Q2 2014_REPORT_FINAL - 1 -DDDDD24124
Copyright: Norwegian Seafood Council, fotographer Tom Haga Highlights for the quarter EBIT Group NOK 123 million pre fair value EBIT pre fair value and non-recurring items - pro forma (NOK million) 325 214 137 113 123 Sales volume 6 thousand tonnes lower than estimated due to market timing. Full year estimate at same level Continued high ex-cage cost for Atlantics in Chile. Target of USD 3.8 per kilogram in 2015 reiterated First ASC certification in Chile achieved One green license in category C awarded Sale of grain silo completed with NOK 44 million gain, not included in EBIT pre fair value Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 EPS total operations (adjusted, NOK) 2.6 2.1 1.7 1.8 0.5 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Operating cash flow 289 246 137 100 44 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Cermaq ASA Half year report 2/24
Group key figures pro forma NOK million, NOK EPS Q2 14 Q2 13 YTD 14 YTD 13 FY 13 KEY FIGURES Volumes sold (ktonnes, gwe) 26.5 28.6 61.2 71.7 142.3 Operating revenues 1 106.8 1 130.8 2 621.8 2 369.9 5 155.3 EBITDA pre non-recurring items 190.5 198.2 581.3 289.9 746.6 EBITDA pre non-recurring items % 17.2 % 17.5 % 22.2 % 12.2 % 14.5 % EBIT pre fair value and non-recurring items 123.2 136.9 448.6 167.8 494.9 EBIT pre fair value and non-recurring items % 11.1 % 12.1 % 17.1 % 7.1 % 9.6 % Basic and diluted EPS - total operations 0.7 3.7 2.1 6.9 42.0 Adjusted basic and diluted EPS - total operations 0.5 1.7 3.1 2.0 5.9 Return on capital employed (12-month rolling avg.) 14.0 % 6.3 % 14.0 % 6.3 % 10.3 % Total assets 9 276.5 14 741.6 9 276.5 14 741.6 13 796.3 Capital employed pre fair value at balance sheet date 6 430.6 9 889.9 6 430.6 9 889.9 6 253.8 Equity 4 924.9 6 504.6 4 924.9 6 504.6 9 624.9 Equity ratio 53.1 % 44.1 % 53.1 % 44.1 % 69.8 % Net interest bearing debt 2 092.2 4 155.3 2 092.2 4 155.3 (2 613.3) Operating cash flow - total operations 137.1 245.8 426.2 338.6 483.1 Capital expenditure - total operations 98.1 246.0 181.4 353.5 582.2 EBIT reconciliation NOK million Q2 14 Q2 13 YTD 14 YTD 13 FY 13 EBIT pre fair value and non-recurring items 123.2 136.9 448.6 167.8 494.9 Gains from sale of assets, shares and operations 43.9-43.9 46.1 46.1 Other non-recurring items - - - 1.1 1.1 EBIT pre fair value, reported 167.2 136.9 492.6 215.0 542.1 Cermaq ASA Half year report 3/24
Revenues and profits for the Group (Figures in brackets = 2013, unless otherwise specified) Introduction Cermaq announced 18 July 2013 that a sales agreement for the EWOS business area had been entered into with Altor Fund III GP Limited and Bain Capital Europe LLP for a total enterprise value of NOK 6.5 billion. The transaction was completed on 31 October 2013. A gain of NOK 2.7 billion was recognised in fourth quarter 2013 and classified as part of discontinued operations. EWOS is included in the Cermaq Group accounts until the date of sale and presented as discontinued operations with effect from third quarter 2013. The comparative periods are re-presented. For the purpose of providing relevant information in this report, the profit and loss comments are based on financial information for continuing operations in the periods before 2014. The financial information for continued operations is defined as the Cermaq farming companies and other activities, including Cermaq ASA. Although this presentation seeks to represent the activities as if they were stand alone entities in normal operations, they do not necessarily include all elements in such a situation. For further information, see note 4. Revenues and volumes pro forma Cermaq s operating revenues were NOK 1 106.8 million (NOK 1 130.8 million) in second quarter 2014. Revenues decreased by NOK 24.0 million, or 2 percent, compared to last year, explained by lower volume sold in Norway. Total volumes sold were 26.5 thousand tonnes (28.6 thousand tonnes), approximately 6 thousand tonnes less than the previously communicated estimate. Compared to estimate, the volume variance was mainly related to postponed sales of Atlantics in Chile due to market conditions. The harvest volume in Chile during the quarter was in line with production plans. The volume decrease compared to second quarter 2013 is primarily explained by lower trout volume in Chile and planned maintenance closure of the three processing plants in Norway at various times during second quarter 2014 that impacted sales volume. The Group s operating revenues for the first half year 2014 were NOK 2 621.8 million (NOK 2 369.9 million). Despite a volume reduction of 10.5 thousand tonnes, the revenues increased by NOK 251.9 million, or 11 percent, from stronger salmon prices in all regions compared to first half year 2013. Volumes sold were 61.2 thousand tonnes in first half year 2014 (71.7 thousand tonnes), a reduction of 15 percent compared to the same period last year explained by postponed sales in Chile and scheduled processing plant closures in Norway. EBIT pro forma EBIT pre fair value and non-recurring items for the quarter was NOK 123.2 million (NOK 136.9 million), adjusted for a gain of NOK 43.9 million from sale of a grain silo in Stavanger, Norway. EBIT pre fair value and non-recurring items in Cermaq farming was NOK 137.2 million (NOK 169.1 million) in second quarter 2014. The EBIT loss of NOK 14.0 million (loss of NOK 32.2 million) in Other activities is related to the net expenses of the parent company. The decline in operating result in second quarter 2014 compared to same quarter last year, was mainly in Norway as lower volume and higher costs in Finnmark impacted the results. This effect was partly offset by lower expenses in Other activities due to around NOK 17 million in one-off costs related to all the strategic processes included in second quarter 2013. The net fair value adjustment of biological assets was an expense of NOK 16.6 million (income of NOK 225.2 million) in the quarter, explained by higher inventories and prices in Chile and Norway offset by lower prices by the end of second quarter 2014 in Canada compared to the end of first quarter. For first half year 2014, an expense of NOK 166.6 million was recognized (income of NOK 556.2 million) as net fair value adjustment. First half year EBIT pre fair value and non-recurring items was NOK 448.6 million (NOK 167.8 million), an increase of NOK 280.8 million compared to first half year 2013. Adjusted for the NOK 43.9 million gain from sale of a grain silo in Norway in 2014 and a gain of NOK 46.1 million from sale of a processing plant in Calbuco, Chile in 2013, EBIT pre fair value was NOK 492.6 million (NOK 215.0 million). The improvement is primarily coming from higher average salmon prices in all regions, partly offset by lower volumes sold. Financial items pro forma Net financial items in second quarter was an expense of NOK 22.3 million (NOK 32.4 million), including net interest expenses of NOK 17.0 million (NOK 35.7 million). Net financial items for first half year was an expense of NOK 48.8 million (NOK 59.0 million), including net interest expenses of NOK 34.5 million (NOK 61.2 million). The decrease was caused by a lower net