Welcome to the presentation of the Q1 2016 for Marine Harvest. Here to present is myself, Alf-Helge Aarskog. I'm the CEO of the company. I will try to keep you updated on what page I am on at any time. I go past the forward-looking statement and on to highlights on page three. The Q1 for Marine Harvest 2016 was a good quarter. We had a strong operational EBIT at EUR 112 million. This on the back of good demand for our products and also low supply in the quarter. The result is mainly driven by high prices and record high prices in Europe and Asia for salmon, but also improving prices for salmon in the Americas, both in the U.S. and in Brazil and in other American countries. The contract share in this quarter was for Norwegian salmon 55%.
That is high and on the high end of what we should have. This has put a slight reduction into our result. I will come back and more explain this later on. On the downside here, Chile was impacted by algae bloom in Region X. That has resulted in lower volumes, which I will guide on later on. Also we have been forced to restructure our operation in Chile and try to make that as efficient as possible. On the consumer product side, a fairly good result in the quarter for most factories, but negatively impacted by one factory in Rosyth, which is in Edinburgh, right side of Edinburgh in Scotland, that lost EUR 7.7 million in this quarter. Quarterly dividend, the board decided that to pay that NOK 1.7 per share. I will also come back to that a little bit later on.
Just quickly on financials. The top line grew by 10% from EUR 735.3 million to EUR 809.5 million. Operational EBIT up by 17% from EUR 95.3 million to EUR 111.9 million. Cash flow from operation was good at EUR 160 million, up from EUR 61.6 million in Q1 2015. The harvest volume this quarter was slightly down from 99,476 tons to 96,613 tons in Q1 2016. On page five, you will see the development of the salmon prices in a period from 2012 to throughout the Q1 of 2016. You will see that prices in Europe and Asia has been at record high levels, and prices in Americas has been increasing, and especially in March following the Chilean algae bloom and lower supply from Chile. Price achievement, contracts, and superior share on page 6 shows the achieved price in the different markets.
You'll see that Q1 2016 in Norway, we achieved 92% of spot price. The reason for that is that the contracts contribute negatively to the achieved price. The achieved price is composition of contracts and the quality of the fish measured in superior share. The superior share, as you can see for Norway, was 93%, Scotland 92%. The price achievement is mostly reduced because of the contracts. Canada has no contracts, and we are in line with the spot market, even on slightly low superior share at 88%. Chile, we have 9% contracts, which also contributed negatively, but also the more so here on the quality that was at 87%. If you then go to page seven and take a look at the bridge between Q1 2015, Q1 2016, you will see that feed markets, consumer products, and others have more or less were stable.
Farming, and then because of good prices, increased the result with EUR 15.2 million and took it from EUR 95.3 up to EUR 111.9. If we then go to the different operations, we look at the Norwegian operation on page 8, and you will see that Norway as a region contribute to the biggest part of the result here this quarter with EUR 100.9 million compared to EUR 99.1 million in Q1 2015. This in spite of a reduction in volume from 65,200 tons to close to 54,000 tons in the Q1 of 2016. As you can see, the result is mainly driven by, or it's solely driven by price increase. Volume is a negative effect. Feed cost is up because of slight increase in feed price, but also feed conversion ratio is up.
You will see other saltwater cost, which is mainly treatment cost, is up, and non-saltwater cost is up as well, and that's mostly because of processing cost is up on lower volumes. If we then turn to the contract portfolio, it was high and already stated in the Q1 2016 was at 55%. Q2, the absolute volume is reduced slightly down to 27,000 tonnes, but the contract share for Q2 will also be high because of a lower harvest volume than in Q1 in the second quarter of 2016. We see Q3 a drop in contracts, and this is a rolling picture where we do contracts basically all the time with major clients. What the contracts we do today is at a completely different level and more in line with the forward price for salmon for a year as we speak today.
We go to page 10 and take a look at the different Norwegian regions and their performance. We see that both the Region West and Region North is north of EUR 2 per kilo in margin. We see that the Region Mid and Region South is between EUR 1.4 and EUR 1.56 in margin. All the regions improving in result, but we have more challenges this quarter in Region South due to poorly performing fish and also in Region Mid, but here mostly due to low volumes. We closed that processing plant for almost 1 month. The cost in this region has been high throughout the quarters. Look and go to the next page. It shows a concept or a new concept in terms of development licenses.
