Together with me to present the result today, I have Ivan Windheim, our CFO. And with that, I think we'll just go straight into the details. First of all, this quarter, all in all, was a satisfactory quarter for Marine Harvest. We managed to earn NOK 932,000,000 in operational EBIT margin.
First of all, the result is impacted by strong contribution from Norway. More than NOK830,000,000 here comes from the Norwegian operations alone. That is on the back of a drop in spot prices of NOK 6.5. So all in all, we think the Norwegian operations are doing good. Another important area to notice in this quarter is the market conditions in the American market.
This has to do with different issues actually both the supply increase from Canada at 29%, but also a lot to do with currency weakening of the Brazilian real and also weakening of the NOK against the dollar. I will come more back to the details around the development in the American market later on. We successfully converted 348 out of €350,000,000 convertible to share capital in this quarter and the Board has decided to pay out NOK 1.3 per share in dividend. Then on to the financial highlights. The operational revenue grew with approximately NOK300,000,000 this quarter.
Operational EBIT, as mentioned before, NOK 932,000,000 against NOK 970,000,000 in the same quarter in 20.40. And remember here, we in this presentation, the numbers are compared without Chile. Because of accounting rules, we have to look at Chile as discontinued operation until the merger is finalized. The net interest bearing debt ended at NOK 7,500,000,000 compared to NOK 9,200,000,000 at the end of 2014. The majority of the difference here is obviously caused by the converting of the share of the convertible into share capital.
Some would say it's a little bit high on the working capital side in this quarter, which is correct. And then you have to remember that Easter was in March this year and all the fish sold into Easter is paid in April. 83,000 ton compared to 74,000 ton Q1 2014, 10,000 ton increase here comes from the Norwegian operations. All in all, NOK 11.1 in operational EBIT against NOK 13 in operational EBIT in Q1 2014. Big variation between the different operating units and I will come back to why.
Then into the market situation in this quarter. In Europe, the supply grew with approximately 17% in and that has caused weaker prices. But looking at Russia being down more than 50% in this quarter or close to 50% in this quarter compared to the quarter of 2014 and Europe is still doing good. I think we can speak about good demand for salmon in Europe on the back of huge volume increases. Contradictory, you see in the Americas, high supply growth, 29% from Canada into the North American market and weak prices overall.
We have huge opportunities in the American market now. The American market is the least developed marketplace and to work now with more value added products, more convenient products for the consumers there, works good for the future. So this is also an opportunity in this marketplace. Then to the currency fluctuations that has impacted the market. Norwegian salmon, all in all, has become more competitive, both in U.
K, also in the U. S. And that has obviously had an impact on salmon from other origins. Doral in Brazil has weakened, causing the Brazilian market, especially in March, to drop somewhat and that has an effect on especially on the Chilean side of the production side. Ivan here will come back to more in detail on the currency fluctuations and but bear in mind that has impact in this quarter.
Then a little bit about the price achievement by origin. If you here we compare to Q1 of 2014 and we see that the Norwegian price achievement is better, up to 100 percent with the 92% superior share in the quarter. We had 33% contracts in this quarter and the contracts are pulling us the right way compared to the Q1 of 2014. In Scotland, good price achievement also due to contracts and the Canadian price achievement in this quarter was at 98%, same as for last year. Here we compare to Oerneberg in Seattle for the Canadian operations.
We compare to the Norwegian Nasdaq and in Scotland Nasdaq plus NOK 1.74 per kilo. So that is the reference price. Then to explain the development in operational EBIT going from Q1 in 2014, our feed operations improved with NOK 35,000,000. Our farming operation worsened the result with NOK 231,000,000. That is explained by Scotland, dragging it down more than NOK 100,000,000.
It's explained by the result in Canada, down more than NOK 50,000,000. It's also explained by the Faroe Island result and Norway pulling the other way. But for farming isolated, the result is down 231,000,000. On the market side, we improved the result with 41,000,000. Consumer products improved the result with 61,000,000 and all in all we ended at SEK 932,000,000 for the quarter.
