Good morning, welcome to this second quarter presentation of Lerøy Seafood Group 2017. My name is Henning Beltestad, CEO in Lerøy, and with me today I have CFO Sjur Malm. First of all, I want to take you through some highlights in the quarter, then Sjur Malm will take you through the key financial figures, and then I will come back and have a view on the outlook going forward and look at the supply and demand numbers for the rest of this year.
Second quarter has been a good quarter for us with an EBIT before our fair value adjustment of NOK 800 million. We have harvested 26,000 tons, which is lower than what we did in the first quarter, where we had about 43,000 tons. Relatively, a very low volume in this quarter. The result per kilo, all inclusive, is NOK 27.30.
The contract share in the quarter is 45%, and end of the quarter, we have a net interest-bearing debt of NOK 3.2 billion . The harvest guidance for the year is a total of 160,000 tons in Norway. Historically, in the last four years, there's been very good results in the industry and also for Lerøy. This was the third-best quarter overall with total EBIT.
The best quarter we had was the first quarter this year. If you look at the EBIT per kilo, all inclusive, we see that the second quarter is the best quarter ever with NOK 27.30 per kilo. We are reporting into three segments. We have the farming, we have the wild catch, which is new this year, and we have the VAP Sales & Distribution in one reporting unit.
The main reason why we changed this is that the VAP is now more and more into the sales and distribution. We want to focus on that as one unit. First of all, farming. It's been the best quarter price-wise ever. NSI of close to NOK 68 compared to NOK 64 last year. An increase of 5%. We are also facing a very good development in the trout prices. That's good for us. We are the world's largest producer of trout. We are very satisfied to see that the price achievement for the trout now is higher than the salmon. The contract prices is still below the spot prices in the quarter. We see a small cost increase from first quarter, mainly because of lower volume harvested.
During second quarter, we have built biomass and end of the quarter we have 96,000 ton live weight in the sea, which is 18% up compared to last year. The guided volumes is in Lerøy Aurora, we have estimate of 39,000 ton. Lerøy Midt, 64,000 ton. Lerøy Sjøtroll is 57,000 ton, a little bit lower than what we had earlier. Sjur will come back to that, why the volume is down.
A total of 160,000 ton. We have our share of Norskott Havbruk, 15,000 ton of the total production, which is 30,000 ton in the Scottish Sea Farms. A total for Lerøy, 175,000 ton. We look at the wild catch, it's been a very strong first half. The catch volumes in the second quarter is about the same as the second quarter last year.
We have a high share of saithe in this quarter, which is 39% compared to 11% last year. The remaining quota in the quarter is about the same level as last year, same time. Compared to the second quarter last year, we see a positive price development for cod, up at 9%, haddock up at 30%, and we see prices of saithe is down 28%, mainly because of higher volume of saithe and also there is a lack of effort in the markets for the saithe.
I think that's something that we, Lerøy and the industry, really need to focus more on in the future. We also see good effects from organizational structure in Lerøy Norway Seafoods and the integration with Lerøy Seafood in Bergen. If we look at the remaining quotas for Havfisk, we see for cod it's about the same level. For haddock, it's 500 tons lower.
Saithe is higher, and as we see, it's about 25,000 tons remaining for the rest of 2017. If we look at value chain and distribution, we see a record activity level in the first half of 2017. The main reason for that is the activity that we get in with all the extra whitefish. Also we see the operating margin in this segment is better with a 2.9% operating margin compared to 2.3% second quarter last year. A positive development in the key operations. Our position as a full seafood supplier has been enhanced significantly over the previous year.
We also see that, if you look at the integrated value chain, we are much stronger than we used to be with the whitefish also coming in as an important part of our value chain to have a full traceability, to have more stability in the supply and working closer together with the customer and the sourcing of both farming and fishery gives us a very strong position.