interest bearing debt in 2014 compared to 2013. See note 6 for further information. Cash flow Net cash inflow from operating activities was NOK 137.1 million in the quarter (NOK 245.8 million, including EWOS). EBITDA, excluding the silo gain, was NOK 190.5 million, a decrease of NOK 140.8 million compared to last year (NOK 331.3 million). Income taxes paid were NOK 28.3 million during the quarter (NOK 3.4 million). Working capital increased by NOK 26.4 million in second quarter 2014, compared to an increase of NOK 89.5 million in the same quarter last year. Inventory build up in all regions, partly offset by lower receivables in Norway and Chile, were the main components for the increased working capital in second quarter 2014. Net cash outflow from investing activities was NOK 72.7 million in the quarter (NOK 1 071.3 million). Paid capital expenditures of NOK 98.6 million (NOK 241.5 million) are to a large extent replacement investments like nets, anchoring and pumps in all farming regions. The paid capital expenditures related to EWOS in second quarter 2013, which is included in the Group figures, amounted to NOK 79.8 million. The inflow from sales of PPE, intangible assets and businesses of NOK 32.0 million in the quarter is related to the sale of Stavanger Havnesilo of NOK 49.3 million, partly offset by final settlement agreement in connection with the sale of EWOS. The outflow of NOK 831.9 Cermaq ASA Half year report 4/24
million from purchases and proceeds of shares and other investments in second quarter 2013 were mainly related to the acquisition of shares in Copeinca ASA. Net cash inflow from financing activities in the quarter was NOK 10.6 million (NOK 914.9 million). The proceeds raised from the bond issue in May 2014 of NOK 750 million were used to pay down existing debt and dividend of NOK 161.5 million paid in May. The change in cash and cash equivalents in the period was an inflow of NOK 85.4 million (NOK 101.8 million). Financial position Net interest bearing debt increased by NOK 162.4 million, from NOK 1 929.8 million at previous quarter end, to NOK 2 092.2 million at 30 June 2014. As of 30 June 2014, Cermaq ASA had total available credit lines and cash of around NOK 2.1 billion. NOK 1.5 billion of that amount is committed long-term facilities compared to NOK 1.0 billion at 31 March 2014. This increase in available committed long-term facilities is mainly explained by the repayments of existing loans under the syndicated facilities following the NOK 750 million unsecured bond issue carried out in May 2014. quarter end. The increase is largely due to increased inventories in the quarter. The equity ratio decreased to 53.1 percent at the end of the period, from 54.9 percent at the end of first quarter 2014, explained by the higher total assets as the total equity was relatively unchanged compared to 31 March 2014. Share information Total number of shares outstanding at the end of the quarter was 92.5 million, including 3 656 treasury shares held by Cermaq ASA. Total number of shareholders was 2 607 at the end of June 2014, a decrease of 85 during the quarter. Of the total number of shares at quarter end, 21.0 percent were held by Norwegian residents, excluding the Norwegian State that had a 59.17 percent ownership interest by the end of second quarter 2014. Cermaq ASA's share price increased from NOK 66.5 at the end of March 2014 to NOK 84.5 at the end of June 2014. Total booked equity per share as of 30 June 2014 was NOK 53.2. The number of Cermaq ASA shares traded at the Oslo Stock Exchange in the second quarter 2014 was 9.0 million, compared to 17.4 million in first quarter 2014 and 43.0 million in second quarter 2013. Total assets were NOK 9 276.5 million at the end of second quarter 2014, an increase of NOK 302.8 million from prior Cermaq ASA Half year report 5/24
Cermaq farming Key figures NOK million Q2 14 Q2 13 YTD 14 YTD 13 FY 13 Operating revenues 1 093.0 1 123.5 2 596.1 2 361.1 5 131.7 EBITDA pre non-recurring items 202.8 229.1 608.1 338.0 855.9 EBITDA pre non-recurring items % 18.6 % 20.4 % 23.4 % 14.3 % 16.7 % EBIT pre fair value and non-recurring items 137.2 169.1 478.5 218.4 610.0 EBIT pre fair value and non-recurring items % 12.6 % 15.1 % 18.4 % 9.2 % 11.9 % EBIT pre fair value 137.2 169.1 478.5 265.6 657.2 EBIT pre fair value % 12.6 % 15.1 % 18.4 % 11.2 % 12.8 % EBIT (operating result) 120.6 394.3 311.9 821.8 1 308.8 Volumes sold by region (ktonnes, gwe) Chile 14.0 15.0 33.4 39.6 76.1 Atlantic 10.9 9.8 18.7 21.0 41.0 Coho 1.8 2.4 10.0 12.6 22.8 Trout 1.4 2.7 4.8 6.0 12.3 Norway 8.1 9.7 21.3 24.3 51.0 Nordland 4.4 5.1 8.2 7.9 21.9 Finnmark 3.7 4.5 13.1 16.4 29.1 Canada 4.4 4.0 6.5 7.8 15.1 TOTAL 26.5 28.6 61.2 71.7 142.3 Revenues by region Chile 547.2 523.8 1 300.7 1 095.3 2 470.3 Norway 343.2 414.3 987.4 947.6 2 005.3 Canada 202.5 185.3 307.9 318.2 656.1 TOTAL 1 093.0 1 123.5 2 596.1 2 361.1 5 131.7 EBIT pre fair value and non-recurring items by region Chile 4.6 (6.4) 80.1 (54.8) 30.8 Norway 80.7 121.5 316.4 206.9 445.3 Canada 51.9 54.0 82.1 66.3 133.8 TOTAL 137.2 169.1 478.5 218.4 610.0 Return on capital employed (12-month rolling avg.) 14.4 % (0.6)% 14.4 % (0.6)% 10.7 % EBIT per kg by region (NOK) Chile 0.3 (0.4) 2.4 (1.4) 0.4 Atlantic (0.6) (0.5) 0.4 (2.0) (0.3) Coho 7.5 (2.8) 6.9 (3.3) 1.0 Trout (1.0) 1.8 1.1 2.1 1.6 Norway 10.0 12.6 14.8 8.5 8.7 Nordland 11.0 13.7 14.4 11.9 11.0 Finnmark 8.8 11.4 15.1 6.9 7.0 Canada 11.8 13.4 12.7 8.5 8.9 TOTAL 5.2 5.9 7.8 3.0 4.3 Capital expenditure 93.3 155.8 173.5 236.6 383.9 Cermaq ASA Half year report 6/24
Cermaq Chile Financial overview Cermaq Chile reported an EBIT pre fair value of NOK 4.6 million (loss of NOK 6.4 million). EBIT pre fair value per kilogram, gutted weight, was NOK 0.3 (negative NOK 0.4). Higher achieved sales prices for all species compared to last year mainly explain the improved result. Prices for Coho and trout are in particular significantly higher than second quarter 2013. The remaining stock of last year s Coho generation was sold during the quarter. Biological challenges still have an adverse effect on the production cost for Atlantics and trout compared to same quarter last year, although average harvest weight for Atlantics is good. The mix of the volume sold between regions and harvest from underperforming sites with slightly higher mortality increased the ex-cage costs by 7 percent for Atlantics in second quarter 2014 compared with prior quarter. The new generation currently in sea is performing positively and according to plans. On 1 April 2014, a lawsuit was served on Cermaq Chile from the former owner of Cultivos Marinos Chiloé as described in note 11 in the first quarter 2014 report. Cermaq finds the lawsuit to be without sufficient legal fundament and consequently no provision has been made. Volumes and prices Volumes sold were 14.0 thousand tonnes in the quarter, a decrease of 7 percent, or 1.0 thousand tonnes, compared to second quarter 2013. The sales volumes in second quarter 2014 were 5.4 thousand tonnes, or 28 percent, lower than the previously communicated estimate, mainly explained by a quarterly shift for Atlantics in Chile due to market conditions. Compared to second