Improved price achievement in a falling market Operational EBIT increased 13% ROACE of 26% in the quarter NIBD NOK 5.8 billion after dividend of NOK 2.9 billion High contract share in the second half of 2011 Operational revenue 4 612 3 942 3 583 3 632 4 192 Operational EBIT 1 032 963 792 759 894 Harvest volume (HOG) tons 90 486 76 088 68 102 64 034 79 932 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11
Highlights Marine Harvest Group - main figures Q2. 11 Q2. 10 YTD Q2. 11 YTD Q2. 10 2010 Operational revenue and other income 4 192 3 583 8 134 7 037 15 281 Operational EBIT 1) 894 792 1 857 1 400 3 191 EBIT 381 1 045 1 034 1 811 4 461 Net financial items 400-34 238-2 - 209 Profit or loss for the period 685 741 1 004 1 367 3 108 Cash flow from operations 1 581 890 2 617 1 695 2 599 Total assets 21 946 21 190 21 946 21 190 23 529 Net interest-bearing debt (NIBD) 5 799 4 678 5 799 4 678 5 218 Earnings per share (NOK) 0.19 0.21 0.28 0.38 0.87 ROACE 2) 25.8% 20.8% 24.1% 17.9% 19.7% Equity ratio 47.3% 57.2% 47.3% 57.2% 53.4% NIBD/Equity 55.9% 38.6% 55.9% 36.8% 41.5% Harvest volume (HOG tonnes, salmonids 79 932 68 102 156 020 141 192 295 712 Operational EBIT - NOK per kg incl sales margin 3) Norway 13.08 11.58 na na na Scotland 13.94 9.43 na na na Canada 4.95 11.67 na na na Chile 4) -24.38 1.42 na na na 1) Adjusted for unrealised gains/losses from salmon derivatives, fair value adjustment of biomass, onerous contracts provisions, results from associated companies, restructuring costs and write-downs of fixed assets/intangibles 2) ROACE: Annualised return on average capital employed based on EBIT aligned for fair value adjustment of biomass and onerous contracts provisions /average (NIBD + Equity) 3) Operational EBIT per kg including allocated sales margin. For 2010 the numbers are estimated. 4) Operational EBIT per kg in Chile was affected by very low harvest volume and negative contribution from trading and smoked operations. Summary of the second quarter 2011 After a strong increase in global supply in May and June, spot prices dropped through May and June. Marine Harvest achieved higher average prices than last year due to better quality and a solid contract portfolio. Operational EBIT was NOK 894 million, a 13% increase compared to last year. ROACE was 26% in the quarter. The operating results in Farming regions Norway and Scotland were improved thanks to higher volume and better prices. As guided, results from farming Canada was impacted by biological issues, while farming Chile s result reflects low volumes and exceptional elements. EBIT was NOK 381 million after a negative fair value adjustment of the biomass of NOK 701 million and a gain on unrealised salmon derivatives of NOK 201 million. Net financial items amounted to positive NOK 400 million driven by a lower valuation of the equity conversion option of the convertible bond. Earnings per share amounted to NOK 0.19, 10% lower than in the second quarter last year. Cash flow from operations amounted to NOK 1 581 million after higher earnings, prepayment of unrealised gain from salmon derivatives of NOK 201 million and working capital release of NOK 295 million during the quarter. After dividend distribution of close to NOK 2.9 billion, the net interest bearing debt (NIBD) ended at NOK 5.8 billion and the NIBD/equity ratio at 55.9%. The target is less than 50%. Marine Harvest Group Page 2
Financial results in the period (Figures in parenthesis refer to the same quarter in 2010.) Financial position Operational revenues and other income in the second quarter were NOK 4 192 million (NOK 3 583 million). Included unrealised gains on salmon derivatives the total revenue and other income amounted to NOK 4 393 million (NOK 3 583 million). Operational EBIT amounted to NOK 894 million (NOK 792 million) due to higher volumes and favorable prices. Exceptional items for the second quarter of 2011 amounted to NOK 124 million. All exceptional items are listed in note 5 and commented on in the performance chapter. Earnings before interest and taxes (EBIT) amounted to NOK 381 million (NOK 1 045 million), after unrealised salmon derivatives of NOK 201 million, fair value adjustment on biomass of NOK -701 million (NOK 183 million), provision for onerous contracts of NOK -1.5 million (zero), reversed restructuring costs of NOK 1.6 million (zero), result from associated companies of NOK -12.8 million (NOK 70 million) and impairment losses of NOK -0.5 million (zero). Financial items Marine Harvest Group Q2. 11 Q2. 10 Interest expenses - 98-105 Net currency effects 143-13 Other financial items 356 84 Net financial items 400-34 Net financial items amounted to NOK 400 million in the second quarter (NOK -34 million). Interest expenses were NOK -98 million (NOK -105 million), while positive currency effects amounted to net NOK 143 million (NOK - 13 million), due to appreciation of the NOK. Other financial items amounted to NOK 356 million in the quarter (NOK 84 million), as NOK 396 million was recognised as an income related to change in the fair value of the conversion option of the convertible bond and NOK -42 million in change in fair value of investments in other shares and interest rate swaps. Marine Harvest Group 30.06.2011 31.03.2011 Non-current assets 12 508 12 594 Current assets 9 438 10 238 Total assets 21 946 22 832 Equity 10 381 12 721 Non-current liabilities 8 034 7 693 Current liabilities 3 532 2 418 Total equity and liabilities 21 946 22 832 Cash and cash equivalents 551 377 Net interest-bearing debt 5 799 4 655 NIBD/Equity 55,9 % 36,6 % Equity ratio 47,3 % 55,7 % Total assets amounted to NOK 21 946 million at the end of the second quarter, a decrease of NOK 886 million compared to the first quarter. The decrease in total assets was mainly due to the net effect of a decrease in the fair value of biomass related to the reduced market price of salmon, partly compensated by some increase in cash. Total liabilities increased by 1 455, to NOK 11 566 million. The increase in current liabilities was mainly related to increase in short term loan facilities to finance the dividend distribution in the quarter. Total equity decreased by NOK 2 340 million from the previous quarter to NOK 10 381 million. The decrease was mainly related to the net of dividend distribution of NOK -2 865 million, a quarterly profit of NOK 685 million, currency translation loss of NOK -219 million and issue of shares of NOK 42 million. The NIBD/Equity ratio increased from 36.6% to 55.9% and the equity ratio decreased from 55.7% to 47.3% during the quarter. Marine Harvest Group Page 3
