Good day, welcome to the Marine Harvest Quarterly Report conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kim Galtung Døsvig. Please go ahead, sir.
Yes, thank you. Good afternoon, good morning to those of you who are calling in from the U.S. My name is Kim Galtung Døsvig. I'm the IR representative in Marine Harvest. Today, we made public the Q2 earnings. We'll go through some of the highlights of the presentation, and then towards the end, we'll have a Q&A. I'll just go directly to the presentation on page three.
The highlights for the quarter, we recorded an operational EBITDA of EUR 198 million in the quarter, which is an all-time new record for Marine Harvest in the second quarter. This was driven by record high salmon prices in most markets, highest salmon prices, certainly in all markets. We had a very good performance in our farming operations in both Scotland and Ireland, and also our European consumer products division consisting of 14 plants, delivered very good profits.
We also harvested less volumes in Norway in the quarter due to sea lice issues and connected biological challenges, which I will come back to. Net debt at quarter end was low at EUR 551 million. This is due to strong cash flow in the quarter, but also the conversion of our 2014 convertible bond. The board declared a dividend of NOK 3.2 per share in the quarter, which will be payable in September.
Turning on to page 4, key financials. We recorded an operational EBITDA of EUR 884 million in the quarter, up 6% year-over-year. The harvest volumes were down 10%, and we will see later on that the weight harvested or the weight processed in the consumer division and also sold in the feed business is down year-over-year. The operational revenue increase is due to the salmon price increase.
Operational EBITDA in the quarter up 33% year-over-year. We had an underlying EPS of 0.31 in the quarter. Net cash flow per share of 0.24. With the dividend announcement in mind, you see that we are paying out more than what we made in the quarter. The annualized return on capital employed was 31.2%, and the adjusted equity ratio increased in the quarter and is now at 58%.
The balance sheet is very strong. Stronger than what it was at the quarter-end Q1. Moving on to page 5, the salmon prices. Very good salmon prices in the quarter. Despite the decline towards quarter-end, we see here in the graph that prices in Norway, Canada, and also Chile started off higher in the quarter, but still quarterly good prices. Moving on to page 6, price achievement by region.
We had a high contract share in Norway at 64% in the quarter. This is impacting our price achievement. The price achievement in Norway was 95%. In Scotland, it is 100% with a contract share of 39%. Good contributions from the Scottish farming operation. In Canada, we do not have any contracts. The price achievement was as expected at 100%.
With some contracts in Chile, we recorded a 92% price achievement for that farming region. Page 7, the operational EBITDA comparison. We see a very good development year-over-year. Feed and markets were more or less flat. Farming and consumer products were the two divisions contributing to the increased result. The good price improvement in farming drove the results higher. Also in consumer products, we have seen very good contributions from several of our plants year-over-year.
That's pleasing to see. Page 8, Norway. We harvested 39,000 tons in the quarter, which is low. We guided on slightly higher volumes in the quarter. We have seen sea lice issues and connected biological issues impact the harvesting in Norway in the quarter. Consequently, we have reduced the guidance also for the second half. We are harvesting on the spring 2016 generation these days.
Although the number of individuals harvested is more or less as expected, we see that sea lice directly and indirectly is affecting the average harvest weight. The average harvest weight has been lower than what we forecast three months ago. Notwithstanding that, good profits in the quarter on both higher spot prices but also contract prices in the quarter.
As volumes increase in the second half, the harvesting profile is today about 60% for the second half and 40% in the first half. We will experience scale, or we are at least expected to experience scale advantages in the second half, hence we have guided costs slightly down in the second half. Contracts on page 9. No significant changes in the contract portfolio. It remains relatively stable. Q4 is the biggest contract period for us, hence Q4 contract levels are above the levels for Q3.
I will not go through the regional profit EBITDA per kilo numbers, but moving on to Scotland, page 11. Scotland had very good results in the quarter on both better prices but also good operations. Reduced costs on the back of much higher harvest volumes. 18,500 tonnes in the quarter was good. This has driven down both the seawater costs but also non-seawater costs. In the second half, we are expected to harvest slightly less, hence we do expect to see somewhat higher costs.
We're also harvesting from some sites with a slightly less favorable performance as to sites we have harvested out to date. I should also note that this is the best quarterly performance ever for Scotland, very good contributions. Canada, page 12. Canada remains steady. Good profit in the quarter. Slightly lower quarterly volumes. We've harvested from sites with slightly higher costs.
The sea lice situation in Canada remains relatively stable, and we see good seawater growth in Canada. In Chile has recovered from the algae issues, which affected our operations severely in Q3 2016. We see in the bar to the upper right that most bars have improved. Prices are up.