quarter last year, Coho and trout had a volume decrease of 27 percent and 48 percent, respectively, at relatively small volumes, while Atlantics increased 11 percent. The reduction in Coho volume is related to timing of sales around year-end. The trout decline is due to lower production based on the company s stocking strategy of reducing total trout volume somewhat. Increased sales volume for Atlantics is explained by higher smolt release last year and in general better average harvest weight. The US market has been relatively strong for Atlantics throughout the quarter, but the significant drop in June put pressure on both prices for fresh and fillets towards the end of the quarter. Average achieved price per kilogram for the combined fresh and frozen Atlantics was USD 6.01, an increase of 3 percent compared to the same period last year, and in line with prior quarter. The product mix between fresh and frozen was fairly stable in second quarter 2014 compared to both prior quarter and same quarter last year. The average achieved price for frozen increased around USD 0.8, but the positive effect was offset by a price decline for fresh. Achieved average price per kilogram for Coho and trout was USD 5.91 and USD 7.07, respectively, with a corresponding increase of 44 and 18 percent compared to second quarter 2013 due to strong market conditions. Against prior quarter, prices for both Coho and trout increased around 5 percent. Operations The overall sanitary situation in Cermaq Chile is stable. The main reason for concern is still the presence of SRS at certain Atlantics and trout sites. Mortality has increased slightly compared to same quarter last year. There are noticeable differences between the regions, where region XII is showing promising results. The number of sea lice has continued to be reduced throughout the quarter and is below average industry level in Chile. Compared to same quarter last year, the production cost for sold Atlantics, Coho and trout increased 5 percent, 2 percent and 25 percent, respectively, in second quarter 2014. The challenging biological environment during the last year contributed to increased cost levels for Atlantics and particularly trout against second quarter 2013. Also a relative higher share of the volume harvested from region XI in second quarter 2014, as opposed to region X same quarter last year, added some harvest cost and combined with higher feed prices these factors increased the production costs further. For trout, the increased production cost is caused by poor performance due to biological challenges. Against prior quarter, production cost for Atlantics increased 6 percent, Coho increased 3 percent and trout increased 15 percent. As stated in the company s capital markets day presentation in November 2013, improving the ex-cage cost for Atlantics is a focus area in Chile. The targeted ex-cage cost level of USD 3.8 in 2015 is reiterated. Despite the ex-cage cost increase in second quarter 2014, the activities implemented to ensure that this cost reduction will be met proceed as planned. For the new generation currently in sea, the performance indicators are developing in accordance with expectations. For further information, see Outlook section. 5.0 4.0 3.0 Cermaq Norway Financial overview Ex-cage cost Atlantics, Chile USD/kg (GWE) 4.8 4.8 4.5 4.5 4.9 Q213 Q313 Q413 Q114 Q214 Cermaq Norway reported an EBIT pre fair value of NOK 80.7 million (NOK 121.5 million). EBIT pre fair value per kilogram, gutted weight, was NOK 10.0 (NOK 12.6). The EBIT per kilogram for Nordland was NOK 11.0 (NOK 13.7) and for Finnmark NOK 8.8 (NOK 11.4). Lower volumes and increased production cost compared to second quarter last year were the main reasons for the profit reduction. The higher result in Nordland compared to Finnmark is due to lower production cost from strong biological performance, partly offset by somewhat higher achieved sales prices in Finnmark. A greater share of the volume sold in Finnmark was made early in the quarter when the prices were higher. The ISA detection at Langøyhovden in Nordland has had limited financial impact. Cermaq ASA Half year report 7/24
Volumes and prices Volumes sold of 8.1 thousand tonnes were 16 percent, or 1.6 thousand tonnes, lower than second quarter last year, but in line with previously communicated estimate. Planned maintenance closure of the processing plants in both regions affected the volume sold in second quarter 2014. The Finnmark region accounted for 45 percent of the volume in second quarter 2014, while the share was 47 percent in the corresponding quarter last year. Against prior quarter, the volume was 5.1 thousand tonnes lower. Achieved average sales price per kilogram was NOK 39.2, down NOK 1.1, or 3 percent, from the same period last year, and 13 percent lower than prior quarter. The quoted NASDAQ price (FHL FCA Oslo) was NOK 39.5 and the comparable volume weighted average price was NOK 39.9 for second quarter 2014. Total revenues in second quarter 2014 compared to prior quarter decreased by NOK 301.0 million due to lower volume sold. Fixed price contracts covered 9 percent of the volume sold in the period at an average price of NOK 39.2 per kilogram FCA Oslo. Norway has immaterial volume covered by fixed priced contracts for the remaining estimated total volume in 2014. Operations The biological performance in Norway is good with strong growth, apart from one underperforming site with accumulated high mortality in Finnmark. Production cost per kilogram increased by 7 percent, or NOK 1.9, against same quarter last year, and 6 percent, or NOK 1.5, compared to first quarter 2014, mainly caused by harvest from one underperforming site in Finnmark. Additionally, production costs were adversely impacted by higher processing costs from lower harvested volume in both regions in second quarter 2014 compared to same quarter last year due to scheduled maintenance closure of the three processing plants at various times during the quarter. Higher feed prices also had a somewhat negative effect on the cost development. Production cost per kilogram in Nordland increased slightly by NOK 0.9 and NOK 0.6 against same quarter last year and prior quarter, respectively, caused by higher processing costs from lower volumes. In Finnmark, the production cost increased by 12 percent, or NOK 3.3, against same quarter last year, and 14 percent, or NOK 3.5, against prior quarter primarily due to harvest from two underperforming sites in second quarter 2014 combined with higher processing costs from lower volumes. Cermaq Canada Financial overview EBIT pre fair value in Cermaq Canada was NOK 51.9 million (NOK 54.0 million). The corresponding EBIT pre fair value per kilogram, gutted weight, was NOK 11.8 (NOK 13.4). The profit reduction was mainly coming from higher costs due to lower average harvest weight. Volumes and prices Volumes sold in the quarter were 4.4 thousand tonnes, 0.6 thousand tonnes lower than previously communicated estimates explained by slower growth. Compared to second quarter last year, volumes were 0.4 thousand tonnes, or 10 percent, higher due to lower volume in second quarter 2013 resulting from the IHN