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This is the 2009 annual report for Marine Harvest ASA a publicly traded company. The report contains assessments of the year’s operations, business and financial highlights, company’s view of the upcoming year and their prospects in their industries.
2009 ANNUAL REPORT MARINE HARVEST MARINE hARvEST KEy FIGuRES – GROuP KEY FIGURES 2009 2008 2007 Revenue and other income (NOK million) 14 500.2 13 486.9 14 091.5 Harvest volume of salmonids (HOG). tons 327 100 326 864 339 848 Operational EBITDA (NOK million) 2 193.8 1 298.8 1 476.1 Operational EBIT (NOK million) 1 506.1 613.6 684.3 Operational EBT (NOK million) 1 832.4 -1 167.9 639.6 Profit or loss for the year (NOK million) 1 302.2 -2 852.0 5.1 Operational EBITDA margin 15.1 % 9.6% 10.5% Operational EBIT margin 10.4 % 4.5% 4.9% Total assets (NOK million) 20 389.3 22 736.4 23 183.0 Net interest-bearing debt (NOK million) 5 075.0 7 740.6 6 743.5 Total equity (NOK million) 11 460.5 9 624.6 12 484.0 Equity % 56.2 % 42.3% 53.8% Cash flow from operations (NOK million) 2 375.8 1 498.6 973.0 Earnings per share (NOK) - basic and diluted 0.37 -0.82 0.00 Share price (high) 4.82 4.26 8.30 Share price (low) 1.05 0.97 2.95 Share price at year-end 4.23 1.05 3.49 Number of shares at year-end (million) 3 574.9 3 478.9 3 478.9 Market value (cap) at year-end (NOK million) 15 121.8 3 652.8 12 141.4 Number of employees at year-end 4 947 7 071 8 736 REvENUE ANd OThER INCOME OPERATIONAL EBIT EQUITY % (NOK MIllION) (NOK MIllION) 09 14 500.2 09 1 506.1 09 56.2% 08 13 486.9 08 613.6 08 42.3% 07 14 091.5 07 684.3 07 53.8% 0 3000 6000 9000 12000 15000 0 300 600 900 1200 1500 0 10 20 30 40 50 60 ANNUAl REPORT 2009 Content Key figures 0 Main events 1 Letter to the sharehoLders 2 guiding principLes 4 Board of directors report 6 Board of directors 16 financiaL stateMents group 20 notes group 26 financiaL stateMents asa 64 notes asa 69 confirMation 78 auditor’s report 79 addresses 80 Main events Strong demand Harvest volume Cash dividend proposed Strong underlying demand and a 327 000 tons gutted weight The Board has proposed a cash tight global supply resulted in a harvested in 2009, unchanged from dividend of NOK 0.35 per share for solid market for salmon in 2009. the 2008 level. A strong increase in 2009. Norway compensated for the drop in Chile. Solid financial position Guiding principles NOK 302 million was raised as new In 2009, Marine Harvest launched equity in May. Net interest-bearing guiding principles setting the debt was reduced by close to NOK Share price development standards and ambitions with 2.7 billion during 2009 and the regards to Profit, People, Product equity ratio increased from 43.2% 2009 (noK) and Planet. to 56.2%. 5.0 4.0 3.0 Chile 2.0 Update of business plan in the 1.0 second quarter resulted in write- downs and provisions of NOK 727 0.0 million. Operations downscaled to 31.12.08 31.12.09 a minimum activity level, biological Marine Harvest ASA development looks promising. OSEBX 1 Marine harvest lETTER TO THE SHAREHOlDERS Dear shareholder 2.2 million smolt in 2009 and expect to stock a maximum of 6.4 million smolt in 2010. During the last part of 2009 and early 2010, we have seen a significantly improved biological development in Chile, with low mortality and good growth. Permanent improvements in biological results and an improved regulatory framework are prerequisites for new investments in Chile. As we gradually rebuild our operations in Chile, we will start from a lower cost base and targeting a more cost-efficient and professional organization, meeting all our global quality standards. reducing BioLogicaL risKs Marine Harvest achieved a net profit of NOK 1 302 Salmon farming has historically been, and still is, subject to biological million in 2009, a significant improvement compared to challenges. Through improved regulations, some of these challenges have a net loss of NOK 2 852 million in 2008. The improved been dampened, and biological risks have been reduced in key farming profitability was matched by a significantly stronger regions. There is, however, still room for further reduction in biological cash flow, a considerable reduction in net interest- risks. Infectious Salmon Anemia (ISA) in Chile, Pancreas Disease (PD) bearing debt and a substantial increase in our equity and sea lice mitigation are the main biological challenges affecting the ratio. Based on this development, the Board of Directors industry today. Marine Harvest addresses these issues with a broad mix of of Marine Harvest ASA (the Board) has proposed a initiatives. Internally, we improve our husbandry and mitigation efforts, and dividend of NOK 0.35 per share. invest in research and development (R&D) projects. In cooperation with our colleagues and competitors, we implement common area-based mitigation We achieved these results after getting operational control in Chile, and efforts and measures to reduce the risk of spreading infective agents and to a large part, because of a strong demand for salmon in key markets resistant sea lice. combined with a tight global supply situation. In addition to this, we achieved operational improvements in Scotland, Norway and in VAP Europe. We believe these initiatives will have a long-term, significant and positive impact on profitability and sustainability. The overall improvements in Marine Harvest’s global operations are promising, but there is still room for further improvements and increased guiding principLes profitability. We would like to use this opportunity to highlight some of the Our vision is “Seafood for a better life”, implying that our business should areas we will focus on in the further development of Marine Harvest. lead to a better life for everyone. To guide us in our journey towards this vision through major strategic decisions and smaller day-to-day operational iMproved profitaBiLity and growth in norway decisions, we have established four guiding principles setting our standards In the beginning of 2010, Marine Harvest Norway embarked on a three regarding Profit, People, Product and Planet. year program to improve the freshwater operations. Through this program we will invest in both new and current freshwater sites, with the aim of With regards to Profit, our ambitions are centered around three main areas reducing smolt costs, improving smolt quality and securing larger smolt – profitability, relative competitiveness and solidity. Marine Harvest should stocking flexibility by producing more diverse sizes of smolt. be the most profitable listed farming company over a cycle (4-5 years). We acknowledge that we were behind some of our competitors in 2009, but The Norwegian salmon farming industry has limited potential for growth continue our step-by-step approach to reach our targets. with the current number of licenses and the regulatory framework for Maximum Allowable Biomass (MAB). Fortunately, Marine Harvest Norway Increased focus on People has contributed to improvements compared to has the potential to increase production within this framework. Hence, we previous years, but we are still far from reaching our ambitions. When it have decided to increase smolt stocking in Norway by 10 percent in 2010, comes to employee safety, our ambition is that Marine Harvest should be to secure growth in 2011 and into 2012. We are also exploring the potential the safest actor in our sector. for increased production within current MAB regulation by increasing the smolt size to reduce the grow-out time in sea-water, and hence increase Our Product ambitions are split into two categories: Food quality and output per license. safety, and customer value. Marine Harvest wants to be the preferred partner for our major customers through creation of customer value, quality reBuiLding operations in chiLe and documented safety. Our operations in Chile have been downscaled to a minimum activity level. The process has been painful for everyone involved. In 2010, we expect to When it comes to Planet, our ambitions centers around three key areas; sell only 4 000 tons of salmon from Chile, whereas we stocked a meager feed sustainability, environmental impact and fish health. A common 2 ANNUAl rePOrT 2009 denominator for our planet ambitions is sustainable development. Marine Harvest has been leading this development through investments in processing capacity in the US for pre-rigor fillets from Norway. We have The four guiding principles are highly interrelated and, in the long-term, we also doubled our filleting capacity in Norway with significant and positive will have to follow all four principles to develop our business in accordance effects on transport costs, carbon footprint and our ability to exploit with our vision. During 2009, we also raised the bar for personal conduct trimmings through production of by-products. by developing a new Group-wide code of conduct. This document will be distributed to every employee, followed up by e-learning and management positive outLooK for 2010 presentations. 2009 was a good year for Marine Harvest. With a strong market for salmon and gradual improvements across business units, we have good reasons to a gLoBaL MarKet for saLMon be optimistic about the results also in 2010. The global market for Atlantic salmon saw a major shift during 2009 as the reduced supply from Chile to the US, EU and Asian markets was partly Marine Harvest’s ambition is to become the leading global seafood compensated by supply from other regions. We now see clear signs of a company. After the three party merger in 2006, focus has been on the global market for salmon, both through rather quick shifts in supply patterns daily operational challenges. Further improvement of the operational and changes to pricing between regions. performance will be the main priority in 2010. 3 Marine harvest GUIDING PRINSIPlES AND CORPORATE AMBITIONS REGNSKAP OG NOTER – KONSERN Marine Harvest’s guiding principles and ambitions profit people Attractive Safe and financial results meaningful jobs product planet Tasty and Sustainable and healthy seafood environmentally providing customer responsible value development 4 ANNUAl rePOrT 2009 During 2009 Marine Harvest developed the 4 P’s – a - The principles and ambitions are embedded in the budget process framework for the Group’s principles with regards to: and drive performance - The Group’s risk assessment and internal control processes will Profit: Attractive financial result be linked to the Group’s ambitions, plans and risks with regard to reaching the targets People: Safe and meaningful jobs Through the established group-wide quality program, Qmarine, Marine Product: Tasty and healthy seafood providing Harvest continuously develops and implements procedures to improve customer value operational efficiency and effectiveness, increase quality and reduce risks. Introduction of the four guiding principles gives an overall strategic Planet: Sustainable and environmentally perspective and stricter priority to the continuous improvement efforts responsible development already ongoing through the work with Qmarine. To each of the principles there are stated ambitions that will serve By integration of the principles in the business processes, Marine different purposes: Harvest will in a systematic way secure that the principles contribute to - The ambitions will determine the target setting with regard to the development of the Company as the leading seafood company and performance throughout the organization. 2010 will be the first year add to value creation. where this system is rolled out in a systematic manner The guiding principles are split into the following ambitions: guiding principle ambitions 2010 priorities Deliver a ROACE of at least 10% over a Improve cost structure, optimize market profitability cycle (4-5 yrs) strategies and CAPEX prioritization Be the most profitable listed farming Develop business portfolio, secure sound relative competitiveness company over a cycle rebuilding of operations in Chile Improve capital structure, secure new long profit solidity NIBD/Equity ratio below 0.5 term financing Harmonize reporting, implement Safety employee safety Be the safest in the sector Management Principles and reduce injury frequency rate by 50% for the Group A culture supporting development of Best practice networks in selected areas culture employees and driving Group wide best and develop training programs for Chilean people practice employees for the rebuilding Supply seafood with valuable health Secure the best product control in the food quality and safety benefits, preferred for quality and industry, establish and document levels of documented safety omega-3 fatty acids in the product Be the preferred supplier that exceeds Implement supply chain integration with customer value customers expectations based on product customers product knowledge and supply chain expertise Only use marine feed ingredients certified Reduce dependency on marine protein raw feed sustainability as sustainable and reduce dependency on materials and document possibilities for marine proteins and implications of increased substitution planet Activities shall not leave lasting footprints in Zero escapes and reduction in the use of environmental impact the environment antibiotics Cooperation with authorities and the Reduce risk of disease outbreaks and industry, stop the spread of PD, control fish health implications sealice and contribute to ISA-free rebuilding of the Chilean industry The ambitions will be followed up and performance reported in a systematic manner starting with the 2010 annual report. 5 Marine harvest BOARD OF DIRECTORS REPORT Board of Directors Report During the first half of 2008, feed raw material prices rose to an unprecedented high level due to supply shortage. Towards the end of 2008 et år preget av utfordringer og fokus på langsiktig utvikling. prices started to decline - a development that continued into 2009 as the prices for fishmeal and fish oil were reduced. Towards the end of 2009, fishmeal prices started to rise again, but it is expected that the salmon feed producers will be able to compensate for this increase through substitution of raw materials during 2010. During 2008, Marine Harvest’s Norwegian operation was challenged by Pancreas Disease (PD) in 2 of its operating regions (South and West). During 2008 and 2009, industry-wide PD mitigation initiatives were implemented including changes in farming practices and vaccination. The Strong demand and favorable prices, combined actions taken have proven successful and the number of outbreaks and with better operational performance, contributed to mortality related to PD dropped significantly in 2009 compared to 2008. improved operational eBIT compared to 2008 for all Unfortunately, PD was also diagnosed in Region Mid (Trøndelag) during business units. 2009. This is an area that previously has not been affected by this disease. Emergency harvest was practiced and there has been no further spreading The Board would like to thank the employees for their of the disease from the area where it was originally diagnosed, to other efforts and contributions to this progress and towards parts of the region. making Marine Harvest a leading seafood company. In 2009, the presence of sea lice attracted media attention in Norway as the number of lice per fish in some regions increased compared to previous years. Some spread of lice with reduced sensitivity or resistance strong MarKets, chiLe under controL and ManageaBLe to medication, was also registered within the Trøndelag and Nordland diseasesituation in norway counties of Norway. Use of hydrogen peroxide to delice exposed fish is Marine Harvest delivered significantly improved margins in 2009 as a one of the measures that has demonstrated good efficiency. In cooperation result of strong demand and favorable prices, combined with improved with the Norwegian industry and the authorities, Marine Harvest is working operational performance. The ISA situation in Chile remained challenging in on several initiatives to handle this issue and the company has taken 2009 and Marine Harvest regrets that more than 2 000 employees had to preparatory actions, should the situation escalate. One major initiative leave the organization during the year as part of the restructuring process. has been to start farming of ballan wrasse. The ballan wrasse has proven The downscaling of the operation resulted in restructuring costs and write- effective in the effort to reduce the number of sea lice in salmon farming as downs of assets and inventory, all recognized during the year. The ISA it preys on parasites of other fish. Marine Harvest would like to utilize this situation now seems under control. lice mitigation tool better, as it reduces the need for medical treatments and thus also the threat of developing reduced sensitivity and resistance Due to the substantial reduction in volume coming out of Chile and strong to medication. The farmed ballan wrasse will be put to sea in 2011. In the demand, prices developed favorably during the year. The favorable market meantime, Marine Harvest will rely on pharmaceutical measures and wild conditions were the main driver for the positive development in profit and caught wrasse. cash flow. In the European market, prices increased by 11.0% to EUR 3.46 per kilo in 2009 (Superior spot price FCA Oslo per kilo gutted weight). In the Towards the end of 2009, the Board approved a new code of conduct US market, the price increase was also pronounced, as the lack of Chilean for the Group. The code addresses what is considered proper behavior salmon only was partially compensated by fish from Europe. The prices in by Marine Harvest employees in different situations in the everyday the US market increased by 10.2% during the year to USD 3.87 per lb in operations. The code of conduct will be implemented in the organization Miami (UB 2-3 lb c-trim fillet). The favorable market conditions are expected during 2010. The ambition of the implementation process is to create an to continue in 2010. organization of managers and employees that develop and produce results in accordance with Marine Harvest’s strategy and values. In May, Marine Harvest successfully completed a private placement of 96 million shares at a subscription price of NOK 3.15 per share. Gross During 2009, the NOK appreciated significantly vs the Group’s main proceeds from the transaction amounted to NOK 302.4 million. The currencies EUR and USD. This put pressure on prices in NOK, but also purpose of the private placement was to finance the restructuring of the contributed to a significantly improved financial position and the equity ratio Group’s operations in Chile, improve the financial position in general and increasing from 42.3% to 56.2%. facilitate an agreement with the Group’s lenders to adjust the covenant structure in the Group’s loan agreements for the second, third and fourth quarter of 2009. Amendments to the covenants of the loan agreement were agreed with the banks in May. 6 ANNUAl rePOrT 2009 MarKet 1 506 million for 2009, up from NOK 614 million in 2008. Earnings before Global harvest volume of Atlantic salmon was approximately 1 320 interest and taxes (EBIT) were NOK 1 334 million (NOK -1 480 million). The thousand tons gutted weight in 2009, which constituted a drop of 1.8% improvement is a consequence of substantial increase in profit and fair compared to 2008. value adjustment on biological assets, combined with lower write-downs in Chile in 2009. The drop in global harvest volume was driven by a 40.8% decrease in Chilean volumes relative to 2008. The drop came as a result of the financiaL iteMs depletion of the Chilean industry’s biomass during 2008 and 2009 due to Net financial items decreased substantially in 2009, and amounted to the ISA disease. Harvest volume in Chile is expected to hit its lowest level positive NOK 326 million compared to negative NOK 1 782 million in 2008. in 2010. Harvest volume in Norway increased by 15.5% compared to 2008. Currency effects related to appreciation of NOK towards EUR, USD and The strong increase was due to exceptionally good growth conditions in the GBP amounted to NOK 691 million (NOK -845 million), change in fair value second half of 2009. interest swaps NOK 32 million (NOK -217 million) and change in fair value other shares NOK 18 million (NOK -194 million). Due to strong demand and a tight global supply situation, prices in the market currencies (EUR and USD) increased sharply relative to 2008. As a financiaL position result of currency movements, the prices translated into NOK increased at Total assets were NOK 20 389 million at the end of 2009, a decrease of an even higher rate. NOK 2 347 million compared to the beginning of the year. Total liabilities decreased with NOK 4 183 million during 2009 to NOK 8 929 million. Net When including movements in inventories, volume distributed to the interest-bearing debt decreased by NOK 2 666 million to NOK 5 075 million markets totalled approximately 1 354 thousand tons gutted weight in 2009, during 2009. This reduction was due to strong cash flow from operations, a which constituted a growth of 2.6% relative to 2008. Supply into the EU capital increase executed in May and appreciation of NOK towards the loan market increased by 4.4% at a price increase in EUR of 11.0% (Superior currencies. The currency impact on interest-bearing debt was NOK 1 000 spot price FCA Oslo, per kilo gutted weight). Supply into the US market million in 2009. was strongly influenced by the shortfall in harvest volumes from Chile. Increased export from Europe to the US market partly compensated for The equity ratio increased from 42.3% to 56.2% during 2009, due to an this shortfall and the annual supply to the US market was down 4.8% increase in equity and a decrease in debt. The increase in equity is a result compared to 2008. This was a good indication of inelastic demand as of net earnings of NOK 1 302 million; a capital increase of NOK 302 million; the US reference prices were up between 10.2% (UB superior spot price an increase in fair value of cash flow hedges after tax of NOK 947 million Miami per lb 2-3 C-trim fillet) and 10.8% (UB superior spot price Seattle and negative currency translation differences of NOK 769 million. per lb 10-12 gutted weight) in USD compared to 2008. With the exception of Japan, the other markets were generally competitive during 2009, cash fLow which resulted in a growth in volumes supplied to these markets. As the Cash flow from operations was very strong in 2009, totalling NOK 2 376 availability of salmon from Chile declined in 2009, supply into the Japanese million (NOK 1 499 million). This represents an increase of 59% compared market was reduced by 14.9%. to 2008. A substantial part of the cash flow from operations was allocated to down payment of interest-bearing debt, amounting to net NOK 1 866 financiaL resuLts million. Cash outflow for investments were kept at a low level to further (Figures in parentheses refer to 2008) strengthen the total cash flow. Cash and cash equivalents decreased by NOK 200 million during 2009 to NOK 172 million. The general trends in the results for Marine Harvest Group in 2009 were: − Strong demand in key markets combined with tight supply contributing dividend to favorable prices throughout 2009. The Board will propose to the Annual General Meeting an ordinary dividend − Updated business plan in Chile in Q2 resulting in substantial down-sizing of NOK 0.35 per share for 2009. of operations and write-downs and provisions of NOK 727 million included in EBIT. going concern − Substantially improved financial position through strong cash flow, The Board confirms that the financial statements are based on the going capital increase and appreciation of NOK towards the loan currencies. concern assumption in accordance with section 3-3a of The Accounting Act. The confirmation is based on the results reported, the Group’s operationaL resuLts business strategy, the financial situation and the budgets established. Increased prices and improved operational performance had a positive influence on results in 2009. Operating revenues for 2009 ended at NOK 14 500 million (NOK 13 487 million). Operational EBIT amounted to NOK 7 Marine harvest BOARD OF DIRECTORS REPORT annuaL resuLt aLLocation In October, one site in Region Mid containing 1.4 million fish of one kilo To the Annual General Meeting, the Board will propose the following was diagnosed with PD and all fish was culled/harvested to mitigate further allocation of the net earnings in Marine Harvest ASA for the year: spreading of the disease. The total cost of mortality and clean up amounted to NOK 37 million. The PD mitigation efforts initiated in Regions South and Profit for the year NOK 313 million West have proven successful in 2009 with a significant reduction in the Transfer from other equity NOK 938 million number of PD outbreaks. Towards the end of the year, sea lice constituted Proposed dividend NOK 1 251 million an increasing biological challenge for Marine Harvest Norway. Industry- wide and company specific mitigation efforts have been initiated (ref operationaL perforMance – Business units separate section in this report). Marine Harvest Norway Marine Harvest Norway experienced a year of operational progress in 2009. Operating revenues amounted to NOK The average monthly mortality rate was 0.74% in 2009 (0.97%). Seawater 6 744 million in 2009 (NOK 5 551 million) due to 18% growth in harvest growth was very good in 2009 due to reduced mortality and good growth volume combined with more favorable prices. Market prices developed conditions. Marine Harvest Norway discontinued trout production during favorably during the year as inventories in Chile were depleted and 2009. Norwegian supply only partially was able to compensate. The observed spot market price (Superior spot price FCA Oslo average all sizes) was NOK Marine Harvest Chile For Marine Harvest Chile, 2009 was another 30.22 in 2009 (NOK 25.63). The increase in the average price achieved challenging year due to the continued presence of the Infectious Salmon back to primary processing plant was lower than the increase in the spot Anemia virus (ISAv). Marine Harvest recognizes the detrimental effects market price as Marine Harvest Norway due to currency effects achieved a the ISA situation has had on the local community and has put effort into substantial premium on contracts in 2008. In 2009, the effect of currency helping employees that have lost their jobs in the downscaling process. on the contracts was negative due to the appreciation of the NOK towards During the second quarter, the Board approved an updated business plan EUR. The 2009 third party contract share was 30% (23%). Total harvest for Marine Harvest Chile. The purpose of the plan was to adjust the scale volume ended at 201 676 tons gutted weight in 2009 (171 086 tons). This of the operation to a low level of activity in the near term and minimize increase was possible due to changes in the stocking pattern (spring vs losses during this period. The plan triggered write-downs and provisions fall), better growth in sea water and successful implementation of PD of NOK 727 million. Of the total, NOK 236 million related to write-downs mitigating actions in Regions South and West. The superior share ended at triggered by freshwater culling and costs above the realizable value in 93% (89%). seawater, while NOK 115 million related to restructuring and NOK 376 million to write- down of assets. Of the asset write-down, NOK 41 million The export of fillets to the US market increased throughout the year and was reversed later in the year as assets have been sold within the Group. ended at 12 000 tons gutted weight for the year total (0 tons). All sales from The development of the operation since the approval of the updated Marine Harvest Norway to the US market are channeled through the Miami business plan has been better than expected. As of end 2009 there were sales office. During the year, two small processing/pin boning operations 989 employees (permanent and temporary) in Marine Harvest Chile (3 045 were opened in the US, one in Miami in May and one in los Angeles employees) of which 607 in the farming operations (2 727). in August. These operations are supporting the Norwegian processing operations with the final trims and packaging for the customers. Both US Operating revenues were NOK 2 322 million in 2009 (NOK 2 148 million) plants are consolidated into business unit Marine Harvest Chile together as shortfall in volume from Chile was compensated by increased sales of with other US operating units. Norwegian and Scottish salmon through the sales office in Miami. Marine Harvest sold 36 204 tons gutted weight of its own Chilean produced In December, a new distribution center close to the Oslo Gardermoen salmon in 2009 (75 636 tons). airport was opened. This set-up will reduce delivery time from processing plants in Norway to the customers and will also reduce the total distribution Operational EBIT amounted to NOK -401 million in 2009 (NOK -569 million) costs going forward. due to biomass write-downs, high cost of biomass sold and mortality. Towards the end of the year, signs of improved biological conditions Operational EBIT was NOK 1 090 million in 2009 (NOK 741 million). The resulted in a decision to stock 2.2 million smolts in the fourth quarter. This main contributing factors to the positive development are the favorable fish has developed better than planned both with regards to mortality volume and price development. The cost level in 2009 was a little higher and growth. Provided that the positive development continues and the than the previous year due to harvesting of PD exposed sites and a authorities put in place the necessary regulations to support a sustainable generally high feed cost level in the first half of the year. Operational EBIT salmon industry in Chile, Marine Harvest intends to stock up to 6.4 million per kilo was NOK 5.40 in 2009 (NOK 4.33). Currency movements related to smolts in 2010. receivables/payables and other short-term positions included in operational EBIT were NOK -0.83 per kilo in 2009 (NOK 0.93). Operational EBIT per Total restructuring costs amounted to NOK 149 million in 2009 kilo excluding currency effects thus amounted to NOK 6.23 in 2009 (NOK (NOK 213 million). 