Good day, welcome to the MHG Q1 2014 International Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Paul Jørgensen, Treasury Manager. Please go ahead, sir.
Thank you. Yes, welcome, everyone. Having a look at page two, the forward-looking statement that needs to be there. We turn to page three for the highlights for the quarter. We have a record high operational EBIT this quarter of almost NOK 1.1 million. All-time high prices in Norway and Canada.
The result is partly offset by contract coverage and high costs in Norway. We succeeded with a very successful convertible bond last week of EUR 375 million. We also are expecting to receive the payment for the sales of the Shetland and the Orkney Islands, and we are expecting to receive GBP 122.5 million for that. We are proposing NOK 5 of dividends to the AGM on the 22nd of May. This has been one of the best, or is in fact the best quarter we ever had.
I will run through the key financials, and if you turn to page four. We have an operational revenue of NOK 5.9 billion from NOK 3.7 billion in Q1 2013. Operational EBIT of NOK 1.1 billion from almost NOK 500 million in 2013. Cash flow from operation, NOK 1.2 billion. We had a net interest-bearing debt at the end of the quarter of NOK 7.5 billion.
We have net cash flow from share of NOK 1.75 and underlying earnings per share of NOK 1.8. Brings us to a return on capital employed of 21.5%. Harvest volume is 92,000 during the quarter, compared to 80,000 last quarter. Price is high and up in each and every region. We see that the operational EBIT per region, you can see down the lower part of the table there.
Norway came in at 12.8 NOK per kilo, Scotland at 12.7 NOK, and those two regions had a relatively high contract volume with the 40% in Norway and 64% in Scotland. Canada, which is basically a spot market, had an operational EBIT margin of NOK 19.10 . Chile is coming in at 6.7 NOK with a contract share of 29%.
If you turn to page five, the global supply growth this quarter was around 4%. You see it's pretty much all-time high prices in each and every region. You see all the reference prices here in this table. We turn to page six or slide six, where you see the price achievement per region. If you start in Norway, you have a relatively low price achievement of around 94%.
This is due to a high contract level and a little bit of treatment of sea lice, et cetera, in the northern part of Norway. Scotland is also not at its best. It's at 92%. We have Canada, who has almost 100%, and Chile is above. If you look at the superior share, it's actually very good in Norway and in Scotland, whether we see some winter wounds and stuff in Canada for this quarter.
We turn to slide seven, where we go through Norway. Operational EBIT of NOK 706 million on a harvest volume of 55,000 ton. Operational EBIT of NOK 12.8 per kilo. There was all-time high prices in the quarter, as I mentioned. We had some adverse impact of sales contract that was entered into before the quarter, and which actually is partly why it's not as high as one would expect.
We have a high sea lice awareness in this region. If you turn to page eight. Here is an overview of Norway's sales contract portfolio for the coming quarters, where you see this is a normal, what you would expect for Norway, where our contracts entered into, we are entering into a contract period now. This is as of the 30th of March.
We turn to slide nine, where you can see the different regions in Norway, where it's split by operational EBIT per kilo. We have a very good quarter for region West of NOK 0.1598, and region South also quite good at NOK 0.1373. In the region Mid, we have NOK 0.1085 and region North NOK 0.0972. This is due to some sea lice and ISA in region North. We turn to the Scottish operation on slide 10, where we had an operational EBIT of NOK 133 million.
Harvest volume 10,000 tons. Operational EBIT per kilo was NOK 12.6. There was a high contract level in Scotland as it normally is at around 60%, and prices were very high. We do see that we have some high costs in the quarter and a good biological state to that person. We turn to slide 11. The Canadian business, we had operational EBIT of NOK 122 million on a relatively low harvest volume, which gives us an extremely good EBIT per kilo of 19.1.
This is, as I mentioned, mainly spot market. We therefore get the full effect of the high prices we see for the quarter. The volume reduction is temporary. It's because we have gone away from areas where we have experienced Kudoa and that is one of the reasons why we see lower volume.
