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High Costs in Chile Drive Poor Results for Cermaq in Q3 2014

28 October 2014

NORWAY - Cermaq ASA achieved a negative EBIT pre fair value and non-recurring items of NOK 39 million in the third quarter of 2014, compared to a positive EBIT of NOK 113 million in the corresponding quarter of 2013. Despite weak results the underlying performance is good.

The acceptance of more than 90 per cent of the shares for the offer from Mitsubishi Corporation and announcement that all conditions in the offer have been met, facilitates a rapid completion of the transaction, and delisting of the company from Oslo Stock Exchange is expected before year end, says CEO Jon Hindar.

The takeover by Mitusbishi will create the second largest salmonid farmer globally, and significantly strengthen Cermaq’s resource base, downstream capacity and market access in the fast growing Asian market, Mr Hindar continued.

The third quarter was a weak quarter for Cermaq, with lower achieved prices in all three farming regions and decline in operating results in all regions compared to last year.

Group volumes sold in third quarter were 34,000 tonnes, some 6,000 tonnes below estimate in Q2 report mainly due to effects of Russian import embargo and market timing. Expected sales volume for 2014 is 151,000 tonnes.

"We are definitely not satisfied with the financial results this quarter. Beyond reduced prices in all regions from Q2 and significantly lower volumes in Norway and Canada, the disappointment is mainly linked to a continued high cost level for Atlantics and trout in Chile. In addition we had special events related to fish health both in Canada and Norway that impacted the operational results. This was certainly not a good quarter for Cermaq," says Jon Hindar.

Cermaq Chile's earnings in third quarter were a loss of NOK 84 million compared to a loss of NOK 1 million same quarter last year. EBIT per kg for Atlantics and trout was a loss of NOK 5.2 and NOK 6.2 respectively. Coho continues to perform well and came in at NOK 8.9 per kg. The ex-cage cost for Atlantic remained high in third quarter 2014, but September showed an expected improvement.

Cermaq Norway delivered an EBIT pre fair value of NOK 66 million versus NOK 102 million last year.

EBIT for Nordland was NOK 7.3 per kg and NOK 2.3 per kg for Finnmark. The cost development in Nordland is good and improving in Finnmark. The low margin in both regions is by and large explained by lower volumes and reduced prices in the quarter. Cermaq Canada reported an EBIT pre fair value of NOK 4 million, a reduction from NOK 43 million previous year, mainly due to elevated mortality at one site. EBIT per kg was NOK 0.7.

"We have acquired two new licenses in Region XII in Chile this quarter, and are progressing well towards developing a full scale cluster in Region XII producing 40,000 tonnes," said Jon Hindar.

Sanitary situation in Chile remains concerning, in particular related to mortality on large Atlantics and trout caused by the bacterial disease SRS. The sanitary and cost situation for Coho remains good.

The sea lice treatments during the quarter have continued to reduce Cermaq Chile's number below average industry level in Chile and down to a more normalised level for Chile. Cermaq’s use of antibiotics in the quarter is stable and remains significantly below average level in Chile.

"I’m confident that Cermaq as a part of Mitsubishi Corporation will be well positioned to grow and also benefit from the strengths and expertise of Mitsubishi Corporation," concluded Jon Hindar.

TheFishSite News Desk

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