3.40). 8 ANNUAl rePOrT 2009 Marine Harvest Scotland Marine Harvest Scotland experienced a Operational EBIT was NOK 232 million in 2009 (NOK 108 million). More very good year in 2009. Operating revenues were NOK 1 221 million (NOK favorable prices had a positive impact, while operating costs remained 989 million) due to 17% growth in harvest volume combined with more fairly stable from 2008 in local currency. In NOK, costs increased due favorable prices. During 2009 Marine Harvest Scotland harvested 37 to exchange rate effects. Operational EBIT per kilo harvested was high 698 tons gutted weight (32 341 tons). Good growth in seawater was the at NOK 6.33 per kilo gutted weight (NOK 2.98). An algae bloom with an main contributor to the increased volume harvested. In local currency, the associated escape caused mortality in the fourth quarter. Net mortality average price achieved was 14% higher in 2009 compared to 2008. The cost for the year amounted to NOK 7 million (NOK 10 million). Currency Scottish price premium compared to Norwegian salmon was maintained movements related to receivables/payables and other short-term positions through strong relationships with contract customers, favorable spot prices included in EBIT were NOK 0.67 per kilo in 2009 (NOK 0.64). and a high superior share 94% (89%). The average monthly mortality rate was 0.51% in 2009 (0.62%). Although Operational EBIT in 2009 was NOK 274 million (NOK 90 million). In 2008, mortality has been low, the sea water growth has been reduced compared profitability was affected by exceptional costs related to an incident of to 2008. Changes in operating procedures have been initiated to improve diesel contamination in products sold, amounting to NOK 40 million. growth, but low dissolved oxygen levels hamper optimal feeding Operational EBIT per kilo gutted weight ended at NOK 7.26 in 2009 (NOK procedures. 2.79), which is considered a very strong result. The improvement was a result of more favorable prices and reduced other costs. Higher feed In 2009, research and development efforts have been focused on Kudoa. cost per kilo negatively impacted the operational EBIT in 2009. Currency Finding a long-term solution for Kudoa is expected to take time. movements, related to receivables/payables and other short-term positions included in operational EBIT, were NOK 0.03 per kilo in 2009 (NOK 0.30). Marine Harvest VAP europe Marine Harvest VAP Europe experienced a strong year in 2009. Operating revenues were NOK 4 178 million in 2009 Restructuring costs amounted to NOK 9 million in 2009 as a result of site (NOK 3 770 million). The increase from last year is explained by higher restructuring (NOK 20 million). volume sold combined with higher average prices achieved. Volume sold in 2009 increased by 6% to 58 159 tons as good internal efforts combined The average monthly mortality rate was 0.65% in 2009 due to a slightly with strong customer relations contributed to growth. The fourth quarter more challenging biological environment (0.50%). Despite higher mortality, was particularly strong for this business unit, with high sales of smoked and seawater growth was very good in 2009. . elaborated products. For the year, the shift towards lower priced species, pangasius in particular, was pronounced with an increase of 41.5% in Marine Harvest Canada Marine Harvest Canada benefitted from volume compared to 2008. Sales of salmon products held up well during favorable prices in the US market in 2009. Operating revenues were NOK the year with a volume growth of 8.8% compared to 2008. Sales of Atlantic 1 247 million in 2009 (NOK 1 107 million). The average price achieved was salmon accounted for 63% of the total sales value in 2009 (59%). NOK 32.33/CAD 5.88 per kilo gutted weight (NOK 27.31/CAD 5.18). During 2009, Marine Harvest predominantly harvested fish from the Campbell Operational EBIT was NOK 279 million in 2009 (NOK 177 million). Marine River area, an area that has been negatively affected by soft flesh caused Harvest VAP Europe has been able to improve margins compared to 2008 by the parasite Kudoa thyrsites. Total costs related to discards and claims and Operational EBIT before currency movements related to receivables/ as a result of soft flesh amounted to NOK 63 million/NOK 1.72 per kilo payables and other short-term positions included in EBIT, increased by harvested in 2009 (NOK 26 million/NOK 0.72). The harvested volume was 76% from 2008 to 2009 due to a more favorable product mix and improved 36 537 tons gutted weight (36 050 tons) while the superior share of 78% in operational efficiency. During 2009, the business unit has worked to reduce 2009 was very low (82%). the number of stock keeping units and species in the assortment, which harvest voLuMe (hog) tons saLMonids Q1. 09 Q2. 09 Q3. 09 Q4. 09 fuLL year 09 MH Norway 41 781 48 947 53 110 57 838 201 676 MH Chile 1) 13 354 9 283 7 689 5 878 36 204 MH Canada 10 742 12 267 4 949 8 579 36 537 MH Scotland 7 623 9 374 10 240 10 461 37 698 MH Ireland 1 296 1 805 2 340 3 195 8 636 MH Faroes 1 381 2 284 1 226 1 458 6 349 Group total harvest volume 76 177 83 960 79 554 87 409 327 100 1) Volume in Chile is sold volume. 9 Marine harvest BOARD OF DIRECTORS REPORT has resulted in an improved margin. Raw material costs were approximately to reduced margins in 2009 and the operational EBIT for the year ended at 4% lower in 2009 than in 2008, the main reasons being product mix effects zero (NOK 10 million). (white fish) and lower raw material costs in general for white fish, combined with increased processing yields (higher output per kilo raw material). The As the cod industry experienced substantial setbacks in 2008 and early unit also benefited from fixed price contracts for approximately 70% of the 2009 with low growth, mortality and unfavorable prices, the planned salmon purchases. The operational EBIT margin was 6.7% in 2009 (4.7%). stocking in the industry was limited in 2009. Marine Harvest therefore decided to cull all juveniles in production, suspend further production and Some minor restructuring efforts resulted in costs in the amount of NOK convert the facilities to farming of ballan wrasse (lice mitigation initiative). 10 million in 2009 (NOK 4 million). Write-down of fixed assets amounted to The culling of the cod juveniles resulted in a cost of NOK 22 million in 2009 NOK 18 million for the year and related mainly to a building in France. and an operating EBIT of NOK -26 million (NOK 15 million). Marine Harvest Other Businesses Operating revenues for Marine heaLth and safety Harvest Other Businesses in total amounted to NOK 1 564 million in 2009 A good and safe working environment has been given higher priority (NOK 1 923 million). Operational EBIT was NOK 35 million (NOK 46 million). in Marine Harvest in 2009. All business units have HSE officers. The ambition is to operate in a way that ensures no detrimental effects on For the sales unit Marine Harvest Asia, operating revenues ended at people and the environment. “People” is one of 4 guiding principles in NOK 879 million (NOK 1 018 million) due to reduced volume from Chile. the Marine Harvest Group. During 2009, the ambitions in this area were Operational EBIT was NOK 20 million (NOK 17 million). revised and focus during the year was on reducing the number of lost Time Incidents (lTI) and absentee rates. Marine Harvest Ireland achieved operating revenues of NOK 388 million (NOK 287 million) due to a 55% increase in harvest volume. Harvest In 2009, the Group recorded 219 lTIs, down from 450 in 2008. The volume for the year ended at 8 636 tons gutted weight (5 556 tons). ambition for 2010 is to again cut the number in half and record less than Operational EBIT amounted to NOK 21 million (NOK 31 million) due to PD 100 lTIs for the year. This would translate into 9 lTIs per million hours challenges and loss of egg sales to Chile. The organic salmon market was worked, down from 17 in 2009. There were, unfortunately, two fatal challenging during the year, but developed favorably towards the end of accidents reported among Marine Harvest employees in 2009. The 2009. incident happened at the Caleta Velero site in Chile where two employees died from carbon monoxide poisoning in a confined space. In addition, Marine Harvest Faroes achieved operating revenues of NOK 214 million in there was one incident on Marine Harvest premises related to a third 2009 (NOK 180 million). The unit benefited from favorable prices, but the party contractor. Fatal accidents are not acceptable in Marine Harvest and sea lice situation became more challenging towards the end of the year and actions have been taken to mitigate such incidents going forward. contributed to extra operational costs. Operational EBIT amounted to NOK 31 million in 2009 (NOK 25 million). Additional focus has also been put on sick leave during 2009. For Marine Harvest, the highest sick leave and injury rates are in the harvesting and Sterling White Halibut achieved operating revenues of NOK 84 million in processing plants (cuts and strains). Strains are also the main cause of 2009 (NOK 67 million). Mortality and high cost of harvested fish contributed long-term sick leave in the company. Marine Harvest is working proactively to prevent such injuries and provide for alternative work in cases where that is necessary. Various measures and awareness schemes such as job rotation and competence development have had a positive effect on the statistics. The overall absentee rate in 2009 was 4.1% compared to 4.7% in 2008. The Board will continue focusing on these aspects in 2010, recognizing that through systematic work at all levels in the organization there is room for further improvement. peopLe and organiZation, diversity and eQuaL rights People and Organization At the end of 2009, the Marine Harvest Group had 4 947 permanent employees and 1 068 temporary employees. The Chilean operation was substantially downscaled during 2009 due to reduced activity as a result of the ISA disease. At year-end 2009 all secondary processing activity had been closed, while the farming and overhead organizations had been reduced to fit the new production level. The total number of full-time employees in Marine Harvest Chile at year- 10 ANNUAl rePOrT 2009 end (including the US sales office and the smoked operations in Maine Marine Harvest research and development efforts are principally focused and Chile) were 908. At the end of 2008 the corresponding number on food quality, fish health, feed and feeding, environmental impacts and was 3 045. operational improvements. Marine Harvest recognizes the detrimental effects these lay-offs have on The largest development project initiated in 2009 was on farming of ballan the local community and has put effort into helping former employees in wrasse for sea lice mitigation in Norway, with an economic frame of NOK 8 their search for new jobs, in addition to running programs for supporting million the first year and NOK 10 million for each of the next two years. and developing the most vulnerable employees. Training programs for key operational personnel in other Marine Harvest units have also been In 2009, Marine Harvest also concluded a larger technical development developed to increase skills and prepare them for the future rebuilding of project for the development of a new type of harvest boat in Norway. the Chilean operation. Based on this project, the company will evaluate the possibility for changes to the use of well boats and a possible introduction of harvest boats in all Marine Harvest believes in the importance of attracting and retaining skilled regions in Norway. A transition from use of open hatch well boats to use of and motivated employees and managers with a strong commitment to the harvest boats for transport and harvesting of fish, will have a positive effect operations in line with Marine Harvest’s code of conduct. on the risk for potential pathogen and sea lice spread and reduce other transport-related risks. On 26 November 2009, the Board resolved to offer all permanent employees in Marine Harvest ASA and its Norwegian subsidiaries the In order to identify longer term mitigation techniques for sea lice opportunity to purchase shares in the Company within the scope of management, Marine Harvest is involved in several initiatives. In 2009, the the Norwegian Tax Act §5-14 (The employees’ opportunity to purchase Group increased its commitment to and involvement in sea lice research shares at below market price). The relevant rules in the Tax Act provide the and in areas of biotechnology, treatment optimization, biological control employees with a right to purchase shares with a rebate of up to NOK 1 and resistance management. Among the new projects that have been 500. Permanent employees in the Norwegian based entities were on this supported financially is the sequencing of the sea lice genome. basis offered to purchase 1 756 shares in the Company at a total value of approximately NOK 7 500 against a purchase price of approximately NOK In Canada, research and development efforts have in 2009 been focused 6 000. At the end of the acceptance period 288 employees had accepted on Kudoa and the company has received public funding to support the the offer to acquire shares in the Company. programs. Diversity and equal rights Marine Harvest is committed to ensuring In 2009, Marine Harvest operated a full-scale research station in diversity in the Group. The Group’s aim is to be a workplace with no Norway together with key suppliers Skretting and AquaGroup. The main discrimination due to gender, ethnicity, national origin, descent, skin research currently undertaken at this research station, called the Centre color, language, religion, faith or functional ability in accordance with the for Aquaculture Competence (CAC), is within sustainable feed, use of Norwegian Discrimination Act. Marine Harvest is working actively as a alternative (non-marine) feed ingredients and effects on fish health, growth group in the areas of recruitment, salary and working conditions, promotion, and food quality from alternative feed ingredients. development opportunities and protection against harassment to reach this aim. factors that Might infLuence the eXternaL environMent From a global perspective, the three largest sustainability challenges The fish farming industry has traditionally been an industry with a majority related to food production are emissions of climate gases, use of scarce of male employees. As of end 2009, the shares of male and female freshwater resources and the use of feed for animal protein production. employees were 67% and 33% respectively. In 2009, the Group had These global challenges are mainly seen as opportunities for the salmon female managers in the senior management teams of most subsidiaries. farming industry, as farmed salmon utilizes significantly less feed and less The Group continues to work actively to have diversity in senior freshwater than competing agricultural protein producers, and causes management positions globally. Marine Harvest’s global management significantly lower emissions of climate gases. team in 2009 consisted of 7 members whereof 2 women, including the CEO. Of the 10 members in the Board, there are 4 women. Regardless of this competitive advantage, Marine Harvest proactively pursues several initiatives to further improve the utilization of limited research and deveLopMent sources of marine raw material in feed, and actively engages in projects Historically, Marine Harvest research and development (R&D) activities to establish global standards to ensure sustainable sourcing of marine raw have been organized by each separate business unit. To increase the cost- material. benefit of the Group’s R&D activities, foster development of best practices across regions and optimize the relationships with, and support of key Marine Harvest continuously evaluates potential impacts on the external research institutions, Marine Harvest is now developing a group-wide R&D environment of the Group’s operations based on own experience, strategy. stakeholder discussions, publicly available science and public regulations. 11 Marine harvest BOARD OF DIRECTORS REPORT Potential negative impacts are related to the use of resources as well as salmon and the price achievement is hence a key driver for profitability and discharges and potential environmental effects of operations. cash flows. Farming and processing of seafood requires the use of marine and Over time, the demand for salmon has been growing steadily, whereas vegetable feed ingredients, fresh water and energy as well as utilization of industry supply has been fluctuating strongly due to variations in factors common coastal areas. such as smolt release, biology and sea water temperatures. As a result of the long production cycle and a limited time window available for Discharges from farming may come in the form of feed spill, faeces, harvesting, industry players have limited flexibility to manage their supply medicine use and antifouling treatment of nets. In processing and from month to month. Furthermore, salmon is generally sold as a fresh distribution, water discharge, sewerage, waste packaging and fuels may commodity with a limited time span available between harvesting and impact the external environment. consumption. The consequence of these dynamics is that salmon farmers are expected to be price takers in the market from week to week. Due to Fish farming may also potentially impact the external environment through the tight supply outlook, the short-term risk linked to the salmon price is escaped fish, spread of infective agents and parasites. somewhat reduced from previous periods. All major, potential impacts on the environment are monitored and reported Salmon is a protein commodity which is produced in a limited number of on in Marine Harvest’s yearly sustainability report. Through the Group-wide countries and sold globally. Historically, trade restrictions have inhibited quality program, Qmarine, Marine Harvest continuously improves and the optimal distribution of salmon to the markets and as such impacted implements procedures to reduce the potential environmental impacts. the price yield for the salmon producers in the countries affected by such Marine Harvest has also proactively engaged in development of global restrictions. Marine Harvest has a leading position in the main salmon industry standards to secure the sustainability of global fish farming farming countries and is as such exposed to the level of trade restrictions. operations, and proposed changes to regulatory environment in the Furthermore, farmed salmon has in some instances been subject to operational regions. critical journalism based on statements and publications from various research communities and Non-Governmental Organizations (NGOs). Potential negative effects on wild fish are reduced by the establishment This type of attack has had and may potentially result in temporary of a “zero tolerance” for escapes, with increasing investments and damage to the industry, and can only be countered by good practices and procedures, as well as R&D projects and regulatory initiatives to reduce the well-documented information from the industry. As of today, the industry potential spread of parasites and infective agents. has constructive relationships with WWF and a number of national authorities. sustainaBiLity In salmon farming, sustainability is a precondition for long-term value Marine Harvest has a sales contract policy aimed at limiting the exposure creation. From the financial year 2008, Marine Harvest has chosen to to short-term fluctuations in the salmon price. The sales contracts generally publish a separate report on sustainability, to ensure that this theme is have a duration of 3-12 months and cover 15-40% of Marine Harvest’s thoroughly discussed and reported on. The 2009 sustainability report will harvest volume for the next quarter. Although most sales contracts are be published before the summer of 2010. entered into on a bilateral basis directly with customers, Marine Harvest is contracting a limited volume using financial futures (Fishpool). Furthermore, risK Marine Harvest is reducing its exposure to spot price movements through Marine Harvest is exposed to a number of operational and financial risk its value added processing activities. factors. Biological risks Marine Harvest’s salmon farming operations are subject Operationally, the main industry specific risk factors are linked to the to a number of biological risk elements which might impact profitability development in the salmon price, biological risks linked to the salmon and cash flows through adverse effect on factors such as growth, harvest farming operations and the development in the salmon feed prices and volume, mortality, downgrading percentage and claims from customers. feed utilization. Furthermore, Marine Harvest is exposed to the general The biological parameters are impacted by e.g. diseases, virus, parasites, operational risk for processing and manufacturing industries. Financially, algae blooms, low oxygen levels and fluctuating sea water temperatures. the main risk factors are linked to general fluctuations in interest rates and exchange rates, credit risk and liquidity risk. The Board deems it important Marine Harvest is striving to manage the exposure to biological risk that the Group maintains the necessary measures to manage controllable factors through increased focus on internal procedures for animal risks factors in order to keep the total risk situation within acceptable limits. husbandry, mitigating actions and countermeasures. Furthermore, Marine Harvest commits large resources towards mitigating actions together operationaL risKs with neighboring companies in the various regions, cooperation with exposure to the salmon price Historically, salmon prices have been regulatory bodies to attain optimal regulations and efficient enforcement subject to big fluctuations. Marine Harvest has a large sales volume of and geographical diversification of the salmon farming operations. 