Net interest-bearing debt Net interest-bearing debt increased by NOK 1 144 million in the second quarter, to NOK 5 799 million. Currency effects decreased interest-bearing debt by NOK 103 million. The convertible bond, with a nominal value of EUR 225 million, is recognised at EUR 198 million (NOK 1 541 million) at the end of the quarter. The fair value of the equity conversion option decreased by NOK 396 million during the quarter to NOK 259 million, and is recognised as a non-current interest-free liability. 12 10 8 6 4 Currency exchange rates towards NOK GBP EUR USD CAD Cash flow Marine Harvest Group Q2. 11 Q2. 10 Earnings before interest and taxes (EBIT) 381 1 045 Adjustment for - fair value adjustment and onerous contracts 703-183 - income/loss from associated companies 13-71 - depreciation and impairment losses 162 163 Change in inventory, trade receivables and trade payables 295 77 Taxes paid 40-99 Other adjustments -13-43 Cash flow from operations 1 581 890 Cash flow from operations amounted to NOK 1 581 million (NOK 890 million). In line with seasonable variations the cash flow from operations was significantly affected by release of working capital, in the quarter. Cash flow from operations was impacted by cash flow from margin accounts due to unrealised gains from salmon derivatives of NOK 201 million in the quarter. Cash outflow from investments amounted to NOK 195 million (NOK 233 million). Net cash outflow from financing was NOK 1 188 million (NOK 631 million), after an increase in interest-bearing debt of NOK 1 409 million and a dividend distribution of NOK 2 667 million, net of withholding taxes. Purchase of fixed assets -255-256 Acquisitions and proceeds from investments 60 24 Cash flow from investments -195-233 Changes in interest-bearing debt 1 409 609 Net interest and financial items paid -57-109 Realised currency effects 86 47 Dividend paid, adjusted for withholding tax -2 667-1 178 Net equity paid-in / Purchase own shares 42 0 Cash flow from financing -1 188-631 Currency effects on cash - opening balance -25 6 Net change in cash and cash equivalents in the period 173 33 Marine Harvest Group Page 4
Global market overview Global harvest volumes of Atlantic salmon increased by 7.4% compared to the second quarter of 2010, to approximately 323 000 tonnes gutted weight in the quarter. This is the highest quarterly increase observed since the first quarter of 2009 (7.9%). The absolute volume in this quarter was however in line with the harvest volume observed in the second quarter of 2008. Supply Q2 2011 Change vs 12 month tonnes HOG Q2 2010 change Norway 200 600 2.9% 5.9% Chile 38 700 28.1% -16.3% Scotland 32 600 14.0% -3,2% North America 27 000 0.0% 2.3% Faroe Islands 12 500 37.4% 10.9% Other 11 200 5.7% 5.8% Total 322 600 7.4% 2.1% Despite an increase in supply into the EU market of 8.1% compared to the second quarter of 2010, the average reference price in Norway remained at a high level in the quarter. The price was however put under significant pressure during late May and June due to a short term supply peak combined with bottlenecks in the supply chain in the EU. Both Scotland and the Faroes generated high harvest volumes during this period, and Norway s ability to implement market based reductions in harvest volumes was limited due to maturation issues and commencement of mandatory fallowing periods early July in certain areas. The resulting accumulation of inventory of the fresh commodity led to a buyers market during this period. Chile, Scotland and the Faroe Islands made the largest contributions to the supply growth, whereas Norway experienced a modest growth and North America generated flat volumes 210 000 200 000 190 000 PRICE AND GLOBAL VOLUME ALLOCATION TO THE EU MARKET 6 5 compared to the second quarter of 2010. The volume growth in Chile is part of the general rebuilding of the Chilean industry after biological issues depleted the biomass in the region in 2007-2009. Although the current aggressive build-up of the industry gradually is impacting biological indicators adversely, Tonnes (HOG) 180 000 170 000 160 000 150 000 140 000 130 000 4 3 2 1 0 EUR per kg (HOG) volume growth is expected to continue in the coming periods. The Scottish volume increase is mainly driven by Marine Harvest s planned increase to a higher plateau level in the region. The rest of the industry in Scotland generated marginal reduction in volumes. The growth in the Faroe Islands, which was mainly driven by Bakkafrost, can also be interpreted as a planned increase to a higher plateau level. Volume Europe Reference price Norway, HOG (Oslo) The US reference prices were slightly up during the quarter on the back of approximately 1% increase in supply to the market. Chile continued to increase its supply to the US market in line with the organic growth pace, whereas European suppliers continued the withdrawal from the US market during the quarter. The modest volume growth in Norway is ascribed to adverse growth conditions in the sea during the winter months and the general high utilisation of the licence capacity. Norway is expected 75 000 PRICE & GLOBAL VOLUME ALLOCATION TO THE US MARKET 6 to generate a higher volume growth during the second half of 2011. The development in harvest volumes in North America is reflecting the general stagnation seen in the region over several periods. Tonnes (HOG) 70 000 65 000 60 000 5 4 3 2 USD per lb Reference price Q2 2011 Change vs Q2 2011 Change vs NOK Q2 2010 market 4) Q2 2010 55 000 1 Norway 1) NOK 36.44-8.8% EUR 4.66-7.7% Chile 2) NOK 29.15-13.1% USD 5.36-0.5% North America 3) NOK 20.12-11.6% USD 3.70 1.3% 50 000 Volume USA Reference price North America, HOG (Seattle) Reference price Chile, Fillets (Miami) 0 1) Average superior HOG price per kilo (FHL/NSL Oslo) 2) Average C trim price per pound (Urner Barry Miami 2-3 pound) 3) Average superior HOG price per pound (Urner Barry Seattle 10-12 pound) 4) Market price in local currency Marine Harvest Group Page 5