Q1 is typically a very strong quarter for Canada and we expect increased costs for the remainder of the year. Turn to slide 12. Chile, where we have operational EBIT of NOK 119 million on 17,000 tons, which gives us an operational EBIT per kilo of NOK 6.7. We are fairly satisfied with that result. It's positively impacted by high prices for the quarter but we do see some structural issues for this region in the short and long term.
We turn to Ireland and Faroe Islands. In Ireland, which is a small operation, we have an operational EBIT of NOK 4 million with an operational EBIT per kilo of NOK 8.7. Small operation, but we do earn money and that's good to see. When we turn to the Faroes, it's extremely high operational EBIT per kilo of almost NOK 21 per kilo.
It's a small harvest volume though but its operational EBIT was NOK 44 million. We go over to slide 14 for value-added processed products, VAP Europe. We have an operational EBIT of -NOK 25 million which is due to the fact that we are closing down some parts in France. We're going from 13 to 8 processing plants. Still not satisfied with the performance that is done in the quarter.
Turn to slide 15. Morpol. A relatively good quarter for Morpol. We have a break-even for Morpol which is set around NOK 44 per kilo. The spots have been around NOK 46 per kilo. This is fairly good. We see good operational performance for Morpol
I'll turn to slide 16 which is the feed factory project, fish feed factory project. We are happy to inform you that everything is on schedule and on plan both time-wise and on budget. This is expected to start processing in July. We can then go to slide 18, where we can go a little bit more deep into the figures.
We start with the P&L. As mentioned, the operational revenue, NOK 5.9 billion and operational EBIT of NOK 1.1 billion. The fair value adjustment of biological assets has to do with IFRS adjustments. It's NOK 208 for the quarter. We have some onerous contracts on provisions. It's NOK 87 million. We have income from associated companies, which is NOK 14 million, which ends up at the EBIT of NOK 986 million. Net financial items, NOK 22 million. Earnings before taxes, NOK 1 billion.
This gives us a net cash flow per share of NOK 1.75 and an underlying EPS of NOK 1.8. This, as mentioned, is a return on capital employed of 21.5%. We turn to financial position and the balance sheet on page 19. We have pretty much the same situation as we had at the end of 2013, Q4 then.
We have a total asset of NOK 32.8 billion. We have equity of NOK 16.4 billion, non-current liabilities of NOK 12 billion, current liabilities of NOK 4.2 billion, which gives us a total equity and liabilities of NOK 32.8 billion. This gives us an equity ratio of almost 50%, 49.9%, and a Net Interest-Bearing Debt to equity of 45.8%. We turn to cash flow on slide 20. We started off in Q1 on Net Interest-Bearing Debt of NOK 7.8 billion. We have an operational EBITDA of NOK 1.3 billion.
We have paid some taxes of NOK 96 million, and this gives us a cash flow from operation of NOK 1.2 billion. CapEx for the quarter has a net of NOK 373 million. We continue down here. We see a dividend distributed of NOK 510 million, which is without withholding tax. Gives us a net interest-bearing debt at the end of the period of NOK 7.5 billion.
We turn to our guidance on cash flow for 2014 on slide 21. We have a working capital build-up of NOK 800 million. We have a capital expenditures of total of NOK 1.7 billion. That is NOK 1 billion that expected to be on maintenance and NOK 500 million on structural investments and on organic growth. We are still expecting feed plan to have an outflow of NOK 200 million.
Interest expenses is set at around NOK 360 million, where the run rate for the future will be a little bit lower at NOK 300 million. Tax payable will be NOK 250 million. As mentioned, the quarterly dividend for this quarter is 5 NOK per share, and we have also set an NIBD target at NOK 7.5 million, which is actually, if you calculate, around 15 NOK per kilo for farming.
On slide 22, we have an overview over our financing. The new here is on the convertible bond, where we have issued in April this year, EUR 375 million convertible at annual coupon of 0.875% with a premium of 35 on the share, which we are extremely happy with. We turn to slide 23, where we see the development in the supply.