12 ANNUAl rePOrT 2009 Marine Harvest has temporarily reduced the scale of its Chilean business therefore continuously influence Marine Harvest’s financial statements and significantly to reduce exposure to biological risk. Together with the cash flows. Marine Harvest applies an extensive currency hedging policy authorities and the industry, Marine Harvest is committing large resources which is aimed at reducing the cash flow implications from movements in to handle the ongoing sea lice situation in Norway. currency exchange rates. As the rest of the industry, Marine Harvest has a limited insurance Credit risks Marine Harvest is exposed to the risk of losses if one coverage against adverse biological events. or more contractual partner do not meet their obligations. A significant proportion of the Group’s trade receivables are credit insured and credit exposure to salmon feed prices and feed utilization The feed cost ratings are undertaken of all new customers. In 2009, the reduction in is the largest single cost component in salmon farming. Marine Harvest the insurance market’s capacity was mitigated through close follow-up procures its feed from a limited number of feed suppliers globally. The feed of the customers. Historically, the Group has suffered minor losses on contracts are structured such that Marine Harvest assumes the general trade receivables. The Group is not substantially exposed in relation to any exposure to price fluctuations on the raw material costs, such as fish meal, individual customer or contractual partner as of 31 December 2009. fish oil, vegetable oils and meal. The feed suppliers procure these raw materials in the global commodity markets. Marine Harvest’s exposure Interest risks The Group is generally financed using floating interest is left open for this risk factor. Marine Harvest is, however, working rates for debts to financing institutions and leasing debts. To minimize the continuously with the feed suppliers to secure that the feed recipes are risk connected to fluctuations of floating interest rates, the Group has a altered based on the relative prices of raw materials to secure the lowest strategy where 50–75 percent of the Group’s interest-bearing debt in the possible cost of the feed without compromising the quality, growth and main lending currencies (EUR, USD and GBP), shall be secured by loans biological robustness of the salmon. In addition to assuming the general with fixed interest rates or by interest derivatives with an average duration raw material price risk, the contracts include a fixed nominal payment per of three to four years. The Board has resolved to deviate from this strategy kilo of feed to the feed suppliers for the production of the feed. The volume with respect to USD, where a higher hedging rate is applied. risk is left with the feed suppliers (no take or pay contracts). liquidity risks The largest single factor in connection with liquidity risks Marine Harvest also assumes operational risk linked to the utilization of the is fluctuation in salmon prices. Other key liquidity risks are fluctuations in feed. This risk is mitigated through rolling out best practices, continuous production and harvest volumes, biological issues, and changes in the feed benchmarking between sites and regions and cooperation with feed price, which is the most important individual factor on the cost side. Feed suppliers on optimizing feed recipes. prices are correlated to the marine and agricultural commodity prices of its ingredients. Feed prices decreased on a unit basis through 2009. exposure to general risks linked to manufacturing and processing industries In addition to the above-mentioned operational risk elements, shares and sharehoLders Marine Harvest is exposed to the general operational risk factors facing The market value of the Marine Harvest Group at the end of 2009 was NOK manufacturing and processing industries. These risks are mitigated through 15 122 million, which represent an increase from the beginning of 2009 of internal procedures, policies and insurance programs. NOK 11 469 million. financiaL risKs The Annual General Meeting in May 2009 approved a capital increase of Currency risks Marine Harvest has substantial international activities 96 million shares and a proxy to increase the share capital by up to 10%. and is exposed to changes in the currency exchange rates as a natural part Marine Harvest successfully completed the placement of 96 million shares of its business operations. Fluctuations in the currency exchange rates will totalling NOK 302 million in May. saLMon price 2008 - 2009 CHILEAN ATLANTIC SALMON 2-3 LB FOB MIAMI 10-12 LB FRESH FOB SEATTLE 4-5 KG FHL FOB OSLO USD NOK 5,50 45,00 40,00 4,50 35,00 3,50 30,00 2,50 25,00 1,50 20,00 1/08 14/08 27/08 40/08 1/09 14/09 27/09 40/09 WEEK / YEAR 13 Marine harvest BOARD OF DIRECTORS REPORT At an Extraordinary General Meeting in November 2009, the Board was the Board given the authorization to raise loans up to NOK 2 200 million on terms Members of the Board have broad experience and qualifications to including a right for the creditors to receive shares in the Company. Marine fill the Company’s requirements. None of the members of the Board, Harvest completed successfully a five year EUR 225 million convertible except for the employee representatives, have carried out any paid bond in March 2010. work for the Group. In 2009, the members of the Board have been Svein Aaser, Ole Eirik lerøy (elected Vice Chairman in May 2009), corporate governance leif Frode Onarheim, Kathrine Mo (resigned May 2009), Solveig Strand, Marine Harvest finds that proactive and transparent corporate governance Thorleif Enger, Celina Midelfart, Cecilie Fredriksen, and the three is a prerequisite for delivering increased shareholder value, investor trust representatives elected by the employees; Frank Øren, Geir-Elling and low capital costs. Nygård and Turid lande Solheim. Good corporate governance builds on responsible communication between Chairman of the Board, Svein Aaser, stepped down from his position shareholders, the Board and corporate management in the endeavor with effect from 18 January 2010. Since the three party merger in 2006 to develop the Company’s role as the leading industrial player in the he has led the Board through a difficult time, overseeing the integration aquaculture industry. of the three companies while managing the challenges in Chile. The Board would like to express its gratitude to Svein Aaser for his valuable Marine Harvest complies with the “Norwegian Code of Practice for contribution to the development of Marine Harvest. The Board would also Corporate Governance” issued by the Norwegian Corporate Governance like to thank Kathrine Mo, who stepped down as a board member in May Board (NUES). Reporting of compliance and any deviations from the code 2009, for her contributions. of practice is updated and available on Marine Harvest’s website. As of January 18, Ole Eirik lerøy stepped in as acting Chairman of the The Board has reviewed the Group’s compliance with the code of practice Board, while Tor Olav Trøim stepped up from his deputy position to become during the year and the Group’s steering documents have been amended. a board member. The Board held 14 board meetings during 2009. The Company’s audit committee met 8 times during 2009 to review events after the cLose of the year accounting and operational issues more in detail. The committee consists CeO stepped down The Board and Åse Aulie Michelet reached an of leif Frode Onarheim (Chairman) and Solveig Strand. agreement that Michelet stepped down as CEO effective 23 March 2010. During her term as CEO, Michelet has with her strong inspirational energy made a solid contribution to the development of the Group, and particularly to the unification of the three former companies which created Marine Harvest. Her effort and effectiveness in handling the challenging situation in Chile has been of special importance. Thomas Farstad, Director of Group Operations Canada, Scotland and Others, will be acting CEO until a permanent CEO is in place. Farstad has been a member of the General Management Team of Marine Harvest since the Group’s inception in 2007. Prior to this Farstad held various positions in the group management of Fjord Seafood. Convertible bond Marine Harvest raised EUR 225 million in the beginning of March through the issue of convertible bonds. The bonds will have a coupon of 4.5% and a conversion price of EUR 0.8335 per share representing a conversion premium of 30% on the share price on the day of launch of the convertible bonds. The bonds have a duration of five years and can be called by Marine Harvest after three years. Feed contract In February Marine Harvest ASA exercised an option to extend for a one year period a feed supply contract with Skretting AS covering 58% of Marine Harvest’s global feed requirement. future prospects 2009 represents a significant improvement, both operationally and financially for Marine Harvest. The improvement in performance across business units comes as a result of favorable market conditions, efficient 14 ANNUAl rePOrT 2009 and resolute control of the situation in Chile, lower feed prices and steady, of significant improved financial flexibility, the good prospects for salmon operational progress. prices and potential for operational progress, the capital expenditure level going forward will increase to NOK 900 – 1 000 million per year. Marine Demand for seafood is strong and 2010 has started with price increases Harvest expects to harvest 292 000 tons in 2010. and good growth in volume. The strong position of salmon in the market points to another good year for Marine Harvest as well as the industry. The Feed is the most important cost component for the company. A competitive Board expects a favorable market balance in 2010 and 2011 due to good feed supply is imperative for this industry and Marine Harvest will, in 2010, underlying demand and limited growth in supply. In 2010, the supply will conclude the negotiations of improved new feed contracts for the years to shrink by 5-9% compared to 2009. Although the US market has to compete come. with the European customers on a day to day basis, Marine Harvest has a long-term perspective on the US market and will serve it from Europe until The Company will be refinanced in 2010. There is a good interest in the bank volume from Chile picks up. market for a renewal of the financing and the successful placement of a convertible bond in March this year has prepared the ground for competitive The situation in Chile is under control and the organization is now adjusting terms. to the level sufficient to handle today’s production and the preparations for the revamp of the operations. The Board is confident that there is a strong Marine Harvest will distribute a dividend of NOK 0.35 per share in 2010, the potential in Chile when the biological and regulatory situation allow for a first cash dividend since the three party merger in 2006. The dividend policy revamp of the operations and Marine Harvest will take an active part in that for the company will be communicated later this spring. rebuilding. The performance of the small number of smolt released in 2009 is promising. In 2010, more attention will be given to the development of the Company’s portfolio. The downstream part, which delivered strong results in 2009, The sea lice situation in the Norwegian industry is challenging. Together needs further streamlining while the upstream part needs to be more with the industry and the authorities, Marine Harvest is working on several focused and adjust to a situation where the salmon markets are no longer initiatives to handle these issues and have taken preparatory actions should regional but interlinked to one global market. the situation escalate. Both from a market and nutritional perspective, salmon has an unrivalled Marine Harvest has unused capacity in Norway and will, due to limited position. The future of salmon farming is promising and Marine Harvest will growth in smolt release in 2009, increase the smolt release by 10% in 2010, use its operational and financial leverage to strengthen its position in the which is above the long-term trend of 5%. The company has held back on industry. capital expenditure due to the operational challenges in Chile. As a result osLo, 23 March 2010 Ole Eirik lerøy Thorleif Enger Cecilie Fredriksen Celina Midelfart ACTING CHAIRMAN OF THE BOARD Geir Elling Nygård leif Frode Onarheim Turid lande Solheim Solveig Strand Tor Olav Trøim Frank Øren Thomas Farstad ACTING CHIEF EXECUTIVE OFFICER 15 Marine harvest BOARD OF DIRECTORS Board of Directors Ole Eirik Lerøy (1959) Acting Chairman of the Board position: Chairman of the Norwegian Seafood Federation education: Educated at the Norwegian school of Management 1980-84, AFF management program 1992. Background: Former CEO in lerøy Seafood Group ASA1991-2008. Mr. lerøy has broad experience from the seafood industry. He is Chairman of the Board of The Norwegian seafood federation (FHl) and former Chairman of the Board of the Norwegian Seafood Export Counsil (NSEC). He is member of the Board of the international Groundfish forum. Number of shares: Ole Eirik lerøy and affiliated holds in total 10 200 000 shares in Marine Harvest and have TRS agreements with exposure to further 30 000 000 shares. Thorleif Enger (1943) position: Previously President and CEO, Yara education: PhD, MSc and BSc in Structural Engineering from University of Colorado Background: Various positions in Hydro since 1973: Executive Vice President of Hydro Agri from 1999 until appointed CEO in 2004. Executive Vice President of Oil & Energy from 1996 to 1999, President of Hydro’s Exploration & Production Division from 1987 to 1996, and Project Director of the Oseberg field from 1982 to 1986. Number of shares: 0 Cecilie Fredriksen (1983) position: Frontline Corporate Services ltd education: Bachelor of Business and Science from london Metropolitan University Background: Cecilie Fredriksen is also member of the Board of Aktiv Kapital ASA. Number of shares: 0 16 ANNUAl rePOrT 2009 Celina Midelfart (1973) position: Chairman of the Board Midelfart Holding AS, Executive VAMI AS education: BSc Stern School of Business, NYU, and london School of Economics. Background: CEO of Midelfart AS, from 2004 - 2007. Executive Chairman of companies within the Midelfart Group. Number of shares: 1 000 000 Geir-Elling Nygård (1966) Employee representative position: Technician (Operations), Marine Harvest Norway Region South education: Certification in carpentry, certification and college studies in aquaculture, management training. Background: Started in Mowi AS in 1990, a company later incorporated into Marine Harvest. Prior to this, Nygård worked in 2 smaller aquaculture companies. Number of shares: 0 Leif Frode Onarheim (1934) position: Associate Partner, Norscan Partners AS education: MBA, Graduate from Norwegian School of Economics and business administration (NHH). Background: Former President and CEO, Nora Industrier AS, President Norwegian School of Management 1993-1997, Chairman NHO 1996-2000, Member of Parliament 2001-2005, Director of Private and Governmental Enterprises. Number of shares: 300 000 17 Marine harvest BOARD OF DIRECTORS Turid Lande Solheim (1970) Employee representative position: Production Manager, Marine Harvest Norway AS education: Studies in economics and aquaculture, Molde Regional College Background: Started in the seafood business in 1993 in Mowi AS, a company later incorporated in Marine Harvest. Number of shares: 38 000 owned by spouse Solveig Strand (1961) position: General Manager education: IT/ Economic degree. Background: Managing Director of companies within the Strand Group. Former Parliament Secretary for the Ministry of Fisheries. Number of shares: 20 000 Tor Olav Trøim (1963) position: VP and Director of Frontline ltd. education: Master of Science from NTNU University of Technology in Trondheim, Norway in 1985. Background: Extensive background as a Director in companies like Knightsbridge Tankers ltd, Aktiv Kapital ASA and Golar lNG. He is also President and Chief Executive Officer of Ship Finance International. Until April 2000, Mr. Trøim was the Chief Executive Officer of Frontline Management AS. Prior to his service with Frontline, Mr. Trøim served as Managing Director and a member of the Board of Directors of DNO AS, a Norwegian oil company. Number of shares: 5 000 18 ANNUAl rePOrT 2009 Frank Øren (1972) Employee representative position: Operations Manager, Marine Harvest Norway Region North education: Certification and university studies in aquaculture, various courses. Background: Started in the seafood industry in 1990. Øren started in Fjord Seafood in 1996, a company later incorporated into Marine Harvest. Number of shares: 0 19 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP Financial Statements and Notes et år preget av utfordringer og fokus på langsiktig utvikling. 20 ANNUAl rePOrT 2009 Statement of comprehensive income Marine harvest group (noK MiLLion) note 2009 2008 2007 Revenue and other income 5 14 500.2 13 486.9 14 091.5 Cost of materials -8 690.9 -8 654.4 -9 146.1 Fair value adjustment on biological assets 21 301.2 -278.8 -350.4 Salary and personnel expenses 6/7/11 -2 167.4 -2 139.8 -2 165.0 Restructuring costs 9 -169.5 -241.0 -196.3 Other operating expenses -1 448.2 -1 393.8 -1 304.3 Income/loss from associated companies 18 69.5 5.8 66.6 Depreciation and amortization 16/17 -687.7 -685.3 -791.8 Impairment losses 16/17 -373.1 -1 579.4 -12.1 earnings before interest and taxes (eBIT) 1 334.1 -1 479.8 192.1 Net interest expenses 28 -392.9 -485.4 -380.9 Net currency effects 28 690.6 -844.6 343.9 Other financial items 28 28.7 -451.5 -7.7 earnings before taxes (eBT) 1 660.5 -3 261.3 147.4 Taxes 13 -358.3 409.3 -110.4 Net earnings from continuing operations 1 302.2 -2 852.0 37.0 Income from discontinued operations/assets held for sale - - -31.9 Profit or loss for the year 1 302.2 -2 852.0 5.1 Other comprehensive income Change in fair value of cash flow hedges 28 1 326.6 -1 279.4 97.0 Deferred tax related to fair value of cash flow hedges -379.8 338.7 - Currency translation differences -762.3 858.7 -830.2 Currency translation differences related to non-controlling interests -6.3 10.1 14.8 Other gains and losses in comprehensive income 58.7 69.2 -27.2 Total other comprehensive income 236.9 -2.7 -745.6 Comprehensive income for the year 1 539.1 -2 854.7 -740.5 Profit or loss for the year attributable to Non-controlling interests 5.9 0.6 -0.4 Owners of Marine Harvest ASA 1 296.3 -2 852.6 5.5 Comprehensive income for the year attributable to Non-controlling interests -0.4 10.7 14.4 Owners of Marine Harvest ASA 1 539.5 -2 865.4 -754.9 Earnings per share - basic and diluted 14 0.37 -0.82 0.00 21 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP Statement of financial position Marine harvest group (noK MiLLion) note 2009 2008 assets Non-current assets licenses 16 5 409.5 5 766.6 Deferred tax asset 13 54.5 230.5 Goodwill 16 2 142.6 2 239.9 Other intangible assets 16 136.0 160.0 Total intangible assets 7 742.6 8 397.0 Property. plant and equipment 17 3 518.1 4 243.6 Investments in associated companies 18 520.1 513.5 Other shares 19 118.8 78.9 Total tangible assets 4 157.0 4 836.0 Total non-current assets 11 899.6 13 233.0 Current assets Inventory 20 742.7 1 074.5 Biological assets 21 5 351.1 5 620.6 Trade receivables 23 1 672.1 1 903.4 Other receivables 23 551.6 532.4 Cash and cash equivalents 22 172.2 372.6 Total current assets 8 489.7 9 503.5 Total assets 20 389.3 22 736.4 22 ANNUAl rePOrT 2009 (noK MiLLion) note 2009 2008 eQuity and LiaBiLities equity Paid-in capital 15 11 621.4 11 324.7 Other equity -205.9 -1 745.3 Total equity attributable to owners of Marine Harvest ASA 11 415.5 9 579.5 Non-controlling interests 45,0 45,1 Total equity 11 460.5 9 624.6 Non-current liabilities Deferred tax liabilities 13 1 142.6 732.9 Non-current interest-bearing debt 26 5 116.9 6 747.7 Other non-current liabilities 29 99.8 116.7 Total non-current liabilities 6 359.3 7 597.4 Current liabilities Current tax liabilities 13 50.8 69.9 Current interest-bearing debt 25 130.3 1 365.5 Trade payables 24 1 339.8 1 729.2 Other current liabilities 24 1 048.6 2 349.9 Total current liabilities 2 569.5 5 514.5 Total equity and liabilities 20 389.3 22 736.4 osLo, 23 March 2010 Ole Eirik lerøy Thorleif Enger Cecilie Fredriksen Celina Midelfart ACTING CHAIRMAN OF THE BOARD Geir Elling Nygård leif Frode Onarheim Turid lande Solheim Solveig Strand Tor Olav Trøim Frank Øren Thomas Farstad ACTING CHIEF EXECUTIVE OFFICER 23 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP Statement of cash flow Marine harvest group (noK MiLLion) note 2009 2008 Cash flow from operations Earnings before interest and taxes (EBIT) 1 334.1 -1 479.8 Adjustments for impairment losses and depreciation 16/17 1 060.8 2 264.7 Adjustments for fair value adjustment on biological assets 21 -301.2 278.8 Adjustments for gain/loss on disposal of assets 17 -4.8 -10.4 Adjustments for income/loss from associated companies 18 -69.5 -5.8 Taxes paid 13 32.9 14.0 Change in inventory. trade payables and trade receivables 349.4 479.9 Other adjustments -25.9 -42.8 Cash flow from operations 2 375.8 1 498.6 Cash flow from investments Proceeds from sale of fixed assets 16/17 13.7 42.1 Payments made for purchase of fixed assets 16/18 -643.4 -791.7 Proceeds from sale of shares and other investments 66.2 58.7 Purchase of shares and other investments -22.5 -13.1 Cash flow from investments -586.0 -704.0 Cash flow from financing Proceeds from new interest-bearing debt (current and non-current) 26/29 246.7 733.7 Down payment of interest-bearing debt (current and non-current) 26/30 -2 112.8 -1 032.1 Interest received 11.4 34.8 Interest paid -410.7 -552.4 Equity paid-in 294.6 - Cash flow from financing -1 970.8 -816.0 Currency effects on cash and cash equivalents -19.4 31.4 Net change in cash and cash equivalents in period -200.4 10.0 Cash and cash equivalents - opening balance 372.6 362.6 Net change in cash and cash equivalents in period -200.4 10.0 Cash and cash equivalents - closing balance total 22 172.2 372.6 24 ANNUAl rePOrT 2009 Statement of changes in equity Marine harvest group (noK MiLLion) attriButaBLe to owners of Marine harvest asa non- totaL 2009 share share other cash fLow foreign other totaL controLLing eQuity capitaL preMiuM paid-in hedge currency eQuity interests reserve capitaL reserves transLation reserve Equity 01.01.09 2 609.2 8 692.7 22.7 -829.6 0.6 -916.1 9 579.5 45.1 9 624.6 Capital increase 72.0 230.4 302.4 302.4 Costs related to capital increase -5.6 -5.6 -5.6 Reduction of share premium reserve -3 000.0 3 000.0 0.0 0.0 Change in non-controlling interests 0.0 0.2 0.2 Comprehensive income for the year 946.8 -762.3 1 355.0 1 539.5 -0.4 1 539.1 Total equity 31.12.09 2 681.2 5 917.5 3 022.7 117.2 -761.7 438.9 11 415.5 45.0 11 460.5 (noK MiLLion) attriButaBLe to owners of Marine harvest asa non- totaL 2008 share share other cash fLow foreign other totaL controLLing eQuity capitaL preMiuM paid-in hedge currency eQuity interests reserve capitaL reserves transLation reserve Equity 01.01.08 2 609.2 8 692.7 27.4 111.1 -858.1 1 867.3 12 449.6 34.4 12 484.0 Net equity effect on expensing of stock options -4.7 -4.7 -4.7 Comprehensive income for the year - - -940.7 858.7 -2 783.4 -2 865.4 10.7 -2 854.7 Total equity 31.12.08 2 609.2 8 692.7 22.7 -829.6 0.6 -916.1 9 579.5 45.1 9 624.6 share issue coMpLeted during 2009 SHARE ISSUE 27.05.2009 A private placement was completed of a total of 96 million new shares, each at par value NOK 0.75, at a subcription price of NOK 3.15 per share. Gross proceeds from the private placement amounted to NOK 302.4 million. 25 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP Notes – Marine Harvest Group 1 General information Marine Harvest ASA is a Norwegian company located in Stortingsgaten 8, These financial statements are presented in NOK, and all figures are 0161 Oslo. Marine Harvest ASA is a public company listed at the Oslo Stock presented in millions, unless otherwise stated. The companies in the Group Exchange, with the ticker MHG. have their national currency as functional currency, except for companies in Chile and Singapore where USD is the functional currency. The parent The nature of the Group’s operations and its principal activities are company has NOK as its functional currency. described in notes 4 and 5. Marine Harvest has operations in 18 countries and has structured the main part of the business in 5 business units; Comparable figures for two years are presented for the statement of the farming operations Marine Harvest Norway, Marine Harvest Chile, comprehensive income, one-year comparison is provided for the statement Marine Harvest Canada and Marine Harvest Scotland, and the value added of financial position and the statement of cash flow. processing operations in Marine Harvest VAP Europe, mainly operating in central Europe. The financial statements were authorized for issue by the Board of Directors on 23 March 2010. 