Market Q2 2011 Change vs 12 month distribution tonnes HOG Q2 2010 change EU 165 500 8.1% -1.9% US 58 900 0.9% -3.6% Russia 19 300 0.0% 14.7% China/Hong Kong 8 600 8.9% 11.0% Brazil 8 000 1.3% -24.0% Japan 7 700 16.7% 4.5% Other 54 800 16.1% 8.8% Total 322 800 7.5% 0.4% Supply to Russia was significantly reduced in April (15%) due to trade disruptions. During May/June supply however increased, leading to a flat overall quarterly supply to the region in the quarter. China/Hong Kong continued the positive development seen in previous quarters and supplies to Brazil have started to increase, particularly with regards to fresh salmon. Growth in supply to Japan was primarily driven by the increased demand for imported seafood resulting from the earthquake earlier this year. Other regions also performed well in the quarter. Source: Kontali New organisation from 1 April 2011 Marine Harvest has historically been organised through a decentralised geographic organisation, whereby each geographic farming unit has been responsible for their own sales. As of 1 April 2011, Marine Harvest implemented a new organisation, whereby the sales functions were carved out of the geographic structures and organised as a coordinated global sales entity, together with VAP Europe, in business area Sales and Marketing. The farming entities were similarly aligned in the new global business area Farming. The purpose of the reorganisation is to maximise the overall value creation in the Group through directing the appropriate skillset and attention to the requirements of the two business areas respectively. The performance of the two business areas will be monitored to reach the overall objective of maximising the operational EBIT per kg and margins. Consequently, external reporting will be focused towards measuring and illustrating the overall profitability of harvested volume based on source of origin (operational EBIT/kg) and EBIT margin for VAP Europe. See further description in Note 3 Business Segments. The Operations section of the new report is split into 5 parts A brief summary of the performance by business area and segment, Market performance, describing price achievement and market development, Operational performance, mainly describing volume and cost development for the farming operations, including the EBIT/kg on Marine Harvest salmon by source of origin. VAP Europe is discussed separately due to the size and nature of the business. Other consisting of corporate activities and Sterling White Halibut, is also briefly discussed in the report. Due to lack of comparable data, historic figures for the new segments are not available and comparison towards 2010 is therefore on the old structure in the segment note to the interim financial statements. Reconciliation between the old and the new structure based on the second quarter figures is attached after the notes in this report. The pricing principle between the two business areas is NOS or similar for spot sales, while contracts are on expected market terms, with the target for Sales and Marketing to maximize profit beyond these terms. From 1 April Marine Harvest Norway hedges contract sales in currency towards NOK with Marine Harvest ASA as counter party. Marine Harvest Norway will then hedge the same way as our peers. The effect is included in Operational EBIT. From the same date the impact of realised salmon derivatives are included in Operational EBIT. Marine Harvest Group Page 6
Business areas and segment reporting Marine Harvest Group Farming Sales and Marketing Other Eliminations and exchange effects Group Sales VAP Europe NOK mill Q2 11 Q2 11 Q2 11 Q2 11 Q2 11 Q2 11 Q2 10 External revenue and other income 95 3 035 1 077 22-36 4 192 3 583 Internal revenue and other income 2 945 477 14-7 -3 429 0 0 Operational revenue and other income 3 039 3 512 1 091 15-3 465 4 192 3 583 Operational EBIT 897 36 1-35 - 5 894 792 Operational EBIT% 29.5 % 1.0 % 0.1 % na 0.0 % 21.3 % 22.1 % For the Group, operational EBIT in the second quarter amounted to NOK 894 million (NOK 792 million). Farming contributed with an operational EBIT of NOK 897 million, while Sales and Marketing had an operational EBIT of NOK 37 million. The sales activities generated an operational EBIT of NOK 36 million, whereof NOK 23 million from Raw Materials and Trade Europe, NOK 6 million from Sales and Marketing Americas and NOK 7 million from Sales and Marketing Asia. VAP Europe generated NOK 1 million in Operational EBIT in the period, while Other units reported a loss of NOK 35 million. The effect of Marine Harvest Norway s hedging of contract sales in currency towards NOK, with Marine Harvest ASA, as a counterparty cause a cost/income of NOK 16 million in ASA and Marine Harvest Norway respectively. The period was affected by numerous exceptional events including substantial losses due to biological issues. Total costs related to exceptional items in the second quarter amounted to NOK 124 million. Market performance Volume sold by Marine Harvest Sales in the second quarter largely reflects the harvested volume as only limited volumes were traded in the period. The quarter was challenging, starting with high market prices which later dropped through May and June. Price achievement The overall price achievement improved in the second quarter as contract sales were at reference price level, while the cost of quality downgrading was reduced. The spot price achievement for Norwegian salmon was disappointing, as these sales only generated prices slightly above the reference price for the quarter. The achieved price for salmon of Norwegian origin was similar to the reference price in the past quarter. Increased supply contributed to a buyers market towards the end of the period. Still, both spot sales and contract sales contributed favourably to the total price achievement, and were above the reference price in the period. The negative adjustment for quality downgrading in the quarter was within the normal range and significantly below the level in the second quarter of 2010. With effect from April 1, Marine Harvest includes the realised salmon derivate contract effects in the price achievements. The overall effect on the price achievement in the second quarter was limited, although a significant contribution by the end of the quarter. Norway Marine Harvest Norway Q2 2011 - Impact on average achieved price Other operating units 40.00 Average prices achieved (incl all qualities) vs reference price 30.00 104 % NOK per kg 20.00 10.00 102 % 100 % 98 % 96 % 94 % 92 % 0.00 NOS average price Spot sales Contracts/ salmon derivatives Quality Contribution other units Weighted FCA Oslo 90 % 88 % Norway Scotland Canada Canada incl Kudoa claims Marine Harvest Group Page 7