outbreak at Dixon in 2012. Prices in the US market declined sharply towards the end of the quarter. Achieved average price per kilogram was CAD 8.16 for second quarter 2014, 3 percent up compared to same quarter last year, and down 11 percent compared to prior quarter. The equivalent prices in USD/lb were 3.40 for second quarter 2014, 3.51 for same quarter last year and 3.76 for first quarter 2014. Operations The overall biological performance in Canada is stable, but feeding rates have deteriorated during the quarter and affected growth. Production cost per kilogram was 10 percent higher than in second quarter 2014 and in line with prior quarter. The cost increase is mainly caused by harvesting from sites that suffered from extended periods with feeding issues, which adversely impacted average harvest weight due to slower growth compared with second quarter 2013. Cermaq group sales Q1 13 Q2 13 Q3 13 Q4 13 FY 13 Q1 14 Q2 14 Q3 14 Q4 14 FY 14 volumes (kt, gwe) ACT ACT ACT ACT ACT ACT ACT EST EST EST Chile 25 15 11 26 76 19 14 19 28 80 Atlantic 11 10 7 13 41 8 11 16 16 51 Coho 10 2 1 9 23 8 2-9 19 Trout 3 3 2 4 12 3 1 3 3 10 Norway 15 10 13 14 51 13 8 17 19 57 Nordland 3 5 7 7 22 4 4 8 9 26 Finnmark 12 5 6 7 29 9 4 9 9 31 Canada 4 4 4 3 15 2 4 6 8 20 TOTAL 43 29 28 43 142 35 27 41 54 158 Cermaq ASA Half year report 8/24
Market development Harvest of Atlantic salmon ktonnes WFE Q2 13 Q2 14 FY 13 FY 14E REGION Canada 29 29 115 117 Chile 107 129 468 523 Norw ay 256 295 1 144 1 216 UK 37 40 158 164 Other 39 42 158 172 EST, HARVEST 467 535 2 043 2 191 Source: Kontali Kontali estimates global harvest of Atlantic salmon of 2 191 thousand tonnes in 2014, which is 7 percent above last year. This is an increase from a 2 percent growth rate in 2013, but below historic average demand growth levels. The 2014 supply growth estimate implies a 2 percentage point higher growth rate than the estimate published in the first quarter report, driven by higher harvest estimates for Chile. For 2015 Kontali expects a global supply growth of 1 percent. The issuance of 45 new green licenses in Norway may increase Norwegian capacity by 4 to 5 percent long term, but with limited impact in 2014. Several companies have appealed the decision concerning 20 of these licenses while the appeal period for the last 10 is not over yet, hence it may take time before the licenses are ready to be put into production. The Norwegian Government has announced that it plans against a fee to allow a 5 percent increase in Maximum Allowed Biomass for licenses where the owners commit to very low sea lice levels. Due to the tough restrictions, in addition to the fee, it is likely that there will be only a limited number of companies who will use this option, and hence the capacity increase on an industry level from this initiative will be limited. This increase will at the earliest be in place in December 2014. In Chile, the industry smolt release during the first five months of 2014 was flat compared to the previous year for Atlantics. Smolt release for Coho was up by 11 percent while trout was down by 26 percent compared to last year. Smolt release numbers as well as the financial and biological restrictions currently observed imply relatively stable Chilean production of Atlantic salmon into 2015. The salmon reference prices in Norway and Canada fell by 20 to 30 percent from the end of first quarter to the end of second quarter, while the Chilean price was largely stable. This development led Chilean reference prices to be largely in line with the Norwegian and Canadian when calculated back to a farm-gate equivalent at the end of the quarter measured in NOK per kilogram. Sales by region of Atlantic salmon ktonnes WFE Q2 13 Q2 14 FY 13 FY 14E REGION EU 214 241 905 963 USA 95 100 371 403 Japan 13 17 59 64 Russia 34 34 160 160 China / Hong Kong 15 23 69 80 Brazil 20 26 86 100 Other 88 104 388 426 EST, SUPPLY 479 544 2 038 2 196 Source: Kontali Total sales of Atlantic salmon increased by 14 percent in second quarter 2014 compared to same quarter last year. The EU was the main driver in terms of absolute volume growth, while China/Hong Kong saw the highest growth rate in percent. Sales to Russia started normalizing after a being hurt in the first quarter by high prices and a weakened ruble. Volume to Russia declined by 3 percent in the second quarter versus a drop of 16 percent in the first quarter. Prices on farmed salmon The average Norwegian reference price (FHL FCA Oslo) in the second quarter 2014 was NOK 39.5 per kilogram, down 16 percent from prior quarter and 5 percent below second quarter 2013. Chilean Atlantic fillets and Canadian Atlantic whole fish traded at USD/lb 4.9 and USD/lb 3.2, respectively, in second quarter 2014, which was 5 percent and 7 percent lower compared to the same period last year, and unchanged and 12 percent lower than prior quarter, respectively. The reference prices reflect premium quality while the Chilean industry currently supply a lower premium share due to sanitary issues, which impacts the achieved prices. Atlantic salmon price, wholesale, indexed, local FX 240 220 200 180 160 140 120 100 80 60 1 6 11 16 21 26 31 36 41 46 51 4 9 14 19 24 29 34 39 44 49 2 7 12 17 22 2012 2013 2014 Oslo M iami Seattle Cermaq ASA Half year report 9/24
Outlook Cermaq was awarded 7 new green licenses from the Norwegian government in the first half year of 2014. Five of the awarded licenses were in group B and a result of a closed auction where the awarded licenses geographically can be placed at the company s discretion. For each new license awarded in this group, the company is required to replace one existing license with an additional green one. Cermaq has received the formal letter of allocation for the licenses in group B. Several applicants, including Cermaq, have filed complaints to the Government in relation to the allocation in group A, where Cermaq was granted one license, and the timing of the final allocation is hence uncertain. The awards in group C took place in late June, Cermaq received one license in this group. The appeal deadline is in late July for group C. When fully utilized, the annual production capacity in Cermaq Norway from the new green licenses is expected to increase by approximately 8-9 thousand tonnes. The strategic ambition of being self sufficient with smolt also in Norway will be fulfilled through a new smolt facility project in Nordland. It will be located in Forsan, in the Steigen municipality. The capital expenditures are estimated to NOK 400 million, mostly in 2015 and 2016. Cermaq s estimated sales volume for 2014 is 158 thousand tonnes, at the same level as the previous estimate. Chile going forward. SRS remains a challenge. At its capital markets day in November 2013, Cermaq announced an excage cost improvement target for Atlantics in Chile of USD/kg 0.6 to USD/kg 3.8 and a targeted improvement in price achievement from better quality of USD/kg 0.2, to be achieved in 2015. The company remains committed on improving fish health in order to achieve these targets, and is not discouraged by the increase in ex-cage cost for Atlantics in the second quarter as the underlying important parameters