start from a lower cost base and targeting a more cost-efficient and professional organization, meeting all global quality standards.

Reducing biological risks

Salmon farming has historically been, and still is, subject to biological challenges. Through improved regulations, some of these challenges have been dampened, and biological risks have been reduced in key farming regions. There is, however, still room for further reduction in biological risks. Infectious Salmon Anemia (ISA) in Chile, Pancreas Disease (PD) and sea lice mitigation are the main biological challenges affecting the industry today. Marine Harvest addresses these issues with a broad mix of initiatives. Internally, Marine Harvest improves husbandry and mitigation efforts, and invest in research and development (R&D) projects. In cooperation with colleagues and competitors, the company implements common area-based mitigation efforts and measures to reduce the risk of spreading infective agents and resistant sea lice.

The company believes these initiatives will have a long-term, significant and positive impact on profitability and sustainability.

Guiding principles

Marine Harvest's vision is "Seafood for a better life", implying that business should lead to a better life for everyone. To guide them in their journey towards this vision through major strategic decisions and smaller day-to-day operational decisions, we have established four guiding principles setting the company's standards regarding Profit, People, Product and Planet.

With regards to Profit, the ambitions are centered around three main areas - profitability, relative competitiveness and solidity. Marine Harvest should be the most profitable listed farming company over a cycle (4-5 years). The company acknowledges that they were behind some of competitors in 2009, but continue their step-by-step approach to reach targets.

Increased focus on People has contributed to improvements compared to previous years, but the company is still far from reaching ambitions. When it comes to employee safety, their ambition is that Marine Harvest should be the safest actor in our sector.

Marine Harvest's Product ambitions are split into two categories: Food quality and safety, and customer value. Marine Harvest wants to be the preferred partner for our major customers through creation of customer value, quality and documented safety.

When it comes to Planet, the company's ambitions centers around three key areas; feed sustainability, environmental impact and fish health. A common denominator for planet ambitions is sustainable development.

The four guiding principles are highly interrelated and, in the long-term, the company will have to follow all four principles to develop the business in accordance with the vision. During 2009, the company also raised the bar for personal conduct by developing a new Group-wide code of conduct. This document will be distributed to every employee, followed up by e-learning and management presentations.

A global market for salmon

The global market for Atlantic salmon saw a major shift during 2009 as the reduced supply from Chile to the US, EU and Asian markets was partly compensated by supply from other regions. The company now sees clear signs of a global market for salmon, both through rather quick shifts in supply patterns and changes to pricing between regions.

Marine Harvest has been leading this development through investments in processing capacity in the US for pre-rigor fillets from Norway. The company has also doubled filleting capacity in Norway with significant and positive effects on transport costs, carbon footprint and our ability to exploit trimmings through production of by-products.

Positive outlook for 2010

2009 was a good year for Marine Harvest. With a strong market for salmon and gradual improvements across business units, the company has good reasons to be optimistic about the results also in 2010.

Marine Harvest's ambition is to become the leading global seafood company. After the three party merger in 2006, focus has been on the daily operational challenges. Further improvement of the operational performance will be the main priority in 2010.

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