Norway Scotland Canada Chile* Contract share 52 % 49 % 31 % N/A Superior share 91 % 95 % 73 % 93 % * limited volume in Q2 Only Scotland achieved prices above the reference price level for salmon in the past quarter. Average price achievement is measured vs reference prices in all markets (NOS for Norwegian, and Faroese salmon, derived NOS (currently NOS + 2 NOK) for Scottish salmon, and Urner Barry for Canadian and Chilean salmon) and the ambition over time is to exceed the relevant reference price in all markets. The price achievement on spot superior sales was good and substantially above the reference price for salmon of Scottish and Canadian origin, but negative effects from contract sales and downgrading more than reversed the positive spot effect in Canada. Claims related to soft flesh (Kudoa) further reduced the price achievement compared to reference for Canadian salmon. Based on the current price level, the contract contribution will be positive going forward. The contract share for salmon of Norwegian, Scottish and Canadian origin is 61%, 57% and 12% respectively in the third quarter. Geographic market presence Total sales from the Sales organisation (excl VAP Europe) was in the second quarter distributed as follows: 64 % of the total revenues were derived from sales in Europe ex Russia, 4 % in Russia, 21 % in North America, 9 % in Asia and 2 % in the rest of the world. In the quarter Marine Harvest started third party filleting of salmon in China. This is a first step in a plan to improve access to the Chinese retail market. Operational EBIT contribution Sales contributed in total NOK 36 million to the Operational EBIT in the second quarter. Allocated back to country of origin for the four main farming regions, the per kg amounts were NOK 0.29, NOK 1.04, NOK 1.08 and NOK -3.23 for Norway, Scotland, Canada and Chile respectively. The negative contribution to Chilean salmon is due to losses in the Chilean smoking operation and negative margin on traded fish. Operational EBIT contribution from sales activities Q2 NOK per kilo 2.00 1.00 - (1.00) (2.00) 0.29 1.04 1.08 (3.00) (4.00) (3.23) Norway Scotland Canada Chile Chile affected by negative margin on traded volume and in the smoking operations Marine Harvest Group Page 8
Operational performance Farming Ireland and Marine Harvest Farming Farming Norway Farming Scotland Farming Canada Farming Chile Farming Faroes NOK mill Q2 11 Q2 10 Q2 11 Q2 10 Q2 11 Q2 10 Q2 11 Q2 10 Q2 11 Q2 10 Q2 11 Q2 10 Operational revenue and other income 2 048 na 488 na 296 na 50 na 156 na 3 039 na Operational EBIT 692 na 168 na 30 na - 25 na 32 na 897 na Operational EBIT including Sales 708 557 181 68 38 79-28 2 34 43 934 749 Operational EBIT per kg farming 12.79 na 12.90 na 3.87 na -21.15 na 8.33 na 11.23 na Operational EBIT per kg incl sales* 13.08 11.58 13.94 9.43 4.95 11.67-24.38 1.42 8.86 9.68 11.68 10.99 Harvest volume (gutted weight) 54 112 48 105 13 014 7 167 7 772 6 791 1 164 1 645 3 870 4 394 79 932 68 102 Exceptional items incl in op EBIT - 91-17 0 0-23 0-10 3 0 0-124 0 * Operational EBIT including contribution from Sales for 2010 is estimated. These values are used in the upcoming comparison. The main ambition of the Farming organisation is to apply best product practice throughout the geographies in order to optimise production performance. Cost achievement, growth and product quality are the main operational targets for this business area. Farming includes all primary processing activities. Biological risk reduction Survival is a key measure both for ensuring sustainable operations and low cost of operations. Disease mitigating actions are therefore prioritised and good farming practices transferred between entities to improve survival. Common challenges are discussed in global best practice networks. Sealice mitigation has been high on the agenda since 2009. Marine Harvest s global experiences are shared both within the company and with the industry in general. It is the Group s ambition to be a driving force in this area both in the industry and towards the authorities. The sea lice level in Norway at the end of the second quarter was lower than at the same time last year. Mtigation costs have increased from last year. In Chile, the sea lice level is increasing and causing some concern for the upcoming summer. Improving growth in sea water Good seawater growth is a prerequisite to reach cost leadership. A global project to optimise feeding and growth has therefore been initiated. The ambition is to develop better growth models taking into account local variations in temperatures and water quality in order to optimise feeding and thus growth at any time. Feed and other raw material prices Feed prices have increased during 2011. Projections indicate that feed prices will be somewhat reduced in the second half of the year based on the increased supply of feed raw materials. Marine Harvest estimates that the feed prices in the second half of 2011 and full year 2012 will be similar to the 2010 level. Building for the future Fresh Water investments In order to reduce costs and increase the biosecurity, Marine Harvest has embarked on an extensive fresh water investment program globally. This program encompasses investments in the fresh water area in all the major farming regions, Norway, Scotland, Chile and Canada. These projects will produce better smolt and contribute to significant cost reduction in the fresh water area. Recently approved investments in Norway, Scotland and Chile are progressing according to plan. Guiding Marine Harvest expects to harvest 79 000 tonnes gutted weight in the third quarter and 335 000 tonnes gutted weight in total for 2011. The full year prognosis is down by 6 000 tonnes from the previous estimate due to a reduction in the planned harvest volume in Norway where low sea water temperatures has reduced the production in the first half of 2011. Volumes out of Scotland and Chile have been increased compared to previous guiding due to good sea water growth. Marine Harvest Farming GUIDING HARVEST VOLUME Tonnes gutted weight Norway Canada Scotland Chile Ireland Faroes Total Forecast Q3 2011 46 000 7 000 13 000 11 000 2 000 0 79 000 Full year forecast 2011 213 000 33 000 47 000 26 000 10 000 6 000 335 000 Marine Harvest Group Page 9