like feed conversion rates (1.29 for first half year 2014 compared to 1.41 for full year 2013), productivity (4.41 kg/smolt for first half year 2014 compared to 3.56 kg/smolt for full year 2013) and growth are moving in the right direction. Based on our expectation of continued moderate supply growth in combination with robust demand growth, the salmon market should remain good during 2014 and in 2015. More balanced regional growth rates should help reduce the regional price differences seen in 2013 and the first half of 2014. In 2013 Norwegian supply declined by 3 percent, while Chilean supply increased by 29 percent. In 2014, Kontali expects a supply growth of 6 percent in Norway and 12 percent in Chile, while in 2015 the estimate is negative 5 percent for Chile and positive 3 percent for Norway. Industry volume growth, yoy, Norway vs Chile, Atlantics Cermaq group sales FY 12 FY 13 FY 14 volumes (kt, gwe) ACT ACT EST Chile 50 76 80 Atlantic 22 41 51 Coho 16 23 19 Trout 12 12 10 Norway 51 51 57 Nordland 24 22 26 Finnmark 26 29 31 Canada 19 15 20 TOTAL 120 142 158 Cermaq will continue to focus on improving its Chilean operation as well as cooperating with the industry and regulators going forward. The improved biological results observed over the last year, particularly on the sea lice load, are encouraging, but the preventive measures must continue to secure a sustainable and profitable salmon farming industry in 30 % 20 % 10 % 0 % -10 % -20 % 2Q13 3Q13 Source: Kontali 4Q13 1Q14 2Q14 Chile 3Q14e 4Q14e Norway 1Q15e 2Q15e 3Q15e 4Q15e Cermaq ASA Half year report 10/24
Condensed interim statement of income NOK million, NOK EPS Notes Q2 14 Q2 13 YTD 14 YTD 13 FY 13 Operating revenues 3 1 106.8 1 130.8 2 621.8 2 369.9 5 155.3 Cost of raw materials (390.3) (4.1) (951.7) (233.0) (495.1) Personnel expenses (157.8) (169.7) (341.6) (351.3) (774.4) Other operating expenses (368.2) (347.4) (747.2) (680.6) (1 472.2) Gain/(loss) from disposal of assets 43.9-43.9 46.1 46.1 Depreciations and amortisations (67.3) (61.3) (132.7) (122.1) (251.8) Operating result pre fair value adjustments of biological assets 167.2 548.2 492.6 1 029.1 2 208.0 Fair value adjustments of biological assets 5 (16.6) 241.7 (166.6) 549.4 668.8 Operating result 150.6 789.9 326.0 1 578.5 2 876.8 Share of net income from associates 1.1 9.2 3.3 11.6 11.1 Financial items, net 6 (22.3) (32.4) (48.8) (59.0) (39.8) Income/(loss) before taxes 129.4 766.8 280.5 1 531.0 2 848.1 Income taxes (62.3) (164.8) (90.4) (357.6) (711.3) Net income/(loss) from continuing operations 67.1 602.0 190.1 1 173.4 2 136.8 Net income/(loss) from discontinued operations 4 - (254.0) - (538.7) 1 750.2 Net income/(loss) from total operations 67.1 348.0 190.1 634.7 3 887.0 Net income/(loss) from total operations attributable to: Owners of the parent 67.0 345.8 189.7 633.9 3 886.0 Non-controlling interests 0.1 2.2 0.4 0.8 1.0 Net income/(loss) from continued operations attributable to: Owners of the parent 67.0 598.3 189.7 1 169.6 2 132.7 Non-controlling interests 0.1 3.6 0.4 3.9 4.1 Earnings per share (NOK) Basic and diluted EPS continuing operations 0.7 6.5 2.1 12.6 23.1 Basic and diluted EPS discontinued operations - (2.7) - (5.8) 19.0 Basic and diluted EPS total operations 8 0.7 3.7 2.1 6.9 42.0 Adjusted basic and diluted EPS continuing operations 0.5 4.4 3.1 7.6 16.1 Adjusted basic and diluted EPS discontinued operations - (2.7) - (5.6) (10.2) Adjusted basic and diluted EPS total operations 8 0.5 1.7 3.1 2.0 5.9 Profit and loss items of EWOS are presented as discontinued operations from third quarter 2013. Historical figures for most statement of income line items are re-presented and differ from previously reported figures. Discontinued operations remain consolidated in the Cermaq consolidated financial statements with Cermaq Group internal transactions being eliminated in the Cermaq Group accounts. Consequently, only income and expenses from external transactions for EWOS are reclassified to discontinued operations. This means that the line items and results presented for both continuing and discontinued operations in the Cermaq Group financial statements for the periods up to and including fourth quarter 2013, will not represent the activities as if they were stand alone entities. The interim financial information has not been subject to audit. Cermaq ASA Half year report 11/24
Condensed interim statement of comprehensive income NOK million Q2 14 Q2 13 YTD 14 YTD 13 FY 13 Net income/(loss) from total operations 67.1 348.0 190.1 634.7 3 887.0 Other comprehensive income (OCI), net of tax: Items to be reclassified to profit or loss in subsequent periods: Currency translation differences 88.5 96.9 20.2 212.6 150.6 - currency translation taken to equity 88.5 96.9 20.2 212.6 201.1 - transferred to profit/loss* - - - - (50.5) Change in fair value of cash flow hedge instruments (8.0) 3.4 (6.5) 4.2 11.3 - fair value adjustment taken to equity (8.0) 3.4 (6.5) 4.2 11.3 - transferred to profit/loss - - - - - Available-for-sale investments - change in fair value - 98.3-98.3 (0.0) - fair value adjustment taken to equity - 98.3-98.3 114.3 - transferred to profit/loss** - - - - (114.3) Net investment hedge 15.8-6.6 - - - net investment hedge taken to equity 15.8-6.6 - - - transferred to profit/loss - - - - - Items not to be reclassified to profit or loss in subsequent periods: Actuarial gains/(losses) on defined benefit plans - (0.9) - (0.9) 5.7 Disposal of actuarial gains/(losses) on defined benefit plans - - - - 13.3 Total other comprehensive income from total operations 96.3 197.6 20.2 314.1 181.0 Total comprehensive income from total operations 163.5 545.6 210.4 948.8 4 068.0 Attributable to: Owners of the parent 163.4 543.3 210.0 947.2 4 068.1 Non-controlling interests 0.1 2.3 0.4 1.6 (0.2) * Currency translation differences transferred to profit/loss affected discontinued operations in the statement of income. ** Available-for-sale investments - transferred to profit/loss affected net gain/(loss) on financial assets in the statement of income. The interim financial information has not been subject to audit. Cermaq ASA Half year report 12/24
Condensed interim statement of financial position NOK million Notes 30.06.14 30.06.13 31.12.13 ASSETS Intangible assets 2 076.8 2 507.0 2 041.0 Property, plant and equipment 2 006.5 3 339.2 1 947.8 Financial fixed assets 72.7 104.0 65.9 Total non-current assets 4 156.1 5 950.2 4 054.7 Inventories 488.8 1 768.2 336.9 Biological inventories 5 3 442.8 3 067.9 3 459.6 Accounts receivable 433.4 2 089.1 725.3 Assets held for sale 0.6 914.3 5.3 Other current receivables 404.1 481.3 482.4 Cash and cash equivalents 350.5 470.6 4 732.1 Total current assets 5 120.4 8 791.4 9 741.6 TOTAL ASSETS 9 276.5 14 741.6 13 796.3 - - - EQUITY AND LIABILITIES Total equity attributale to owners of the parent 7 4 927.5 6 480.4 9 601.4 Non-controlling interests (2.7) 24.2 23.5 Total equity 4 924.9 6 504.6 9 624.9 Total provisions 1 046.1 1 020.6 957.3 Interest bearing non-current liabilities 2 299.6 3 350.5 1 911.5 Total non-current liabilities 3 345.6 4 371.1 2 868.7 Current interest bearing liabilities 143.1 1 275.4 207.3 Accounts payable 568.6 2 200.0 647.5 Other non-interest bearing current liabilities 294.3 390.4 447.9 Total current liabilities 1 006.0 3 865.9 1 302.6 TOTAL EQUITY AND LIABILITIES 9 276.5 14 741.6 13 796.3 The interim financial information has not been subject to audit. - - - Cermaq ASA Half year report 13/24