For those of you that's not heard about that, the Norwegian government has put in place an incentive system to come up with new technology and new ways to farm fish. This works in a way that you can apply for licenses. If your project is approved, you will be handed out a set number of licenses, and then you have to fulfill your project obligations and work towards a set project plan. If it succeeds, it's fantastic, then we have a new efficient way to farm salmon. If you do not succeed, you are able to convert these licenses into normal licenses for a reasonable amount of money. This makes it very interesting to come up with new concepts and at a very low risk financially. We have applied for three systems, and I will start with the first one.
The first one is a submersible offshore farming cage. The dimensions there are 100 meter long, the diameter is 24 meter. It is possible to both submerge it and lift it to the surface. The idea behind this cage system, it's a very strong system that will be able to stay in operation below both the sea lice, which is in the top 10 meters or 5-10 meters, and below wave action in rough conditions. This system will be worked, we will demonstrate this system together with the MARINTEK NMBU, which is a Norwegian institute for life sciences, with their own R&D facility where we will test this both small scale in tanks on land to set the stage for the big system, also to document fish health throughout the project and before we start with the project.
The next system is a new system that we will put in place in the northern part of Norway. This is an enclosed system, and you can see the green pipes if you have your presentations ahead of you. That is the inlet or the suction hoses for water that will go through the system. These can be extended and shortened, and we can reach different depths of water by doing it this way. In the doughnut, it will be set a current which makes the fish swim against the current. At the right current, you can set more or less the condition factor and, in fact, also improve the quality of the fish. This is an enclosed system. It will take care of sea lice issues and other pathogens, and it is certified for up to 3 m wave height.
It's mostly to be used in fjords and in protected waters, not ready for open ocean. This is produced in high-density polyethylene, which is 100% reusable material. The last concept, the egg, I presented at the fourth quarter of 2015. Just to sum up, that system is also enclosed system, a little different than the one above. Also in total, just to state that we applied for 28 licenses, and we really hope we can get them and get going with the new technology in the salmon farming world. That's really needed because we need to get back to a growth pattern in the industry. If you go to page 15 and look at the Scottish result, it has improved from EUR 2.3 million in operating EBITDA in Q1 2015 to EUR 8.5 million in Q1 2016.
Higher volumes in this quarter, negatively impacted by the Rosyth operation with negative EUR 0.53 per kilo. Good prices, high contract share in the quarter, high cost, high cost is expected also in the second quarter. Over to page 16 and the Canadian operation. As you can see, very good price achievement and increased pricing. Cost is stable in this operation, we've harvested from sites at low cost or relatively low cost. Good biological situation. The sites we're going to harvest in the second quarter will be at somewhat higher cost, we expect the Canadian operation to continually deliver a good result also in Q3 2016. On page 17, we see the performance of the Chilean unit. This is heavily impacted by the algae bloom that impacted operation end of February, beginning of March, and had an impact in total of EUR 8.4 million.
We have initiated a restructuring program for Marine Harvest Chile. We will write down in the second quarter $60 million in fixed assets, and we will also reduce our number of people with close to 500 people, and that has a provision in the second quarter of $3 million. The cost savings by doing this is around between $8 million and $10 million per year. Cost will be impacted, also going forward with lower volumes, but I think we will also see improved prices and our expectation is to start to make money already from Q3 and the remainder of the year. Still a challenging biology in Chile. Obviously, with less fish in the water, the pressure is lighter, but on the other hand, there is no fundamental change in regulations or in fish health during this quarter.
If you go to page 18, sums up two of our smaller regions, Ireland and Faroe Islands. Ireland had challenging weather conditions in the quarter, we in fact lost EUR 3.6 million due to a set of biological issues and part of it weather-correlated. In Faroe Islands, it was different. We made EUR 3.9 million, here we are benefiting from sales to Russia at very good prices. On the downside here, the Faroe government has put in place a revenue-based fee that's 4.5%, or that reduced our profit by 4.5% in this quarter. We go to consumer products on page 19. Operating revenues up from EUR 270.9 million to EUR 327.3 million in Q1 2016. Operational EBIT negative or slightly negative.
If we made a correction for the Råssøy plant there, which is EUR 7.7 million in the quarter alone, the result is not fantastic, but it is at least positive in what is a weak quarter demand-wise for consumer products. What we see is rather good growth, Germany, Italy, Spain, and also in U.K. The underlying improvements, as I mentioned shortly, we see in many of our operational units in Europe. We go to our fish feed operation. Our operating revenues ended at EUR 64.5 million compared to EUR 45 million Q1 2015. The volume is 53,807 tonnes sold, up from Q1-15, but it is about half the volume we sold in Q4 2016. Typical for the feed business, the Q1 is not when the money are made. That comes later on, especially in Q3 and Q4.