Norway Volume and margin Operational EBIT in the farming operation was NOK 692 million in the second quarter. Including the allocated contribution from Sales, Operational EBIT was to NOK 708 million (NOK 557 million), which amounted to NOK 13.08 per kg (NOK 11.58). The increase in margin was a result of the increase in achieved prices as markets remained strong until the end of May (ref market section). The increase in harvest volume contributed to the improved profitability. Total harvest volume in the second quarter was 54 112 tonnes gutted weight (48 105 tonnes). Pancreas disease (PD) has been more challenging in 2011 than in 2009-10, still better than in 2007-8, with 9 outbreaks year to date (5 in 2010 and 4 in 2009). One site in region South has lost more than 60% of the fish due to PD since the site was stocked. As mortality has continued in July, the remaining fish at the site are considered for early harvest. Mortality has been accounted for in the second quarter in the amount of NOK 24 million. An outbreak of Bacterial Kidney Disease (BKD) hit smolt pre- and post-transfer in region North in the period. The smolt has been culled and the costs accounted for in the quarter amounted to NOK 23 million. As in previous periods, sea lice mitigation costs have been high for 800 700 600 500 400 300 200 100 0 Norway Q2 2011 - Operational EBIT incl. sales contribution Op EBIT Q2 2010 Costs and operations Price Volume Feed Oth SW costs Non SW costs Op EBIT Q2 2011 Increasing feed and lice mitigation costs negatively impacted profit in the period. Other costs were reduced compared to last year. the harvest generation. The estimated exceptional cost in the second quarter was NOK 0.81 per kg (NOK 0.36), which in absolute terms amounts to NOK 44 million (NOK 17 million). Total exceptional costs in the period amounted to NOK 91 million (NOK 17 million) ie NOK 1.68 per kg. Due to low seawater temperatures, especially in region North, and increased mortality in region South, seawater growth has been low in the second quarter. Sea lice levels are under control as mitigating actions are successful. The PD challenge has increased. The cost reduction ambition for Farming Norway in the second half of 2011 of NOK 0.50 per kg compared to the second half of 2010 is maintained, although slow sea water growth and thus lower harvest will affect the unit s ability to reach the target. Scotland Volume and margin Operational EBIT in the farming operation was record high with NOK 168 million in the second quarter. Including the allocated contribution from Sales, Operational EBIT amounted to NOK 181 million (NOK 68 million), which was NOK 13.94 per kg (NOK 9.43). The increase in margin was a result of the increase in achieved prices and high volumes, as planned. Harvest volume increased by 82% to 13 014 tonnes gutted weight (7 167 tonnes), due to good sea water growth and increased stocking (in accordance with the plan to grow to 50 000 tonnes gutted weight). Scotland Q2 2011 - Operational EBIT incl. sales contribution Costs and operations The increasing feed costs had a material negative impact on the Scottish results in the second quarter. Other costs were positively affected by the increased harvest volume through scale effects. The freshwater recirculation project is moving ahead according to plan. The first smolt from this unit is expected put to sea in the third quarter of 2013. The biological situation in Scotland remains positive with low mortality and good growth and as a result the guided volume for Scotland in 2011 has been increased. 250 200 150 100 50 0 Op EBIT Q2 2010 Price Volume Feed Oth SW costs Non SW costs Translation Op EBIT Q2 2011 Marine Harvest Group Page 10
Canada Volume and margin Operational EBIT in the farming operation was NOK 30 million in the second quarter. Including the allocated contribution Sales, Operational EBIT amounted to NOK 38 million (NOK 79 million), which was NOK 4.95 per kg (NOK 11.67). The reduction in margin was a result of lower prices, and higher costs. Contrary to other farming units, Marine Harvest s Canadian operation did not benefit from higher prices in the period mainly due to the effects of Kudoa (soft flesh) reducing the achieved price. Total harvest volume in the second quarter was 7 772 tonnes gutted weight (6 791 tonnes). Costs and operations Due to slow sea water growth and increasing feed prices both feed cost and other sea water costs have increased compared to 2010. Growth improving initiatives have been initiated and this remains the main focus area for the Canadian unit. An algae bloom caused mortality at two sites in June with a loss in the amount of NOK 3 million accounted for in the period. Beyond the issue of slow growth, the biological situation is good with low mortality and good sea lice control. 100 80 60 40 20 Canada Q2 2011 - Operational EBIT incl. sales contribution Kudoa remains an issue for fish grown in certain areas, and exceptional items included in operational EBIT amounted to NOK 23 million in the second quarter related to discards and claims (NOK 0). 