2 Significant accounting policies The principal accounting policies applied in the preparation of these entities that issue rights in a currency other than functional currency, consolidated financial statements are set out below. These policies have from treating the rights as derivatives with fair value changes recorded been consistently applied to all periods presented. in profit or loss. Such rights will now be classified as equty instruments when certain conditions are met. Marine Harvest expects to apply IFRS Basis of preparation 9 as of 1 January 2011. The annual report comprises statement of comprehensive income, statement of financial position, statement of changes in equity, cash There are also several other enacted changes in standards and flow statement and note disclosures for the Group. The accounting year interpretations that are not yet effective at the end of 2009. These are not equals the calendar year. The financial statements for the Group have been considered to have a material effect for the Group’s reporting. prepared in accordance with International Financial Reporting Standards and the interpretations issued by the International Accounting Standards Board The financial statements have been prepared on a historical cost basis, (IASB) as adopted by the EU (EU-IFRS). Additional disclosure requirements except for where IFRS require recognition at fair value, mainly related to according to the Norwegian Accounting Act are included. measurement of certain financial instruments and valuation of biomass. At the end of 2009, there are new standards, changes in existing standards consoLidation and interpretations that are not yet effective, but will be relevant for the Consolidation The consolidated financial statements present the Marine Harvest Group: financial position, comprehensive income, changes in equity, and the cash − IFRS 3 (revised) Business Combinations with amendments and flow for the Group as a combined entity. clarifications related to the use of the purchase method. This includes issues such as goodwill in business combinations achieved in stages, Subsidiaries The Group’s consolidated financial statements comprise non-controlling interest and contingent considerations. Transaction the financial statements of companies in which the parent company or costs other than share and debt issuance cost will be expensed as subsidiaries have a direct or indirect controlling influence. A controlling incurred. Marine Harvest will apply IFRS 3 (R) as of 1 January 2010. influence normally exists if the Group directly or indirectly owns more − IAS 27 (revised) Consolidated and Separate Financial Statements than 50% of the voting capital in the controlled entity. Recently acquired provides more guidance on accounting for changes in ownership subsidiaries are included from the time a controlling interest is obtained. interest in a subsidiary and the disposal of a subsidiary. Marine Harvest Divested subsidiaries are included in the consolidated financial statements will apply IAS 27 (R) as of 1 January 2010. up to the point of divestiture. − IFRS 9 Financial Instruments replaces the classification and measur- ement rules in IAS 39 Financial Instruments – Recognition and measure- Investment in associates Associated companies are defined as ment. Marine Harvest expects to apply IFRS 9 as of 1 January 2013. companies in which the Group has significant influence and can exercise − Amendments to IAS 32 Financial Instruments: Presentation significant, but not controlling influence (normally ownership of 20-50%). Classification of Rights Issued. The amendment provides relief to Associated companies are included in the Group financial statements 26 ANNUAl rePOrT 2009 according to the equity method. The Group’s share of profit in an associated comprehensive income and accumulated in the separate component of company is its proportionate amount of the after-tax profit of the associated equity, will be reclassified from equity to profit or loss (as a reclassification company, less any depreciation of the surplus value (due to the cost of the adjustment) when the gain or loss on disposal is recognized. ownership interest exceeding the acquired share of equity). In statement of comprehensive income, the share of profit in associated companies is Transactions in foreign currency Transactions made in a foreign classified on a separate line included in earnings before interest and taxes. currency are translated using the exchange rate at the time of the In the statement of financial position, ownership interests in associated transaction. companies are classified as non-current assets. Receivables, debt and other monetary items in foreign currency are elimination of internal transactions All transactions and balances measured at the exchange rate at the closing date and the translation between companies in the Group are eliminated. Unrealized gains from differences are charged to profit or loss continuously. Other assets and debt internal transactions are eliminated. Unrealized losses from internal in foreign currencies are valued at the exchange rate on the transaction date. transactions are also eliminated, but are considered an impairment indicator of the asset transferred. financiaL instruMents – initiaL and suBseQuent elimination of shareholdings in subsidiaries Shareholdings in MeasureMent subsidiaries are eliminated in the Group financial statements according to Initial recognition Financial instruments are recognized in the financial the acquisition method. The difference between the cost price of the net statement when Marine Harvest becomes a party to the contractual ownership interest and the recognized value of the net assets at the time provisions of the instrument. All financial assets are initially measured at of acquisition (excess value) is analyzed and allocated to assets and liability fair value plus, in the case of investments not at fair value through profit or according to their fair value. Any further additional value is capitalized as loss, directly attributable transaction costs. All financial liabilities are initially goodwill. If the cost price of the net ownership interest is lower than the measured at fair value minus, in the case of loans, directly attributable value of the acquired net assets, the difference (badwill) is charged directly transaction costs. to profit or loss. Deferred tax provisions are made for the excess values, except for goodwill. The nominal tax rate for the relevant tax jurisdiction is Financial instruments in Marine Harvest are classified into the following used when calculating deferred tax. specified categories: −Financial assets and liabilities measured at amortized cost Discontinued operations/assets held for sale Non-current assets −Financial instruments at fair value through profit or loss and liabilities are classified as held for sale if their carrying amount is −Financial assets at cost because the fair value cannot be reliable expected to be recoverable through sales transactions rather than through measured own use, it is expected that the sale is likely to occur within one year from −Financial derivatives designed as hedging instruments which qualify for closing date, and management has a clear commitment to sell the assets. hedge accounting Non-current assets and liabilities held for sale are measured at the lower of The classification depends on the nature and the purpose of the financial the carrying amount and fair value less sales cost. Discontinued operations instrument, and is determined at the time of initial recognition. Subsequent is a major line of business or geographical area of operations that either has measurement of financial instruments depends on their classification in the been disposed of, or is classified as held for sale as part of a disposal plan. specified categories. Net profit from discontinued operations including gain or loss on sale of discontinued operations and assets held for sale is presented on a separate Subsequent measurement of financial assets and liabilities line in comprehensive income. In the statement of financial position assets measured at amortized cost loans and receivables are non-derivative and liabilities held for sale are also presented on separate lines. financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets and foreign currency transLation interest bearing loans are subsequently measured at amortized cost using The financial statements for the Group are presented in NOK, the functional the effective interest rate method, less impairment. currency for the parent company. The amortization and losses from impairment are recognized in profit or loss Translation of accounts of foreign subsidiaries Profit or loss as financial items. transactions in foreign subsidiaries are translated using the average exchange rate for the consolidation period. Assets and liabilities of a foreign Subsequent measurement of financial instruments at fair value subsidiary are translated at the exchange rate at the end of the reporting through profit or loss Financial instruments at fair value through profit period. or loss include − financial instruments held for trading On the disposal of a foreign operation, the cumulative amount of the − financial instruments designated upon initial recognition at fair value translation differences relating to that foreign operation, recognized in other through profit or loss. 27 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP Financial assets are classified as held for trading if they are acquired for When a derivative is entered into, an evaluation is made of whether the purpose of selling or repurchasing. This category includes derivative the derivative is part of a portfolio qualifying for hedge accounting or financial instruments that are not designated as hedging instruments if changes in market value shall be charged to the profit or loss. The qualifying for hedge accounting. classification is documented with a description of the hedge relationship and how to measure and follow up on hedge effectiveness. Marine Harvest has designated investments in other shares listed on the stock exchange into this category. Fair value hedges Gains and losses on derivatives hedging the fair value of an asset is charged to the profit or loss where it is fully or partly offset by Financial instruments at fair value through profit or loss are carried in the change in value of the asset being hedged. the statement of financial position at fair value with changes recognized in profit or loss: Cash flow hedges The non-current currency exposure in certain business − as operational revenues/expenses for current forward exchange contracts units is hedged using forward contracts. The hedges are determined by − as financial items for interest rate swaps and other shares expected future cash flows in the relevant foreign currency. Gains and losses on derivatives constituting a cash flow hedge is recognized in other Fair value of financial instruments On each reporting date, the fair comprehensive income and in a hedging reserve within equity until the value of the financial instruments that are traded in active markets are hedged cash flow materializes and affects the profit or loss. determined by reference to quoted market prices or dealer price quotations, without any deduction for transaction costs. For financial instruments not If a cash flow hedge expires without being renewed or the hedge traded in an active market, the fair value is determined using appropriate relationship is terminated, accumulated gains and losses in the hedging valuation techniques reserve within equity are recycled through profit or loss in accordance with the above principle. If the hedged transaction is no longer expected Offsetting financial instruments Financial assets and liabilities are to occur, accumulated unrealized gains and losses previously recognized in offset and the net amount recognized in the statement of financial position other comprehensive income is immediately reversed and recycled through only when there is a legally enforceable right to offset the recognized profit or loss. amounts and there is an intention to settle on a net basis, or settle the asset and the liability simultaneously. cLassification Assets and liabilities Cash, assets and liabilities associated with the regular Impairment of financial assets Financial assets, other than those business cycle, assets held for sale, and items due for payment within one year subsequently measured at fair value, are assessed for indicators of from the end of the reporting period are classified as current assets or current impairment. Financial assets are considered to be impaired when there is liabilities. All other assets are classified as non-current assets. All other liabilities objective evidence that the estimated future cash flow from the investment and provisions for non-current liabilities are classified as non-current. will be negatively affected. Discontinued operations/assets held for sale Net result in discontinued Derecognition of financial instruments A financial asset is operations and operations held for sale are presented separately in the derecognized when the contractual rights to the cash flows from the statement of comprehensive income. In the statement of financial position, asset expire or when the Group has transferred the financial asset and assets and liabilities owned by operations held for sale are presented on substantially all risks and rewards of ownership of the asset to another separate lines. entity. A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. Currency effects in comprehensive income Currency effects related to trade receivables and payables, short-term hedging instruments, bank derivative financiaL instruMents and hedge accounting and current accounts are classified as part of EBIT. Currency effects related The Group uses derivative financial instruments such as forward currency to long term receivables or debt are classified as financial items. Currency contracts and interest rate swaps to hedge its foreign currency risks effect related to cash flow hedges are classified as other comprehensive and interest rate risks. Derivative financial instruments are initially and income. subsequently recognized at fair value. Derivatives are classified as financial assets when the fair value is positive and as financial liabilities eQuity when the fair value is negative. Financial instruments are classified as debt or equity in accordance with the underlying economic realities. Gains or losses at expiry as well as unrealized changes in fair value of derivatives are recognized in profit or loss, except for cash flow Interest, dividends, gains or losses related to a financial instrument that is hedges qualified for hedge accounting, which are recognized in other classified as debt, are presented as income or expense in the statement of comprehensive income. comprehensive income. Distributions to owners of financial instruments classified as equity will be accounted for directly in equity. 28 ANNUAl rePOrT 2009 Cost and tax effects related to transactions with shareholders are recognized property, pLant and eQuipMent directly in equity. Purchase and sale of treasury shares is recognized directly Property, plant and equipment is measured at acquisition cost less in equity. accumulated depreciation and write downs. Costs associated with normal maintenance and repairs are expensed when they occur. Costs of major Convertible bonds made up of both a debt and equity element, are, when issued, replacements and renewals that substantially extend the economic life of separated into two components and reported as debt and equity respectively. an asset are capitalized. Assets are considered fixed assets if the useful economic life exceeds one year. Borrowing cost that are directly attributable revenue recognition to the acquisition, construction or production of a qualifying asset form part Revenue is measured at the fair value of the consideration received or of the capitalized cost of that asset. receivable for the sale of goods and services in the ordinary course of business. Revenue is shown net of discounts, VAT and other sales related taxes. Ordinary straight-line depreciation is applied over the useful life of the asset, based on the asset’s historical cost price and estimated residual value at Revenue for the company is mainly sales of fish. Sales of goods are recognized disposal. If a substantial part of an asset has an individual and different when the goods are delivered and significant ownership and risks have passed. useful life, this part is depreciated separately. Depreciation is classified as This will normally be at delivery. an operational expense in the statement of comprehensive income. The asset’s residual value and useful life is evaluated annually. Changes in estimated fair value on biomass are recognized in profit or loss. The fair value adjustment is classified on a separate line; “fair value adjustment on The gain or loss arising from the disposal or retirement of an asset is biomass”. The change in fair value adjustment is calculated as the change in fair determined as the difference between the sales proceeds and the carrying value of the biomass less the change in accumulated cost of production for the amount of the asset. biomass. At harvest, fair value adjustments are reversed. iMpairMent Interest income is recognized on an accrual basis. At the end of each reporting period the carrying amounts of the Group’s assets are reviewed to determine whether there are indications that specific governMent grants assets have suffered an impairment loss. If such indications exist, the Government grants are deducted from the carrying amount of the asset and recoverable amount of the asset is estimated in order to determine the recognized as income through reduced depreciations of the asset. extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and the net present value of discounted cash Government grants related to biological assets measured at fair value will be flows (value in use). recognized as income, when and only when, the conditions attached to the government grants are met. In addition an annual impairment test is carried out for intangible assets with indefinite life including goodwill. This impairment test is done by assessing goodwiLL the value in use based on the discounted future cash flows for each cash In a business combination, the difference between fair value of acquired generating unit. For further information regarding impairment testing of assets and liabilities and the acquisition cost is capitalized as goodwill. The intangible assets, reference is made to note 16 Intangible assets. goodwill in the statement of financial position is measured at acquisition cost less any write downs made after acquisition. The goodwill is allocated If the recoverable amount of a cash generating unit is estimated to be less to the cash generating units which were expected to contribute to synergy than the carrying amount of the net assets of the cash generating unit, a capture and future profits when the acquisition occurred. The goodwill write-down to the recoverable amount is recognized. If a write-down is is subject to an annual impairment test, or when there is indication of required, goodwill is written down first, thereafter other intangible assets. If impairment, and any impairment loss is recognized in the comprehensive further write- downs are required other fixed assets will be written down. income. Impairment losses on goodwill are not reversed. Impairment losses recognized in previous periods are reversed if the When selling a subsidiary or an associated company, the goodwill related to recoverable amount exceeds the carrying amount in a later period. The the investment is included in the calculated gain/loss on the sale. reversal will not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized farMing Licenses for the asset in prior years. Impairment losses on goodwill are not reversed. The value of licenses acquired by the company (mainly licenses for farming of salmon), is capitalized. In Norway the licenses are considered Tangible assets that are not in use, or are held for sale, are valued indefinite, while licenses in Scotland and Canada are automatically individually. renewed as long as operations are run with negligible impact to the environment. The licenses are assessed as having an indefinite life and are not subject to amortization, but an impairment test is performed annually. Impairment write-downs are reversed if the value recovers. 29 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP Leasing Valuation model The valuation is completed for each business unit and Assets leased on terms that largely transfer rights and obligations to the is based on biomass in sea for each seawater site. The specification of Group (financial leasing) are capitalized as tangible assets, and the financial biomass includes total number of fish, estimated average weight and the obligations are recognized as other non-current debt. Other lease expenses cost of the biomass. In the calculation, the value is estimated by estimating are classified as regular leasing costs, and presented as ordinary operating a value for the total kilo of biomass. Number of kilo biomass is multiplied expenses (operational leasing). by a value per kilo that reflects the market price. The market price is derived from a range of prices, normally a combination of achieved prices leased items classified as assets are subject to depreciation according to last month and the most recent contract entered into. For Marine Harvest the useful life of the asset, and the leasing liabilities are reduced with the Norway quoted forward prices (from Fishpool) are also included in the leasing fees paid, net of deduction of interest. calculation. The valuation takes into consideration that not all the fish are of the same quality. inventory Inventories comprise feed, goods in progress, packaging materials and fiXed price contracts finished goods. Inventories of goods are measured at the lower of cost and The company holds long term sale contracts related to salmon products. net realizable value. These contracts do not contain any elements of embedded derivatives and are therefore not treated as financial instruments. The contracts are settled The cost of finished goods includes direct material costs, direct personnel based exclusively on the assumption that or delivery of salmon products expenses, and indirect processing costs (full production cost). Interest costs should take place. The contracts are not tradable, nor do they contain a clause are not included in the inventory value. The cost price of purchased goods is for net settlement in cash or cash equivalents. the actual purchase price. The cost is based either on the principle of first-in first-out or weighted average. Provisions are made for onerous fixed-price contracts that oblige the company to sell fish at a price lower than the carrying amount plus expected If fish farmed by the Group is included in inventory as raw material for costs to harvest. further processing in one of the Groups processing entities, such fish is included in inventory with its fair value when put to inventory. cash and cash eQuivaLents Cash and short-term deposits in the statement of financial position BioLogicaL assets comprise cash at hand and in banks and short-term deposits which without Biological assets comprise eggs, juveniles, smolt and fish in the sea. significant currency risk can be converted to cash within three months. Biological assets are measured at fair value less cost to sell, unless the fair value cannot be measured reliably. Broodstock, smolt and small live fish are taXes measured at cost less impairment losses. live fish over approximately 1 – Taxes for the year in profit or loss comprise taxes on the taxable profit for 1.5 kilo is measured at fair value less cost to sell. the year, changes in deferred taxes and adjustments in previous year’s taxes. Taxes on transactions that are recorded in other comprehensive Effective markets for sale of live fish do not exist so the valuation of live fish income or directly in equity do not form part of the tax expense for the year. under IAS 41 implies establishment of an estimated fair value of the fish in a hypothetical market. The calculation of the estimated fair value is based Tax payable is calculated using the nominal tax rate for the relevant tax on market prices for harvested fish and adjusted for estimated differences jurisdiction at the end of the reporting period. in accordance with IAS 41.18 b). The prices are reduced by harvesting costs and freight costs to market, to arrive at a net value back to farm. Deferred tax is calculated on the basis of temporary differences between The valuation reflects the expected quality grading and size distribution. accounting and taxation values at the close of the accounting year. Deferred Further the valuation will take into account the stage in the life cycle, actual tax liabilities are recognized for all taxable temporary differences, except size and expected harvest weight of the fish. The change in estimated fair where the deferred tax liability arises from the initial recognition of goodwill value is recognized in profit or loss on a continuous basis, and is classified or of an asset or liability in a transaction that is not a business combination separately (not included in the cost of the harvested biomass). At harvest, and, at the time of the transaction, affects neither the accounting profit the fair value is reversed on the same line in profit or loss. nor taxable profit and loss. Deferred tax assets arise from temporary differences that give rise to future tax deductions. Deferred tax assets are Biomass acquired trough business combinations are carried at full only recognized in the statement of financial position if it is likely that it can production cost plus fair value adjustment. When this fish is harvested be utilized directly or by netting a deferred tax liability. and sold, the cost of production is classified in comprehensive income as cost of goods sold and the fair value adjustment on this fish when acquired Tax increasing and tax decreasing temporary differences are offset against through a business combination is classified as “fair value (excess of cost) each other to the extent that the taxes can be netted within one tax regime. on biomass acquired and harvested”. 30 ANNUAl rePOrT 2009 pension pLans Costs related to restructuring are classified on a separate line in profit or Contribution plans Obligations to make payments to contribution loss. plans are expensed when they occur. Under these pension schemes, the employer has no obligations other than making regular payments according share Based payMents to agreement. The Group has a share option scheme which can be settled in cash (‘cash- settled transactions’). The fair value of the options is recognized as a payroll Defined benefit plans Pension schemes where the employer has expense and as a liability. The fair value of the options are measured at the guaranteed the beneficiary a defined benefit from the plan are accounted for end of each reporting period and are distributed over the period until the based on the net present value of liability for the company. The net liability employees have earned an unconditional right to receive them. in each scheme is defined as the difference between the net present value of the liability in the scheme and the fair value of the assets available in the cash fLow stateMent pension scheme. The net obligation is calculated using actuarial assumptions The cash flow statement is prepared in accordance with the indirect method and expertise. The change in net liability is recorded in the accounts at every and shows cash flow from operations, from investments and from financing. reporting date. Cash and cash equivalents comprise cash, bank deposits, and other short- provisions for LiaBiLities term, liquid investments that can be rapidly converted into cash. A provision is recognized in the accounts if the company has a legal or constructive/self-administered obligation related to a past event, and it is Cash flow effects from merged or acquired companies are included as of the likely that the obligation will lead to a financial outflow for the company. time the companies were integrated for accounting purposes. The net cash long-term provisions are valued based on discounted expected cash flows. effect from the consolidation of the acquired company, e.g. the cash outlay in the acquisition less the cash available in the acquired entity at acquisition is restructuring costs presented as net cash effect on business combinations, and is presented as Provisions for restructuring costs will be recognized if the company has part of cash flow from financing. published or started, within the end of the reporting period, a restructuring plan which identifies what parts of the company, approximately how many Paid interest is in the cash flow statement included in the cash flow related employees that will be affected, the actions that will be taken, and when to financing activities. Purchase and sale of shares is classified as investment the plan will be implemented. Provisions are recognized only for costs that activities in the cash flow statement. Cash flow in discontinued operations is cannot be associated with future earnings. not included in the cash flow statement. 