Total of 3,800 employees in the company today. We have our distribution network in Europe is very strong. We have used many years to build up this network with small flexible units in all main markets, main cities. One example of that is a new factory opened in Barcelona. Production started in April 2017 producing sushi and ready meals solutions for retail.
This is the counters in the supermarket focus on kind of a takeaway, ready meals food for seafood with salmon, with tuna and also other species. It's a huge potential in all major markets all over Europe for these kind of products. Okay. I give it over to Sjur Malm.
Yes, thank you, Henning. I think the main themes in our first half and second quarter report is the fact that we had a high harvest volume first quarter. Through second quarter, we built biomass. Biomass is 18% higher compared to the same time last year. We had a relatively low harvest volume this quarter. Profitability on the harvest volume has been good, particularly also helped by the fact that trout prices now are on par with salmon prices. If you look into the details, we can see the drivers for our profit loss, the key drivers at least on the latter lines. We can see harvest volume. 26,000 tons compared to 41,000 tons last year, it's down 36%.
You also see that the profitability per kilo is significantly up driven by a lift in salmon prices, obviously, but even more a lift in trout prices. That means that the EBIT for this quarter is slightly higher than the same quarter last year on a 36% lower volume. We can also see that depreciation and amortization is up. That is mainly driven by the fact that our acquisition into whitefish is consolidated from September 1st last year.
That gives us a higher capital base as we will see soon, and higher depreciation and amortization. Income from associate, and we have a number of well-performing associate companies. Most important is Scottish Sea Farms which had a strong quarter. We can see that our pre-tax is NOK 840 compared to NOK 775 last year.
Given the harvest volume, we are pleased with the profitability level this quarter. Looking at the first half, we can see that the volume decline is much less significant. We're down about 10,000 tons compared to last year. Profitability per kilo is up almost NOK 10 . We have the highest EBIT in any first half at any point in time in the history for our company at NOK 2.1 billion, up more than 50% from last year.
We also see that we have a high revenue level and the highest activity level in any first half at any point in time in our company's history. We are quite pleased with first half performance and profit levels. Return on capital employed is 29%, looks low, the increase from last year given the increase in operating profit.
That's driven by the fact that our balance sheet is significantly increased with the acquisition of whitefish. Today, the return on capital employed is significantly higher in red fish than in whitefish, and obviously our aim is to increase the returns also in the whitefish business. Looking into our balance sheet, you can see what I already have described. We consolidated the whitefish business September 1st last year .
With that acquisition, we gained access to quotas, which is the key driver for the increase in intangible assets. We also got access to several factories, but even more a large fishing fleet. Of 10 boats, which is the reason, or nine boats operating, now 10 boats from first quarter next year. That's the increase in tangible fixed asset. Other than that, there are no key highlights in the balance sheet.
It's worth mentioning biological asset at cost, which is the cost of the fish at sea, which will be harvested later. We see that the increase compared to last year is up 19%. Henning has already touched upon that the biomass is up 18%, and this is the first quarter where we see the same increase in cost as same increase in biomass for actually some years.
That is an indication that cost level is leveling out, and we believe there is potential for lower release from stock cost going into second half of 2017 and also into 2018. This is mainly driven by operational improvements, but there is also a potential later 2017 and even more in 2018 in lower feed cost. Equity ratio is 57%.
Net interest-bearing debt of NOK 3.2 billion looks high compared to last year. At this point in time last year, we had raised equity for acquisition. We hadn't paid for all the shares yet. This shows amortization schedule on debt. We believe it's a sound profile. We are well within our covenants. In cash flow, a lot of numbers on this slide. I choose to highlight first half.
You can see the effect of building down biomass Q1 and building it up Q2 on working capital. If you look first half, EBITDA is NOK 2.4 billion. High profitability level last year gives us a tax bill of NOK 500 million. Now all taxes are paid for 2017. We built some working capital. Cash from operation is almost NOK 1.8 billion.