We've decided to increase our operation in fish feed by building a new factory in Scotland at a site called Kyleakin on the west coast of Scotland and in the middle of our farming area and the remaining industries farming area. The location we find good. It's on the water, both raw materials and finished products can go out by boats, which is a competitive advantage for Marine Harvest. We go to the financials. Go briefly on those. The operational revenue I've commented on. The operational EBIT have been two. If you look at the earnings before tax, they were at EUR 164.4 million, up from EUR 52.8 million. Look at the earning per share, it's up at EUR 0.28 per share compared to EUR 0.06 in Q1 2015.
If we go to page 23 and look at the financial position for the company. You will see that the balance sheet and equity ratio here is at 45.9% compared to 51.1% at the end of Q1 2015. I don't need to comment more on that. If you look at the cash flow statement on page 24, you will see that the cash flow is good in the period, which is normal, really. This is the quarter when farming operation, at least on the northern hemisphere, releases cash. If we continue to cash flow guidance, there's no real change there from previous presentations. Both the working capital buildup is along the same lines. Capital expenditure at EUR 190 million. Long-term mid-target unchanged. EUR 1,050 million. The quarterly dividend is new. I see it says in Q2 2016.
Well, it will be paid in Q2 2016 for Q1 2016 at 1.70 per kilo. Financing is more or less unchanged. We have good and solid financing in the company. The only thing that's changed there is the conversion price of the convertible bonds. Other than that, everything is equal to what we saw at the end of the fourth quarter 2015. We go into the supply development during the quarter. We see in total there is a growth in supply at 0.2%, which is low. In Norway, the reduction was 6.1%. Scotland, Faroe Islands, Ireland grew. In fact, the remaining operation grew with the exception of others. Small changes in total. We look at the development in prices. We've been through partly that, but in Norway, the euro price average Q1 2016 was at EUR 6.15. That is a record high price.
We see that the Chilean price, both in terms of on a Miami D trim 3-4, it was at $4.30. gutted weight to compare to the Norwegian price, $4.36. North America, the price at $2.92, gutted weight $5.82. You see the corresponding increases in % and the prices in NOK. We go to the volumes per market. Obviously, if you notice, slightly higher than supply, we believe that is a release of frozen storage from Chile for the most part. Here the volume is up 3.9%. If you compare that to the supply, the fish has to come from somewhere, we believe it comes from frozen storage. You see that EU it's down slightly but stable. Russia is in fact up, that can fit well with the frozen fish coming from Chile.
U.S. is up 12.7% on increasing prices, which bodes good for the recovery in the American market. Other Americas up as well, no big changes and no big volumes in the other markets. Percentage-wise, because they are low in the first place. You see Japan increasing by almost 30%, but from rather low volumes. South Korea, Taiwan is down somewhat. In terms of the supply outlook on page 30, we'll see that our guidance is a negative supply growth for 2016 between -9% and -5%. This is a change from previous guidings, and that's mostly due to the situation in Chile where we have a reduction in 2016 between -23% and -19%. For Q2, we believe that the supply will be reduced between -10% and -5%.
Then correspondingly for the second half, between negative 12% and negative 8%. There will be shortage of salmon in 2016, which obviously will vote for high prices. On the other hand, this is not a situation we would like to continue because this industry needs to grow, not to be reduced. That's why we think new ways of farming fish, like shown previously in the presentation, is very much needed. Our volume is also down, and we are mostly affected by a reduction in Chile with 16,000 tons. This is on page 31. We're now down to 414,000 tons for the whole of 2016. You will see there the numbers 419 in 2014, 420 in 2015, then 414.
This is not a good development for Marine Harvest. We need to come out with new solutions and gradually start increasing production again. Go to page 32 on the outlook for the coming year period. Well, as already stated, we think the market balance will be tight in 2016. We know that future prices are very high and at record level of EUR 5.9 per kilo. The demand for our products is very good in Europe and Asia and improving in the Americas. Algae bloom in Chile will have a major impact on American supply. We will continue to make our operation in Chile as streamlined and as efficient as absolutely possible.
Already stated that we will apply for 28 development licenses in Norway, or we have applied for 28 development licenses in Norway, and we expect results there as soon as the Norwegian government has gone through the applications and hopefully approve them. Dividend, already mentioned NOK 1.7 per share. If any of you that's listening in would like to come to our capital markets day that will be held in Bergen first and second of June, you're more than welcome. This is a great opportunity to see the most modern feed factory in the world alongside some of the best farming sites that this industry can show at this moment. With that, I would like to open up for questions, moderator. Maybe you can take over from here.