Condensed interim statement of changes in equity Share Capital Treasury shares Retained earnings Actuarial gains and losses reserve Available-forsale reserve Cash flow hedge reserve Net Translation investment differences hedge reserve Total to ASA's owners Noncontrolling interests NOK million Equity 1 January 2013 925.0 (0.0) 4 926.7 (19.2) - 1.7 - (197.1) 5 637.0 41.6 5 678.6 Net income/(loss) - - 633.9 - - - - - 633.9 0.8 634.7 Other comprehensive income - - - (0.9) 98.3 4.2-211.7 313.3 0.9 314.1 Total comprehensive income - - 633.9 (0.9) 98.3 4.2-211.7 947.2 1.6 948.8 Share based payments - - (5.2) - - - - (5.2) (5.2) Dividends paid - - (92.5) - - - - - (92.5) - (92.5) Transactions with noncontrolling interests - - (6.0) - - - - - (6.0) (19.1) (25.1) Equity 30 June 2013 925.0 (0.0) 5 456.8 (20.1) 98.3 5.8-14.6 6 480.4 24.2 6 504.6 Net income/(loss) Q3-Q4 2013 - - 3 252.0 - - - - - 3 252.0 0.2 3 252.3 OCI Q3-Q4 2013 - - - 19.9 (98.3) 7.2 - (59.9) (131.1) (2.1) (133.2) Total comprehensive income - - 3 252.0 19.9 (98.3) 7.2 - (59.9) 3 120.9 (1.8) 3 119.1 Transactions with noncontrolling interests - - - - - - - - - 1.2 1.2 Equity 31 December 2013 925.0 (0.0) 8 708.9 (0.2) - 13.0 - (45.3) 9 601.4 23.5 9 624.9 Total equity Equity 1 January 2014 925.0 (0.0) 8 708.9 (0.2) - 13.0 - (45.3) 9 601.4 23.5 9 624.9 Net income/(loss) - - 189.7 - - - - - 189.7 0.4 190.1 Other comprehensive income - - - - - (6.5) 6.6 20.2 20.2-20.2 Total comprehensive income - - 189.7 - - (6.5) 6.6 20.2 210.0 0.4 210.4 Change in treasury shares - - (0.0) - - - - (0.0) - (0.0) Dividends paid - - (4 883.8) - - - - - (4 883.8) (26.6) (4 910.4) Equity 30 June 2014 925.0 (0.0) 4 014.8 (0.2) - 6.5 6.6 (25.1) 4 927.5 (2.7) 4 924.9 The interim financial information has not been subject to audit. Cermaq ASA Half year report 14/24
Condensed interim statement of cash flows NOK million Q2 14 Q2 13 YTD 14 YTD 13 FY 13 Income/(loss) before taxes continuing operations 129.4 766.8 280.5 1 531.0 2 848.1 Income/(loss) before taxes discontinued operations - (336.3) - (713.3) 1 486.0 Income/(loss) before taxes 129.4 430.5 280.5 817.7 4 334.0 (Gains)/losses on property, plant, equipment and intangible assets (44.1) (0.5) (44.0) (52.5) (54.4) Depreciation, amortisation and bargain purchase gain 67.3 101.9 132.7 202.9 337.5 Fair value adjustments of financial items and gain of shares - (0.8) - (0.3) (2 889.4) Net interest expense and other financial items 23.6 53.1 45.1 91.6 192.1 Net change in fair value adjustments of biological assets 16.6 (243.3) 166.6 (529.4) (660.0) Income taxes paid (28.3) (3.4) (30.1) (52.4) (75.7) (Income)/loss from associated companies (1.1) (9.9) (3.3) (12.7) (12.6) Dividends received from associated companies 0.1 7.7 0.1 7.7 9.6 Change in inventory, accounts receivable and accounts payable (29.1) (74.5) (83.4) (123.0) (872.2) Change in other current operating assets and liabilities 2.7 (15.0) (37.9) (11.1) 174.1 Net cash flow from operating activities 137.1 245.8 426.2 338.6 483.1 Purchases of property, plant, equipment (PPE) and intangible assets (98.6) (241.5) (191.7) (353.6) (574.9) Purchases of businesses, net of cash acquired (6.0) - (6.0) - - Proceeds from sale of PPE, intangible assets and businesses, net of cash disposed 32.0 2.0 32.3 63.0 5 218.6 Purchases of and proceeds from sale of shares and other investments - (831.9) - (835.8) 108.0 Net cash flow from investing activities (72.7) (1 071.3) (165.4) (1 126.4) 4 751.7 Proceeds from borrowings 870.6 1 804.2 1 261.6 2 130.6 3 802.5 Payments of borrowings (665.4) (806.3) (943.5) (1 340.9) (4 457.4) Net change in drawing facilities - 64.0-142.4 (62.1) Net interest paid and other financial items (33.2) (54.5) (57.6) (94.9) (206.7) Acquisition of non-controlling interests - - - (17.8) (17.8) Dividends paid, including to non-controlling interests (161.5) (92.5) (4 905.4) (92.5) (92.5) Net change in treasury shares (0.0) - (0.0) - - Net cash flow from financing activities 10.6 914.9 (4 645.0) 726.9 (1 034.1) Foreign exchange effects 10.4 12.4 2.7 21.2 21.1 Net change in cash for the period 85.4 101.8 (4 381.5) (39.6) 4 221.9 Cash and cash equivalents at the beginning of the period 265.2 368.8 4 732.1 510.2 510.2 Cash and cash equivalents at the end of the period 350.5 470.6 350.5 470.6 4 732.1 * Includes restricted cash of NOK 7.8 million (NOK 2.0 million). Net cash flows related to the Group`s discontinued operations Net cash flow from operating activities in discontinued operations - 130.8-174.6 381.8 Net cash flow from investing activities in discontinued operations - (95.9) - (125.5) (436.8) Net cash flow from financing activities in discontinued operations - 148.0 - (32.2) (231.6) The interim financial information has not been subject to audit. Cermaq ASA Half year report 15/24
Selected notes disclosure 1. Basis for preparation Statement of compliance The interim condensed consolidated financial statements, combined with other relevant financial information in this report, have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required for full annual financial statements and should be read in conjunction with the Group s Annual Report for 2013. The condensed consolidated interim financial statements have not been audited or subject to a review by the auditors. These condensed consolidated interim financial statements were approved by the Board of Directors on 17 July 2014. Significant accounting policies As a result of rounding differences, numbers or percentages may not add up to the total. The consolidated financial statements for the Group for the year ended 31 December 2013 are available upon request from the company s registered office at Dronning Eufemias gate 16, Oslo, Norway or at www.cermaq.com. Accounting principles applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the Annual Report for 2013, except for the adoption of new standards and interpretations effective from 2014 as described in the Group s 2013 Annual Report note 2 and below: IFRS 10 Consolidated Financial Statements IFRS 10 replaces the parts of IAS 27 that contain consolidated financial statements and is based on one single control model to be applied on all investments. The implementation of IFRS 10 had no impact on the Group accounts. IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and removes the option to account joint operations based on the proportionate consolidation method. The implementation of IFRS 11 had no impact on the Group accounts as the Group do not have any joint arrangements. IFRS 12 Disclosures of Interests in Other Entities IFRS 12 applies for enterprises with interests in subsidiaries, joint arrangements, associates and structured entities and replaces the disclosure requirements that were previously included in IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. In addition, further disclosures are required. The implementation of IFRS 12 had no impact on the Group accounts. 