A little bit about the Norwegian operation. I will say a strong result for Marine Harvest in the Q1. The cost side here was in line with the cost of 2014 and the operational EBIT was better than 2014. And that on the back, as I mentioned before, that the spot price is down NOK 6.5, I. E.
Our contracts has pulled the price up compared to the price achievement we had in Q1 2014. If you look at the cost side, you will see that the volume has an effect on cost. The feed cost is slightly up, not a lot, but offset by non seawater cost in this quarter. So the volume effect has worked and cost wise we are stable compared to the Q1 2014. In terms of increased treatment costs, that continues.
That is a challenge for the organization. This quarter, the sea life mitigation cost was at NOK 1.65 per kilo. That is high. And that is on the back of high seawater temperatures in the quarter, vary a little bit along the Norwegian coast, but on average close to 1.5 degree up compared to normal temperature. And this obviously is not good for the biological situation in Norway.
If we then look at sales contracts, in the quarter, 33 percent coverage, around or a little bit north of 20,000 tonne. We have around the same volume, 20,000 tonne also for the Q2 contracted at good prices. And in Q3, it's lower. But contracting is a continuous business. So it's natural that it's lower in Q3 than in Q2.
If we then look at the Norwegian operation and breaks it down into the different regions, we see a fairly even result in the different regions and I think good operational EBIT margins in most regions. In region south, we harvest in this quarter from Agder and part of the Uroogaland for the most part. And we have an operational margin at NOK 12.11 per kilo. Some issues here in terms of CMS, but all in all, satisfactory result in Region Sandd. Region West, the record region also in this quarter.
They were the best region also in Q1 of 2014, dollars 14.95 per kilo, a good result, but a challenging more challenging situation in this region in terms of sea lice going forward. Region Mid are improving the results compared to the result in 2014, doing better, but still have room to further improvement before we are satisfied. Region North, on the other hand, is coming back and gradually improving. And I think we will see this region improving also in the next quarters to come. All in all, a good result for all regions, taking into account the spot price in this region in this quarter compared to the quarter of 2014.
Then to Scotland, we knew that Scotland was seriously hit by biological issues already in Q4 and we announced that this would be a weak quarter as well. We are bouncing back in Scotland. The result is improving as we speak. And when we now go into a new generation, I think we will see quite different numbers from our Scottish operation. So gradually better also in Q2.
And from there on, I think we will be back on track in our Scottish operation. Low volumes in this quarter and also low harvesting weights, we've taken out fish that has been damaged because of both jellyfish, AGD and some sea lice issues here. And this has also impacted when we took out a lot of fish both in Q4 at small sizes and to a certain extent in Q1. This has impacted the average weight of the operation because we are pulling fish towards you. So it's not the ideal development.
On the other hand, we'll see the local market here will be negatively impacted by strengthening of the pound. So Scottish salmon will be even in more competition with the Norwegian salmon going forward. And as I already said, cost improvements will come in the quarters to come. Then over to our Canadian operation. As you can see from the waterfall here, hit heavily by a drop in prices.
In fact, our Canadian operation are reducing cost, but not in line with the reduction in prices. We are fairly satisfied with the biological performance there. Sites are doing better and better and also resulting in a lower cost. So overall, we're happy with the production performance. But obviously, the market situation is challenging, which it is Over the years, obviously, selling mostly into the U.
S. Market and the Canadian market. And here, we have experienced supply growth from the North American market of 29%, but also more competition for from Norwegian salmon in the U. S. Market.
Island and Faroe Islands, no fish in Faroe Islands this quarter and just a little bit in Ireland and a breakeven result. And I don't want to comment much and use more time on that because we didn't harvest fish, which was expected. Then on the consumer product, consumer product consists of MURPOL and former VIP operations. We have improved the results with slightly north of SEK 60,000,000 compared to the last quarter of 2,000 or the same quarter in 2014. What we see here is improvement in efficiency as we expected and improvement in productivity.
But on the other hand, we're not satisfied with the results still. Our target is north of 5% EBIT margin for this operation. And especially here, we are loss making in the French smoke operation improving, but still challenging. And then we are starting up in U. K, a huge facility in Rosyth in Scotland, which obviously has start up cost before we have filled it with products.
