Good day. Welcome to the MHG Meeting Event Information International Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Alf-Helge Aarskog, CEO. Please go ahead.
Thank you, and welcome to the presentation of Q1 results for Marine Harvest. I will just start with page three highlights and then just tell you when I go from one page to the other. On Highlights, all in all, a satisfactory operational result for Marine Harvest ended at NOK 932 million. A strong contribution from the Norwegian operation and challenging market conditions in the Americas I would highlight as the two biggest outliers in this presentation on the positive and negative side. We did redeem one convertible bond at EUR 350 million. EUR 348 million was turned into share capital. The quarterly dividend that will be paid out now in Q2 is at NOK 1.30 per share. Over to key financials on page four. Just go through the main numbers. Operational revenue increased from NOK 5.2 billion to NOK 5.6 billion in this quarter.
The operational EBIT was down from NOK 970 to NOK 932. The harvest volume up from 74,500 tons in Q1 2014 to 83,400 tons in this quarter. Quite a bit of variance in terms of the operational result per kilo in the different units. In Norway, the result was slightly up to 12.87 NOK from NOK 12.83. This despite a strong reduction in spot price of salmon of 6.5 NOK from Q1 2014 to Q1 2015. Scotland, a much lower result, 2.7 NOK compared to NOK 12.66 in Q1 2014; this is on the back of a situation that started in Q4. I will come back to that. Same for Canada, affected by the market in the U.S. If you then go to page five, see how the different market has developed.
In Europe, still good prices for salmon. The NASDAQ price was just north of 40 NOK per kilo, and this despite weak Russian demand and 17% more salmon going into the European market. In the Americas, weak prices. The North American supply growth was high; it was at 29% for the quarter. The American market was also impacted by currency fluctuations. The Brazilian real weakened quite a bit during the quarter and led, especially in March, to lower demand from Brazil. The fish there comes from Chile, and the Chilean fish has to go into the U.S. At the same time, the Norwegian krone was weaker compared to the US dollar. This makes Norwegian fish more competitive into the American market as well.
The prices achieved in the American market this quarter were very low and below break even, I would assume for most producers in this marketplace. Go to slide six and price achievement. Improved price achievement in Norway. Our contracts in Q1 were at a good price level and actually contributed slightly to an increased price or a price above the NASDAQ reference price. You have quality that always will drag it a little bit down. Corrected for quality, we achieved 100% of the NASDAQ, which indicates good contracts. Same for Scotland and Canada. We are only spot -based, and the reduction in price there is driven by a little bit lower quality. Go to the operational EBIT on slide seven for the company.
This waterfall brings us from Q1 2014 until Q1 2015, and we can see the changes in the most important divisions. Marine Harvest Fish Feed did not produce feed in the first quarter of 2014 but had some expenses in combination with the building period and had a result of a negative NOK 16 million. In the first quarter of 2015, the result was positive NOK 19 million, and that's the difference of NOK 35 million. On the farming side, the majority of the changes are a weaker result in Scotland at NOK 113 million and a weaker result in Canada and as well as no salmon in Faroe Islands reduced the contribution from farm.
Markets improved the result with NOK 41 million in Consumer Products. Even though we were at break-even level, the result improved NOK 61 million from the result in Q1 2014. All in all, the company ended at NOK 932 million.
We turn to page eight and look at the Norwegian operation. A very good result for the Norwegian operation, NOK 839 million in operational EBIT compared to NOK 707 in the same quarter last year. We can see there that we in fact increased the result slightly per kilo; the cost reduction here is a volume effect and on non-seawater costs, fixed costs, meaning wellboat and harvesting plants that reduce costs. Slightly increase in feed cost. All in all, the cost of the operation were at the similar level as first quarter 2014. One cost that grew was the sea lice treatment cost, and at this quarter it was at NOK 1.65 per kilo, which is high compared to what we've experienced before.
If we go into the sales contracts for the Norwegian salmon, we have a contract policy, this is on slide 9, that tells us to be between 25% and 50% of the volume contracted. Q1, we had 33% contracted. The number for Q2 is 32%, so slightly lower. In absolute terms, around 20,000 tons contracted in Q2 and 15,000 tons contracted in Q3 at good prices for these contracts. On slide 10, you will see the four different regions. We've broken the Norwegian operation into four separate regions. This has to do with risk management. They're self-supplied with smolt. They have necessary farming equipment and processing equipment in each region. A fairly even result, NOK 12.87 for the group, and it ranges between NOK 11.53 in Region Mid up to NOK 14.95 in Region West.