As we highlighted and presented in the fir st quarter, we have a significant investment program into larger smolts, into more efficient industrial value chain as well. Our CapEx is the highest ever, first half, at almost NOK 600 million. We have received a nice dividend from operations in Scotland, and we've paid out NOK 830 million in dividends. In sum, cash flow is a reduction in net interest-bearing debt is only NOK 244 million.
Keep that then in mind that we paid out our dividends and all taxes are paid. We expect a significantly stronger reduction in net interest-bearing debt in the second half. Henning Beltestad has already touched upon the segments, I go more into details in the following slide. Looking into Lerøy Aurora, which is our farming operations in Troms and Finnmark in the northernmost part of Norway.
This company has been performing exceptionally well over the recent years. Performance is still good. Performance on the generation, which is currently harvested is not the best we've done. We have slightly higher cost this quarter. We do see that what we have at sea is growing well with record growth, and we do expect declining cost into second half of 2017. Volume guidance 39,000 tons.
Looking to Central Norway, those of us who know as well, know that we had significant challenges in this region combating sea lice second half of 2016 but also second half of 2015. That situation second half of 2016 is impacting our harvest volume this quarter and also harvest volume in 2016. You can see it's very low volume in this quarter. Yet to date, the volume is on par with the first half of last year.
Profitability level is impacted by the low volume, which has an impact on cost. The most important thing in Central Norway is how we will be able to handle the autumn of 2017. What I can say is that so far, the situation is significantly improved compared to last year. We have made significant investments in equipment, in clean fish treatment equipment, but maybe most important, has been a very high focus and the organization has worked well.
So far, so good. We are humble that we are at peak when it comes to temperatures and potential challenges. It's too early to conclude. So far, so good, and we are increasing the volume guidance for this operation at this point in time. Going to Hordaland,. This operation has seen a high challenge from lower trout prices. This is where we produce trout in Norway.
We are the world's largest trout producer and the Laksefjord company, we're producing most trout. Trout prices has been under pressure post Russia's ban on imports in 2014 when half of the market disappeared. We have succeeded in building new markets, new channels, and there's also a lower harvest volume, which has given a significant lift in trout prices. We are pleased to see that the achieved price on trout this quarter is on par and actually marginally higher, 10%. There's quite some time since that was the case. You have to go back to 2014. That dynamics gives a lift in profitability level to NOK 21 in Q2 this year. Our costs are still higher than what we are pleased with.
We have also seen challenges in the first half this year and now in the second quarter on growth from the spring 2016 generation, which we are harvesting out these days. Performance on the autumn generation is better. There is room for significant cost reductions late this year into 2018. We are a little bit humble given the experiences on the previous 2016 generation. Those bad experiences is the reasons for lower volume guidance of around 7,000 tons.
Looking into whitefish and wild catch, Henning has already touched the main themes. We have an annual quota for most of what we catch. Obviously looking on quarterly numbers is challenging as the catching time may vary from year to year. If you look on first half, we are pleased with profit levels of around NOK 244 million. We see that the volume is slightly higher than last year.
We can also see that, Henning has already shown that the main quotas are on par with last year. As now, best indication now is a higher catch volume in 2017 and 2016 and extremely good catch efficiency rates is a key driver for this first half to be the best first half ever for Havfisk. Cod prices, good development, haddock prices, a good development, and we have plenty of job to do on this side. This is our operation in U.K., which is owned 50/50 with SalMar.
A strong quarter and actually the strongest quarter in the company's history. Good performance. Everything points toward good performance also in coming quarters. Contract share of 34% and the company is investing in three new and better efficiencies through new smolt facilities, which is under construction. Harvest volume is expected at 30,000 tons.
We are very, very pleased with the performance in Scottish Sea Farms this quarter and are proud to see the strong numbers they report. Looking into value-added products, sales, and distribution. As said, the volume on salmon product is down 36%. That obviously impact activity level on that business. We're also building a significant processing capacity downstream, as Henning has already commented upon. There is a good development in these businesses.