0 Op EBIT Q2 2010 Price Volume Feed Oth SW costs Non SW costs Translation Op EBIT Q2 2011 Chile Volume and margin Operational EBIT in the farming operation was NOK -25 million in the second quarter as the unit only harvested fish during June. Including the allocated contribution from Sales, Operational EBIT amounted to NOK -28 million (NOK 2 million). The negative contribution from Sales is a result of a negative result in the Chilean smoking operations (now included in the S&M business area) combined with negative margin on traded volume. The volume harvested in the period was 1 164 tonnes gutted weight (1 645 tonnes). Costs and operations Due to good feed conversion and improved efficiency in the sea water operations, the seawater costs have decreased compared to last year. Other non-seawater costs have increased substantially from 2010. The increase is partly caused by the accounting for culling of broodstock. A total of NOK 10 million has been accounted for in the second quarter, and included in exceptional items. A release of accrual for mortality of NOK 14 million in 2010, and the negative contribution from the smoked operations further explains the movement in other non-seawater costs between the second quarter of 2010 and the same period in 2011. 5 0-5 -10-15 -20-25 -30 Op EBIT Q2 2010 Chile Q2 2011 - Operational EBIT incl. sales contribution Price Volume Feed Oth SW costs Non SW costs Translation Op EBIT Q2 2011 Growth and mortality remains good, but increasing sea lice levels and challenges with SRS (salmon rickettsial syndrome) causes some concern. Marine Harvest has decided to maintain the conservative stocking number for 2011 of 8 million smolts. Marine Harvest Group Page 11
Other Farming Units Marine Harvest Ireland Marine Harvest Ireland achieved an operational EBIT of NOK 10 million (NOK 25 million) including the contribution from Sales in the second quarter of 2011. The reduction was mainly a result of a 45% reduction in harvest volume and slightly higher feed costs. Prices were higher than in the same period last year. Harvest volume in the second quarter of 2011 was 1 673 tonnes gutted weight (3 032 tonnes). Operational EBIT per kg harvested in the period was NOK 5.69 (NOK 8.38). Challenges related to IPN caused mortality amounting to NOK 4 million in the period. Marine Harvest Faroes Marine Harvest Faroes achieved an operational EBIT of NOK 25 million (NOK 17 million) including the contribution from Sales the second quarter. Compared to 2010 the price achievement was negative as the unit in 2010 benefited from favourable prices in the US market. Marine Harvest Faroes benefited from higher volumes as well as lower costs compared to the second quarter in 2010. Operational EBIT per kg harvested in the period was NOK 11.19 (NOK 12.58). Operational Performance VAP Europe Prices and volume Marine Harvest VAP Europe s operating revenues were NOK 1091 million in the second quarter (NOK 1 067 million). The volume sold was 3% lower than in the same quarter in 2010 while the average price achieved was 7% higher than last year in EUR. Volume reduction was recorded mainly in salmon products due to high salmon prices and reduced promotional activity in the retail sector. Operations and profit Operational EBIT was NOK 1 million in the second quarter of 2011 (NOK 60 million). Profitability in the period was negatively impacted by the substantial increase in raw material prices compared to 2010, costs related to reorganisation and moving of production in Poland and poor results from the smoking operations. The costs in Poland amounted to NOK 6 million in the second quarter. Sales of Atlantic salmon accounted for 68% of the total sales value VAP Europe Q2 2011 - Operational EBIT variance in the second quarter of 2011 (68%). Salmon Other species Q2 2011 Q2 2010 Q2 2011 Q2 2010 Volume share 59 % 61 % 41 % 39 % Revenue share 68 % 68 % 32 % 32 % Gross Margin share 51 % 70 % 49 % 30 % 140 120 100 80 60 40 20 0 Op EBIT Q2 2010 Price Volume Raw Materials Other Op EBIT Q2 2011 Due to the counter cyclicality of this business, increased volumes and margins in Marine Harvest s downstream operations are expected going forward. As a result of salmon s competitiveness compared to other protein sources, retailers have again started to plan promotional activities. Other Holding and Parent Companies Included in Marine Harvest Other Businesses are holding companies and the parent company. Operational EBIT for these companies in the period was NOK -39 million (NOK -1 million). The result includes the internal hedging effects towards NOK for the Norwegian sales operations with NOK -16 million. Sterling White Halibut Sterling White Halibut recorded operating revenues of NOK 21 million (NOK 27 million) in the second quarter. Operational EBIT in the second quarter was NOK 3 million (NOK 1 million.) Marine Harvest Group Page 12
Events during and after closing of the quarter Guiding Principles Marine Harvest s guiding principles and corporate ambitions, including the 2011 priorities, are described in the 2010 Annual report. Profit Increase in syndicated loan Marine Harvest has reached agreement with its lenders to up-scale the EUR 600 million Facility Agreement by EUR 200 million. The terms of the Facility Agreement will not be affected by the upscaling. Dividend distributed Dividend of NOK 0.80 per share was approved by the General Meeting and distributed in May. As a result of the dividend distribution the conversion price for the convertible bond was reduced from EUR 0.7494 to EUR 0.6547. People Marine Harvest has the ambition to place the company among the leaders in safety across industries, globally. The Group has initiated a safety program custom designed for Marine Harvest by an international group specialising in industrial safety practices, for delivery by Marine Harvest facilitators. During the next two years the goal is that every Marine Harvest employee will participate in the program. Product The Sales and Marketing continues to strengthen its organisation including increased market intelligence capacity and new team leaders for the central east European unit, and the unit handling sales of airfreighted salmon. Planet Antibiotics Marine Harvest used 49 grams of antibiotics per tonne produced in the second quarter of 2011. This is an increase compared to the 2010 full year level of 28 grams per tonne. The main challenge in the period was salmon rickettsial syndrome (SRS) in Chile, accounting for 91% of the total antibiotics used in the period. The increased use of antibiotics in Chile is causing concern and Marine Harvest takes this concern into consideration when evaluating the speed of the rebuilding of the Group s Chilean operations. Sea