Difference has to do mostly with the better cost improvement in region west compared to the other regions. All in all, we're satisfied with this result , taking into account, as I said, that the spot price was down 6.5 NOK compared to the first quarter of 2014. On to page 11 on the Scottish operation. Scotland ended at a positive result of NOK 19 million in operational EBIT, but this is a strong reduction from NOK 132 million in Q1 2014. The result did not surprise us, so we knew it would be a low result that was already mentioned in the Q4 presentation. We turned the minus in Q4 into a positive number in Q1 2015, and we expect this to improve going forward.
This has to do with going into a new generation with better biological performance, and that we will see cost improvements going forward. On the Canadian operations, a big drop in prices. The result went from NOK 117 million to NOK 51 million in Q1 2015. The prices actually stood for most of or almost everything of the reduced result. Cost, in fact, was down in the quarter compared to the same quarter of 2014. Biologically, a good performance from the Canadian operation. Heavily impacted by the weaker market in the U.S. , Ireland, and Faroe Islands, I will not comment a lot on. We do not have any harvest volume until Q4 in the Faroe Islands this year. The Faroe Islands will be a little bit on and off because we have few sites and low production.
On average, we will harvest around 7,000 tons per year in the Faroe Islands, so more to be harvested in 2016 than in 2015. On to page 14, Consumer Products. As already mentioned, the result was close to break even, turning a loss of NOK 63 million into minus NOK 2 million in this quarter. We see improvement, but we're not satisfied with the result. Our target is an EBIT margin between 5% and 6%. Part of this operation delivers those results, but we have especially two units that are challenging. One is the French smoked operation, which is loss-making, and also the new processing plant in Scotland, which has just started up, and we have some start-up costs connected to that. To page 15 on feed. Low volume in this quarter. We still had third-party commitments and contracts that we had to adhere to.
Overall, we are satisfied with the result, 4.8% on basically only a third of the capacity utilized in this quarter. If we then continue on to page 16, we will show the Chilean and U.S. operation that will be affected by the merger with AquaChile or the potential merger with AquaChile. This, due to accounting rules, has to be classified as discontinued operations. We had a terrible quarter in Q1 2015. We had one site in region 11, one site with trout we decided to take out completely because of the official situation but also the quality of the site, and cut our losses on that site. That cost us 51 million NOK. In addition to that, prices fell on salmon. All in all, the result was negative 6.48 per kilo.
Full cost high this quarter, including culling of the fish that we said, it ended at $5.2 per kilo. In addition to that, not in the first quarter but the last week, we had a volcanic eruption that was described in the media that could be a game changer in the Chilean operations. For us, this volcanic eruption did not have a material impact in terms of stocking plans and harvest plans going forward. We lost 2.4 million eyed eggs. They are already replaced. We lost 6.8 million fry, which we can replace mostly by internal supply. This was very small fish, so it will not have impact on stocking in 2015 or in 2016, and no impact on expected harvest volume for 2015 or 2016. Over to financial and a little bit more on harvest volume markets.
I think the profit and loss, we have been through it more or less. If there are specific questions there I can answer when we come to the question part. This on slide 18. On slide 19, you see our financial position. Total assets is up NOK 36 million compared to NOK 32 million in the same quarter 2014 and on the same level as at the end of 2014. All in all, a fairly strong equity ratio of 50.9%. Net interest-bearing debt is slightly on the high side compared to what was expected. That has to do with a little bit high working capital than expected. I think Easter sales, which is quite high sales, the income from that will follow in Q2. We see that already happening. The cash flow statement going from the beginning of the quarter.
Net interest-bearing debt at the beginning of the quarter at NOK 9.2 billion. Then you see the effect; I will not go through item by item, but you will see here the biggest impact is the conversion of the convertible bond to equity at NOK 2,369 million down towards the bottom of the list. You see, we ended up at NOK 7.5 billion as the net interest-bearing debt for the end of the period. Cash flow guidance. Working capital: There's no change there. It's NOK 900 million, and this is to support the organic growth going forward. In terms of CapEx, there is a change. We are obviously investing in Canada. We're investing in Scotland. Due to currency, there is a change from NOK 1.7 billion to NOK 1.9 billion.