Costs are down to $5.1 per kilo in box. That's good to see. In the third quarter, similar to the second quarter, price achievement will be impacted negatively by some maturity issues at a few sites. The quantity is about $2.5 million, which will be the effect in Q3. Page 14, Ireland and Faroes. Very good contribution from Marine Harvest Ireland.
They are producing and selling organic salmon, which attracts a significant premium to Atlantic salmon. That continues. Also costs in the Irish operation was good in the quarter. EBITDA per kilo of NOK 3.35 was very, very good. Marine Harvest Faroes, they did not harvest any fish from that business unit in the quarter, but production is going as planned, and we expect to harvest the first fish in September in Q3. Page 15 on consumer products.
Although volumes were down in the quarter due to less fish available, we see that operating revenues increased significantly year-over-year. This is due to price. They are able to sell the salmon products which they make into the various markets in Europe at a much higher price. Salmon accounts for as high as 85% of the revenue for that business unit. It's not only the big Mowi plant which is contributing to the increased or improved results.
It's also the site in Edinburgh has seen a significant turnaround. The Pieters in Holland and Belgium is performing well, and so is the processing plant in Boulogne in France, which sells its products mostly into the French market. It's pleasing to see that the key and the big processing plants are delivering good profits these days.
We see that the value of salmon sold continues to increase across all markets. Feed, on page 16, had a low quarter, as expected. You see that the produced volume is likely or is higher than the sold volume. The inventory will be sold in Q3 as we are growing the biomass and as increased biomass requires more feed. Feed raw materials have been reduced in the quarter, and this should also support somewhat lower farming costs going forward.
The feed plant in Scotland, as you see the picture at the bottom, is underway. It's under construction, and it's expected to be completed in the second half of 2018. Moving on to the market section. I think I'll skip the financial slides as we've been through most of the numbers. On page 21, I'd just like to highlight some of the main points.
The working capital build-up of 120 million pounds is unchanged versus last quarter. We have released the working capital year -to -date, it means that we do expect to tie significant working capital in the second half. Of course, this depends on how much biomass we're able to build. As communicated earlier on the presentation this morning, we do see that there's some downside risk to this number, i.e., it depends on how much biomass we build.
The CapEx remains unchanged, so have the interest paid. Taxes paid have been increased by EUR 30 million due to increased prepayment of tax in Scotland and Canada on the back of higher-than-expected earnings. A dividend of NOK 3.2 will be paid in the third quarter. Page 22. The change on this slide is we have refinanced the bank facility.
On the back of the conversion of the convertible bond of the 2014 bond, we have refinanced the bank facility and increased it from EUR 805 million to EUR 1,206 million, which we are very happy about. We've also increased the number of banks from four to six. The other financing, it's unchanged. The 2015 convertible bond and the high yield 2013, the long-term debt remains the same.
On to the supply slide on 23. Supply growth was in line with expectations in the quarter. However, slightly, or 16,000 tons less than expected in Europe, driven by Norway, and more than expected fish harvested at higher weights in Chile. Overall, 4% supply growth was as expected. On page 25, global volume by market.
We see that some of the arrows are green and some of them are red, meaning the volume change in some of the markets have been negative as there has been a shortage of fish. You should note that the overall consumption decline of 3% is almost surprising as the supply increase was 4%, and this is explained by a movement in inventory.
We saw that inventories in 2016 were released into the market. Starting now in Q2, we have seen inventories have been built in Chile for the most part. That explains the difference between consumption and supply. If we convert this table to euro figures, most or all arrows would in fact be green. In Europe, the consumption increase was approximately up by 5% in value terms. 26, supply outlook, 3% to 5% for 2017. Moderate supply growth for the year.
No major changes on our supply outlook compared to previous quarter. Somewhat more higher growth in Q3. For the second half, more or less unchanged. Our own volume guidance on 27. It has been reduced, as I mentioned. The reduction is in Norway by 25,000 tons. This is more or less across all of the coastline.
Not from the very south but from the Stavanger area, from the mid region south area, all the way up to the middle of region north. In the very north it goes quite well, in the very south it goes also quite well. In between we have seen that we had to reduce our harvest outlook for 2017. We do hope to build the biomass in the second half and into 2018, hence tying also more working capital going forward. The outlook on page 28.
We do see a modest supply growth. The Fish Pool forward price is at EUR 6.7. We have several important growth initiatives ahead of us. I mentioned the new feed plant in Scotland. We are on the farming side. We are also building up East Canada. We purchased Grieg Seafood last quarter. This is a greenfield expansion. We are also hoping to grow the biomass in Norway.
We are building new freshwater sites in Norway in particular to support more smolt releases in the years to come. In West Canada, we have two additional new sites. Also in Scotland, there's additional room for growth. It's lots of activity, organic growth initiatives ongoing in Marine Harvest. The normalization of trade relations between Norway and China is also exciting. Hopefully we will sell salmon into China soon. The quarterly dividend of NOK 3.2 I mentioned. With that, operator, could you please open up for any Q&A there might be?