Lice situation in Norway The good development seen in the last quarters continued in the second quarter with lice levels at Marine Harvest sites below previous years in April and May and on par with 2009 and 2010 in June. Mitigation costs are increasing in line with previous guiding. In July Marine Harvest stocked its first net pen with the first commercially farmed Ballan Wrasse produced globally. Prestocking tests have confirmed that also farmed wrasse graze on sea lice on farmed salmon. PD situation in Norway By the end of the second quarter the Norwegian Veterinary Institute had registered 41 outbreaks of PD in the Norwegian industry, compared to 43 last year and 57, 77 and 29 in the years 2007, 2008 and 2009. Marine Harvest has registered 9 outbreaks in regions South and West, compared to 5 at the same time in 2010 and 10, 12 and 4 in the years 2007, 2008 and 2009. Other Sustainability reporting Marine Harvest has this year changed the format of sustainability reporting. A seafood sustainability guide discussing sustainability issues in our industry was published in May. This guide takes a broad and long term approach to seafood sustainability and does not include detailed data from 2010. A separate Update on Progress report, with data from 2010, is published together with this quarterly report. Marine Harvest Group Page 13
Outlook Marine Harvest reached a record second quarter result. Higher volumes and better prices than last year as a result of the solid contract portfolio created a strong cash flow that in combination with strict capital discipline financed a large proportion of the NOK 2.9 billion in dividends distributed in the second quarter. After several periods of stable global supply, the sudden price drop reminded Marine Harvest that this is a business where sharp increases in fresh supplies over a short period can have significant impact on the market prices. The prices were driven down by the steep increases in supply in May and June and expectations of strong increases in supply from Chile. However, demand is still intact, the price of Atlantic salmon has increased less than competing food products and the global consumption of salmon has never been higher. In this environment it is more important than ever to focus on improved cost performance and strict capital management. The Board has resolved to reduce the 2011 capital expenditure programme by approximately NOK 200 million. Going forward the annual capital expenditure level and smolt stocking will be adjusted to reflect the cash flow generation of the Group. The Group is committed to its cost reduction programs and the cost reduction ambition for Marine Harvest Norway in the second half is maintained, although slow sea water growth and thus lower harvest will affect the unit s ability to reach the target. In Norway the proposals put forward by the Gullestad commission, emphasising sustainability measures, are at large supported by Marine Harvest. The measures which most likely will lead to a more consolidated and sustainable industry going forward, represent short term challenges for the whole industry, but this will be more than compensated by better operating conditions and reduced risk in the long run. Due to the biological situation, Marine Harvest follows the development in the industry in Chile closely and plans to stock 8 million smolt this year. The stocking level in 2012 will be considered in light of the biological development. Marine Harvest will harvest 335 000 tonnes in 2011, a reduction of 6 000 tonnes compared to the forecast in the first quarter. The reduction is mainly due to lower volumes of 10 000 tonnes from Norway as a result of biological challenges in the southern part of Norway and low seawater temperatures in the northern part. In the third quarter of 2011 Marine Harvest expects to harvest 79 000 tonnes gutted weight. The Board is somewhat concerned over the estimated increase in harvest volume which will come to the market in the next 12 months. Particularly the volumes out from Chile are expected to show high growth. Marine Harvest will in view of this concern review the production plans with the potential to reduce the future production growth somewhat. The new Sales and Marketing organisation will work proactively to ensure that Marine Harvest takes a commanding role in managing an efficient allocation of these incremental volumes into the markets. Marine Harvest is currently delivering approximately 5 million meal units per day. Marine Harvest will as a function of the weaker market balance and lower prices increase global marketing with the ambitious target to increase the global demand for our healthy food product. Such efforts have already been started through planned sales campaigns with major retailers. The Board anticipates that these efforts will show clear results during the next twelve months. A lower salmon price is likely to increase the margins in VAP Europe. Marine Harvest is working actively within this field to strengthen the existing operation and is also actively considering further expansion. With a 24% market share in the upstream market, Marine Harvest is well positioned to play a leading role also downstream in the years to come. In accordance with our dividend policy, a semi-annual dividend will be considered in light of the cash flow generation in the second half of the year. Marine Harvest Group Page 14