2. Key earnings measure Cermaq s key earnings measure under IFRS is Operating result pre fair value adjustments of biological assets. The fair value adjustments of biological assets relate to valuation of biological assets. Cermaq reports Operating result pre fair value adjustments of biological assets to clearly identify earnings on sales during the period. In addition return on capital employed (ROCE) is an essential profitability measure. ROCE is calculated on a 12-month rolling average basis, and is defined as Operating result pre fair value adjustments of biological assets plus share of net income from associated companies divided by capital employed pre fair value adjustments of biological assets. 3. Operating segment information Operations in the Cermaq Group are fish farming of Atlantic salmon, Coho salmon and trout in Chile and Atlantic salmon in Canada and Norway. Fish farming activities in the three regions are defined as operating segments. Cermaq discloses segment information in accordance with IFRS 8. The following overview displays certain key earnings measures for the different farming regions: Cermaq farming (NOK per kg) Q2 14 Q2 13 YTD 14 YTD 13 FY 13 Net sales after freight per kg (gwe) Chile 36.4 33.2 36.4 25.9 30.4 Norway 39.2 40.3 42.8 36.5 36.5 Canada 44.9 45.2 46.7 39.2 42.0 TOTAL 38.7 37.3 39.7 30.9 33.8 Total cost per kg (gwe)* Chile (36.0) (33.7) (34.0) (27.2) (30.0) Norway (29.3) (27.7) (27.9) (28.0) (27.8) Canada (33.1) (31.7) (34.0) (30.7) (33.2) TOTAL (33.5) (31.4) (31.9) (27.9) (29.5) EBIT per kg Chile 0.3 (0.4) 2.4 (1.4) 0.4 Norway 10.0 12.6 14.8 8.5 8.7 Canada 11.8 13.4 12.7 8.5 8.9 TOTAL 5.2 5.9 7.8 3.0 4.3 *Total cost include all costs, and are not directly comparable with the production cost development mentioned in the operation sections in this report. Cermaq ASA Half year report 16/24
Segment summary Norw ay Chile Canada Other/Eliminations Cermaq Group NOK million Q2 14 Q2 13 Q2 14 Q2 13 Q2 14 Q2 13 Q2 14 Q2 13 Q2 14 Q2 13 Operating revenues 343.2 414.3 547.2 523.8 202.5 185.3 13.8 7.3 1 106.8 1 130.8 Cost of raw materials (146.4) (177.1) (161.9) (186.1) (82.1) (64.8) 0.0 423.9 (390.3) (4.1) Depreciations and amortisations (18.8) (17.0) (36.8) (32.4) (10.0) (10.6) (1.7) (1.3) (67.3) (61.3) Operating result pre fair value adj. of biological assets 80.7 121.5 4.6 (6.4) 51.9 54.0 30.0 379.1 167.2 548.2 Fair value adj. of biological assets 86.1 29.7 35.7 165.6 (138.4) 29.8-16.5 (16.6) 241.7 Operating result 166.8 151.3 40.3 159.2 (86.5) 83.8 30.0 395.6 150.6 789.9 Profit/(loss) before taxes 167.6 151.9 22.8 145.9 (88.8) 418.6 27.8 50.5 129.4 766.8 Income taxes (45.0) (42.1) (22.2) (12.9) 15.3 (22.1) (10.3) (87.6) (62.3) (164.8) Net income/(loss) 122.5 109.7 0.6 132.9 (73.5) 396.4 17.5 (37.1) 67.1 602.0 Total assets 2 877.2 2 579.3 5 080.5 4 840.0 1 119.0 1 012.2 199.7 6 310.1 9 276.5 14 741.6 Intangible assets 517.7 514.2 1 435.0 1 384.9 111.4 111.0 12.7 496.9 2 076.8 2 507.0 Biological inventory at cost 751.8 663.4 1 576.7 1 294.8 528.0 414.6 - (75.1) 2 856.4 2 297.7 Accounts receivable 176.1 228.8 211.3 149.2 43.0 43.4 3.1 1 667.8 433.4 2 089.1 Total liabilities 1 066.2 1 147.0 3 678.7 2 556.9 274.7 233.0 (667.8) 4 300.1 4 351.6 8 237.0 Capital expenditure 51.7 43.1 34.6 100.4 7.0 12.3 4.8 90.1 98.1 246.0 Capital employed last 12 months 1 647.5 1 650.6 3 842.6 2 939.7 565.3 593.8 7 284.2 8 718.4 Norw ay Chile Canada Other/Eliminations Cermaq Group NOK million YTD 14 YTD 13 YTD 14 YTD 13 YTD 14 YTD 13 YTD 14 YTD 13 YTD 14 YTD 13 Operating revenues 987.4 947.6 1 300.7 1 095.3 307.9 318.2 25.7 8.9 2 621.8 2 369.9 Cost of raw materials (376.1) (469.2) (465.9) (476.8) (110.2) (124.9) 0.6 837.9 (951.7) (233.0) Depreciations and amortisations (37.2) (34.1) (72.5) (64.5) (19.9) (21.1) (3.1) (2.5) (132.7) (122.1) Operating result pre fair value adj. of biological assets 316.4 206.9 80.1 (8.7) 82.1 67.4 14.1 763.5 492.6 1 029.1 Fair value adj. of biological assets 26.7 59.3 (54.3) 348.0 (138.9) 149.0 - (6.8) (166.6) 549.4 Operating result 343.0 266.2 25.7 339.3 (56.9) 216.4 14.1 756.6 326.0 1 578.5 Profit/(loss) before taxes 337.6 259.3 (11.2) 315.3 (58.4) 551.8 12.6 404.6 280.5 1 531.0 Income taxes (90.5) (72.9) 2.1 (61.4) 1.7 (55.5) (3.7) (167.8) (90.4) (357.6) Net income/(loss) 247.1 186.5 (9.2) 253.9 (56.7) 496.3 8.9 236.8 190.1 1 173.4 Capital expenditure 73.4 74.0 79.8 144.2 20.3 18.5 7.9 116.9 181.4 353.5 Norw ay Chile Canada Other/elim Cermaq Group NOK million FY13 FY13 FY13 FY13 FY13 Operating revenues 2 005.3 2 470.3 656.1 23.6 5 155.3 Cost of raw materials (937.4) (993.9) (265.8) 1 701.9 (495.1) Depreciations and amortisations (70.5) (133.3) (42.1) (5.8) (251.8) Operating result pre fair value adj. of biological assets 445.3 76.9 134.9 1 550.8 2 208.0 Fair value adj. of biological assets 182.8 222.3 246.5 17.2 668.8 Operating result 628.1 299.3 381.4 1 568.0 2 876.8 Profit/(loss) before taxes 611.6 235.6 671.0 1 329.9 2 848.1 Income taxes (156.4) (46.3) (101.3) (407.3) (711.3) Net income/(loss) 455.2 189.3 569.6 922.6 2 136.8 Total assets 2 907.1 5 188.6 1 189.5 4 511.0 13 796.3 Intangible assets 515.0 1 402.5 110.3 13.2 2 041.0 Biological inventory at cost 783.5 1 468.0 450.2-2 701.7 Accounts receivable 307.1 389.1 17.2 12.0 725.3 Total liabilities 1 195.4 3 793.4 292.8 (1 110.3) 4 171.3 Capital expenditure 127.3 219.5 37.1 198.3 582.2 Capital employed last 12 months 1 652.4 3 496.4 557.6 8 721.6 Cermaq ASA Half year report 17/24
4. Discontinued operations: EWOS Cermaq announced 18 July 2013 that Cermaq ASA had entered into a definitive agreement for the sale of its EWOS business area to Altor Fund III GP Limited and Bain Capital Europe LLP (collectively referred to as "Altor and Bain Capital"). The purchaser was a Norwegian company established by funds advised by Altor and Bain Capital for this purpose named Albain Bidco Norway AS. The transaction was completed on 31 October 2013 at the previously announced enterprise value of NOK 6.5 billion. The consideration received as part of the closing reflects the enterprise value of NOK 6.5 billion, adjusted for certain items as agreed between the parties in the Share Purchase Agreement (SPA), the contingent consideration of NOK 180 million in specific overdue receivables in Chile and cash in EWOS at closing, which also result from cash flow generation between signing and closing. The contingent consideration of NOK 180 million will be received upon EWOS receiving payment from two customers in Chile. Based on current processes and the agreement between EWOS Chile and these customers, Cermaq continues to expect the contingent consideration to be made in full, but can at this stage not provide more details with regards to the timing of such expected payments. On 26 March 2014, the parties finalized the completion statement in accordance with the procedures stated in the SPA. The estimated gain of NOK 2.7 billion in the 2013 Annual Report, that includes the contingent consideration of NOK 180 million described above, is unchanged following the conclusion of the completion statement. The gain is classified as part of discontinued operations and included approximately NOK 35 million in transaction