3 Accounting estimates The preparation of financial statements in accordance with IFRS requires Information regarding key assumptions and key sources of estimation management to make judgments, estimates and assumptions that affect uncertainty which have a significant risk of causing a material adjustment to the application of accounting principles and carrying amounts of assets and the carrying amount of assets and liabilities within the next financial year are liabilities, income and expenses. The estimates and underlying assumptions covered in following notes: are based on past experience and other factors perceived to be relevant and probable when the judgments were made. Estimates are reviewed - Note 13 Taxes on an ongoing basis and actual values and results may deviate from these - Note 16 Intangible assets estimates. Revisions to accounting estimates are recognized in the period in - Note 21 Biological assets which the estimates are revised. - Note 31 Contingent liabilities Information regarding critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are covered in following notes: - Note 21 Biological Assets - Note 28 Financial instruments 31 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 4 Consolidated entities The consolidated financial statements include the following companies: parent coMpany country Marine Harvest ASA Norway suBsidiaries - norway country ownership % Marine Harvest Holding AS Norway 100.00 % Kinn Salmon AS Norway 100.00 % Marine Harvest Norway AS Norway 100.00 % Marine Harvest Ingredients AS Norway 100.00 % Sterling White Halibut AS Norway 100.00 % Imsland Smolt AS Norway 100.00 % Marine Harvest Minority Holding AS Norway 100.00 % Marine Harvest Terminal AS 1) Norway 49.00 % Marine Harvest labrus AS Norway 100.00 % suBsidiaries - aMericas country ownership % Marine Harvest Canada Inc. Canada 100.00 % Marine Harvest North America Inc. Canada 100.00 % Marine Harvest USA Holding llC USA 100.00 % Ducktrap River of Maine llC USA 100.00 % Marine Harvest USA llC USA 100.00 % Heartland Enterprises ltd. British Virgin Islands 100.00 % Salmoamerica ltd. British Virgin Islands 100.00 % Marine Harvest Insurance NV Netherlands Antilles 100.00 % Cultivadora de Salmones linao S.A Chile 100.00 % Fjord Seafood Chile S.A. Chile 100.00 % Salmones Americanos S.A Chile 100.00 % Salmones Tecmar S.A Chile 100.00 % Salmones lican S.A. Chile 100.00 % Processadora De Productos Marinos Delifish S.A Chile 100.00 % Marine Harvest Chile S.A Chile 100.00 % Ocean Horizons S.A. Chile 100.00 % Aquamerica International Holdings S.A. Panama 100.00 % Panamerica International Holdings S.A. Panama 100.00 % Salmoamerica Corp. Panama 100.00 % suBsidiaries – asia country ownership % Marine Harvest Hong Kong Cy ltd Hong Kong 100.00 % Pan Fish Japan Co ltd. Japan 100.00 % Marine Harvest Japan Inc Japan 100.00 % South Sea Food KK Japan 100.00 % Stolt Sea Farm KK Japan 100.00 % Marine Harvest Korea Co. ltd Korea 100.00 % Marine Harvest Singapore Pte ltd Singapore 100.00 % 1) Marine Harvest has controlling interest in Marine Harvest Terminal AS. 32 ANNUAl rePOrT 2009 suBsidiaries - europe country ownership % Marine Harvest (Scotland) ltd Scotland 100.00 % Borsea Hatcheries ltd Scotland 100.00 % Borsea ltd Scotland 100.00 % Eishken Estate ltd Scotland 100.00 % Followstart ltd Scotland 100.00 % Harlosh Salmon Company ltd Scotland 100.00 % Marine Harvest (Properties) ltd Scotland 100.00 % McConnel Salmon ltd Scotland 100.00 % Marine Harvest (Fort Williams) ltd Scotland 100.00 % Atlantic Sea Products ltd Scotland 100.00 % Pairc Salmon ltd Scotland 100.00 % Stolt Sea Farms ltd Scotland 100.00 % Bradan (Maoil Rua) Teoranta Ireland 100.00 % Bradan Fanad Teoranta Ireland 100.00 % Bradan Prioseal Teoranta Ireland 100.00 % Comhlucht Iascaireachta Fanad Teoranta Ireland 100.00 % Fanad Pettigo Teoranta Ireland 100.00 % Feirm Farraige Oilean Chliara Teoranta Ireland 100.00 % Fanad Fisheries (Trading) ltd Ireland 100.00 % Silverking Seafoods ltd Ireland 100.00 % Marine Harvest Faroes P/F Faroes 72.90 % Belisco Ehf Iceland 100.00 % Marine Harvest Spain II. S.l. Spain 100.00 % Pieters Bresken BV Netherlands 100.00 % Gebroeders Sterk Holding BV Netherlands 100.00 % Gebroeders Sterk Beheer BV Netherlands 100.00 % Sterk Specials BV Netherlands 100.00 % Marine Harvest Sterk BV Netherlands 100.00 % Marine Harvest International BV Netherlands 100.00 % Marine Harvest NV Netherlands 100.00 % Marine Harvest Holland BV Netherlands 100.00 % Marine Harvest Pieters NV Belgium 100.00 % Marine Harvest VAP Europe NV Belgium 100.00 % Marine Harvest Appéti’ Marine SAS France 100.00 % Marine Harvest Boulogne SAS France 100.00 % Marine Harvest Rolmer SAS France 100.00 % Marine Harvest lorient SAS France 100.00 % J.l. Solimer SARl France 100.00 % Marine Harvest Kritsen SAS France 100.00 % Marine Harvest Rennes SAS France 100.00 % Marine Harvest France SNC France 100.00 % Marine Harvest VAP France SAS France 100.00 % Marine Harvest Kritsen Italy SRl Italy 100.00 % Marine Harvest Poland Sp. Zoo Poland 100.00 % 33 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 5 Business segments identification of segMents Marine Harvest has structured its operations in five main business units. These other units include the farming operations in Ireland which produce Business unit MH Norway includes fish farming operations and sales conventional and organic salmon, the salmon farming operations in the operations in Norway, which produces and sells Atlantic salmon. The Faroes, the sales organization in Asia, the farming of Halibut in Norway operations in Norway also include processing facilities producing fillets. as well as the Corporate head office. The total of these are presented as Business unit MH Chile includes the Group’s operations in Chile and in the “Corporate/MH Other Businesses” below. US. Operations in Chile include fish farming, and processing facilities. In the US the Group has a sales office located in Miami and processing facilities in Maine, los Angeles and Miami. The business units MH Canada and MH accounting principLes appLied for the segMent reporting Scotland produce and sell Atlantic salmon. The same accounting principles as described for the Group financial statements have been applied for the segment reporting. Some corporate The business unit MH VAP Europe processes and sells elaborated seafood costs have been distributed to the segments (management fee), and are in the European market, of which approximately 60% is based on Atlantic presented as part of the income and expenses in the segments. Inter- salmon, approximately 20% on whitefish, and approximately 20% on other segment transfers or transactions are entered into under normal commercial seafood. terms and conditions, and the measurement used in the segment reporting is the same as used for the actual transactions. Investments in the period In addition to the main business units the Group has a number of operations comprises of additions to tangible and intangible assets. which are individually smaller, and are operated as separate businesses. Key figures By Business segMents for 2009 (noK MiLLion) Mh norway Mh chiLe Mh canada Mh scotLand Mh vap corporate/ eLiMinations totaL europe Mh other Business Sales revenues external customer 4 483.3 2 258.3 1 197.6 1 057.9 4 078.6 1 424.5 0.0 14 500.2 Sales revenues other divisions 2 260.7 63.9 49.7 162.9 99.5 139.6 -2 776.3 -0.0 revenue and other income 6 744.0 2 322.2 1 247.3 1 220.8 4 178.1 1 564.2 -2 776.3 14 500.2 Cost of material -3 894.4 -2 325.1 -681.2 -576.4 -2 783.3 -1 135.5 2 704.9 -8 690.9 Fair value adjustment on biological assets 248.0 -8.4 50.7 8.8 - 2.1 - 301.2 Other operating expenses -1 495.1 -267.9 -227.1 -318.1 -1 032.2 -344.5 69.2 -3 615.6 Restructuring costs - -149.3 - -9.5 -10.2 -0.5 - -169.5 Income/loss from associated companies 68.7 - - - 0.8 - - 69.5 Depreciation and amortization -264.8 -130.5 -107.6 -52.5 -83.2 -49.2 0.0 -687.7 Impairment losses -6.6 -334.9 -9.6 -2.7 -18.0 -1.3 - -373.1 earnings before interest and taxes (eBIT) 1 399.8 -894.0 272.5 270.5 252.1 35.4 -2.2 1 334.1 Operational EBITDA 1 354.6 -270.8 339.0 326.3 362.7 84.2 -2.2 2 193.8 Operational EBIT 1 089.8 -401.3 231.5 273.9 279.4 35.0 -2.2 1 506.1 Assets 11 486.2 2 616.0 2 789.6 1 769.2 2 590.8 2 900.4 -3 763.0 20 389.3 liabilities -3 025.5 -1 618.3 -391.7 -388.7 -1 124.8 -6 095.6 3 715.8 -8 928.8 Investment in associated companies 517.5 - 2.3 - - 0.3 - 520.1 Investments in the period 353.4 37.1 53.2 76.1 84.7 38.9 - 643.4 Harvest volume (tons) 201 676 36 2041) 36 537 37 698 - 14 985 - 327 100 No of employees 31 December 2009 FTE 1 091 908 537 367 1 792 252 - 4 947 1) Volume in MH Chile is sold volume. Harvested volume in MH Chile 2009 was 30 702 tons. 34 ANNUAl rePOrT 2009 Key figures By Business segMents for 2008 (noK MiLLion) Mh norway Mh chiLe Mh canada Mh scotLand Mh vap corporate/ eLiMinations totaL europe Mh other Business Sales revenues external customer 4 084.6 1 884.0 1 044.7 912.0 3 713.5 1 848.1 - 13 486.9 Sales revenues other divisions 1 466.2 263.9 61.8 76.6 56.2 76.5 -2 001.2 - revenue and other income 5 550.8 2 147.9 1 106.5 988.6 3 769.7 1 924.6 -2 001.2 13 486.9 Cost of material -3 186.3 -2 105.9 -707.0 -523.5 -2 585.9 -1 503.3 1 957.5 -8 654.4 Fair value adjustment on biological assets -332.6 7.4 21.8 25.2 - -0.6 - -278.8 Other operating expenses -1 381.5 -449.7 -207.9 -320.1 -912.6 -305.6 43.7 -3 533.6 Restructuring costs - -213.4 -3.4 -20.2 -3.8 -0.2 - -241.0 Income/loss from associated companies -0.4 - - - -0.9 7.1 - 5.8 Depreciation and amortization -241.7 -161.3 -84.1 -54.9 -93.9 -49.4 - -685.3 Impairment losses -13.7 -1 549.9 - -15.6 -0.4 - - -1 579.4 earnings before interest and taxes (eBIT) 394.6 -2 324.9 125.9 79.5 172.2 72.6 0.0 -1 479.8 Operational EBITDA 983.0 -407.8 191.6 145.0 271.2 115.7 0.0 1 298.9 Operational EBIT 741.3 -569.1 107.5 90.1 177.3 66.3 0.0 613.6 Assets 9 948.4 4 486.4 2 621.5 1 684.7 2 881.2 5 078.3 -3 964.0 22 736.4 liabilities -3 711.3 -2 435.8 -347.4 -407.0 -1 369.4 -8 759.5 3 918.5 -13 111.9 Investment in associated companies 510.7 - 2.4 - 0.1 0.3 - 513.5 Investments in the period 399.1 144.1 63.5 88.8 47.7 48.6 - 791.7 Harvest volume (tons) 171 086 75 395 1) 36 050 32 341 - 11 751 - 326 623 No of employees 31 December 2008 FTE 1 057 3 045 520 383 1 730 336 - 7 071 1) Volume in MH Chile is sold volume. Harvested volume in MH Chile 2008 was 84 879. reconciLiation Between segMent operationaL eBit to net earnings Before interest and taXes (eBit) (noK MiLLion) 2009 2008 Operational eBIT 1 506.1 613.6 Fair value adjustment on biological assets 301.2 -278.8 Restructuring costs -169.5 -241.0 Income/loss from associated companies 69.5 5.8 Impairment losses -373.1 -1 579.4 earnings before interest and taxes (eBIT) 1 334.1 -1 479.8 revenue and other incoMe By custoMers’ Location The table below presents the operating income for Marine Harvest split by main geographical markets. (noK MiLLion) 2009 2008 Norway 1 356.4 1 078.9 Europe 8 732.5 8 497.2 America 3 478.0 2 884.5 Asia 895.1 679.5 Other markets 38.2 346.8 Total revenue and other income 14 500.2 13 486.9 35 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 6 Salary and personnel expenses (noK MiLLion) 2009 2008 2007 Wages and salaries -1 622.4 -1 685.8 -1 718.5 Social security taxes -243.7 -202.3 -204.3 Pension expenses -62.3 -48.3 -36.7 Other benefits -239.0 -203.4 -205.5 Total salary and personnel expenses -2 167.4 -2 139.8 -2 165.0 Average number of full-time employees 6 009 7 904 8 492 At year-end 2009 there were 4 947 permanent full-time employees in the Group. 7 remuneration to Group management Key personnel are, in addition to the Board, employees that have been The corporate management team has individual contracts that regulates or are part of the corporate management team and have had substantial salaries, bonuses and post-employment benefits. influence in important decision-making processes for the Group in the period. saLary and other Benefits paid (noK thousand) saLary Bonus pension other totaL 2009 totaL 2008 Group management: Group CEO 2009 3 593 1 000 73 1 220 5 885 3 900 Group CFO 2 222 126 65 0 2 413 2 500 Group Director Operations Canada, Scotland and Other Businesses 1 803 53 61 0 1 917 1 700 Director Corporate Development 1 400 0 55 0 1 455 0 Managing Director Business Unit MH Norway 1 830 358 71 162 2 421 2 300 Managing Director Business Unit MH Americas 2 200 500 0 0 2 700 1 400 Managing Director MH VAP Europe 1 866 496 134 119 2 615 2 400 Total remuneration 14 914 2 533 459 1 501 19 406 14 200 remuneration to Chief executive Officer 2009 Åse Aulie Michelet had Bonuses are awarded as a percentage of base salary. The CEO is entitled an annual salary of NOK 3.6 million and received NOK 1.2 million yearly for up to a 50% annual bonus based on criteria set by the Board. Business Unit as contribution for her saving for retirement. In addition she received 2008- Managing Directors and Senior Group Staff are entitled to a 30% bonus bonus payment of NOK 1 million in 2009. The bonus scheme is limited up based on a mix of Group financial targets (70%) and personal targets (30%). to 50 percent of annual salary. Business Unit Management Team members are entitled to a 20% bonus which is also based on Group financial performance and personal business Terms and agreements with key personnel The CEO and the Chairman targets. These targets are designed to further the objectives of the business of the Board decide the remuneration to key personnel. Key personnel and motivate key personnel to align their actions with the needs of the are defined as Business Unit Management Team members, Business business and to reward them for achieving budgeted goals. Unit Managing Directors, and Senior Group Staff. In principle, wages are set using well-known job weighing techniques and salary scales based Bonus paid out in 2009 relates mainly to results and performance in 2008 on regional compensation trends. The salary policy is designed to provide and the bonus is calculated in line with the contracted criteria’s. fair wages and attract the right competence. The salary policy will allow In 2008 a new share based incentive program was established. Further the Group to compete in the labour market and should attract and hold information about this new program is given in note 8. employees, but the primary focus of the company is to provide significant and meaningful work in a leading seafood company. Salary increases are based on achieved results and contribution to the business. 36 ANNUAl rePOrT 2009 Other remunerations for CFO and Group Director Operations Canada, Severance Pay The company can enter into employment agreements Scotland and Other Business Group CFO is entitled to a contribution for that grant key personnel the right to severance pay. Further, if a person in saving for retirement and has agreed on the terms. In 2009 NOK 1.4 million management is deprived of position, whether actual or de facto, the health was recognized as a provision for the period August 2007 to December and safety work act mitigates with the right to receive severance pay. An 2009, which will be disbursed in 2010. Going forward Marine Harvest appointment in a new position in another company will normally lead to a ASA will annually pay approximately NOK 0.6 million as contribution for his proportional reduction in the severance payment. In special circumstances saving for retirement. and during staff reductions, severance pay can be agreed for staff leaving voluntarily. Severance pay may not apply where there are pre-agreed Group Director Operations Canada, Scotland and Other Business is entitled contractual or other negotiated terms of agreement for dismissal. to an individual pension plan. In 2009 NOK 1.4 million was recognized as a provision for the period from 2006 to 2009. Going forward Marine Harvest In the agreements with the key personnel, conditions relating to terminal ASA will annually make a provision of approximately NOK 0.4 million as payments based on base salary are included, given fulfilment of certain contribution for his saving for retirement. conditions. No key personnel are entitled to terminal payment for a longer period than two years from termination of employment. Pensions The corporate management team is included in defined contribution plan where the contribution is limited to 6.5% of salaries up to NOK 0.9 million (12 G.) Payments made on pension plan for the key personnel are included in the figures presented above. For further information about pensions, please refer to note 11. fees paid to the Board of directors Total fees to the Board of Directors amounted to NOK 3.5 million in 2009 and NOK 2.8 million in 2008. Board fees, paid (noK thousand) 2009 Ole Eirik lerøy (Acting Chairman of the Board) 175 Svein Aaser (Prior Chairman of the Board) 750 leif Frode Onarheim 2) 413 Solveig Strand 3) 350 Kathrine Mo 138 Celina Midelfart 275 Thorleif Enger 275 Cecilie Fredriksen 1) 0 Turid lande Solheim 4) 275 Geir-Elling Nygård 4) 275 Frank Øren 4) 275 Total board fees and other compensation 3 200 1) As of 31 December 2009 there is a provision of NOK 275 000 related to remuneration of Board members. 2) Included in the payment to Leif Frode Onarheim was NOK 100 000 as remuneration as member of the audit committee 3) Included in the payment to Solveig Strand was NOK 75 000 as remuneration as member of the audit committee 4) Employee representatives in the Board of Directors, will in addition to board fee, receive salary as employees in the Group. Loans to eMpLoyees In 2009, employees in Norway were offered to buy shares in the company Excluding this there were no further loans at year end between the Group for NOK 6000, with the amount deducted from the salary in 2010. and its employees at year-end. At any time there will be minor receivables and payables between employees and company related to travel reimbursement and similar issues. 37 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 8 Share based payments share Based payMent for current between the market price for Marine Harvest ASA’s shares at this time and eMpLoyees in Marine harvest the determined subscription price multiplied by the number of allocated In the Ordinary General Meeting in 2007 it was decided to give the Board a options. This amount will represent the bonus which the person in question detailed authorization to implement a share based incentive program for the is entitled to. The bonus, minus the tax which the relevant person’s employer company’s management linked to a maximum of 35 million shares a year. is obliged to withhold, will be paid to the entitled person, however so that the The authorization concerned one assignment per year for three years. The person in question has undertaken to invest this amount in shares in Marine program should be a supplement to management’s salary and other bonus Harvest ASA. schems. The company will assist in the completion of this investment, either by The following was authorized on the Ordinary General Meeting in 2008, arranging for the purchase of shares in the market on behalf of the entitled emphasizing that the bonus could not exceed two years’ salary. The decision person or by transferring the company’s own shares to this person at market has to be seen in connection with the decision on the Ordinary General terms. The entitled person will undertake not to sell these shares until 12 Meeting in 2007 (available on the company web page): “In the 1. quarter of months after the acquisition”. 2008, the Board of Directors in Marine Harvest ASA decided to implement a long-term incentive scheme for the Group’s senior executives based on the On 28 March 2008, the Board of Directors in Marine Harvest ASA distributed development in Marine Harvest ASA’s share price. 30 750 000 such synthetic options at a subscription price of NOK 3.3239 to 87 employees in the Group, in which all of the senior executives were The scheme is based on the Board of Directors in Marine Harvest ASA included. assigning a certain number of synthetic options to subscribe for shares in Marine Harvest to individual employees, at a subscription price On 26 June 2009 an additional 13 450 000 was awarded on the same terms corresponding to 107.5 % of the market price at the time of allocation. as described above, with a subscription price of NOK 4.487 to 65 employees in the group, in which all senior executives were included. The number of synthetic options assigned to each employee will vary based on the position and area of responsibility of the person in question. The In 2009 the group has accrued NOK 24,8 million to meet the cost of these synthetic options will be settled 36 months after being allocated. The person programs. entitled will then receive a cash amount corresponding to the difference The Group Management Team has the following synthetic options as of 31 December 2009: naMe and position nuMBer of options granted eXercised outstanding at year-end 2009 Åse Aulie Michelet , CEO 4 500 000 0 4 500 000 Jørgen K. Andersen, CFO 1 350 000 0 1 350 000 Thomas Farstad, Group Director Operations Canada, Scotland and Other Business 1 125 000 0 1 125 000 David Carnes, Director Corporate Development 375 000 0 375 000 Marit Solberg, Managing Director MH Norway 1 350 000 0 1 350 000 Alvaro Jimenez, Managing Director MH Chile 1 125 000 0 1 125 000 Jo Dekeyzer, Managing Director MH VAP Europe 1 125 000 0 1 125 000 Total options 10 950 000 0 10 950 000 At the beginning of the year 25 100 000 were outstanding, as a The right to the synthetic options will terminate without any compensation consequence of change in management 400 000 were forfeited during to the beneficiary if his/her employment with the Marine Harvest Group 2009, and after the additional 13 450 000 awarded in June, the total number ceases prior to the settlement date. of synthetic options outstanding were 38 150 000. . 38 ANNUAl rePOrT 2009 9 restructuring and exceptional items restructuring: The Group had restructuring costs in the amount of NOK Marine Harvest Norway suffered increased costs as a consequence of 169.5 million in 2009 mainly due to the down-sizing of the Chilean organiza- sealice mitigation actions in the amount of NOK 17.3 million in 2009. In tion. addition, the unit culled/harvested out 1.4 million fish of approximately 1 kilo During the second quarter, the business plan for Marine Harvest Chile was to mitigate further spreading of PD in Region Mid. Total costs related to the updated resulting in substantial accruals for restructuring related to site and PD outbreak amounted to NOK 37.0 million. plant closures as well as general down-sizing. Total restructuring costs amounted to NOK 149.3 million in 2009. In Marine Harvest Chile increased costs related to ISA amounted to NOK 517.5 million in 2009, of which NOK 302.9 million was due to mortality and In Marine Harvest Scotland, restructuring costs amounted to NOK 9.5 million write-down of biomass, NOK 149.3 net of currecy effects related to restruc- in 2009 and related to site closures. turing costs and NOK 55.7 million related to other exceptional items. Restructuring costs in Marine Harvest VAP Europe amounted to NOK 10.2 For Marine Harvest Canada, the 2009 profit was affected by exceptional million in 2009 and related to operational changes. customer claims and discards at harvest of NOK 63.0 million due to the parasite Kudoa thyrsites. exceptional items: In addition to the restructuring expenses, the 2009 ac- counts contain several items that are considered exceptional relative to the Marine Harvest decided in 2009 to discontinue its cod juvenile production normal business. The total effect of exceptional items included in EBITDA and find an alternative venue for the assets through the production of ballan was NOK 657.2 million for the year. wrasse. Due to a difficult market situation, the remaining cod juveniles were culled, resulting in exceptional costs of NOK 22.4 million. 10 Auditor’s fees fee to auditors 2009 (noK MiLLion) ernst & young other appointed auditors Audit services 8.8 0.3 Other authorization services 0.7 - Tax advisory services 1.8 - Other services non-audit related 3.6 0.0 Total fees for 2009 14.9 0.3 fee to auditors 2008 (noK MiLLion) ernst & young other appointed auditors Audit services 8.6 0.4 Other authorization services 0.3 - Tax advisory services 1.7 0.6 Other services non-audit related 1.1 0.5 Total fees for 2008 11.7 1.4 fee to auditors 2007 (noK MiLLion) ernst & young other appointed auditors Audit services 8.2 1.5 Other authorization services 0.6 - Tax advisory services 6.9 0.9 Other services non-audit related 1.4 - Total fees for 2007 17.1 2.4 Auditor’s fee is stated exclusive value added tax. 39 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 11 Pensions defined Benefit pLans Contribution plan in Marine Harvest Norway Marine Harvest Norway Pensions are not a significant cost component or obligation in the financial and subsidiaries have a defined contribution plan for 1 462 employees. statement, but the different schemes in the Group are explained below. All employees with more than 20% positions are included in the scheme where 4-8% of the salary up to 12 G is paid in by the employer. The cost of Pension scheme in Marine Harvest Norway Marine Harvest Norway the schemes was NOK 30.9 million in 2009. and subsidiaries have changed the pension agreement from defined benefit to defined contribution. There are still some defined benefit plans Contribution plan in Marine Harvest Chile In Marine Harvest Chile, the in effect for e.g. retired employees and early retirement amounting to a net pensions are generated by an individual mandatory savings account equal for pension liability of NOK 30.7 million. The plan includes a limited number of all workers, legally defined. Every month 10% of the salary is deducted and employees at year-end 2009. sent to the administrator chosen by the worker. Pension scheme in Marine Harvest Scotland Marine Harvest Contribution plan in Marine Harvest Scotland Marine Harvest Scotland participates in a pension scheme providing benefits based on final Scotland operates a defined contribution pension scheme for 197 pensionable pay which is now closed for further contributions. The scheme members. The pension charge for the year represents contributions payable has 657 members. The pension liability is recognized with NOK 27 million. by the company to the scheme, and was NOK 3.8 million in 2009. Contribution plan in Marine Harvest Canada Marine Harvest Canada Pension schemes in France The entities in France have established has a single defined contribution pension plan (DCPP) with 233 current agreements where the employees are entitled to payments after retirement members. The plan is voluntary and employees can join after 2 years of according to a defined benefit plan, limited upward to maximum one continuous service. The contribution rate is 6% by employer and 4% by year’s salary. There are 783 employees in France that are included in these employee. There is no liability as the employee’s pension upon retirement is pension schemes, and the net obligations amount to EUR 1.15 million. The based on the investment value of the contributions that were made during calculation is based on normal, actuarial assumptions. A discount rate of their employment. 6% and an expected increase in salaries of 3% are taken into consideration in the calculation. Estimated remaining average time to retirement in the Contribution plan in Belgium A contribution plan for groups of employees schemes is 24 years. has been established in Belgium, covering 59 employees. The premium in the scheme is calculated as a percentage of yearly salary, and both the company contriBution pLans and the employee contribute to the scheme. Any costs related to the plan are Contribution plan in Marine Harvest ASA In Marine Harvest ASA there expensed when they occur. According to the law in Belgium the contribution is a defined contribution plan with 31 members. The cost is charged to plan has a minimum return guarantee and in 2009 the return is in line with this the statement of comprehensive income. For 2009 the cost related to this minimum guarantee. scheme was NOK 1.6 million. Contribution plan Other businesses The entities grouped under Marine Harvest Other Businesses have contributions plans. 