Summary year to date 2011 Record results with better prices and 11% higher volume than in 2010. Operational EBIT of NOK 1 857 million, an increase of 33% compared to 2010. Strong cash flow from operations of NOK 2 617 million, up NOK 922 million from 2010. New organisation from 1 April, with two business areas: Sales and Marketing and Farming. The farming units in Norway and Scotland have delivered record results, while Canada has been negatively impacted by biological issues. Chile has adapted to a lower activity. VAP margins continued to be negatively impacted by high raw material prices. ROACE of 24.1% up from 17.9% in 2010. NIBD NOK 5.8 billion, after dividend disbursement of NOK 2.9 billion in May 2011. Risks Marine Harvest has not identified any additional risk exposure beyond the risks described in note 2 of this report and the 2010 annual report. Confirmation from the Board of Directors and the CEO We confirm, to the best of our knowledge, that the interim financial report for the first half of 2011 has been prepared in accordance with IFRS, as adopted by EU, and gives a true and fair view of the Group s consolidated assets, liabilities, financial position and result of for the period. Furthermore, we confirm that the interim management report includes a fair review of the information required under the Norwegian Securities Trading Act 5 6, fourth paragraph. Oslo 19 July 2011 The Board of Directors of Marine Harvest ASA Ole-Eirik Lerøy Leif Frode Onarheim Cecilie Fredriksen Kolbjørn Jektvik - Chairman of the Board - Deputy Chairman of the Board Celina Midelfart Geir Elling Nygård Mike Parker Hege Sjo Turid Lande Solheim Solveig Strand Alf-Helge Aarskog - CEO Marine Harvest Group Page 15
Interim financial statements Q2/2011 Statement of comprehensive income Note Q2. 11 Q2. 10 YTD Q2. 11 YTD Q2. 10 2010 Revenue and other income 3 4 392.7 3 582.6 8 334.9 7 037.0 15 281.2 Cost of materials -2 171.9-1 802.3-3 928.2-3 659.7-7 780.7 Other operating expenses - 963.8-825.9-2 023.2-1 654.5-3 656.3 Depreciation and amortisation - 162.0-162.3-325.1-322.9-653.0 Fair value adjustment on biological assets 4-701.2 182.6-1 013.0 342.2 1 091.7 Onerous contracts provision - 1.5 0.2 0.5-18.6-14.3 Restructuring cost 1.6-0.2 1.6-0.2-4.4 Income from associated companies 6-12.8 70.7-11.1 89.1 202.0 Impairment losses - 0.5-0.4-2.4-1.1-5.0 Earnings before interest and taxes (EBIT) 380.6 1 045.0 1 034.0 1 811.2 4 461.3 Interest expenses 8-98.3-104.9-193.6-181.8-380.3 Net currency effects 8 142.6-13.3 152.1 114.3 366.7 Other financial items 8 356.0 84.0 279.3 65.1-195.3 Earnings before tax 780.8 1 010.7 1 271.9 1 808.9 4 252.3 Taxes - 95.6-269.6-268.2-442.0-1 143.9 Profit or loss for the period 685.2 741.2 1 003.7 1 366.9 3 108.4 Other comprehensive income Change in fair value of cash flow hedges 12.6 18.9-50.9 184.0 216.6 Deferred tax related to fair value of cash flow hedges - 5.9-6.1 13.9-52.3-61.8 Currency translation differences - 218.0 333.2-330.9 421.7-3.4 Currency translation differences non-controlling interests - 0.8-0.6-0.4-2.1-3.2 Other gains and losses in comprehensive income 3.5 0.0 0.0 0.0 0.0 Total other comprehensive income - 208.6 345.4-368.3 551.3 148.2 Comprehensive income in the period 476.6 1 086.6 635.4 1 918.2 3 256.6 Profit or loss for the period attributable to Non-controlling interests 9.0 3.9 6.3 9.1 30.5 Owners of Marine Harvest ASA 676.2 737.3 997.4 1 357.8 3 077.9 Comprehensive income for the period attributable to Non-controlling interests 8.2 3.3 5.9 7.0 27.3 Owners of Marine Harvest ASA 468.4 1 083.3 629.5 1 911.2 3 229.3 Basic and diluted earnings per share (NOK) 10 0.19 0.21 0.28 0.38 0.87 Marine Harvest Group Page 16
Statement of financial position Q2/2011 Note 30.06.2011 31.03.2011 31.12.2010 30.06.2010 ASSETS Licences 5 440.6 5 357.1 5 442.5 5 643.4 Goodwill 2 111.7 2 115.8 2 111.6 2 118.7 Deferred tax assets 163.4 155.2 118.6 93.3 Other intangible assets 124.3 128.5 132.9 136.7 Property, plant and equipmentt 3 969.4 3 917.6 3 885.1 3 733.9 Investments in associated companies 6 584.7 642.2 678.9 603.6 Other shares 114.3 277.6 124.2 110.7 Total non-current assets 12 508.4 12 593.9 12 493.8 12 440.4 Inventory 727.0 757.8 775.8 702.4 Biological assets 4 5 966.8 6 818.8 7 278.1 5 631.1 Current receivables 2 193.2 2 284.4 2 662.2 2 147.3 Cash and cash equivalents 550.9 377.4 318.9 268.5 Total current assets 9 437.8 10 238.3 11 035.0 8 749.4 Total assets 21 946.1 22 832.2 23 528.8 21 189.8 EQUITY AND LIABILITIES Equity 10 304.3 12 652.5 12 500.2 12 075.6 Non-controlling interests 76.4 68.3 70.5 50.3 Total equity 10 380.7 12 720.8 12 570.7 12 125.9 Deferred taxes liabilities 2 437.8 2 359.4 2 237.9 1 633.1 Non-current interest-bearing debt 5 278.0 4 620.6 5 107.3 4 554.6 Other non-current liabilities 317.9 713.2 571.1 248.4 Total non-current liabilities 8 033.7 7 693.3 7 916.3 6 436.1 Current interest-bearing debt 1 072.4 411.5 429.7 392.3 Other current liabilities 2 459.3 2 006.7 2 612.1 2 235.4 Total current liabilities 3 531.7 2 418.1 3 041.8 2 627.7 Total equity and liabilities 21 946.1 22 832.2 23 528.8 21 189.8 Marine Harvest Group Page 17
Statement of cash flow Q2/2011 Q2. 11 Q2. 10 YTD Q2. 11 YTD Q2. 10 2010 Earnings before interest and taxes (EBIT) 380.6 1 045.0 1 034.0 1 811.4 4 461.3 Adjustment for fair value adjustment and onerous contracts 702.7-182.7 1 012.4-323.5-1 077.4 Adjustment for income/loss from associated companies 12.8-70.7 11.1-89.1-202.0 Adjustment for depreciation and impairment losses 162.5 162.6 327.5 324.0 658.0 Change in inventory, trade payables and trade receivables 295.3 77.1 235.0 158.8-927.8 Taxes paid 40.3-98.5 21.4-107.2-203.8 Other adjustments - 13.0-42.8-24.6-79.0-108.8 Cash flow from operations 1 581.2 890.0 2 616.8 1 695.3 2 599.5 Payments from sale of fixed assets 33.4 5.2 33.9 15.2 22.1 Payments made for purchase of fixed assets - 288.5-261.5-551.1-464.9-986.5 Proceeds from associates and other investments 48.9 23.6 90.1 25.9 59.8 Purchase of shares and other investments 10.9-0.1-133.6-0.1-0.6 Cash flow from investments - 195.3-232.8-560.7-423.9-905.2 Proceeds from convertible bond 0.0 0.0 0.0 1 820.3 1 820.3 Proceeds from other new interest-bearing debt 1 537.5 3 092.0 1 537.5 3 092.0 3 874.4 Down payment of interest-bearing debt - 128.8-2 482.6-664.0-4 790.8-4 931.1 Net interest and financial items paid - 57.3-109.0-161.8-188.7-349.6 Realised currency effects 86.0 47.2 141.7 62.7 172.4 Net equity paid-in 42.1 0.0 42.1 0.0 0.0 Dividend paid to owners of Marine Harvest ASA -2 666.7-1 176.6-2 680.6-1 176.6-2 131.1 Dividend paid to non-controlling interests 0.0-1.7 0.0-1.7-1.7 Transactions with treasury shares - 0.5 0.0-2.8 0.0 0.0 Cash flow from financing -1 187.7-630.7-1 787.9-1 182.8-1 546.4 Change in cash and cash equivalents in the period 198.2 26.5 268.3 88.6 148.0 Cash and cash equivalents - opening balance 377.4 235.6 318.9 172.3 172.2 Currency effects on cash - opening balance - 24.7 6.4-36.3 7.5-1.2 Cash and cash equivalents - closing balance 550.9 268.5 550.9 268.5 318.9 Marine Harvest Group Page 18