So all in all, improvements, but not to the extent that we are satisfied at this moment. Then over to our feed operations. We produced approximately 38,000 tonne no, 36,000 tonne of feed in this quarter, very low volume for this operation, but we are heavily contracted in the feed business at the moment. The contracts are running out and will be replaced and steadily and gradually diminish during 2015. But the Q1, we couldn't produce nearly at capacity.
Saying that, a result of 4.8 percent EBIT margin for a feed operation running at less than half of capacity is not bad. So we're satisfied with the operations, but we obviously would have liked to produce more feed, which will happen going forward. And as you know, I already stated in the quarter of 2,000 or in the Q4, we expect this facility to produce approximately 80% of the need this year, which will again increase profitability in this part of the business. Then over to Chile and the Chilean operation. We've used the same set of presentation as we always use on our Chilean operation, but it is discontinued into the numbers because of the merger we are doing.
Here also affected by weak prices in the Americas and also especially the currency movements at both the real and the dollar here is unfavorable for our Chilean operations. For Marine Harvest, we had a tough quarter. We took out one site in Region 11 because it was a bad site, and we saw the cost being lower to take out the site now than to continue to produce and lose gradually more money as we go. So the decision cost us NOK51 1,000,000, but the decision was correct. To wait, we would have lost more.
So that explains part of the loss in Chile. The other part is heavily explained by low prices, but also higher cost on the biology side. So it is a challenging situation and especially due to SRS. In terms of the volcano that you have read about in the media, we had 2 sites impacted. No people hurt.
We lost 2,400,000 IDEX in Rio Blanco. It's a hatchery, basically a hatchery fry production unit and 6,800,000 fry. To replace IDEX is easy. And also with the setup we have now in Region 11 with the huge hatchery that we got from Aquinnova to replace small fry is also pretty simple. So all in all, this will not have an effect on marine harvest stocking plan and or harvest plan as for now.
Everything has been replaced. And that's fortunate for us because it was not smolt that was killed. But all in all, it certainly has had an impact on the Chilean industry. Then Ivan, more on financials and harvest volumes and markets. And the floor is yours.
Thank you, Alperger, and good morning, everybody. As usual, we start with P and L. The Q1 of 2015 saw us make a turnover of approximately NOK 5,700,000,000. This is up approximately 8% compared to the turnover in the Q1 last year. Bear in mind that all the Q1 2014 figures and 2014 figures are adjusted for our Chilean operations, which is now recognized as discontinued operations.
So the numbers are 100% comparable. Profit wise, operational EBIT in the Q1 this year NOK 932 1,000,000 somewhat below the Q1 last year NOK 9.70 million. If we go further down in the P and L and visit the major items, first, the biomass adjustments, negative NOK 589 million due to a lower spot price at the end of this quarter compared to the spot price at the end of the Q4. The biomass is also down compared to year end figures. Our associated company, NovaSeq, is recognized under income from associated companies, NOK 12,000,000 this is bottom line including IFRS adjustment.
The underlying profit for NovaSe in the Q1 was NOK 14.8 in EBIT per kilo on approximately 6,900 tons. You find all the details in the appendix. Earnings per share here is NOK 0.94. This is the IFRS earnings per share, which we do not focus on. The underlying earning per share of the Q1 was NOK 1.33.
That number includes our discontinued operations in Chile. Harvest volumes in the Q1 83,400 tons, which is up approximately 12% compared to the Q1 last year. Operational EBIT, all inclusive, 1st quarter NOK 11.17 per kilo. Return on capital employed, 17.6%. So much about the P and L.
Then over to the balance sheet. Total balance sheet amounted to approximately NOK 36,000,000,000 at the end of the Q1. This is somewhat down compared to year end figures and somewhat up compared to the same quarter last year. The increase compared to the Q1 2014 is due to organic growth, but also the Akunova acquisition we did back in December. Net interest bearing debt at the end of the quarter NOK 7,500,000,000 and a very solid equity ratio of 51%.
Then over to the cash flow statement. As Arfelghi said initially here, we tied up a substantial amount in working capital in the Q1 due to Easter. So from an EBITDA of approximately $1,200,000,000 we had $669,000,000 in cash inflow from operations. We had and we have an extensive CapEx program. In the Q1.