12 Operating leases operating Leases and suBLeases (noK MiLLion) 2009 2008 Operating leases expensed -35.3 -28.3 Income from operating subleases 0.9 0.5 Total net operating leases -34.4 -27.8 40 ANNUAl rePOrT 2009 future payMents for operating Leases (noK MiLLion) 2009 2008 Gross amount payable within 1 year -30.4 -29.7 Gross amount payable within 1-5 years -61.1 -77.1 Gross amount payable after 5 years -60.1 -69.0 Total gross amount payable -151.6 -175.8 future incoMe for operating suBLeases (noK MiLLion) 2009 2008 Total future income for operating subleases 7.3 10.1 13 Taxes taX for the year in the stateMent of coMprehensive incoMe (noK MiLLion) 2009 2008 2007 Norway -2.4 -1.0 -16.6 Foreign units -18.4 65.2 -54.1 Tax on profits (current tax) -20.8 64.2 -70.7 Norway -412.4 286.1 -244.8 Foreign units 75.0 58.9 205.1 Change in deferred tax/tax benefit -337.5 345.0 -39.7 Total taxes related to profit for the year -358.3 409.3 -110.4 reconciLiation Between noMinaL and effective taX rate (noK MiLLion) 2009 2008 2007 Profit before tax 1 660.5 -3 261.4 147.4 Nominal tax rate 28% 28% 28% Tax calculated with nominal tax rate -464.9 913.2 -41.3 Permanent difference reported by the entities -4.1 -32.0 -82.6 Withholding tax -2.3 -3.1 -6.0 Tax free gain/loss on sale of shares 0.0 -57.7 -5.5 Recognition of deferred tax assets not recognized previously/use of losses not recognized 1) 196.5 - 59.8 Correction of earlier year's taxes 0.5 - -6.8 Effects from different tax rate in the various juridistictions -114.7 -272.1 -109.0 Other differences 2) 30.7 -139.0 81.0 Total actual tax in the statement of comprehensive income -358.3 409.3 -110.4 1) Use of tax losses not recognized includes tax positions in Japan and Norway 2) Other differences include currency effects and temporary differences 41 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP taX for the year recogniZed in coMprehensive incoMe (noK MiLLion) 2009 2008 2007 Deferred tax related to income in comprehensive income -248.1 401.3 -12.0 taX prepaid/receivaBLe in the stateMent of financiaL position (noK MiLLion) 2009 2008 2007 Tax prepaid/receivable in foreign units 108.6 201.8 122.3 Total tax prepaid/receivable in the statement of financial position 108.6 201.8 122.3 taX payaBLe in the stateMent of financiaL position (noK MiLLion) 2009 2008 2007 Tax payable in Norway - - 32.4 Tax payable. foreign units 50.8 69.9 43.3 Total tax payable in the statement of financial position 50.8 69.9 75.7 specification of deferred taX and Basis for deferred taX/taX assets taX increasing/(reducing) 2009 2008 2007 teMporary differences (noK MiLLion) Non-current assets 4 957.4 5 013.4 6 171.3 Current assets 4 322.9 2 094.6 3 749.0 Provisions for liabilities -100.2 -257.0 116.1 Tax losses carried forward -4 746.4 -6 215.6 -4 839.1 Other differences -7.2 -184.6 3.2 Total temporary differences 4 426.5 450.8 5 200.5 Tax losses carried forward in Norway -4 137.8 -4 518.6 -4 053.0 Other temporary differences in Norway 5 924.5 3 179.5 5 820.1 Tax losses carried forward abroad -608.6 -1 697.0 -786.1 Other temporary differences abroad 3 248.3 3 486.8 4 219.5 Total temporary differences 4 426.5 450.8 5 200.5 42 ANNUAl rePOrT 2009 totaL deferred taX asset/LiaBiLities in the stateMent of financiaL position (noK MiLLion) 2009 2008 2007 Deferred tax assets 54.5 230.5 27.0 Deferred tax liabilities -1 142.6 -732.9 -1 199.7 Net deferred tax in the statement of financial position -1 088.1 -502.4 -1 172.7 The Group has capitalized considerable deferred tax assets related to Deferred tax assets linked to tax losses are offset against deferred tax losses carried forward. This is based on the expectation of sufficient tax liabilities in the tax jurisdictions where acceptable, and remaining earnings in the future, mainly in Norway, Netherlands and Canada where deferred tax asset in the group accounts are mainly deferred tax assets the majority of tax losses carried forward are located. In Norway tax in Norway. losses can be carried forward indefinitely, and in Canada also for more . than 10 years. In addition substantial deferred tax liabilities linked to non- current assets and current assets are recorded. Maturity of taX Losses where norway aBroad totaL taX rates appLied (seLected countries) 2009 2008 deferred taX Loss is recogniZed To year 2010 - 1.5 1.5 USA 35% 35% 2011 - 5.9 5.9 Japan 42% 41% 2012 - 3.6 3.6 Canada 26% 28% 2013 - - - Belgium 34% 34% 2014 - - - France 33% 33% 2015 - - - Scotland 28% 28% 2016 - - - Norway 28% 28% 2017 - - - The Netherlands 26% 26% 2018 - 210.5 210.5 Poland 19% 19% 2019 - - - Faroe Islands 18% 18% >2019 - 141.8 141.8 Chile 17% 17% Unlimited 4 137.8 245.2 4 383.0 Ireland 10% 10% Total 4 137.8 608.6 4 746.4 Maturity of taX Losses for which norway aBroad totaL no deferred taX asset is recogniZed To year 2010 - 0.5 0.5 2011 - 32.1 32.1 2012 - 58.5 58.5 2013 - 19.4 19.4 2014 - - - 2015 - 12.2 12.2 2016 - 52.9 52.9 2017 - 2.4 2.4 2018 - - - 2 019 - - - >2019 - - - unlimited - 27.3 27.3 Total - 205.2 205.2 43 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 14 earnings per share earnings per share/diLuted earnings per share (noK MiLLion) 2009 2008 2007 Profit for the year after tax 1 296.3 -2 852.6 5.5 Profit for the year from continuing operations 1 296.3 -2 852.6 37.4 Profit for the year from discontinued operations - - -31.9 Time-weighted average of shares issued and outstanding (million) 1) 3 536.0 3 478.9 3 477.7 Diluted number of shares (million) 2) 3 536.0 3 478.9 3 481.2 = earnings per share (NOK) 0.37 -0.82 0.00 = Diluted earnings per share (NOK) 0.37 -0.82 0.00 = earnings per share from continuing operations (NOK) 0.37 -0.82 0.01 = Diluted earnings per share from continuing operations (NOK) 0.37 -0.82 0.01 = earnings per share from discontinued operations (NOK) - - -0.01 = Diluted earnings per share from discontinued operations (NOK) - - -0.01 1) deterMination of average nuMBer of shares (noK MiLLion) 2009 2008 2007 Number of shares outstanding as of 01.01 3 478 898 329 3 478 898 329 3 472 648 331 Exercise of stock options, 12.03.07 - 6 250 000 shares 5 017 361 Private placement, 27.05.09 - 96 000 000 shares 57 066 667 Average number of shares outstanding 3 535 964 996 3 478 898 329 3 477 665 692 Number of shares as of 31.12 3 574 898 329 3 478 898 329 3 478 898 329 2) deterMination of diLuted average nuMBer of shares (noK MiLLion) 2009 2008 2007 Average number of shares outstanding, calculated above 3 535 964 996 3 478 898 329 3 477 665 692 Potential shares 0 0 3 516 827 Diluted number of shares 3 535 964 996 3 478 898 329 3 481 182 519 44 ANNUAl rePOrT 2009 15 The share and shareholders the share (noK MiLLion) 2009 2008 Total number of shares (thousand) 3 574 898 3 478 898 Nominal value as of 31.12 (NOK) 0.75 0.75 Share capital (total number of shares at nominal value) 2 681 174 2 609 174 Share premium reserve 5 917 540 8 692 774 Other paid-in capital 3 022 719 22 719 Total paid-in capital 11 621 433 11 324 667 overview of the Largest sharehoLders 31.12.2009: shares owner's share % Geveran Trading Co ltd 1 071 232 775 29.97% Folketrygdfondet 188 115 925 5.26% Bank of New York Mellon SA/NV 149 404 381 4.18% Morgan Stanley & Co International. PlC 129 565 382 3.62% Dnb NOR Bank ASA 113 016 777 3.16% State Street Bank and Trust Co 77 421 330 2.17% Fidelity Funds 66 321 101 1.86% Bank of New York Mellon SA/NV 59 951 375 1.68% Clearstream Banking S.A. 58 530 886 1.64% Skagen Kon-Tiki 57 780 000 1.62% State Street Bank and Trust Co 56 053 537 1.57% Citybank N.A. New York Branch 54 643 663 1.53% Bank of New York Mellon SA/NV 44 144 683 1.23% State Street Bank and Trust Co 39 848 730 1.11% Deutche Bank AG london 34 963 351 0.98% Deutche Bank AG london 29 954 001 0.84% JPMorgan Chase Bank 29 726 906 0.83% MP Pensjon 24 658 000 0.69% Societe Generale Global Sec. Serv 24 354 986 0.68% Statoil pensjon 23 306 743 0.65% Total 20 largest shareholders 2 332 994 532 65.26% Total other 1 241 903 797 34.74% Total number of shares 3 574 898 329 sharehoLders per country shares owner's share % Cyprus 1 071 242 775 29.97% Norway 845 345 946 23.65% Great Britain 654 006 141 18.29% Belgium 417 385 080 11.68% USA 361 528 942 10.11% Other countries 225 389 445 6.30% 45 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP shares owned By Board MeMBers, group ManageMent and their reLated parties as of 31.12.2009 shares The Board of Directors own 11 633 000 shares directly and indirectly. Group management own 2 450 968 shares. Board of Directors Ole Eirik lerøy (Acting Chairman of the Board) 10 220 000 leif Frode Onarheim 300 000 Solveig Strand 20 000 Thorleif Enger 0 Celina Midelfart 1 000 000 Cecilie Fredriksen¹) 0 Frank Øren 0 Geir Elling Nygård 0 Turid lande Solheim 38 000 Tor Olav Trøim 5 000 Svein Aaser (retired Chairman of the Board) 50 000 Group management Åse Aulie Michelet, CEO 2009 139 756 Jørgen Andersen, CFO 51 756 Thomas Farstad, Group Director Operations Canada, Scotland & Other Businesses 40 000 Marit Solberg, Managing Director MH Norway 0 Alvaro Jimenez, Managing Director MH Chile 1 957 700 Jo Dekeyzer, Managing Director MH VAP Europe 10 000 David Carnes, Director Corporate Development 251 756 Total number of shares held by Board members and Group management 14 083 968 Total number of shares held by Board members and Group management in % of total outstanding shares 0.39% ¹) Cecilie Fredriksen is a member of the class of Beneficiaries of the Trusts which indirectly control Geveran Trading Co Limited sharehoLders rights authoriZation to raise convertiBLe Loans There are currently no limitations in voting rights or trade limitations related The Board is given the authorization to raise convertible loans not exceeding to the Marine Harvest share. NOK 2 200 000 000 and not exceeding 440 000 000 shares representing an increase in the Company’s share capital of maximum of NOK 330 000 000. authoriZation to increase the share capitaL The authorization is valid until the Annual General Meeting in 2010 subject The Board of Directors is granted an authorization to increase the to expiry on 30 June 2010. company’s share capital through issuance of new shares with an aggregate nominal value of up to NOK 260 917 350 divided into 347 889 800 shares, trs agreeMents with a nominal value of NOK 0.75 per share. Gerevan Trading Co ltd hold TRS agreements with an underlying exposure The term of this authorization shall last until the Annual General Meeting in to 100 million shares. 2010, however, no longer than until 1 July 2010. synthetic stocK option arrangeMents power of attorney to repurchase own shares In the Ordinary General Meeting in 2007 it was decided to give the Board a The Board is granted a power of attorney to purchase shares in the detailed authorization to implement a share based incentive program for the company up to a maximum total nominal value of NOK 260 917 350, which company’s management linked to a maximum of 35 million shares a year. equals approximately 10 percent of the current share capital. The shares Further information about this program is given in note 8. may be purchased at a maximum price of NOK 12 per share and a minimum price corresponding to their nominal value, NOK 0.75 per share. This power of attorney shall remain in force until the Annual General Meeting in 2010, however no longer than 1 July 2010. 46 ANNUAl rePOrT 2009 16 Intangible assets specification of intangiBLe assets (noK MiLLion) goodwiLL Licenses other intan- totaL giBLe assets 2009 2008 2009 2008 2009 2008 2009 2008 Acquisition cost as of 01.01 4 697.1 4 206.5 6 757.8 6 319.1 285.1 222.6 11 740.0 10 748.2 Additions in the year as a result of acquisitions - 15.3 - - 15.3 Additions in the year 0.1 1.0 3.9 6.2 4.0 7.2 Reclassification -0.3 12.2 - 11.9 Disposals in the year - -0.1 - -0.3 -1.5 -0.4 -1.5 Foreign currency adjustments -383.9 489.6 -395.3 423.7 -29.9 45.6 -809.1 958.9 Total acquisition cost as of 31.12 4 313.3 4 697.1 6 362.5 6 757.8 258.7 285.1 10 934.5 11 740.0 Accumulated amortization and impairment losses as of 01.01 2 457.2 861.9 991.2 752.5 125.1 86.7 3 573.6 1 701.1 Amortization in the year - 2.7 3.7 13.3 13.0 16.0 16.7 Impairment losses in the year 1 308.4 192.1 0.8 - 0.8 1 500.5 Accumulated amortization and impairment losses on disposals -0.4 -0.3 -1.4 -0.7 -1.4 Foreign currency adjustments -286.5 286.9 -40.6 42.9 -16.1 26.8 -343.2 356.7 Total accumulated amortization and impairment losses as of 31.12 2 170.7 2 457.2 953.0 991.2 122.7 125.1 3 246.5 3 573.6 Total net carrying amount as of 31.12 2 142.6 2 239.9 5 409.5 5 766.6 136.0 160.0 7 688.0 8 166.4 intangiBLe fiXed assets in cash-generating units The following units have significant carrying amounts of intangible assets (noK MiLLion) goodwiLL Licenses 2009 2008 2009 2008 Marine Harvest Norway 1 553.2 1 553.2 3 116.1 3 118.6 Marine Harvest Chile - 1 370.3 1 655.7 Marine Harvest Scotland - 416.4 454.7 Marine Harvest Canada 22.1 23.1 438.9 458.6 Marine Harvest VAP Europe 567.3 663.6 - Other units - 67.8 79.0 Total for the Group as of 31.12 2 142.6 2 239.9 5 409.5 5 766.6 iMpairMent testing The procedure of impairment testing The Group tests intangible assets annually for impairment, or more frequ- Impairment testing is carried out by calculating the net present value of ently if there are indications that the assets are impaired. The annual impair- estimated future cash flows (value in use) for the cash generating unit in line ment test is performed at year-end. Marine Harvest has substantial assets with IAS 36 and comparing the net present value of the cash flow towards with indefinite lives in the form of licenses. The licenses are subject to the carrying amount of net assets held by the cash generating unit (CGU). If impairment testing in combination with goodwill in the annual test. Marine the carrying amount is higher than the calculated value in use, a write-down Harvest has identified its’ operating units in different countries as its’ cash to the calculated value in use is made. generating units, but in situations where the different countries are monito- red and combined as one segment, the intangible assets are monitored and The estimated cash flows are based on the assumption of continued opera- tested for the relevant group of cash generating units (e.g. Marine Harvest tion as part of the Marine Harvest Group. The basis for the estimated cash VAP Europe and Marine Harvest Chile). A group of cash generating units flows are the confirmed budgets for 2010 and the strategic plan for the follo- is never larger than an operating segment as defined in IFRS 8 Operating wing 4 years. The strategic plans have been reviewed and the targets appro- segments and corresponds to the unit structure used for internal follow up ved by Group management. For CGU Marine Harvest Chile - the impairment and monitoring. test is based on 8 years of validated figures as it is assumed that rebuilding 47 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP the unit will take longer than 5 years. Growth after the fifth year in the Discount rate: The discount rates are based on the Weighted Average Cost calculation is set independently for each cash generating unit based on the of Capital (WACC). The cost of debt is based on the risk free rate in the expected growth potential, capacity etc. The maximum growth rate applied applicable country. In the model, the average of the 10 and the 30 year risk beyond the 5 (8) year period in the 2009 impairment test is 2.5%. This is free rates has been used as the risk free rate, if both figures are available, lower than the expected growth rates in the first 5 (8) years. otherwise the 10 year risk free rate has been applied. The calculation of the final discount rates (WACC) also take into account market risk premium, Indications of impairment debt risk premieum, the gearing and beta value. The values used have been At year-end 2009 there were no indications that the Group’s assets on reviewed/ compared with external sources for reasonableness. consolidated level should be impaired. The book value of equity for Marine Harvest Group was lower than market value of the Group’s equity and the Infinite growth rates are set independently for each cash generating unit, market value has continued to increase in 2010. The impairment testing at maximum 2.5%. year-end did not result in identification of impairment losses. Sensitivity As part of the Chilean business plan update in the second quarter of 2009, In connection with the impairment testing of intangible assets, sensitivity intangible assets were tested for impairment to evaluate if the cash flows analysis has been carried out. The value in use has been determined based from a conservative rebuilding process were sufficient to support the carry- on future strategic plans considering the expected development in both ing amount of net assets. The test confirmed the asset values. macroeconomic and company related conditions. Sensitivity analysis has been performed for each of the defined cash generating units. Key assumptions of the impairment test at year-end 2009 The key assumptions used in the calculation of value in use are harvest Given the current strategic plans, all cash generating units have very high volume, EBITDA, capital expenditure, discount rates and the infinite growth tolerance levels for changes to the assumptions. Excluding Chile, the cash rates. flows have to decrease by more than 30% every year (including the indefi- nite future) before assets are impaired in any unit. For the larger cash gene- Harvest volume: Harvested volume is based on the current stocking plans rating units the cash flows have to fall significantly more before assets are for each unit and forecasted figures for growth and mortality. impaired. With regards to changes in the discount rate, the tolerance level is even higher as the rate has to increase by approximately 40% before assets EBITDA/Margins: In the strategic plan process, prices and all cost elements are impaired in any unit. For the larger cash generating units, the cost of were forecasted to arrive at the profit figures EBIT and EBITDA. It is expec- capital must increase significantly more before assets are impaired. ted that the profit figures in the upcoming 5 year period will exceed the his- toric average due to limited growth potential in most countries except Chile Also for Marine Harvest Chile there is substantial headroom when it comes where the rebuilding of the industry after the ISA challenges is expected to to impairment given the biological development expected in Chile. However take time. Committed operational efficiency programs are taken into consi- as there rests uncertainty with regards to the rebuilding of the entity and deration in the calculations. Changes in the outcome of these initiatives may the effect of new regulations, CGU specific sensitivity has been included affect future estimated EBITDA margins. for this entity. The following changes compared to the strategic plan would generate a net present value of future cash flows equal to the asset value: Capital expenditure (Capex): In the 5 (8) year strategic plan period the capital − A 2% increase in the discount rate expenditure necessary to meet the expected growth in revenue and profit is − An infinite growth rate slightly on the negative side taken into consideration. The necessary capital expenditure is in compliance − A reduction in EBITDA of approximately 20% every year (including the with current laws and regulations. Changes in the applicable laws and regu- indefinite future) lations may affect future estimated capital expenditure needs. − An increase in the capital expenditure level of approximately 50% every year (including indefinite future) 48 ANNUAl rePOrT 2009 17 Property, plant and equipment specification of property, pLant and eQuipMent (noK MiLLion) property pLant eQuipMent totaL totaL 2009 2008 Acquisition cost as of 01.01 2 352.6 5 220.1 313.1 7 885.9 6 539.6 Additions in the year as a result of acquisitions - - - - 3.4 Additions in the year 24.5 72.6 528.5 625.6 760.0 Reclassification 75.6 274.7 -350.3 - -11.9 Disposals in the year -22.2 -359.6 -19.7 -401.5 -275.9 Foreign currency adjustments -206.6 -554.7 -49.7 -811.0 870.7 Total acquisition cost as of 31.12 2 223.9 4 653.1 422.0 7 299.0 7 885.9 Accumulated depreciation and impairment losses as of 01.01 947.8 2 477.5 217.0 3 642.2 2 644.9 Depreciation in the year 108.7 440.5 122.6 671.8 668.7 Impairment losses in the year 84.3 262.5 25.5 372.3 78.9 Accumulated depreciation and impairment losses on disposals -21.6 -351.3 -17.4 -390.3 -244.4 Foreign currency adjustments -97.9 -376.6 -40.6 -515.1 494.2 Total accumulated depreciation and impairment losses as of 31.12 1 021.3 2 452.6 307.1 3 780.9 3 642.2 Total net carrying amount as of 31.12 1 202.7 2 200.5 114.9 3 518.1 4 243.6 Estimated lifetime 0-20 years 5-20 years 3-5 years Depreciation method linear linear linear saLe of fiXed assets within the Group had limited potential. During the third and fourth quarter, Tangible fixed assets have been sold throughout the year and net gain on further analysis recognized a potential for transfer of some assets internally sale of assets amounts to NOK 4.8 million in 2009. The corresponding and as a result write-downs in the amount of NOK 41 million were reversed. figure for 2008 was NOK 10.3 million. Total asset write-down in Chile in 2009 thus amounted to NOK 335 million. write-down of fiXed assets In Marine Harvest Canada write-downs in the amount of NOK 5 million As stated in Note 2 - ”Significant accounting policies”, the carrying amounts were recognized as a result of discontinued fresh water operations, while of the Group’s assets are reviewed at the end of each reporting period to NOK 4 million were related to impairment losses on other assets. determine whether there are any indications that specific assets have suf- fered an impairment loss. Marine Harvest VAP Europe recorded impairment losses of NOK 18 million in 2009, mainly relating to a building in France and machinery/equipment in As part of the business plan update in Marine Harvest Chile in the second France and Belgium. quarter all assets were reviewed and write-downs in the amount of NOK 376 million accounted for. It was at that time assumed that the assets The remaining write-downs relate to impairment losses for assets sold in would be of little value in Chile as all industry players had idle farming assets Marine Harvest Norway and Marine Harvest Scotland in addition to the in their possession as a result of the downscaled production after ISA out- equipment lost when a feed barge sank on the Faroes in October. breaks and emergency harvest. It was also assumed that transfer of assets 49 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 18 Investments in associated companies Associated companies are companies where the Group has a significant Associated companies are recorded in the Group accounts in accordance ownership interest, ranging from 20-50%, and where the Group is able to with the equity method. None of the companies accounted for as associa- exercise significant influence. ted companies are listed. associated coMpanies head owner- owned By acQuisition carrying share of divdends other carrying (noK MiLLion) office ship cost aMount profit received changes aMount 01.01.09 2009 2009 2009 31.12.09 Nova Sea As lovund 48% Marine Harvest Holding AS 205.2 406.7 64.0 22.4 0.1 448.4 Finnøy Fisk AS Finnøy 45% Marine Harvest Norway AS 17.9 28.9 4.7 - 3.7 37.3 Vågafossen Settefisk As Vikedal 48% Marine Harvest Norway AS 1.3 6.1 - - 1.2 7.3 Center for Aquacultural Competence AS Hjelmeland 33% Marine Harvest Norway AS 0.2 22.2 1.5 - -2.2 21.5 Helgeland Havbruksstasjon AS Dønna 33% Marine Harvest Norway AS 2.7 - - - 2.7 2.7 Others 1) 3.6 49.6 -0.7 - -46.0 2.9 Total 230.9 513.5 69.5 22.4 -40.5 520.1 1) Includes divestment of Aqua Farms Vartdal 19 Investments in other shares Shares and holdings where the Group does not have significant influence. sharehoLdings (noK MiLLion) nuMBer owner acQuistion changes carrying of shares ship cost in MarKet aMount vaLue 2009 31.12.09 Aker Seafood ASA 10 092 923 11.9 % 284.8 20.7 79.5 Aqua Gen AS 403 342 15.2 % 25.0 - 25.0 Stofnfiskur 10 633 341 7.8 % 6.0 - 6.0 lighthouse Caledonia ASA 2 927 144 0.0 % 27.8 -1.5 0.8 Other shares 7.1 - 7.5 Total carrying amount of other shares 350.7 19.1 118.8 The shares in Aker Seafoods ASA and lighthouse Caledonia ASA AS and Stofnfiskur are held at cost in lack of stock value. It has not are carried at fair value based on the market price for the shares at been possible to measure fair value in a reliable way, but there are no the Oslo Stock Exchange at year-end 2009. The shares in Aqua Gen indications of loss in value on the shares. 20 Inventory (noK MiLLion) 2009 2008 Raw materials and goods in process 319.1 375.4 Finished goods 423.7 699.1 Total carrying amount of inventory 742.7 1 074.5 Raw materials include packaging materials and feed. Goods in process concerned write-down in Marine Harvest Chile). The write-downs were includes semi-finished products and spare parts. Finished goods include all a consequence of the extraordinary biological challenges in Chile, which products ready for sale. resulted in early harvest of small fish at a high cost.This fish proved difficult to realize above full cost of production and write-downs to the estimated Write-down of finished goods due to the extraordinary biological selling price were accounted for. Throughout 2009 a majority of the Chilean situation in Chile inventory has been sold and as a result accruals for write-down of finished As of 31 December 2008 accruals for write-down of finished goods and goods and raw materials per 31 December 2009 has been reduced to NOK raw material inventory amounted to NOK 62.4 million (NOK 56.6 million 12.6 million, whereof NOK 10.3 million related to Marine Harvest Chile. 