It's not that we are investing more, but it's just that we are buying the same equipment in pounds or in dollars, and when we then translate it into Norwegian kroner, the effect is an increased CapEx on the same projects. Interest expenses at NOK 270 million. Tax payables unchanged to NOK 650 million for the year. Quarterly dividend is NOK 1.3, as already mentioned. Dividend policy stays the same. The NIBD target here is revised to EUR 950 million. It's the same contribution to the farming kilos: NOK 15 per kilo. The remaining is attributed to feed and to Marine Harvest Consumer Products, the value-added operation. We go to slide 23, overview of financing. Basically nothing changed there other than the conversion of the one convertible that was EUR 350 million. On to supply development.
In this slide on page 24, you'll see. What surprised us the most was the increase in Norway at 9.6%. We guided this to be between 2% and 6% for the first quarter but higher than normal seawater temperatures in the quarter on a higher biomass that was allowed due to this temporary increase of maximum allowed biomass gave a higher supply harvest volume in Norway. Other than that, Chile is slightly down. The same for Scotland. North America up 28.6%. We guided a range there up to 34%, so that was within what we expected, and the same for the remaining volume. All in all, an increase of 4.5% in the quarter. If you go on to the reference prices, this led to a drop in prices in Europe, 39.9%, but from a very high level.
We compare here to first quarter of 2014, which had record -high prices. More concerning is the development for Chilean fish and for the North American fish, with a drop of 17% and 35%. As already mentioned, this had several reasons. Supply increase from the North America was substantial, but also the effect of the currency in the different markets or the Norwegian salmon going into the U.S. and the weakening of buying power in Brazil. We go to page 26 and look at global volume by market. We see a very strong growth in EU, 17.2% compared to Q1 2014. It has to be described as a very strong demand. Other markets to comment on is Russia is down 42.4%. It has to do with the situation in Russia, both sanctions and the currency development.
The Russian ruble lately has developed to be slightly stronger; it's still weak compared to what it was one year ago. In terms of other markets, Ukraine is down with 52%. Other than that, there's a very positive change in South Korea and Taiwan at almost 100%. When you come into other markets, they grew by 12.9% and are now accounting for 85,100 tons out of a total of 484 in the quarter. Most markets in the other category, salmon is sold to, last time I counted, 166 different countries. We see good growth in countries like Turkey and in countries like South Africa. I could mention a lot of countries within this category that is growing very well. Same, in fact, for Israel.
If you go to industry supply outlook, really bodes well for good prices also going forward. For the year, we expect the salmon to grow between 2% and 5%. For next quarter and the second quarter, from -2% to +3%. That is the range. The remaining second half, obviously, is the residual of those two first mentioned. All in all, low supply growth is to be expected, which should bode for good prices, even though we are worried about the development, especially in the U.S. market. It is at a low level these days. To our own harvest volume on page 28. We have included Chile here just to get the total number, which is unchanged at 440,000 tons. Slight increase in Norway compared to earlier estimates. Slight reduction in Canada. Overall, not big changes to our own operation.
Our growth, including Chile, is expected to be in the area of 5%. A little bit on the high end compared to the estimate for the industry. Outlook. The market in Europe, based on what we've seen over the last year and even two years, is still very strong. The future prices are at NOK 40 per kilo. This on the back of the supply that's expected. It's strong prices. The conditions in the American market, as before mentioned, we monitor that closely, and we work hard there on promoting new products into U.S. retail stores and more convenient products. We think that there is room to grow this market by having more developed products, easier for the consumer.
The white paper came in this quarter, and the Norwegian government stated that if we are going to grow the Norwegian supply, it has to be within improved biological control, and it has to be done in a sustainable way. This is something Marine Harvest strongly supports, because if we are going to grow the industry, it has to be done in the correct manner to make it sustainable for the future. In terms of the AquaChile merger, that is in process, and the deal is ongoing, and we still expect this to be closed by Q3 of 2015. We have also filings to the competition authorities in several countries, and we need to get the results from that back before we can close the merger.