We are pleased to see an increase in operating margin from 2.3% to 2.9% and EBIT this quarter of NOK 115 million. There is still significant potential in this part of our business, and we are very eager to put more whitefish into the value chains we have already built. There is a potential there to create more demand for the whitefish business.
If you now look into outlook, looking at the volume expectations for 2017, there is basically no growth in Norway, and there has basically been no growth in Norway since 2012. This is obviously positive for price development, but we believe it's a challenge for our industry's competitive position longer term.
We are backing out from not growing in several interesting markets, and we hope that there is room for a gradual increase in growth rates in Norway in the coming years, although there are no such indications as of today. Looking at the different regions, as expected, anyone who can grow will grow at current salmon prices. We see U.K. increasing. We see new regions like Iceland coming up. It's still small volumes. We see an increase in Australia, but overall there is limited volume growth in 2017.
Indications are for some more growth in 2018, but still at a low level and particularly low level if you make some comparison over the last five years. This shows the salmon price. It is volatile. It is also a little bit less recent years due to challenges with sea lice in Norway, but it is seasonal. There is a higher volume to be harvested in Norway second half than first half.
There are no surprises in that prices come under pressure from the historic high levels we saw in Q2 now into Q3. Our experience is that with the levels we are seeing now, there's a pickup in activity level in industry and in retail. It will be volatile in peak supply period, which we have coming months, but we believe the market response is good, and we believe demand for salmon remains strong.
This shows the monthly harvest volume from Norway. As we can see, we have a seasonal increase July into August this year as basically any year. The higher volume will increase further in September. It's expected for a slightly lower volume October, November, December. It is higher growth than first half, not high growth in historic perspective.
Some seasonality in price and volume is expected, is also expected from the buyers of salmon. We believe investor activity will pick up forward to the Christmas season. Looking to Europe, Norway is a very high share. The dynamics is the same. Growth rate is slightly lower. If you look into Chile is picking up a bit from very low growth rates due to events several years back.
We see relatively high growth rates on a relative basis compared to last year, but the volume is not high in historical perspective. We believe a significant share of this volume will go to the U.S. and more local markets around in Southern America. Worldwide, summing up, it's no doubt, and there's been no doubt all year that there will be higher relative growth rate second half compared to first half. There isn't much growth there if you look some years back. On the consumption side, we get the response which is expected. We see new markets willing to pay a higher price, and we see the EU market, the most mature market, losing some market share. Totally, consumption is estimated down around 5%.
It's more down in the EU, while there is slightly better performance in the U.S. and then some growth in other markets, and non-growth in some other markets, but in some other markets gaining market share. This is obviously then looking at volume. If you look at value, there is very strong growth in how much money people are spending on salmon in 2017 compared to 2016.
It is important to look at value and not only volume, and we believe the market and the demand for salmon is strong. This is looking into the other markets, and we can see growth in several markets, and these markets are the markets we would like to develop further. There's a significant potential for salmon in basically all markets, and we need some more volume to continue to develop these markets.
Summing up, we believe it's a positive outlook for our industry. We see that people are spending more and more money on seafood, and we believe we have a good position to utilize that trend and be part of developing that trend. Looking into our red fish business, we're guiding for 175,000 tons, including associate companies. That is down 5,000 tons, and that's not much.
Keep in mind that it's not nails we're making, we're making live animals, there will always be some uncertainty. Overall, we have good growth these days, and we have a good sea lice situation. There has been some challenges in Hordaland, as I mentioned. Our volumes will be higher third quarter, meaning also that the contract share will be lower. We expect around 30% contract share in third quarter.
Within whitefish, we've just started, and we believe there is a significant potential in both making efficiency gains in the value chain, and we believe there's a significant potential in increasing demand for whitefish. We look forward to continue that work together with all our employees. With that, I end, and thanks for your interest.