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2016-05-12

Lerøy Seafood Group ASA : Q1 2016 Results

RECORD PRICES GENERATE RECORD OPERATING PROFIT

Lerøy Seafood Group (LSG) posted an operating profit before fair value
adjustment of biomass of NOK 584 million in Q1 2016, compared with NOK 404
million in Q1 2015. This is equivalent to operating profit before biomass
adjustment of NOK 15.3 per kg compared with NOK 11.5 per kg in the same
period last year.

"The price for Atlantic salmon has been high in the first quarter, and prices
for trout have also improved significantly from 2015. With realised prices as
the key driver, operating profit for the first quarter of 2016 is the highest
in the Group's history. We're satisfied with the earnings level, but see many
areas where we can improve. These are our core focus" says CEO Henning
Beltestad.

In Q1 2016, Lerøy Seafood Group reported revenue of NOK 3,815 million,
compared with NOK 3,268 million in the same period in 2015. Compared with Q1
2015, the Group's slaughter volumes of salmon and trout increased by 9%. The
Group's profit before tax and before fair value adjustment of biomass was NOK
592 million in Q1 2016, compared with NOK 390 million in Q1 2015.

Net interest bearing debt was reduced by NOK 502 million in the quarter, and
was NOK 2.092 million the 31 March 2016. The equity ratio end quarter was 57%

FISH FARMING SEGMENT - HIGH PRICES RESULTS IN HIGH EARNINGS

Operating profit before fair value adjustment of biomass reported by the
Farming segment increased from NOK 322 million in Q1 2015 to NOK 522 million
in Q1 2016. The Farming segment harvested a total of 38,163 GWT salmon and
trout in Q1 2016, up 9% from the same period in 2015. EBIT/kg increased from
NOK 9.2 per kg in Q1 2015 to NOK 13.7 per kg in Q1 2016.

In Q1 2016, Lerøy Aurora achieved operational EBIT per kg of NOK 21.9. Lerøy
Midt and Lerøy Sjøtroll are reporting EBIT per kg of NOK 14.6 and NOK 9.1
respectively for the same period.

"We have significantly reduced the number of treatments in 2016 compared with
the same periods in 2014 and 2015, and we are more confident that the
measures taken and investments made will prove effective," says CEO Henning
Beltestad. "At the same time, we're still in a transitional phase, with
extraordinarily high direct and indirect costs linked to treatment as well as
increasing cost linked to prevention. We expect treatment costs to fall
through 2016."

"However, despite this positive development, we are concerned about some
aspects of the future framework regulation that appears to be imposed on our
industry," Beltestad continues. "The global growth in demand for seafood
offers considerable potential for value generation. It is important for
Norway to ensure that parts of this value generation can take place in
Norway, and that the Norwegian aquaculture industry has framework regulations
which makes it competitive also in the long term," he explains.

VAP SEGMENT - HIGH PRICES A CHALLENGE

The revenue in the VAP segment is up 17% from NOK 425 million in Q1 2015 to
NOK 498 million in Q1 2016. The operating margin is down from 4.3% in Q1 2015
to 2.7% in Q1 2016.

"High raw material prices are a challenge for the Group's processing
activities, and have had a negative impact on earnings in the segment in the
first quarter. We still think we are well positioned, and are working to
adapt to the expectation of permanently high raw material prices," says CEO
Henning Beltestad.

SALES&DISTRIBUTION SEGMENT - GOOD ACTIVITY, BUT HIGH PRICES A CHALLENGE

The revenue for the Sales&Distribution segment totalled NOK 3,617 million in
Q1 2016, up 18% on Q1 2015. The operating margin is down from 2.0% in Q1 2015
to 1.6% in Q1 2016.

"The Sales&Distribution segment also increased its revenue in the first
quarter of 2016," says CEO Henning Beltestad. "However, high prices mean
pressure on the operating margin, which is down slightly compared with the
same period last year. But there is still extensive unutilized capacity in
several of the Group's 'fish-cuts', and we see great potential to increase
activities and earnings within this part of the value chain in the years
ahead."

MARKET AND OUTLOOK

The Group is in a transitional phase, with extraordinarily high direct and
indirect treatment costs, combined with increasing costs for prevention. The
Group has made substantial investments, including in the use of cleaner fish,
and it is seeing good results from this. A significant increased investment
in cleaner fish was initiated in 2013/2014, and it is only this year that
does the Group has had access to the volume of cleaner fish considered
necessary. However, the Group acknowledges that the farming of lumpfish
remains in the start-up phase and that provision must be made for unforeseen
events. We believe that there will be improvements both in production and in
the use of lumpfish, which will gradually have positive effects on the
production of salmon and trout. The Group is also investing in other tools to
optimise production, including mechanical cleaning and fresh water treatment.
In the course of 2016, the Group will have access to significantly greater
well boat capacity, which will increase the capacity to carry out fresh water
treatment and provide significantly greater capacity for mechanical cleaning.
Costs in connection with prevention will therefore increase in 2016, but the
Group sees it as positive that the number of treatments so far in 2016 has
been considerably lower than in the same periods of 2015 and 2014. The Group
is therefore more confident that the measures taken will prove effective, and
that costs in connection with treatment will fall in 2016 compared with
previous years.

However, despite the positive development, the Group is concerned about some
aspects of the future framework regulations that appears to be imposed on the
Norwegian fish-farming industry. It is of decisive importance for the future
of the industry that the authorities ensure that future framework regulations
are founded on fact-based knowledge. It is essential for the Norwegian
fish-farming industry that in 5-10 years' time it, too, has framework
regulations in place that allow it to be economically sustainable. The global
growth in demand for seafood offers considerable potential for value
generation. From a social and economic perspective, Lerøy Seafood Group
believes it is important for Norway to ensure that parts of this value
generation can take place in Norway.

The Norwegian krone has weakened against key currencies. This dynamic is
positive for prices realised for salmon but also means - all other factors
being equal - higher feed prices. The best estimate continues to indicate
that feed costs for fish harvested in 2016 will increase compared with 2015,
though the Board of Directors still sees opportunities for cost reductions in
other areas during 2016.

The Group currently estimates a total harvest volume of 183,000 GWT for 2016,
including the share of LSG's volume from associates.

In view of the potential for better productivity and the positive market
outlook, the Board of Directors and management currently expect the Group's
earnings in 2016 to be considerably higher than last year.

Questions and comments may be addressed to the company's CEO, Henning
Beltestad, or to the CFO, Sjur S. Malm.

This information is subject to the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.

Q1 2016 Report
http://hugin.info/131537/R/2011768/744952.pdf
Q1 2016 Presentation
http://hugin.info/131537/R/2011768/744953.pdf

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Lerøy Seafood Group ASA via Globenewswire

HUG#2011768

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