We have a total of increase in the global harvest volume of 4%, which is in line with our expectations. 1.5% of this is in Europe and 9% in Americas. The details is listed here. I don't know if you find anything interesting. If you could say what it would be, it would be that maybe North America is down 26.7% and Chile is up 19.6%.
We turn to slide 24. Here is the price development again. You could look at the development in Norwegian kroner. The change versus Q1 in 2013, Norway is 31.5% and Chile is 31.5% there as well, while North America has actually 52.1%. If you look at the local currency or the sales currency, this is for Norway, 17% and 21.6% for Chile and North America, 40% increase. An extremely high price this quarter, as mentioned.
We turn to slide 25, the global volume by market. Here you see a total increase compared to Q1 2013, 2.9% up. We see big changes in Brazil where you have an increase of 30.6%. You have a decrease in Russia of 11.7%. Very strong demand in the U.S. market and increased import from Europe. The Russian consumers are sensitive to the high prices.
We turn to industry supply outlook on slide 26. Our industry estimate is for 2014 is between 4%-10%, but most of this will come from Norway. If you look at detail here in Q2, in the middle here, you see 6%-11% in the near future, where the later part of the year is between 3%-11%. We turn to slide 27. Our volume guidance for 2014. The increase from last time we had this from 405,000 tonnes to 417,000 tonnes.
This increase is already done in the Q1, where we previously had 80,000 tons and now has 92,000 tons. We can go to our outlook on slide 28. We expect our strong demand to continue. We see forward price of around NOK 39 per kilo for Q2 through to Q4, which is in fact a little bit lower than the spot prices we see today.
We see our focus area will be for the feed factory to successfully develop this and get the feed factory up and going. We are looking at new acquisitions, as mentioned earlier, still in Norway and in Chile. We of course, will focus on integration with Morpol. Challenges we see is a high sea lice awareness in Norway and in Chile. This remains concerning. We are hoping for risk-averse regulatory change in Norway.
Quarterly dividend of 5 NOK per share is proposed to the AGM, and that's about it. Operator, if we can go to Q&A.
Our first question today comes from Gianmarco Bonacina of Equita SIM. Please go ahead.
Yes, good afternoon. A couple of questions. The first one, if you can elaborate a little bit more on the current status of the regulation in Norway. What are the recent updates and when we could expect the, let's say, the parliament or the government to enforce the new regulation? The second is about the feed. I see in the report it is mentioned that the company may evaluate a second plant. Is this already something that you are working on, and how likely is it that later this year or next year you will start to build a second factory? Thank you.
Hi, this is Kristine Gramstad. I'm the Global Director of Communications. I will try to answer your questions. Your questions about regulations in Norway is that the ministry is currently working on average MAB. Marine Harvest has advised against due to the biological factors. We think that it's important that we have the sea lice situation under control in Norway before growing.
The ministry has said that they expect to have a decision before summer. Regarding the new feed factory, we are working on finding a location. We will then present the case for the board, complete with location and production estimates and what kind of investment cost we see. We expect this to be presented to the board for a decision in the first half of 2015.
Okay. Sorry, just a follow-up on the regulation, because I read somewhere recently that the government was working to present a white paper. That could take a while, so maybe a decision could be taken next year. You still think that a decision should be taken before the summer?
Yeah. The minister has said that they will make this decision separate of the white paper. That's the indication we have now, and that they will come with a decision on this before summer, and then they will also work with the white paper.
Okay. Sorry, if they take the decision before the summer, what is the point in doing this white paper, which will not be useful? If they decide on a new regulation, they shouldn't do a study, no?
That's a very good question.
Okay. Thank you.
Thank you. If we have any further questions, please press star one on your telephone keypad now. We have no further questions in the queue at this time.
Okay. Thank you, everyone. I guess that's goodbye then. Have a good day.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.