Good day, welcome to the Marine Harvest ASA quarterly report international conference call. At this time, I'd like to turn the call over to Kim Galtung Døsvig. Please go ahead, sir.
Thank you. Hello, everyone. I'm the Investor Relations Officer in Marine Harvest. Today we announced the Q4 quarterly results. The presentation is already out on our website. We have a webcast that you can also click on. I will go through the presentation quite quickly, then we can open up for some Q&A. Moving on to page three, the highlights for the quarter. Starting off with 2016 in general, was a great year for the company. Record earnings and cash flow generation. Very good demand. 2016 was a very good year for Marine Harvest in total. The Q4 earnings of EUR 259 million was also a record high. We had very good results coming from all entities across our business chain, from feed to farming to sales and marketing and Consumer Products. The salmon prices were very good.
Fantastic impressive demand throughout 2016 and reduced supply. The board of directors have approved a dividend of NOK 2.8 per share for the quarter. Key financials on page four. The first time in the history of the company, we generated more than 1 billion in revenue for the quarter, which is up 17% year-over-year. Operational EBIT of EUR 259 million and EUR 700 million for 2016. Underlying EPS of NOK 0.43 and net cash flow per share of NOK 0.25. The harvest volume was 10% down versus the previous year, and in fact, volumes for 2016 overall were down by 9%. Operational EBIT across the value chain of 2.6 was very good. On page five, the prices. Prices in Q4 were a record high in both Europe, in Americas, and also Asia.
The strong prices have continued in the Americas in Q1, in Europe they have declined slightly but are still at a good level of around EUR 7 today. Moving on to page seven, operational EBIT comparison. The main contributor to the increased earnings year-over-year is the very good contribution from the farming division across all regions, Norway, Scotland, Canada, and Chile. Feed also delivered an improved result year-over-year, and also markets and the Consumer Products division. Going into the different countries. Some of the highlights in Norway on page eight were an operational EBIT of NOK 172 million, an operational EBIT per kilo of NOK 2.7, and a price achievement of 90%. The price achievement was lower than the reference price which is spot based because we had a high contract share in the quarter. The contract prices were below the spot reference price.
The biological issues in Norway persist and as you can see, the sea lice mitigation cost or what is denoted exceptional items per kilo is still at a high level of EUR 0.41 per kilo. We do expect the costs in the first half to increase somewhat due to the low volumes. On page nine, you can see our contract portfolio. The contract rates, sorry, the contract volumes for 2017 are slightly lower than the same quarters in 2016. We maintain our contract policy and contract strategy of entering into longer-term contracts with retailers. Contract prices are expected to continue to increase as they roll over on higher prices. Page 11, Scotland. Operational EBIT of EUR 22 million on a harvest volume of 11.8 thousand tons. A very good year-over-year improvement in Scotland, mainly driven by price.
The price achievement is the same as in Norway, below 100%, of 91%, that's due to a high contract share. We see that the volumes are slightly lower than the same quarter last year, that's due to some biological challenges that we had in 2015, which affected the harvesting volumes in 2016. However, the turnaround process in Scotland is on track. We changed some of the management team in Scotland in 2015, we have been through an organizational change in Scotland, we have also reduced the manpower in our Scottish farming operation. Hence, we do expect cost to decrease into the first half of 2017. In Canada, on page 12, a very steady quarter by the Canadian farming team. Same as last quarter, very good price achievement. Spot prices have increased, costs are more or less stable.
We do expect costs in the Canadian operation to be relatively stable going forward. In Chile, on page 13, Chile has really changed a lot in the last year, from losing EUR 19 million, the Chilean business area has now made EUR 20 million, despite significantly reduced volumes due to the algal bloom in March of 2016. The operational EBIT per kilo is, of course, impacted by the higher prices. Also, we were harvesting from some very good sites in the quarter, which carried a lower cost. Hence, the cost improvement year-over-year was also good. Having said that, volumes are expected to be more or less at the same level as in Q4, going into Q1 and Q2 of 2017. We know that the fish we'll harvest carry a higher cost. We do expect cost per kilo to increase in the next six months. Page 14.