Thank you, sir. Now we have our first question. It comes from Fredrik Ivarsson from Kepler Cheuvreux. Please go ahead. Your line is open.
Thank you. First question on the strong growth in the consumer products. Can you just give some color on what's been driving this in Q1 in contrast to previous quarters?
Yes, it's certainly opening of the factory in Rosyth, in Edinburgh, that is supplying all the fish to one of the bigger retailers in the U.K. We have been able to supply, and we have been able to supply very good products, and the growth has actually been there, but we have not made, unfortunately, a lot of money on it. We actually lost. That's the major explanation, but it's also increased demand, especially from our Polish operation in Ustka, which we expanded and have expanded with another portion factory, 7,500 sq m. Higher capacity there as well. There is high demand for our products.
Thank you. On the low feed conversion in Norway in particular, have you seen any improvement here? Also what do you expect in terms of feed costs towards the second half of the year, given that most input prices have been trending downwards for some time?
Yeah. Obviously, the fish we harvested in Q1 2015, most of it, at least the Norwegian fish, was put into the ocean in 3rd quarter and 4th quarter of 2014 and has been impacted by the feed price in that period. It's not only the feed price, it is feed conversion ratio. When we talk about economical feed conversion ratio, the impact from treatments and mortality during treatment to avoid sea lice has had a high impact on the fish we harvested in this quarter. That is the explanation for the increased feed cost per kilo.
Have you seen an improvement on the feed conversion ratio in Norway?
In Norway, the feed conversion ratio. It's hard to talk about feed conversion ratio in Norway. If you look at our 2015 yearly annual report, it's much better than we look at one quarter. We control our feed. We have our research station. We know that our feed conversion ratio on our feed in healthy fishes is, in fact, the best there is because we benchmark against all the other competitors.
Okay. Very true. Just a quick one on the CapEx levels. I know you're just guiding for 2016 levels, but if you could just give us some more color on how would you think about 2017, 2018, given all the ongoing R&D projects you were talking about that we appreciated.
Yeah. As you correctly state, we don't guide on 2017 yet. Certainly, it's hard to come up with good, secure numbers on the R&D projects before we get the licenses approved. That's why I don't want to come with any specific number at this point in time. I will rather wait until I see if the project is approved and then guide at that moment, because else it will be more or less guesswork, and I will have to restate again if we don't get the project approved. That's why I will not go into guide on those numbers. I'm sorry.
Fair enough. That's all from me. Thank you.
As a reminder, ladies and gentlemen, to ask a question, please press star one. We'll take our next question from Patrick Mortensen from Kepler Cheuvreux. Please go ahead.
Yeah. Hi, thanks for taking my question. What, in your view, looking at the Chilean supply of all, what would be the outlook for when that production can recover? I'm not necessarily just talking about your production, but just Chile as a whole. Thanks.
It's a complex question and a good one. It has to do with several issues. First of all, maybe access to capital. We know that the Chilean industry over time has struggled, and certainly there are players with access to capital, but there are also players with less access to capital. That will have a decisive factor, at least initially. To be honest with you, I hope that the recovery also, maybe for the first time, will be guided by some regulations. We have been talking about the change in regulation and new regulations in Chile for a long time. It's not happened yet. That can also be part of the future growth or the foundation for the future growth. That's why it's difficult to state exactly when it can be back at high levels.
We know that 2016 will be low, and we know that the effect of the algae bloom also will be in 2017. I will not go in and try to guide on specific volumes 2017 and 2018.
While the line is open, as the salmon prices seem to be breaking new highs, do you get a sense that there will be sort of a kink or a dent in demand because of sort of price elasticity? There must be a point where consumers are beginning to switch into something else.
It's certainly in all economic theory that is the case. Then the question is, what is that breaking point where you will see that people will switch to other products? So far, we have seen good demand on forward prices EUR 5.9 per kilo going forward for the whole of 2016. We know that we can do contracts with major retailers at those levels. At least that is levels that we are able to sell our fish at. Then again, I do not have enough data, and I do also in terms of kind of saying there is a set point that will be different in different markets, and they will also be impacted by development of new products.
It's clear that if you put 4 grams of salmon on top of rice in a sushi construction, the price of the product is less sensitive than if you buy a whole fillet.
One final question, if I may. Looking at these new technologies, pardon my ignorance, if these systems are fully closed, would that mean that in principle, the sea lice problem could be over forever?
Yes.
All right. Thank you.
There are no further questions.
Okay. Thank you very much for participating in the conference call, and we'll be back after the second quarter with a new conference call. Have a great afternoon or day if you are in those time zones. Thank you.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.