fees. Reporting of discontinued operations The EWOS business area has been classified as discontinued operations from 11 July 2013 and until the completed closing on 31 October 2013. In the statement of financial position the assets related to the EWOS business area and the liabilities directly related to those assets are presented as Assets held for sale and Liabilities held for sale on a gross basis from the time the discontinued operations criteria are met. Prior periods are re-presented in the statement of income so the operations that have been discontinued by the end of the reporting period are presented as discontinued operations in all comparable periods. EWOS transactions with Cermaq group companies are eliminated as usual in the consolidation of the Cermaq Group accounts until the completed closing on 31 October 2013, meaning that only income and expenses from external transactions are ascribed to continuing and discontinued operations. Consequently, no revenues generated from feed sales to the Cermaq farming companies are included in the line Net income/(loss) from discontinued operations and hence the reported net income from both continuing and discontinued operations will not represent the operations as stand alone entities. Combined Discontinued Total Combined Discontinued Total operations operations operations operations operations operations NOK million Q2 14 Q2 14 Q2 14 Q2 13 Q2 13 Q2 13 Operating revenues 1 106.8-1 106.8 3 050.8 (1 920.0) 1 130.8 Cost of raw materials (390.3) - (390.3) (1 876.5) 1 872.3 (4.1) Personnel expenses (157.8) - (157.8) (268.3) 98.6 (169.7) Other operating expenses (368.2) - (368.2) (574.7) 227.3 (347.4) Gain/(loss) from disposal of assets 43.9-43.9 - - - Depreciations and amortisations (67.3) - (67.3) (101.9) 40.6 (61.3) Operating result pre fair value adjustments of biological assets 167.2-167.2 229.4 318.9 548.2 Fair value adjustments of biological assets (16.6) - (16.6) 243.3 (1.7) 241.7 Operating result 150.6-150.6 472.7 317.2 789.9 Share of net income from associates 1.1-1.1 9.9 (0.7) 9.2 Financial items, net (22.3) - (22.3) (52.1) 19.7 (32.4) Income/(loss) before taxes 129.4-129.4 430.5 336.3 766.8 Income taxes (62.3) - (62.3) (82.5) (82.3) (164.8) Net income/(loss) from continuing operations 67.1-67.1 348.0 254.0 602.0 Net income/(loss) from discontinued operations - - (254.0) (254.0) Net income/(loss) from total operations 67.1 348.0 Attributable to: Owners of the parent 67.0 345.8 Non-controlling interests 0.1 2.2 Cermaq ASA Half year report 18/24
4. Discontinued operations cont. Combined Discontinued Total Combined Discontinued Total operations operations operations operations operations operations NOK million YTD 14 YTD 14 YTD 14 YTD 13 YTD 13 YTD 13 Operating revenues 2 621.8-2 621.8 5 911.0 (3 541.1) 2 369.9 Cost of raw materials (951.7) - (951.7) (3 710.6) 3 477.7 (233.0) Personnel expenses (341.6) - (341.6) (546.8) 195.5 (351.3) Other operating expenses (747.2) - (747.2) (1 126.6) 446.0 (680.6) Gain/(loss) from disposal of assets 43.9-43.9 46.1-46.1 Depreciations and amortisations (132.7) - (132.7) (202.9) 80.8 (122.1) Operating result pre fair value adjustments of biological assets 492.6-492.6 370.2 658.9 1 029.1 Fair value adjustments of biological assets (166.6) - (166.6) 529.4 20.0 549.4 Operating result 326.0-326.0 899.5 678.9 1 578.5 Share of net income from associates 3.3-3.3 12.7 (1.1) 11.6 Financial items, net (48.8) - (48.8) (94.5) 35.5 (59.0) Income/(loss) before taxes 280.5-280.5 817.7 713.3 1 531.0 Income taxes (90.4) - (90.4) (183.0) (174.6) (357.6) Net income/(loss) from continuing operations 190.1-190.1 634.7 538.7 1 173.4 Net income/(loss) from discontinued operations - - (538.7) (538.7) Net income/(loss) from total operations 190.1 634.7 Attributable to: Owners of the parent 189.7 633.9 Non-controlling interests 0.4 0.8 Combined Discontinued Total operations operations operations NOK million FY 13 FY 13 FY 13 Operating revenues 12 416.4 (7 261.1) 5 155.3 Cost of raw materials (7 727.9) 7 232.8 (495.1) Personnel expenses (1 106.4) 332.0 (774.4) Other operating expenses (2 259.3) 833.3 (1 426.1) Depreciations and amortisations (387.3) 135.6 (251.8) Operating result pre fair value adjustments of biological assets 935.4 1 272.5 2 208.0 Fair value adjustments of biological assets 660.0 8.8 668.8 Operating result 1 595.4 1 281.4 2 876.8 Share of net income from associates 12.6 (1.5) 11.1 Financial items, net 2 676.3 (2 716.0) (39.8) Income/(loss) before taxes 4 284.2 (1 436.1) 2 848.1 Income taxes (353.0) (358.3) (711.3) Net income/(loss) from continuing operations* 3 931.2 (1 794.5) 2 136.8 Net income/(loss) from discontinued operations 1 794.5 1 750.2 Net income/(loss) from total operations 3 887.0 * The figure in the Discontinued operations column includes depreciation of EWOS assets after being classified as held for sale Attributable to: Owners of the parent 3 886.0 Non-controlling interests 1.0 Discontinued operations represents external profit and loss items for EWOS and shown as a single amount in the statement of income for Cermaq. This re-presentation does not indicate the profits earned by continuing or discontinued operations, as if they were stand alone entities. Cermaq ASA Half year report 19/24
5. Biological inventory Tonnes (live weight) 30.06.14 30.06.13 31.12.13 Smolts, fry and brood stock 1 558 1 227 1 995 Non-harvestable biomass 48 164 39 984 51 497 Harvestable biomass 54 869 44 697 46 831 Total biological inventory at reporting date 104 591 85 908 100 323 The harvestable biomass as described represent typical minimum harvest weights defined as > 4.0 kilo for Atlantics and > 2.5 kilo for Coho and trout. Fish below these weights are defined as immature or non-harvestable. Tonnes (live weight) 30.06.14 30.06.13 31.12.13 Biological assets as of 1 of January 100 323 99 706 99 706 Increase due to purchases 1 710 2 186 2 980 Increase due to production 84 701 69 737 173 808 Decrease due to sales/harvest/mortality (82 141) (85 720) (173 394) Decrease due to business divestments/discontinued operations - - (2 777) Biological assets at reporting date 104 593 85 909 100 323 The unrealised fair value adjustment on biological assets recognised in the second quarter 2014 interim statement of income was a loss of NOK 16.6 million (profit of NOK 241.7 million) from continuing operations. A 10 percent price increase would have changed the unrealised fair value adjustment on biological assets by NOK 236.0 million at the end of June 2014. 6. Financial items (NOK million) Q2 14 Q2 13 YTD 14 YTD 13 FY 13 Net interest expenses (17.0) (35.7) (34.5) (61.2) (108.8) Foreign exchange gain/(loss) 1.3 10.8 (3.7) 14.8 12.9 Gain on sale of shares - - - - 114.2 Other financial items, net (6.6) (7.5) (10.6) (12.6) (58.1) Financial items, net (22.3) (32.4) (48.8) (59.0) (39.8) Net interest expenses decreased by NOK 18.7 million and is explained by lower average net interest bearing debt compared to the same quarter last year. Other financial items are mainly related to amortisation of upfront fees incurred in connection with the refinancing of the Group s credit facilities and the bond issue. Cermaq ASA Half year report 20/24