Good contributions from Marine Harvest Ireland and very good contributions from the Faroes. Prices are good and costs are good in the Faroes. An operational EBIT of NOK 3.59 per kilo is very good. Moving on to the Consumer Products division. It was a good quarter for Consumer Products. Q4 is the seasonally best quarter because of high volumes in Christmas sales. 14% volume increase year-over-year is good. Good demand response across Europe for our products. Of course, compared to Q4 of 2015, where we had some challenges in the startup of one of our processing sites, those are now well behind us. The year-over-year improvement was good. We're building a new VAP processing factory in Canada, and the idea is that that plant will process our Canadian fish and then sell into the Canadian and North American market.
It follows our strategy of making more and more processed products. Page 16, in Feed. It was a very good quarter for the Feed operation with a 10.1% operational EBIT margin. Self-sufficiency rate of 86% in Norway, and the capacity has been increased to now 330,000 tons. This factory continues to increase in size and delivering feed to our Norwegian farming operation. Moving into the financial and supply and demand section on page 18. We have talked about some of the key numbers, operational EBIT of NOK 259 for the quarter. The net fair value adjustment of NOK 74.7 is mainly related to the increased salmon prices. Hence, the value of our biomass needs to be IFRS mark-to-market adjusted, hence the uptick. Income from associated companies is a very good contribution from our Nova Sea holding in the northern part of Norway.
They made EUR 2.76 per kilo, so a very good quarter for Nova Sea. Underlying EPS of EUR 0.43 and the net cash flow per share of only EUR 0.25, and that's due to the seasonal buildup of working capital. Page 19, financial position. Our balance sheet continues to grow. The equity ratio is 42.9% at quarter end, and the net interest-bearing debt of EUR 890 is below the long-term target of EUR 1,050. On page 20, we see the cash flow and the debt breakdown. In the quarter, working capital, we tied a lot of working capital due to seasonal buildup of sales from our Consumer Products division, accounts receivable, but also biomass in sea. Taxes paid for the quarter and for the year, and CapEx came in in line with our previous guidance. So did the net interest paid and net debt end of quarter at EUR 890.
Cash flow guidance for the year on page 21. Working capital buildup of EUR 120 million relates to organic growth within farming, mainly within farming, also within Consumer Products. We are growing our volumes from the 2016 levels. We would like to grow our biomass. This drives working capital. CapEx of EUR 240 should be seen in relation to a depreciation level of around EUR 160. Some expansion activities continue. We are through a multi-year expansion project in Marine Harvest first and foremost expanding our freshwater footprint, building new smolt facilities in Norway, Scotland, Faroes, and Canada. We expect those projects to amount to about EUR 50 million in 2017. The new plant in Scotland is slightly delayed, we hope to get the permission to start building. We will spend EUR 35 million on that for this year.
Some selected expansion activities across our Consumer Products division, both in Europe but also in the Americas and Asia of NOK 25 million in total. Interest paid of NOK 25 million, more or less the same as in 2016. Taxes paid up to NOK 150 million due to significantly higher profits achieved in 2016. No changes on our financing on page 22. On page 23, the supply outlook, supply development in the quarter. Supply for the quarter came in as expected of -11% compared to the same quarter last year. This was driven by lower volumes in Europe, mainly due to the biological situation in Norway and Scotland. In Chile, the volumes are slightly above what we expected, but still significantly down year-over-year.
They're down because of the algal bloom, and they're up versus expectations of about 100,000 tons because of some farmers harvested early because of the biological situation in Chile. On page 24, the prices we have talked about, so I'll move on to page 25. The market, global volume by market. Over time, the supply follows the consumption, so when supply is down by 11%, we should expect to see more or less the same trend on the consumption. This quarter was down by 9%, so it's in line with what we expected. Having said that, prices in Europe are up by more than 50%, and prices in the U.S., the Americas, and Asia are up by more than 70%. Demand is very good, and the markets continue to grow. Page 26, supply outlook. We have reduced the supply guidance slightly.
If you recall, we said last quarter that the risk was on the downside on our supply estimate, they have been taken down somewhat, and we now expect a global supply change of -1%- +4% for the year. Q1, we expect a negative development of 8%-12% for the global salmon market. Moving on to 27, our own volumes. Marine Harvest guided today some volumes for 403,000 tons for 2017. We do expect to recover some of our volumes in Norway and Chile, to continue to grow in Scotland. In Faroes, we will in fact reduce in 2017 because we lack the number of sites. We should expect the volumes in Faroes to increase in 2018 to more or less the same level as we achieved in 2016.