50 ANNUAl rePOrT 2009 21 Biological assets reconciLiation of changes in carrying aMount of BioLogicaL assets 2009 2008 (noK MiLLion) Carrying amount 01.01 5 620.6 5 553.9 Acquired entities in the year - 0.7 Purchases 5 842.0 7 035.2 Change in fair value 301.2 -278.8 Write-downs fish in sea in period -212.1 -324.0 Costs of goods sold -5 973.7 -6 611.5 Currency translation differences -226.8 245.1 Total carrying amount of biological assets as of 31.12 5 351.1 5 620.6 fair vaLue adJustMents on BioLogicaL assets in the stateMent of financiaL position 2009 2008 (noK MiLLion) Marine Harvest Norway 661.6 413.2 Marine Harvest Chile - 9.3 Marine Harvest Canada 106.2 58.1 Marine Harvest Scotland 89.9 89.6 Marine Harvest Faroes 6.2 3.4 Marine Harvest Ireland 59.2 51.8 Marine Harvest Other Businesses, ex MH Ireland and MH Faroes 5.3 22.3 Total fair value adjustment included in carrying amount in the statement of financial position 928.3 647.7 Biomass at cost 4 422.8 4 972.9 Total biological assets 5 351.1 5 620.6 fair vaLue adJustMents on BioLogicaL assets in the stateMent of coMprehensive incoMe 2009 2008 2007 (noK MiLLion) Marine Harvest Norway 248.0 -332.6 234.5 Marine Harvest Chile -8.4 7.4 -417.4 Marine Harvest Canada 50.7 21.8 -188.1 Marine Harvest Scotland 8.8 25.2 5.4 Marine Harvest Faroes 3.5 -17.0 - Marine Harvest Ireland 15.7 -1.7 24.8 Marine Harvest Other Businesses, ex MH Ireland and MH Faroes -17.1 18.1 -9.6 Total fair value adjustment in the statement of comprehensive income 301.2 -278.8 -350.4 The fair value adjustment to biomass amounted to an income of NOK 301.2 NOK 80.4 million related to acquired biomass. The cost of acquired biomass million in 2009. There was no value adjustment related to acquired was a result of the acquisition of Marine Harvest N.V in 2006 (total fair biomass in the period. In 2008 the total fair value adjustment to biomass value adjustment for acquired biomass amounted to NOK 830.4 million, of amounted to a cost of NOK 278.8 million, including a cost of which NOK 750.0 million was sold in 2007 and NOK 80.4 million in 2008). 51 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP voLuMes of BioMass (tons) 2009 2008 2007 Volume of biomass harvested during the year (gutted weight, HOG) 1) 328 087 327 662 339 848 Volume of biomass in the sea at year-end (live weight) 222 129 241 085 258 220 1) Volume harvested for all entities except Marine Harvest Chile where the figure reflects volume sold. The figure includes Sterling White Halibut vaLuation of BioLogicaL assets Market price: The market price assumption is very important for the The accounting principles and the valuation model applied for valuation of valuation and even minor changes in the market price will give significant biological assets are explained in note 2 – Significant accounting policies. changes in the valuation. The methodology used for establishing the market price is explained in note 2. If assumed that all fish per 31 December 2009 assuMptions used for deterMining fair vaLue of Live fish were of harvest size and the volume is 222 129 tons live weight, a change The estimated fair value of biomass will always be based on uncertain in the price of NOK 1 per kilo gutted weight would change the valuation by assumptions, even though the company has built substantial expertise in NOK 184 million. assessing these factors. Estimates are applied to the following factors: bio- mass volume, quality of the biomass, size distribution and market prices. write-down of BioMass Write-downs of fish in sea may have two sources: extraordinary mortality Biomass volume: The biomass volume is in itself an estimate based on the and impairment (if the cost of the biomass is higher than the expected reco- number of smolt put to sea, the estimated growth from the time of stock- verable amount). ing, estimated mortality based on observed mortality in the period etc. The uncertainty with regards to biomass volume is normally low in the absence Extraordinary mortality: Extraordinary mortality is accounted for when a site of incidents resulting in mass mortality early in the cycle or if the fish for either experiences elevated mortality over time or massive mortality due to some reason has been sick or cannot be handled. an incident on the farm (outbreak of disease, lack of oxygen etc). In 2009, all farming units except Marine Harvest Scotland recorded extraordinary mor- The quality of the biomass: The quality of the biomass can be difficult to tality losses. Reference is made to note 9 – Restructuring and exceptional assess prior to harvesting, especially if the reason for downgrading is rela- items, where the most important losses are described. ted to flesh quality (e.g. the effect of Kudoa in Canada). In Norway downgra- ded fish is normally priced based on standard rates of deduction compared Write-down of biomass: In situations where expected prices going forward to a Superior quality fish. For fish classified as ordinary the standard rate of are very low or the cost of biomass is high the biomass might be impaired. reduction is NOK 1.50 – NOK 2.00 per kilo gutted weight. For fish classified In such situations the biomass is written down to the expected recoverable as production grade the standard rate of reduction is NOK 5.00 – NOK 15.00 amount. During the last 2-3 years the industry has experienced a time of per kilo gutted weight depending on the reason for downgrading. In other escalating costs of production in Chile due to ISA. In the business plan update countries the price deductions related to quality are not as standardized. for Chile in second quarter in 2009 the biomass was considered to be sub- stantially overstated compared to the recoverable amount and write-downs The size distribution: Fish in sea grows at different rates and even in a in the amount of NOK 236 million were accounted for. Of these write-downs situation with good estimates for the average weight of the fish there can NOK 145 million were reversed in the second half of the year, due to more be considerable spread in the quality and weight of the fish. The size distri- favorable prices and better biological performance than anticipated in the bution affects the price achieved for the fish as each size category of fish business plan. As of year-end 2009, the write-down remaining in the state- is priced separately in the market. When estimating the biomass value a ment of financial position amounts to NOK 35 million while the remainder has normal distribution of size is applied. been released to cover culling and actual losses during the year. 22 restricted funds The Group held cash and cash equivalents at 31 December 2009 of NOK 172.2 million, of which NOK 44.3 million are restricted funds. The majority of the restricted funds relates to withheld tax for employees in Norway 52 ANNUAl rePOrT 2009 23 Trade receivables and other receivables specification of carrying aMount of receivaBLes (noK MiLLion) 2009 2008 Trade receivables 1 687.1 1 919.2 Provisions for bad debts -15.0 -15.8 Net trade receivables 1 672.1 1 903.4 Prepayments 60.8 86.0 Net value on currency hedging instruments 197.8 - Other 293.0 446.4 Other receivables 551.6 532.4 Total trade receivables and other receivables 2 223.7 2 435.8 age distriBution of trade receivaBLes (noK MiLLion) 2009 2008 Receivables not overdue 1 456.3 1 516.3 Overdue 0-6 months 220.5 392.2 Overdue more than 6 months 10.3 10.7 Total carrying amount of trade receivables 1 687.1 1 919.2 MoveMent in provisions for Bad deBt trade receivaBLes currency eXposure to trade receivaBLes At beginning of 2009 provisions for bad debt amounted to NOK 15.8 million. The Group held trade receivables amounting to NOK 1 672.1 million at year-end. In 2009 NOK 3.8 million was considered lost and thus written-off. After ad- ditional provisions for losses of NOK 4.8 million in 2009, as well as NOK -1.8 The business units generally completes their sales in the main trading currency million in currency effects, the provision for bad debt amounted to NOK 15.0 in the country of destination. Below is presented the carrying amount of trade million at year-end 2009. receivables per business unit, and an indication of currency is given by refer- ence to the markets where sales from the business unit generally are made. Business unit (noK MiLLion) Main MarKets and currency 2009 2008 Marine Harvest Norway European market (EUR), US market (USD), Russia (USD) and Asia (JPY&USD) 474.8 524.4 Marine Harvest Chile US market (USD), Brazil and Argentina (USD) and Asia (Yen) 159.6 180.0 Marine Harvest Canada US market (USD) 104.4 101.9 Marine Harvest Scotland Domestic market (GBP) and European market (EUR) 88.4 110.7 Marine Harvest VAP Europe Belgium, France and Holland (EUR) 718.1 855.7 Marine Harvest Other Businesses and eliminations 126.8 130.7 Net trade receivables 1 672.1 1 903.4 53 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP 24 Trade payables and other current liabilities trade payaBLes (noK MiLLion) 2009 2008 Trade payables 1 339.8 1 729.2 Trade payables are non interest-bearing and are normally settled on 30-60 days terms. Other current liabilities Social security and other taxes 1) 63.6 60.3 Accrued expenses 1) 397.0 403.3 Market value interest- and currency hedging instruments 2) 250.7 1 394.9 Other liabilities 3) 337.3 491.4 Total other current liabilities 1 048.6 2 349.9 1) Settlement will take place within 1-3 months. 2) Calculated based on interest and currency exchange rates at the end of the year, representing the cost to the Group in case of a cancellation of the contracts at that point in time. 3) Settlement will take place in 2010. This item consists of accruals for interest costs and different types of other costs, sales provisions etc. 25 Current interest-bearing debt and unused drawing rights current interest-Bearing deBt to financiaL institutions (noK MiLLion) 2009 2008 First years instalment on debt 1) 22.9 755.8 Bank overdrafts 107.2 16.6 Other current interest-bearing debt 0.2 593.1 Total current interest-bearing debt 130.3 1 365.5 1) In December 2009 Marine Harvest prepaid all the installments due in 2010 to the lenders under its syndicated loan facility unused drawing rights (noK MiLLion) 2009 2008 Unused part of bank overdraft facility (to be renewed within one year) 27.1 127.7 Unused part of bank overdraft facility (to be renewed in more than one year) 302.7 456.2 Unused part of other drawing rights (to be renewed in more than one year) 824.3 246.4 Total unused drawing rights 1 154.1 830.3 54 ANNUAl rePOrT 2009 26 Non-current interest-bearing debt currency (noK MiLLion) 2009 2009 2008 2008 Borrowings in Borrowings Borrowings in Borrowings LocaL currency in noK LocaL currency in noK NOK 182.0 182.0 178.5 178.5 USD 168.6 971.1 105.4 733.6 EUR 443.8 3 681.6 630.8 6 121.0 CAD - 0.2 2.6 15.0 DKK 39.3 43.8 40.6 53.0 GBP 28.0 261.1 39.5 402.3 Other currencies - - - 0.1 Total non-current debt and leasing liabilities to financial institutions 5 139.8 7 503.5 First years instalment on debt including leasing 22.9 755.8 Total non-current interest-bearing debt and leasing 5 116.9 6 747.7 The carrying amount of interest-bearing debt has been reduced by NOK interest-bearing debt and leasing. A significant part of the non-current 20.4 million in capitalised borrowing costs. There are no significant debt is described further in note 13 in the financial statement of the parent differences between the carrying amount and fair value of non-current company. the group’s repayMent scheduLe (noK MiLLion) 2010 2011 2012 2013 2014 Later totaL Annual instalments, debt incl. leasing 22.9 4 886.4 14.7 91.1 11.6 113.1 5 139.8 covenants The loan agreements contains standard financial covenants related to solidity justed by a number of items from the reported EBITDA. These adjustments (equity ratio) and earnings (NIBD/EBITDA) which have to be met by the Group include exceptional items which are listed in note 9. Furthermore, the ability on a consolidated basis. For the NIBD/EBITDA calculation, the EBITDA is ad- for the Group to take on new debt is limited by the loan agreement. 27 Secured liabilities and guarantees given carrying aMount of deBt secured By Mortgages and pLedges (noK MiLLion) 2009 2008 Debt to financial institutions 5 028.9 7 919.2 leasing debt 139.3 166.3 Total debt secured by mortgages and pledges 5 168.2 8 085.5 Guarantee liabilities 77.4 78.0 The principal loan program has been established with security in current assets, licenses (where applicable), fixed assets and guarantees from some of the entities in the Group. In addition the shares in larger subsidiaries have been pledged in favour of the bank syndicate. 55 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP carrying aMount of assets pLedged as security for deBt 2009 2008 (noK MiLLion) Tangible fixed assets and licenses 4 036.7 4 098.7 Inventory and biological assets 4 456.8 5 108.8 Trade receivables 1 117.4 1 440.3 Other assets 35.0 37.4 Total assets pledged as security 9 645.9 10 685.2 28 Financial Instruments capitaL ManageMent − increase in the company’s share capital through issuance of new shares The primary objective of the group’s capital management is to ensure with an aggregate nominal value of up to NOK 260 917 350 divided into access to capital contributing to satisfactory operations and maximum gen- 347 889 800 shares at a nominal value of NOK 0.75 per share eration of shareholder values. The group manages its capital structure and − raise loans on terms including a right for the creditors to receive shares makes adjustments in light of changes in the underlying economic condi- in the company in settlement of the loan by setting off its claim of repay- tions. Access to borrowed capital is continuously monitored and the group ment against the contribution obligation (convertible bond). The total has a continuous dialog with its lenders.The syndicated loan agreement sets principal amount of such loans shall not exceed NOK 2 200 000 000 and forth covenants on the financial ratio of net interest-bearing debt to EBITDA the number of shares issued shall not exceed 440 000 000 representing and the equity ratio. Marine Harvest complied with the covenants in its loan an increase in the share capital of maximum NOK 330 000 000. agreements at the end of 2009. The group’s principal financial liabilities, other than loans, consist of deriva- Marine Harvest intends to maintain an equity suitable for the characteristics tives, bonds and accounts payable. These financial liabilities constitute of the operations, taking into consideration that fish farming is a cyclical the majority of the group’s third party financing. The group holds financial business. Capital not deemed necessary for further growth will be returned assets such as accounts receivable, cash and shares. to shareholders as dividends or repurchase of shares. At year-end 2009, Marine Harvest had an equity of NOK 11 461 million. The equity share, The group uses financial derivatives, mainly forward contracts and interest defined by equity/total assets, was at the same time 56.2%. Net interest- rate swaps. The purpose of these instruments is to manage the interest bearing debt, defined as total interest-bearing debt less cash was NOK 5 rate and currency risk arising from the operations of the group. No trading in 075 million at year-end. The Board consider the equity in the group appropri- financial instruments is undertaken. ate for the scale of the operation. The Board has proposed a dividend of NOK 0.35 per share for 2009. The Board has been given proxies from the Annual General Meeting to: − repurchase of shares in the company up to a maximum total nominal value of NOK 260 917 350 which equals approximately 10% of the current share capital. 56 ANNUAl rePOrT 2009 CATEGORIES OF FINANCIAL INSTRUMENTS IN THE STATEMENT OF FINANCIAL POSITION Details regarding criteria for recognition and the bases for measurement for each class of financial instrument are disclosed in note 2 – Significant accounting principles. 31 December 2009 financial assets and liabilities non-financial total (noK MiLLion) financial assets financial derivatives assets and financial instruments at fair and liabilities at cost qualified for hedge liabilities value through profit or loss amortized cost accounting trading optional Non-current assets Intangible assets 7 742.6 7 742.6 Property, plant and equipment 3 518.1 3 518.1 Shares in associated companies 520.1 520.1 Other shares 80.4 38.4 118.8 Current assets Inventory 742.7 742.7 Biological assets 5 351.1 5 351.1 Trade receivables 1 672.1 1 672.1 Other receivables 11.5 186.3 353.8 551.6 Cash and cash equivalents 172.2 172.2 Total Assets 1 844.3 11.5 80.4 38.4 186.3 18 228.4 20 389.3 equity 11 460.4 11 460.4 Non-current liabilities Deferred tax liability 1 142.6 1 142.6 Non-current interest-bearing debt 5 116.9 5 116.9 Other non-current liabilities 99.8 99.8 Current liabilities Tax payable 50.8 50.8 Current interest-bearing debt 130.3 130.3 Trade payables 1 339.8 1 339.8 Other current liabilities 4.9 220.3 30.3 793.2 1 048.7 Total equity and liabilities 6 591.9 220.3 0.0 0.0 30.3 13 546.8 20 389.3 57 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP categories of financiaL instruMents in the stateMent of financiaL position (noK MiLLion) 31 December 2008 financial assets and liabilities non-financial total financial assets financial instruments at fair financial derivatives assets and and liabilities at value through profit or loss cost qualified for hedge liabilities amortized cost accounting trading optional Non-current assets Intangible assets 8 397.0 8 397.0 Property, plant and equipment 4 243.6 4 243.6 Shares in associated companies 513.5 513.5 Other shares 40.0 38.9 78.9 Current assets Inventory 1 074.5 1 074.5 Biological assets 5 620.6 5 620.6 Trade receivables 1 903.4 1 903.4 Other receivables 16.0 516.4 532.4 Cash and cash equivalents 372.6 372.6 Total Assets 2 276.0 16.0 40.0 38.9 0.0 20 365.6 22 736.5 equity 9 624.6 9 624.6 Non-current liabilities Deferred tax liability 732.9 732.9 Non-current interest-bearing debt 6 747.7 6 747.7 Other non-current liabilities 116.7 116.7 Current liabilities Tax payable 69.9 69.9 Current interest-bearing debt 1 365.5 1 365.5 Trade payables 1 729.2 1 729.2 Other current liabilities 10.1 242.7 1 168.3 928.9 2 350.0 Total equity and liabilities 9 852.5 242.7 0.0 0.0 1 168.3 11 473.0 22 736.5 There has not been any reclassification between the categories of financial assets or liabilities in 2008 and 2009. FAIR VALUE OF FINANCIAL INSTRUMENTS level 1: fair value determined directly by reference to published quotations Fair value of financial instruments carried at amortized cost level 2: fair value estimated using a valuation technique based on The group considers that the carrying amount of financial assets and liabili- observable data ties recognized at amortized cost in the financial statements approximates level 3: fair value estimated using a validation technique based on their fair value. unobservable data. Fair value measurements recognized For Marine Harvest all financial instruments in the category “Financial in the statement of financial position instruments measured at fair value through profit or loss” and in the Financial instruments that are measured at fair value subsequent to initial category “Financial derivatives qualified for hedge accounting” are recognition are according to IFRS 7 grouped into a hierarchy of 3 different measured using the level 1 of valuation techniques determined directly levels based on the degree to which the fair value is observable: by reference to published quotations. 58 ANNUAl rePOrT 2009 fair vaLue MeasureMents recogniZed in the stateMent of financiaL position 31.12 (noK MiLLion) 2009 2008 level 1 level 1 Assets measured at fair value: Financial assets to fair value through profit or loss Other shares 80.4 40.0 Current currency hedges 11.5 16.0 Financial derivativies qualified for hegde accounting 186.3 0.0 liabilities measured at fair value: Financial liabilities to fair value through profit or loss Interest swaps 210.9 242.7 Current currency hedges 9.4 0.0 Financial derivativies qualified for hegde accounting 30.3 1 168.3 financiaL instruMents iMpact on coMprehensive incoMe (noK MiLLion) 2009 2008 Classified in eBIT Net currency effects on financial instruments in working capital -62.4 217.6 including gain (loss) on current transaction hedges Realized gain (loss) on non-current cash flow hedges 48.8 -5.2 Net in eBIT -13.6 212.4 Financial items Net interest expense -392.9 -485.4 Currency effects on external interest-bearing debt 999.9 -1 305.0 Currency effects from intercompany loans and receivables -309.3 460.4 Change in fair value interest rate swaps 32.0 -216.6 Change in fair value other shares 18.4 -194.1 Dividends and gain (loss) on sales of other shares 0.1 -5.4 Net other financial costs -21.8 -35.3 Net financial items 326.4 -1 781.5 Other comprehensive income Non-current cash flow hedges qualified for hedge accounting 1 326.6 -1 279.4 Long terM cash fLow hedging eQuity reserve (noK MiLLion) 2009 2008 The change in the cash flow reserve within equity is: Cash flow hedging equity reserve as of 01.01 -1 172.6 111.1 Change in fair value of long term cash flow hedges 1 277.8 -1 278.5 Realized gain (loss) recycled through profit or loss 48.8 -5.2 Cash flow hedging equity reserve as of 31.12. 154.0 -1 172.6 59 Marine harvest FINANCIAl STATEMENTS AND NOTES – GROUP financiaL risK ManageMent Through hedging of transaction exposures, each business unit will ensure The Group monitors and manages the financial risks arising from the opera- that its’ net cashflows in currencies other than its’ main hedging currency tions. These include currency risks, interest rate risk, credit risk and price/ are hedged towards this currency. liquidity risk. Cash flow exposures arise from structural imbalances between curren- The Group seeks to manage these risks through operational measures cies on the revenue side vs the expense side. This imbalance is predomi- or (where such measures are not available) through the use of financial nantly a result of production taking place in a country different from the derivatives. country of the customer. Due to their structural nature, the exposure horizon for cash flow exposures is longer than for transaction exposures and these A policy on the management of these risks has been approved by the are therefore quantified on the basis of estimates for future revenues and Board. The policy includes principles on currency risk, interest rate risk, expenses. In this estimation, focus is kept on the underlying currency struc- price risk, the use of financial instruments and other operational means as ture of the individual revenue and cost item and the actual currency in which well as limits on the maximum and minimum levels of these exposures. transactions are invoiced is of lesser importance. Hedging transaction desig- nated to manage cash flow exposures are defined as cash flow hedges. currency risK The Marine Harvest Group normally has a net positive cash flow exposure In the Marine Harvest Group, several business units carry out a large towards EUR, GBP, USD and JPY and a net negative cash flow exposure number of business transactions in currencies different from the domestic towards NOK, CAD and ClP. To hedge Group cash flows against exchange currency. For the Group, the relative importance of these transactions is rate fluctuation Marine Harvest has a policy for long-term hedging of the substantially larger on the revenue side than on the cost side. most predominant net exposures. The Group hedges 50-90% of its’ under- lying exposure between EUR and NOK with a horizon of 2-4 years, 50-80% To mitigate the potential fluctuation effects on its’ cashflows, the Group of its’ underlying exposure between USD and CAD with a horizon of 2-4 maintains a foreign exchange strategy designated to manage these expo- years. In 2009, Marine Harves also hedged 40-70% of its underlying expo- sures both in the short- and long term. sure between USD and ClP with a horizon of one year. For each of Marine Harvest’s business units, the Group has defined a main Where the hedge program comprises more than one year, the percentage hedging currency. For some business units this currency is different from of the exposure to be hedged is reduced over time. their domestic and functional currency At the end of 2009 the Group held a portfolio of hedging instruments des- Marine Harvest Norway EUR ignated to mitigate transaction and cash flow exposure with a total contract Marine Harvest Chile USD value of NOK 5 436.1 million. Instruments equivalent to 46% of the contract Marine Harvest Scotland GBP value mature in 2010 and no instrument matures beyond 31 December 2012. Marine Harvest Canada USD The portfolio had a net positive market value of NOK 158.1 million at year-end. Marine Harvest VAP EUR Marine Harvest Faroes DKK Currency exposure in the statement of financial position Marine Harvest Cold Water Species NOK As a consequence of the Group’s net cash flows being generated in EUR, Marine Harvest Asia USD GBP and USD, the interest-bearing debt should reflect this currency struc- ture and over time consist of: Transaction exposures arise from firm commitments made to transact in 75% EUR, a currency different than the main hedging currency. The exposure horizon 15% USD, for transaction exposures depend on the duration of the commitment, but 6% GBP and will normally be relatively short. Hedging transactions designated to man- 4% in other currencies. age transaction exposures are referred to as transaction hedges. This currency mix is obtained through borrowings as well as the use of currency derivatives. As of 31 December 2009 net interest-bearing debt (incl long term basis swap) had the following currency structure: (noK MiLLion) noK usd eur gBp Jpy dKK cad other totaL Cash and cash equivalents 42.2 47.7 46.8 0.4 8.9 7.4 10.5 8.3 172.2 Current interest-bearing debt -100.0 -254.9 594.2 -93.7 6.8 5.1 -30.5 3.3 130.3 Non-current interest-bearing debt 165.0 971.1 3 680.8 261.1 0.0 38.7 0.2 0.0 5 116.9 Net interest-bearing debt 22.7 668.5 4 228.2 167.1 -2.1 36.4 -41.0 -4.8 5 075.0 60 ANNUAl rePOrT 2009 sensitivity anaLysis - changes in eXchange rates On the basis of financial positions and currency hedges in existence as of 31 December 2009, the effect of a 10% change in exchange rate of the following relevant currency pairs has been estimated: currency pair (noK MiLLion) eur/noK usd/noK Jpy/noK usd/cad EBIT 27.0 -19.8 -2.8 -11.9 Financial items 343.4 -12.3 0.0 -44.3 Other comprehensive income 584.3 0.0 0.0 62.4 Total 954.6 -32.1 -2.8 6.2 interest rate risK Marine Harvest ASA shall at all times hedge between 50% and 75% of the decreasing over time. The Board has decided to deviate from this policy Group’s non-current interest-bearing debt in its main financing currencies for USD where a larger percentage of debt has been hedged. (EUR, USD and GBP). Interest rate hedges can be entered into for a period between one and seven years. The average duration shall be minimum 3 At year-end 2009 the Group had a portfolio of interest swaps with a net and maximum 4 years. The percentage of exposure hedged shall be negative market value of NOK 210.9 million. currency aMount the group pays the group start Maturity MarKet vaLue receives EUR 42.0 Fixed 4.1410% 3M Euribor 24-3-2010 -3.0 EUR 32.0 Fixed 1.8100% 3M Euribor 24-3-2010 -0.7 EUR 185.0 3M Euribor 1M Euribor 24-3-2010 1.3 EUR 40.0 Fixed 4.11350% 3M Euribor 24-3-2011 -11.5 EUR 27.0 Fixed 2.1130% 3M Euribor 24-3-2011 -2.2 EUR 21.0 Fixed 2.4590% 3M Euribor 24-3-2012 -3.3 EUR 165.5 Fixed 4.1390% 3M Euribor 24-3-2012 -69.2 EUR 25.0 Fixed 4.2875% 3M Euribor 24-3-2012 -11.1 EUR 53.0 Fixed 2.6970% 3M Euribor 25-3-2013 -6.3 GBP 5.5 Fixed 5.6515% 3M libor 24-3-2011 -2.9 GBP 15.0 Fixed 5.2300% 3M libor 24-3-2012 -10.5 GBP 7.0 Fixed 1.8600% 3M libor 24-3-2010 -0.2 USD 35.5 Fixed 5.1025% 3M libor 24-3-2010 -2.5 USD 33.8 Fixed 5.1005% 3M libor 24-3-2011 -11.0 USD 140.0 Fixed 5.1050% 3M libor 26-3-2012 -72.0 USD 60.0 3M libor 1M libor 24-3-2010 0.2 EUR 152.0 Fixed 3.6790% 3M Euribor 24-3-2012 24-3-2014 -5.6 GBP 3.0 Fixed 1.8600% 3M libor 24-3-2010 24-3-2011 0.0 GBP 5.0 Fixed 3.1740% 3M libor 24-3-2011 26-3-2012 -0.1 GBP 20.0 Fixed 3.9840% 3M libor 26-3-2012 24-3-2014 0.0 USD 100.0 Fixed 3.3120% 3M libor 26-3-2012 25-3-2013 -1.3 USD 92.0 Fixed 3.3120% 3M libor 25-3-2013 24-3-2014 1.2 Total -210.9 A 0.50% point parallel shift in all relevant yield curves will cause a NOK 52.9 million change in the market value. This change would be classified as a financial item in the statement of comprehensive income for the Group. 