We spent NOK 426 1,000,000. This is ex Chile. If we include Chile, the number is approximately NOK 500 1,000,000. We also flushed our convertible bond of €350,000,000 which had effect of the net interest bearing debt. Those numbers you find in the items below cash flow from investments.
We also distributed the dividend. And I should also mention that Chile all in all had a negative cash flow of 245,000,000. Dollars You find the reconciliation of the Chilean figures back in the note. There you also find the reconciliation of the cash. A quite a big amount is related actually to internal finance costs there.
So from an external point of view, the cash the negative cash flow was not as high as 245,000,000 which it looks like from this cash flow statement. All in all, net interest bearing debt at the end of the quarter of NOK 7,500,000,000 Then over to the cash flow guidance. The guidance on working capital for 2015 is unchanged still $900,000,000 plus. This is tied up in inventory and other working capital items to support further organic growth. The CapEx forecast for 2015 is increased somewhat from $1,700,000,000 to 1,900,000,000 mainly due to FX.
As you know, we are reporting in Novichikuna and we have extensive operations in other currencies. So when we set the CapEx plan, this is sometimes subjected to FX movements and that's what we have seen in this quarter. Interest expenses down from NOK 300,000,000 to NOK 270,000,000 due to the flush of the convertible bond. Tax payables still at NOK 650,000,000. Dividend to be distributed, as you can see from the stock notes just released in the beginning of June, NOK 1.30 per share.
Dividend policy, no changes here, but we have changed the debt targets due to the flush of the convertible bond. We are still chasing the long term targets of NOK 15 net interest bearing debt per kilogram. That gives a new debt target of €950,000,000 OVO financing, apart from the flush, no changes. So I will not spend much time on the details there. If there are any questions to the flush, we can take that afterwards.
I'm not sure that all the details are of interest for the entire audience. So much about the financial figures, then over to supply development. Supply growth in the Q1 ended in the upper range of our previous guidance, mostly driven by higher than normal seawater temperatures in Norway on the back of a temporary increase in the MLB. We also saw as expected substantial supply growth in North America. And I think our South, Main Harvest Canada was the main provider.
Supply from Chile, stable if you take into account release of frozen inventory. So in terms of the supply in the Q1, no big surprises apart from the very good growth conditions in Norway. Then the reference prices, the NOSDAQ in the Q1 was NOK 40.72 per kilo, which is according to us a good price taking into account the supply inflow of salmon in the EU of 70% in the Q1, a good price in absolute terms. We see that the price in euros is down. So I guess we could say that we also got some help from a very strong euro versus the NOK.
In Americas, we are concerned. If you look at the price for the Chilean salmon hair, converted to head on gutted, it was approximately $4.3 $4.4 if you include sales margin and that's below breakeven price in Chile. We saw that the price increased somewhat from a low level towards land, but after land it has decreased. So we are still under breakeven in Chile on price. So the price for our Chile operation remains a concern.
We also saw a drop in the price of our Canadian salmon. If you convert this reference price to head on gutted to farmer you are somewhat below 40. That we think is mostly driven by the supply growth in North America, plus a strong U. S. Dollar, which makes the European salmon more competitive towards the Canadian salmon in the American market.
And that being said, it doesn't help for our Chilean salmon either. Then over to demand. Markets are fantastic demand in Europe in the Q1. They absorbed as much as 17% of the volume at least if you compare it to last year figures. So and in absolute terms, at a very attractive price level, So EU is developing very satisfactory.
As expected, Russia and Ukraine significantly down due to the trade sections we all know about and the FX negative effect. You cannot read it from these numbers, but Brazil was substantially down in March due to FX. The strengthening of the U. S. Dollar has reduced the purchasing power for our Brazilian clients.
And this development has continued into April. So we are monitoring the development in the Brazilian market closely. And we saw a 7% growth in the U. S. Other markets are developing very well.
And once again in Europe, a fantastic demand and at very attractive prices taken the inflow of salmon into account. Then over to the supply outlook. We are more or less at the same level on total numbers for 2015, a growth of approximately 2% to 5%. I think that's more or less in line with consensus. We are not presenting the 2016 figures here, but we also believe in a modest growth for 2016.