We haven't changed our guidance for the year, but we have taken down the Norwegian volumes by 2,000 tonnes, and we have increased the Scottish volumes slightly. Shifted the volumes a little bit around. To sum it up before we open up for any potential questions, the outlook, we expect the market to remain tight in 2017 on the back of continued good demand and low supply growth. When we look at the forward price, it shows EUR 7.2 for the next 12 months in EUR per kilo. The sea lice situation, it's still the number one industry challenge as we see it. Our strategy of focusing on non-medicinal treatments, tools, techniques, innovation continues across all farming regions. The announced potential acquisition of Gray Aqua Group on the east coast of Canada is very exciting. It's still subject to court approval.
If approved, it will tie in nicely with our Canadian operation. We have decided to go from a level two ADR program in the U.S., we're listed on the New York Stock Exchange there, to a sponsored level one program. This means that the shares will be moved from the exchange to over-the-counter trading. We see that the trading liquidity of the ADR in the past three years has been, or is today, around 3%, so still quite low. U.S. ownership of Marine Harvest is increasing. Most of those shareholders are buying their shares in Oslo. That's the reasoning for that change. The quarterly dividend of NOK 2.8 per share continues to be paid as a repayment of paid in capital. Operator, with that, we can open up for any questions, please.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. Our next question comes from Frédéric from Kepler Cheuvreux. Please go ahead.
Hi again. On the increasing costs in Norway, broadly spoken, of course, is there anything else on top of the low volumes in Q1 and Q2 that's driving these?
Hello, Frédéric. No, it's mainly due to the fact that the cost of smolt, we know, it's higher. The volumes are slightly lower. We have a negative fixed cost impact, but also the cost to stock is what it is.
Okay. Is it fair to assume that the costs then in Q3 and Q4 will be more in line with the first two quarters of last year? How should we think about it?
Yes. That depends on how the spring and summer turns out to be in terms of average harvest weights and volumes. It's too early to give firm guidance on. It depends on how the next 6 months turns out. We're starting on a new generation after the summer, sorry, slightly before summer. It also depends on how the cost to stock on that generation develops the next six, nine months.
Understood. Thanks. That's all from me.
As a reminder, that is star one to ask a question. Next, we'll hear from Fabrice Théveneau from Lyxor. Please go ahead, sir.
Supply you could expect for 2018. Some people would expect supply to move up in line with higher prices. I also have a question on the demand side, notably coming from China. What will be the effect of the changing regulation in China on your demand and also on prices? When do you think you would start shipping significant volumes towards China? Thank you.
Hello. Thanks for the question. It's very interesting with China. Of course, Asia is a very important region, and Norwegian salmon has been banned from entering into the Chinese market for more than six years now. The potential is big in China. The Chinese and Hong Kong markets combined represent about 80,000 tons. It's about 4% of global demand, so to say. Of course, it's a big positive event for the Norwegian seafood and salmon industry. In fact, we are, from a regulation point of view, allowed to sell salmon into China, but it takes some time for the logistics and from a technical aspect to flow through. It should be gradually increasing throughout the year, we expect. The way we answer what impact it can have on price, as I said, it represents 4% of the global market.
You can look towards our regression of supply and demand. Any incremental demand, of course, is supportive for prices.
Thank you.
Thank you.
Just on the supply outlook for 2018, do you already have some forecast about what one could anticipate? Should we expect more production to come on stream in 2018?
We don't have an official guidance on 2018. What we do know, of course, is the new regulations in Norway will be effective on the 1st of October, and they've been quite clear that we can grow the biomass in sea by about 6% on a two -year basis, so 3% per year starting in October 2016. With no reduction in capacity. It's a question of biology and average weights, and that's too early for us to give comments on in 2018. Scotland and Canada, we expect will continue to grow. Chile is also interesting from a regulation and biologic point of view. It depends on what the farmers do and how they adapt to the new regulations.
We think that the unit cost will be higher, the production cost per kilo will be higher if we are to use new sites that we don't have already infrastructure around. It depends on what the farmers do in the next 12 months in terms of stocking pattern.
Thank you.
Thanks.
Again, press star one to ask a question. Sir, there appears to be no further questions at this time.
Okay. I would wish you a good day, and thanks for joining the call. Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.