Dividend already mentioned: 1.3 NOK per share. This is to be paid in the form of repayment of paid capital or paid-in capital. With that, I would like to open up for questions.
Thank you. If you would like to ask a question at this time, please press the star or asterisk key, followed by the digit one on your telephone. If your question has already been asked, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We will pause for just a moment to allow everyone to signal. As a reminder, ladies and gentlemen, it's star one to ask a question. We have a question from Kirsten Macaulay of Bloomberg. Please go ahead.
Good afternoon. Thanks for fitting me in the question. You mentioned biologic issues in Chile, and I was just wondering how would you characterize those biologic conditions. You've mentioned them before, and I'm just wondering, are they deteriorating? Do they seem contained? Is there potential for that to affect overall Chilean supply in the next 6-18 months?
To answer that question on the biological conditions in Chile, what we see is that the sea lice situation in Chile is fairly contained. The one issue that is the major problem in Chilean farming is a disease called SRS, Salmonid Rickettsial Syndrome. It's caused by bacteria. It's complicated to develop a good vaccine towards this bacteria. The result has been to use antibiotics to treat the fish with that. That is working. We see, I would say, more frequent number of SRS outbreaks and more usage of antibiotics in the Chilean operation. That is not a good sign. I will not say that it can completely go out of control. It's something that really needs to be solved long-term to make it into a sustainable operation. We're working on vaccine development together with the rest of the industry.
There are vaccines coming on now, but we also need to work and improve farming conditions even further to avoid this to be an issue. I will not say it can have a huge impact on supply. We expect supply to go down in Chile in 2015 no matter what, but it certainly is a concern, and it's a problem and issue that needs to be solved.
If I could also just ask about the Canada-US supply development, because that was a significant step up. Where is the additional supply coming from? Is that just reflective of a particular bumper salmon run or just expansion of other farming operations in that market?
It is a combination of successful farming practices. It's partly actually caused by us at Marine Harvest. We took down production basically almost two years ago and because of something called Kudoa, and we have found a solution for that, and we are growing our operation back to normal levels. Bear in mind that North America is not huge compared to the total global supply, but anyhow, it grew with 6,000 tons in this quarter, and close to 4,000 of those tons came from Marine Harvest. It is basically coming back to normal volumes. That, in combination with more competition from Norwegian farms and also Chile that has to, at least especially in March, has to sell more fish into the U.S., has an effect on the supply into the U.S. market and thus the price.
What we are working on now is new products, and new products to actually new customers in the U.S. that is now selling salmon for the first time. More convenient and more user-friendly products can solve this. The consumption in the U.S. was last year around 380,000 tons. That's slightly above 1 kilo per capita, which is on the low end. We believe that there is room to grow the market, but that has to be done through product development going forward. If you look at the numbers for the year, it is a substantial increase from North America. If you combine that with the Chilean volume, and if you expect actually a reduction in Chilean volume going forward, there will most likely be pressure on prices, but that has to be combated on with product development.
Okay, my last question is just in terms of farming costs. I think last year in Norway, the sea lice issue kind of materialized in Q3 throughout Q4. How do you see that item evolving over the remainder of 2015?
I think we will see a cost increase in Q2, basically because of what you just mentioned. I think beginning of Q3 and onwards, costs in general will fall on a week in summer, and that is not because I believe that it will be a lot less sea lice cost, but because of feed costs will be reduced going forward. That has to do with raw materials, both on the vegetable side, what we use of vegetable raw materials, but also that the fishing in Peru has been good. We expect, and we have seen already, that fish meal and fish oil prices has come down. That's the cost development in Norway. For Marine Harvest, we expect costs to go down in Scotland, coming from a high level, but both in Q2 and the remaining of the year.
In Canada, we have already performed fairly well on cost, and I don't see any big changes in that operation cost-wise. In Chile, we had one-off in this quarter that brought the cost up. I think we will foresee a slight reduction in cost in Chile also going forward.
Great. Thank you very much. We have no further questions at this time. As a reminder, please press star one to ask a question. We have no further questions at this time.
With that, I will thank you for participating and wish you all, I guess you're from all corners of the world, so a good day or a good afternoon.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.