So from an overall basis, we think things still look very favorable from a supply point of view. And there are of course some variations between the regions, but in the end of the day, we think at least in the long term salmon is a global product. In terms of the Q2, we think the supply growth will be somewhat lower year on year compared to the Q1 figures, But we normally see higher volumes compared to the Q1 due to seasonality. We also think that will happen this year. So once again, from an overall basis, the supply outlook looks still very favorable, although we are struggling somewhat in some markets due to various reasons.
Then over to our own figures. We are still, if we include our Chilean operations, at 440,000 tons full year, some minor adjustments between the regions, not any substantial ones. So I think that's all on that item. So then I would like to give the word to Ralf Erik again. Thank you.
Yes. If you look a little bit into the future here and lift your eyes a little bit, the outlook in Europe is, I would say, fantastic. If you see the growth of 17% in Europe and if you saw the previous slides here, this market growing with 100,000 tonne over the last 24 months at very good prices, demand for salmon, it's hard to question that. In terms of the American market, we monitor this closely. We also put a lot of effort into producing new products.
Introducing new products into actually new business areas for salmon in the U. S. Market is timely and it's highly needed and it's the most unmature salmon market in the world in terms of product development. So it's still only 380,000 ton consumed in the U. S.
And we think the opportunity there is really good, to put it bluntly, but on the back of low prices. It's not maybe the smartest way to market salmon, but it works, as they say. In terms of the Norwegian government and the white paper, this has been in question for a long time. That came in this quarter. I think it is a responsible approach by the Norwegian government.
Overall, this is bringing the industry in the right direction. There are obviously some measures that needs to be debated and clarified and but all in all, good for the industry. And I think improved biological control here, if we want to develop this business for the future, if we want to grow this business into 2,050 and it's going to be a leading business in Norway, there's no other way. You cannot continue like we're doing today. So kudos to the Norwegian government for this.
Aqbal Chile, this merger process continues. As we said in the last quarter, we expect to finalize it in Q3. And then quarterly dividend of NOK NOK NOK 1.30 per share will be distributed shortly. So with that, I will open up for questions. And please state your name and employer and we will try our best to answer.
Yes. So Thomas Klork with Arctic Securities. In light of this reporting when you have Chile as discontinued operations, can you say something about the net debt target if you were to exclude Chile? I guess Chile is included in that guiding. Can you also maybe say something about what you hear from the industry in general in Chile in terms of how many smolts that may have been adversely impacted by the volcano?
Thanks. I
can start with the net interest bearing target. You're right, Thomas. This is including our Chilean operations. And we haven't merged yet. So, we will not we will revert to a new debt target when we merge.
So, this is so, in Marine Harvest, apart from our reporting, it's business as usual. So we do not adapt to a new regime before it's final. So from an operational and financial point of view, it's business as usual. We deal with this as marine harvest as is.
The next question was more in the line of speculation on how many smalt that has been lost in Chile. We don't have any we have numbers on our own operation. We lost 2,400,000 eggs. We lost 6,800,000 fry. That will not have a major impact.
We know that. The best advice I can give you is maybe to look at the Salmond Chile numbers, but we don't have specific information outside on our own operations. More questions? There's one in front
here. Georgios, Abigail Snagolade. A follow-up on Thomas' question. If you were to have the balance sheet now on say on a pro form a basis, what would be the impact on the current net interest bearing debt from excluding the Chilean operations? And also, Ham, much of the CapEx is related to the Chilean business.
And the working capital. Yes. That was not little. If we start with net interest bearing debt, we are to merge Marine Harvest Chile on a net interest bearing debt free level. So consequently, this will not affect our net interest bearing debt.
But in our agreement, they will pay us for 50% of the Upper Norvo acquisition. So consequently, we will be refunded approximately half of the amount related to that acquisition. So, if you at least from a reporting point of view compare our net interest bearing debt today to what it will be, all else being equal, it will actually be a little bit better. So by the amount half of the amount related to the Alky Novak decision. And then you asked about our CapEx for Chile.