Certainly. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that's press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We do have our first question from Karl Johannessen from Targa. Please go ahead.
Hi again. Just a short question on the contracts. Could you expect contracts for second half to be around EUR 6? For 2018, I know you don't want to comment on it, but are the interest from buyers on higher levels than this, and how is it to do contract at level around six and a half EUR? One question also regarding the volume guidance. Are there any sort of main explanation why you take down the guidance so much? I see that the mortality is not especially high, it's lower than it was last year. Is it the sea lice treatment that lead to starving of the fish that is a big problem, or is it something else? Thank you.
Yes. Hi, Karl. Thanks for the question. On the contracts for the second half 2017, they should be more or less in line with the levels we achieved in Q2. There was a step change earlier this year, for the remainder of 2017, it's more or less on the same levels. Maybe slightly higher. For 2018, it's too early to say. It's too much uncertainty. We do roll over contracts with our existing clients, our strategic clients. Those remains the same.
The contract volumes is not changing significantly. Of course, the percentage can change if the harvest volumes fluctuates. Those contract renewals are more or less up for negotiations as we speak. It's too early to comment on 2018, I'm afraid. Of course, we do look at the forward price once we enter into new contracts. The next 12 months is at 6.7. It's at least a good reference point both for us but also for the buyer. I think I'll leave it at that.
Yes. Thanks.
The volume guidance in Norway, of course it is disappointing. Some of the shortfall I can see is in relation to Q2. Q2 Norway was slightly lower than what we had guided on. I think it's a continuation of that. It's biological constraints in general across the coast of Norway. It's not necessarily facing or moving fish into 2018. It's more that the average weights have been lower than expected. Mortality rates are still high, although improved year-over-year, at least in relation to sea lice treatment.
Sea lice treatment-related mortality is down. We see that the overall mortality has not changed significantly. It's difficult to measure exactly what causes mortality, if it's a mechanical treatment or if it's some other disease. I think it's that the average harvest weights have been lower than expected, and that's the main driver for the reduced expectations.
Thank you.
You're welcome.
Again, that is star 1 on your telephone keypad if you'd like to queue for a question. At this time, we do not have any questions, oh, we do. Take our next question from Sam Glover from Tideway Investment Partners.
Hi there. Thanks for taking my questions. First question, is it too soon to provide any supply guidance for your side for 2018? I know from presentation you include the Kontali supply investment at 7%. Looks particularly bullish to me given the bio challenges you're facing in H2. Can you comment on that? Secondly, I understand the NOK bond is maturing in February 2018. I wonder if you can comment on what your plans are surrounding that maturity. Thank you.
Yes. Thank you for those two questions. We got in our own volumes for 2018 in our Q3 presentation in November. It is too soon to comment on our own volumes. We put in the Kontali figure for 2018 as a reference point. We will revert specifically to our own guiding in a few months. Then on the NOK bond, you are right. It is maturing within the next year, in Q1 2018.
What we have not defined yet what to do with the bond. Depends also on our net debt development and the biomass development in the second half. Of course, it is an expensive bond for us in terms of coupon in relation compared to the bank financing. It is a strategic discussion we are having. We will revert to it as we come closer to the maturity date. It's too early to give specific comments around it.
Again, that is star one if you'd like to ask a question. We'll take our next question from Alvin Kai from Bloomberg Intelligence. Please go ahead.
Hi. Thank you for taking my question. Can you comment about the new technology farming that you have been exploring? I understand that you have received some approval for some of these new techniques, the Donut or the Egg. When will this be put in a commercial operation? Any updates on land-based farming system? Thank you.
Yes, thanks. That's a good and interesting question. We have received a pre-approval for the Egg concept in general and also for the Donut. We did not receive all of the licenses we applied for. We have appealed both the decisions. Our appeal is currently sitting with the Director of Fisheries, and they are processing our appeal. It's too early to say when they will issue their final decision.
We have not yet decided what we will do, because we would like to receive all of the licenses to test one site with the full set of Eggs and also one site with a full set of Donuts, and not only one unit or one production concept. That's the idea. That's the argument we made in the application. We will see what they come back to us with.
Okay. Thank you.
Land-based farming, it's also becoming more and more, how should I say, interesting from a financial point of view as prices remain at very good levels. We have seen some new projects have secured financing in the last few months. However, Marine Harvest does not believe in full-scale land-based projects. We will continue to farm salmon in the ocean. Of course, we will monitor the situation closely. I think I'll leave it at that.
All right. Thank you.
You're welcome.
At this time, we do not have any questions in queue.
Okay. I would like to say thank you very much for dialing in and your interest in Marine Harvest, and have a good day. Thank you.
Ladies and gentlemen, this does conclude today's call. Thank you for your participation, and you may now disconnect.