We do not report our CapEx per region. We prefer to have some flexibility when we are allocating the CapEx as we go along. And the day we start to report the CapEx per region, then we have given away that flexibility. So we would like to keep that as a business secret. But in the long run, if you disregard 1 year, but in the long run, you can use the volumes for the CapEx need.
And then you of course have to adjust for any structural investments. So and so consequently, if you look at our CapEx in the Q1 in Chile, you will see that the CapEx there is above the depreciation level, because we have just made an acquisition of Aquinovo and we yes, And we're also ramping up from historically a very low volume level if we go back to 2010. So the CapEx level in Chile for some years now have been higher than the depreciation. But that doesn't mean that that will continue because the day we start to maintain our volumes, then we can start to talk about maintenance CapEx and that's something else. But we like to keep the flexibility internally on where we spend our CapEx amounts.
And sometimes we actually change plans during the year if we see any incidents. So for instance, what we have seen now in related to the volcano, it didn't affect us because we are contracting this externally. But it could and then we had to do some adjustments, but we don't. I don't know if that's a good question. At least it was very long.
And the same applies to the working capital with respect to discussing the split?
Yes, that's right. So I'm sorry, you have to bear with us and accept the total amount.
Thank you.
Magnus Skoure, Carnegie. You said that the contracts have pulled off the results for the Q1. But we have seen that if you look at fish pool forward prices for instance, there's been a pretty big drop in the forward prices for 2015. So can you say something about how your own contract prices have developed so far in 2015?
Yes. I think as you correctly stated compared to the Q1 the contract prices are at a good level compared to the Q1 of 2014. I would say also forward going contracts are at very favorable prices.
Kolbjorn Nyiskegaard, Nordea Markets. One specific question on sea lice. You say that you have severe sea lice challenges in U. K. In the recent months.
You are being accused of having one standard in Norway and another one outside of Norway. Comment on that? And the second one is more general question on the cost development, both biological cost and feed cost in the quarters to come. What's your expectations on the level there?
First on the question on Scotland, not as of now. This was last fall we had the issues in Scotland and I'm the first to admit mistakes. We had algae blooms and jelly fish in the Hebrides and including even AGD and we could not treat at that moment because of the situation of the fish. We should have taken the fish out earlier. I'm the first to admit that that was a mistake.
When it comes to standards for sea lions, we do the same in all countries. We fight for as low number of gravid females as possible because we think that if you reduce the reproductive phase of the lies, we are better off as an industry. So our strategy, exactly the same all over the place, a mistake in Scotland last year. That is I'm the first to admit. And there's a reason also why I have been speaking about this being a big problem.
If you look at the sea life cost in Norway increasing this quarter, it's €1,650,000,000 If it was not a problem, I would probably not have spoken about it either. So I see what they write in the papers, but my conscience is pretty clear. In terms of cost development, well, on the biological side, it's probably we've not seen the top yet on and I think we will see slightly increased cost in different regions. In Scotland, cost will come down, but from a high level. In Canada, I think we will stay at a good level.
In Norway, it's a little different in different regions. In some areas, we are more hampered by the sea lice than in others. So all in all, maybe a slight increase, but offset now with good fisheries in Peru on the fish mill, fish oil side and also other raw materials on feed in developing in a favorable way. I think over time, we will see the cost again dropping in Norway, at least if this continues. But as you all know, feed costs, you put feed into the fish and then you release the fish.
So I expect slightly cost increase both because of feed and because of sea lice in the nearest quarter to come and then a drop. That's what I see in the Norwegian operation. In Chile, well, we have to come down, certainly because of this quarter being an incident where we took out one site. And but we will see lower cost in Chile going forward, but from a very high level.
Yes. Just a follow-up question again. Thomas Lohrk with Arctic. You have tended to indicate a breakeven level for your Moorpool operations. And since you have merged these entities, can you say something about your ability to be profitable going forward at various breakeven levels?
Like the salmon price?
I mean, you tended to indicate like a 41 NOK breakeven level for Moorpool's operations.
Yeah. But when you start to negotiate with the customers, it's never a good start to give those numbers in advance. So that's why we have stopped doing that. We have learned. Sorry, again.