61 Marine harvest FINANCIAl OG NOTER – KONSERN REGNSKAP STATEMENTS AND NOTES – GROUP credit risK mitigated its exposure to spot prices by entering into bilateral fixed price/ The Group trades only with recognized, creditworthy third parties. It is the volume contracts with its’ customers. The hedging rate has normally varied Group’s policy that all customers who wish to trade on credit terms are between 15 and 40% of Marine Harvest’s sold volume and the duration subject to credit verification procedures. In addition, receivable balances are of the contracts have typically been three to twelve months. To a limited monitored on an ongoing basis and a large proportion of the Group’s trade extent such contracts have been entered into with duration of more than receivables are credit insured. The Group is monitoring exposure towards twelve months. Furthermore Marine Harvest is reducing its’ exposure to individual customers closely and is not substantially exposed in relation to spot price movements through its’ value added processing activities and tai- any individual customer or contractual partner as of 31 December 2009. The loring of products for its customers. Other key liquidity risks are fluctuations maximum exposure is disclosed in note 23. in production and harvest volumes, biological issues, and changes in the feed price, which is the most important individual factor on the cost side. price/LiQuidity risK Feed costs are correlated to the marine and agricultural commodity prices The Group is continuously monitoring liquidity and estimates expected of the ingredients liquidity development on the basis of budgets and monthly updated fore- casts from the business units. Marine Harvest’s aim is to maintain a balance between long-term financ- ing and flexibility by using credit facilities, new borrowings and bonds. In Marine Harvest’s financial position and development depend significantly note 26 an overview of the maturities on Group debt is presented. Marine on the spot price developments for salmon, and these prices have histori- Harvest considers the combination of available liquidity and cash flow from cally been volatile. As such Marine Harvest is exposed to movements operations to be sufficient to meet the on-going payment obligations. in supply and demand for salmon. Marine Harvest has to some extent 29 Other non-current liabilities (noK MiLLion) 2009 2008 Deferred income, investment grants 9.4 17.4 Net pension obligations 86.6 94.6 loss on office rental contracts and other non-current liabilities 3.8 4.7 Total other non-current liabilities 99.8 116.7 30 related party transactions Related parties are in this respect considered as persons or legal entities year-end 2009 Geveran Trading’s affiliated ownership in Marine Harvest which directly or indirectly possess substantial influence on the company was 1 079 632 755 shares, constituting 30.2% of the total share capital. through ownership or position. At year end 2009 Geveran Trading had a lending position of 8.4 million shares in Marine Harvest. In addition Geveran Trading held at year-end sharehoLders TRS agreements with exposure to 100 million Marine Harvest shares. Geveran Trading Co ltd is indirectly controlled by trusts established by John Fredriksen for the benefit of his immediate family. Geveran Trading The figures presented below are transactions with associated companies, Co ltd was allocated 20 million shares of the new capital issue in May. At mainly Nova Sea AS and Center for Aquaculture Competence AS. reLated party trade transactions (noK MiLLion) 2009 2008 Revenue 50.0 49.2 Purchase -377.6 -356.9 Trade receivables 6.4 0.6 Trade payables 37.1 49.2 62 ANNUAl rePOrT 2009 31 Contingent liabilities dispute in chiLe concerning terMination of contract dispute in chiLe concerning terMination of a service Pesquera Puluqui S.A. (Chile) has claimed payment of damages from contract three Marine Harvest Group companies in Chile (Fjord Seafood Chile S.A., Asesorías y Servicios Arctic ltda. has taken legal proceedings against Salmones Tecmar S.A. and Cultivadora de Salmones linao limitada) due Marine Harvest Chile S.A. claiming breach of contract and payment of to the termination of a contract. The dispute shall be settled by arbitration. damages due to termination of a service contract before the expiration An adverse result may imply the payment of damages of up to date. The total amount claimed in damages is approximately USD 4 million plus interest and costs of litigation. USD 3 000 000 plus interests and litigation expenses. Marine Harvest Chile S.A. has made a provision of USD 500 000 in the accounts. During 2009 a sentence has been issued in favour of Pesquera Puluqui S.A. The three Marine Harvest Group companies in Chile have been sen- insurance settLeMent in canada - discussions regarding tenced to pay a total of approximately USD 932 000 to Pesquera Puluqui the nuMBer of deductiBLes S.A. This amount has been provided for in the financial statements. The Marine Harvest Canada Inc. is having discussions with its insurance sentence has been appealed. company regarding the number of deductibles that should be charged in an ongoing insurance settlement (USD 250 000 per deductible). Marine aLLeged Breach of environMentaL Harvest Canda Inc. considers there to be only one insurance claim in the and sanitary reguLations in chiLe insurance settlement and has recognized for only one deductible, i.e. USD Sociedad Turística y Hotelera Puerto Viejo limitada has taken legal 250 000 in the accounts. The insurance company could end up consider- proceedings against Marine Harvest Chile S. A. for alleged breach of ing there to be three claims, thus leaving a potential additional liability for environmental and sanitary regulations under Chilean aquaculture laws. If Marine Harvest Canada Inc. of USD 500 000. found guilty, Marine Harvest Chile S.A. may be subject to legal fines in the maximum amount of approximately USD 1 610 000 and the revocation of a lake concession. Marine Harvest Chile S.A. has made a provision of USD 100 000 in the accounts. 63 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA Financial Statements and Notes ASA et år preget av utfordringer og fokus på langsiktig utvikling. 64 ANNUAl rePOrT 2009 Statement of profit and loss Marine harvest asa (noK MiLLion) note 2009 2008 2007 Revenue and other income 10 38.9 16.9 0.0 Salary and personnel expenses 2 -61.2 -47.3 -49.6 Other operating expenses 3/4 -53.0 -40.0 -100.2 Depreciation 6 -2.7 -2.4 -0.5 Net currency effects included in EBIT 69.6 -20.6 -29.3 earnings before interest and taxes (eBIT) -8.5 -93.5 -179.6 Financial income 64.7 197.3 276.9 Net Interest expenses -382.4 -660.0 -517.7 Net currency effects 620.1 -551.8 349.3 Other financial items 116.2 -430.8 -178.7 earnings before taxes (eBT) 410.2 -1 538.8 -249.8 Taxes 5 -96.8 326.6 21.6 Profit or loss for the year 313.4 -1 212.2 -228.2 Distribution of result Dividends payable 1 251.2 0.0 0.0 From retained earnings -937.9 -1 212.2 -228.2 From/to retained earnings 313.4 -1 212.2 -228.2 65 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA Statement of financial position Marine harvest asa (noK MiLLion) note 2009 2008 assets Non-current assets Deferred tax asset 5 1 354.0 1 446.4 Total intangible assets 1 354.0 1 446.4 Property. plant and equipment 6 7.8 5.6 Total tangible assets 7.8 5.6 Investments in subsidiaries 7 16 353.5 16 294.5 Intercompany non-current receivables 10 2 023.6 2 450.7 Investments in other shares 8 80.4 40.6 Total financial assets 18 457.5 18 785.7 Total non-current assets 19 819.3 20 237.7 Current assets Trade receivables - 9.9 Other current receivables 1.2 1.7 Total receivables 1.2 11.6 Cash and cash equivalents 11 10.9 191.2 Total current assets 12.1 202.7 Total assets 19 831.4 20 440.4 66 ANNUAl rePOrT 2009 (noK MiLLion) note 2009 2008 eQuity and LiaBiLites equity Share capital 12 2 681.2 2 609.2 Share premium reserve 12 5 917.5 8 692.7 Other paid-in capital 12 2 259.5 22.7 Total paid-in capital 10 858.2 11 324.6 Other equity 12 - 174.6 Total equity 10 858.2 11 499.2 liabilities Bonds 13 78.7 78.8 liabilities to financial institutions 13/14 4 865.2 6 461.5 loans from group companies 10 926.2 482.0 Total non-current liabilities 5 870.1 7 022.3 Other interestbearing debt 87.0 747.3 Trade payables 6.8 3.0 Intercompany liabilities 10 1 518.2 903.2 Accrued salary expenses and public tax payables 2.7 3.6 Other current liabilities 9 237.2 261.8 Dividends payable 1 251.2 - Total current liabilities 3 103.1 1 918.9 Total liabilities 8 973.2 8 941.2 Total equity and liabilities 19 831.4 20 440.4 osLo, 23 March 2010 Ole Eirik lerøy Thorleif Enger Cecilie Fredriksen Celina Midelfart ACTING CHAIRMAN OF THE BOARD Geir Elling Nygård leif Frode Onarheim Turid lande Solheim Solveig Strand Tor Olav Trøim Frank Øren Thomas Farstad ACTING CHIEF EXECUTIVE OFFICER 67 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA Statement of cash flow Marine harvest asa (noK MiLLion) note 2009 2008 Cash flow from operations Earnings before interest and taxes (EBIT) -8.5 -93.5 Adjustments for impairment losses and depreciation 6 2.7 2.4 Taxes paid 5 -2.3 -30.9 Change in inventory. acc. payables and acc. receivables 20.2 -29.7 Other adjustments 36.0 -2.2 Cash flow from operations 48.1 -153.9 Cash flow from investments Payments made for purchase of fixed assets 6 -4.9 -2.5 Purchase of shares and other investments -21.8 -10.9 Cash flow from investments -26.7 -13.4 Cash flow from financing Proceeds from new interest-bearing debt (current and non-current) 13 246.7 492.4 Down payment of interest-bearing debt (current and non-current) 13 -1126.0 -561.1 Paid interest (net) -343.4 -443.6 Received interest group internal (net) 10 36.9 -17.4 Net change in intercompany balances 689.5 -3 216.9 Repayment of share premium reserves/dividends received 0.0 3 989.9 Paid-in capital 294.6 0.0 Cash flow from financing -201.7 243.3 Net change in cash and cash equivalents in period -180.3 76.0 Cash and cash equivalents - opening balance 191.2 115.2 Net change in cash and cash equivalents in period -180.3 76.0 Cash and cash equivalents - closing balance total 11 10.9 191.2 68 ANNUAl rePOrT 2009 Notes – Marine Harvest ASA 1 General information and accounting policies will not be recognized in the Group financial statements until approved in Marine Harvest ASA is the parent company in the Marine Harvest Group the general meeting, while in the separate financial statements for Marine and consist of corporate management. Harvest ASA it will be recognized when proposed by the Board of Directors. The separate financial statements of Marine harvest ASA have been Investment in subsidiaries and intercompany loans are measured to the prepared in accordance with the Norwegian Accounting Act from 1988 lowest of fair value and cost. Financial derivatives within the Group are and Generally Accepted Accounting Principles in Norway. The financial measured to fair value. The statements of profit and loss and changes in statements for the Group have been prepared in accordance with equity in the separate financial statement divert from the statements for the International Financial Reporting Standards and interpretations issued by Group as other comprehensive income still is treated like equity transactions the International Accounting Standards Board (IASB) as adopted by the EU in the separate financial statements. (EU-IFRS) Revenues and other income consist mainly of management fee charged to For accounting policies used reference is made to note 2 in the Group the business units. Management fee was allocated in 2009 and 2008, but Financial Statements. Overall the accounting principles used in the financial not in 2007 due to the establishing of new organisation and management statements for Marine Harvest ASA are similar to the accounting principles structures. Marine Harvest ASA is responsible for the Group’s bank used for the Group’s financial statements. However dividends payable accounts and for external financing of the Group. 2 Salary and personnel expenses saLary and personneL eXpenses (noK MiLLion) 2009 2008 2007 Wages and salaries -40.3 -33.7 -29.3 Social security taxes -6.2 -6.3 -7.1 Pension expenses -1.6 -1.6 1.9 Other benefits -13.1 -5.8 -15.1 Total salary and personnel expenses -61.2 -47.3 -49.6 loans to employees 0.1 - - Average number of full-time employees 31 30.5 27 At year-end 2009 there were 31 full-time employees in the company. defined contriBution pLan With regards to salaries and other benefits to Group Management reference Marine Harvest ASA had a defined contribution plan where the contribu- is made to Group note 7. tion is limited to 6.5% of salaries up to 12 G. The are 31 members of the plan as of 31 December 2009. 3 Other operating expenses specification of other operating eXpenses (noK MiLLion) 2009 2008 2007 Sales and marketing costs -5.2 -8.1 -8.5 losses on trade receivables - 0.1 -0.2 IT costs 1) -16.3 0.2 -8.1 Consultancy fees 2) -18.4 -18.1 -47.3 Other operating costs -13.1 -14.2 -36.1 Total other operating expenses -53.0 -40.0 -100.2 1) In 2009 IT costs were expensed in MH ASA and then invoiced the subsidiaries. In 2008 IT costs amounted to NOK 18 million which were directly charged the subsidiaries. 2) Includes fees to external auditor. legal services and consultancy fees. 69 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA 4 Auditor’s fee fee to auditors 2009 (noK MiLLion) ernst & young Audit services 1.7 Other authorization services 0.6 Tax advisory services 0.8 Other services non-audit related 3.4 Total fees for 2009 6.5 fee to auditors 2008 (noK MiLLion) ernst & young Audit services 2.1 Other authorization services 0.5 Tax advisory services 1.7 Other services non-audit related 0.7 Total fees for 2008 4.9 Fee for audit services include NOK 1.3 millions that are services for 2007. fee to auditors 2007 (noK MiLLion) ernst & young Audit services 1.4 Other authorization services 0.0 Tax advisory services 6.7 Other services non-audit related 0.3 Total fees for 2007 8.4 70 ANNUAl rePOrT 2009 5 Taxes specification of this year’s taX eXpense (noK MiLLion) 2009 2008 2007 Withholding tax/changes compared to earlier years -2.3 -3.1 -15.7 Changes in deferred taxes -94.5 329.7 37.3 Total tax expense -96.8 326.6 21.6 specification of teMporary differences and Loss carried forward (noK MiLLion) 2009 2008 Fixed assets -0.1 1.5 Non-current assets and liabilities in foreign currencies 63.8 -679.1 Current assets - - Net pension liability -3.2 - Profit and loss account - 0.3 losses carried forward -4 730.1 -4 311.4 Other provisions for liabilities -166.2 -176.9 Total basis for deferred taxes/deferred tax asset: -4 835.8 -5 165.6 Nominal tax rate 28 % 28 % Deferred taxes/deferred tax asset 1 354.0 1 446.4 Total recognized deferred tax asset 1 354.0 1 446.4 71 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA 6 Property, plant and equipment specification of property, pLant and eQuipMent (noK MiLLion) 2009 2008 Acquisition cost as of 01.01 8.5 6.7 Additions in the year 4.9 2.5 Disposals in the year - -0.7 Total acquisition cost as of 31.12 13.4 8.5 Accumulated depreciation and impairment losses as of 01.01 2.9 1.2 Depreciation in the year 2.7 2.4 Accumulated depreciation and impairment losses on disposals - -0.7 Total accumulated depreciation and impairment losses as of 31.12 5.6 2.9 Total net carrying amount as of 31.12 7.8 5.6 Estimated lifetime 3-6 years 3-6 years Depreciation method linear linear 7 Shares in subsidiaries coMpany Business address date of owner’s nuMBer of eQuity as of profit carrying (noK MiLLion) purchase share shares 31.12.2009 this year aMount 31.12.2009 Marine Harvest NV Amersfoort. Netherland 29-12-06 100 % 225 000 1 808.6 -0.3 5 392.9 Marine Harvest Holding AS Oslo. Norway 07-04-06 100 % 590 452 360 5 987.1 217.6 10 676.8 Marine Harvest Faroes Kollafjordur. Faroes 01-11-99 72.6 % 1 107.7 14.2 110.5 Marine Harvest Kritsen SAS Pollaouen. France 11-04-97 100 % 7 005 366 267.1 53.0 173.3 Pan Fish Japan ltd. Tokyo. Japan 28-06-01 100 % 3 000 -3.6 -0.3 0.0 Total 8 166.9 284.3 16 353.5 Shares in subsidiaries are recognized according to the cost method. The owners share listed above are equal to the voting rights for each company. 72 ANNUAl rePOrT 2009 8 Investments in other shares Other shares include investments where Marine Harvest ASA does not have any or only very limited influence on operations and management (normally an ownership less than 20 percent). coMpany (noK MiLLion) nuMBer of ownership acQuisition changes in carrying shares % cost MarKet vaLue 2009 aMount 2009 Aker Seafoods ASA 10 092 923 11.9 % 284.8 20.7 79.5 lighthouse Caledonia ASA 2 927 144 0.0 % 27.8 -1.5 0.8 Other shares 0.8 0.1 Total carrying amount of investments in other shares 19.1 80.4 The shares in Aker Seafoods ASA and lighthouse Caledonia ASA are carried at fair value based on the market price for the shares at Oslo Stock Exchange at year-end 2009. 9 Other current liabilities provisions and contingent LiaBiLities and assets (noK MiLLion) 2009 2008 Negative fair market value on interest swaps 210.9 242.9 Accrued interest cost 4.9 10.0 Net forward contracts 1) -0.2 -2.9 Other accruals 21.7 11.8 Total other current liabilities 237.3 261.8 1) The amount includes the market value of forward contracts with subsidiaries representing a receivable for Marine Harvest ASA of NOK 198 million. The forwards contracts were initiated to hedge the exposures of the subsidiaries. To the extent this exposure cannot be offset internally, Marine Harvest ASA has entered into forward contracts with 3rd party banks. 73 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA 10 Transactions with subsidiaries receivaBLes and LiaBiLities towards suBsidiaries (noK MiLLion) 2009 2008 Intercompany non-current receivables 2 023.6 2 450.7 loans from group companies -926.2 -482.0 Net non-current receivables 1 097.4 1 968.6 Intercompany receivables 223.4 908.8 Intercompany liabilities -1 741.6 -1 812.0 Net intercompany liabilities -1 518.2 -903.2 Totalt net intercompany balances -420.8 1 065.5 Management fee. net invoiced subsidiaries 1) 38.9 16.9 group internaL incoMe and eXpense (noK MiLLion) 2009 2008 Interest income group companies 57.3 177.9 Interest expense group companies -20.5 -195.3 Group contribution 29.2 20.7 The table shows the effects group internal transactions have on financial income and financial expense presented in the statement of profit and loss. 1) In 2009 IT costs of NOK 16 million were included in management fee. In 2008 these costs were directly invoiced the BU’s. 11 restricted funds Marine Harvest ASA possessed cash and cash equivalents of NOK 10.9 million at 31 December 2009, mainly restricted funds. 74 ANNUAl rePOrT 2009 12 equity specification of changes in eQuity in 2009 (noK MiLLion) issued share other other totaL capitaL preMiuM paid-in eQuity eQuity reserve capitaL equity 01.01.09 2 609,2 8 692,7 22,7 174,6 11 499,2 Capital increase 72.0 230.4 - - 302.4 Costs related to capital increase - -5.6 - - -5.6 Reduction of share premium reserve - -3 000.0 3 000.0 - - Dividends payable - - -763.2 -488.0 -1 251.2 Profit or loss for the year - - - 313.4 313.4 Total equity 31.12.09 2 681.2 5 917.5 2 259.5 0.0 10 858.2 specification of changes in eQuity in 2008 (noK MiLLion) issued share other other totaL capitaL preMiuM paid-in eQuity eQuity reserve capitaL equity 01.01.08 2 609.2 8 692.7 27.4 1 447.3 12 776.62 Net equity effect on expensing of stock options - - -4.7 1.7 -3.0 Change in deferred tax related to direct equity transactions - - - 40.0 40.0 Currency changes booked directly towards equity - - - -108.2 -108.2 Other minor items charged directly to equity - - - 6.0 6.0 Profit or loss for the year - - - -1 212.2 -1 212.2 Total equity 31.12.08 2 609.2 8 692.7 22.7 174.6 11 499.2 distriButaBLe eQuity Additional equity that can be distributed as dividend as of 31 December 2009 amounts to NOK 905.5 million, and is classified within other-paid-in capital. 75 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA 13 liabilities to financial institutions (noK MiLLion) 2009 2008 Non-current debt as of 01.01 6 540.3 5 359.8 Change in revolving loan facilities 246.7 627.4 Foreign exchange effect -782.7 1 010.3 Change in capitalised loan costs 20.8 25.1 Ordinary loan instalments -570.9 -561.1 Downpayment next year’s instalments -589.0 - liabilities to financial institutions as of 31.12 4 865.2 6 461.5 Bonds 78.7 78.8 Total non-current debt as of 31.12 4 943.9 6 540.3 repayMent profiLe on non-current deBt to financiaL institutions year: 2010 2011 2012 2013 totaL Instalment 1) - 4 865.2 - 78.7 4 943.9 1) The instalments in 2010 was paid in full ultimo 2009. For 2008 this was included in the non-current debt. The repayment profile described is in line with the contractual instalments maturity for the revolving credit facilities. In December 2009 Marine to the syndicate. Based on the cash flow generated in a calendar year, the Harvest made a voluntary prepayment of all instalments for 2010. The instalment may, under given circumstances, increase beyond the table revolving credit facilities are available to Marine Harvest ASA and selected above. subsidiaries. In addition parts of the revolving credit facilities may be allocated as bilateral credits (including overdraft facilities and facilities for the issuance Financing of the Marine Harvest Group is principally through the parent of guarantees) between syndicate banks and group companies. company Marine Harvest ASA. External financing in the subsidiaries are only conducted if this is optimal for the Group for operational or tax pur- The syndicated loan agreement sets forth covenants on the financial ratio of poses. net interest bearing debt to EBITDA together with equity ratio. The following programs are the main financing sources of Marine Harvest Net interest bearing debt to EBITDA is also the basis for determining the Group per 31 December 2009: interest margin. Based on group performance the loan margin can vary between 0.70 percent p.a. and 2.25 percent p.a. above the interbank inter- eur 1.100 MiLLion syndicated Borrowing faciLity est rate. The Group has a syndicated loan facility with an original limit of EUR 1 100 million. The loan facility consists of a term loan of originally EUR 550 million Bond together with two revolving credit facilities totalling EUR 550 million. In connection with the refinancing in January 2003, a subordinated convert- ible bond of NOK 78 million was established. The bond matures in 2013, The term loan is repaid in semi annual instalments of EUR 22 million and was convertible and non interest bearing the first 5 years, and is now inter- USD 20 million and has final maturity in March 2011, which is also the final est-bearing with an interest rate of NIBOR + 2.00 percent p.a. 76 ANNUAl rePOrT 2009 14 Assets pledged as security and guarantee liabilities assets pLedged as security and guarantee LiaBiLities The syndicated loan facility in Marine Harvest is secured by assets pledged assets. The larger subsidiaries of the Group have also granted a pledge in from the larger subsidiaries of the Group. In addition Marine Harvest ASA their current assets, partly as a pledge in favour of a third party and partly as has pledged the ownership in its subsidiaries, as well as certain current security for the fulfilment of the obligations. (noK MiLLion) 2009 2008 Secured Group debt 4 972.5 7 271.9 Carrying amount of assets pledged as security: Receivables 1 927.8 2 916.3 Fixed assets - - Other (shares in subsidiaries) 16 243.1 16 247.4 Total carrying amount of assets pledged as security 18 170.9 19 163.7 Guarantee liabilities: 68.9 597.1 Nominal value of guarantee liabilities 68.9 597.1 15 Financial derivatives foreign eXchange risK At the end of 2009 Marine Harvest ASA had a portfolio of currency Further, Marine Harvest ASA holds a basis swap which fixes the exchange hedging instruments against third party counterparts with a total contract rate between EUR and USD. This basis swap represents an adjustment to value of NOK 5 436.1 million. The portfolio had a positive market value of the currency structure on external debt and had a positive market value of NOK 158.1 million. The portfolio is described in further detail in note 28 to NOK 20.3 million as of 31.12.09. the group accounts. The forward contracts and the basis swap are recorded at fair value in the The subsidiaries are required to do all their currency hedging with Marine balance sheet. Harvest ASA as their counterparty. In addition to the portfolio of external hedges, Marine Harvest ASA also holds a portfolio of foreign exchange interest rate risK hedges with their subsidiaries as counterparty. This portfolio to a large Marine Harvest ASA hedges all interest rate risk on behalf of the Group. extent offsets the external portfolio with respect to amounts, maturities For positions held in interest rate derivatives and their value, reference is and market values. made to note 28 of the Group accounts. 77 Marine harvest FINANCIAl STATEMENTS AND NOTES – ASA confirMation froM the Board of directors and the ceo We confirm, to the best of our knowledge, that the financial statements of the Board provides a true and fair view of the development and perfor- for the period from 1 January to 31 December 2009 have been prepared in mance of the business and the position of the Group and the Company, accordance with IFRS, as adopted by the EU, and give a true and fair view together with a description of the key risks and uncertainty factors that the of the Group and the Company’s consolidated assets, liabilities, financial company is facing. position and results of operations. Furthermore, we confirm that the Report osLo, 23 March 2010 Ole Eirik lerøy Thorleif Enger Cecilie Fredriksen Celina Midelfart ACTING CHAIRMAN OF THE BOARD Geir Elling Nygård leif Frode Onarheim Turid lande Solheim Solveig Strand Tor Olav Trøim Frank Øren Thomas Farstad ACTING CHIEF EXECUTIVE OFFICER 78 ANNUAl rePOrT 2009 Auditor’s report 79 Marine harvest ADDRESSES Addresses et år preget av utfordringer og fokus på langsiktig utvikling. Marine Harvest ASA Marine Harvest Norway Marine Harvest VAP Stortingsgt 8 Sandviksboder 78A Kolvestraat 4 0161 OSlO 5035 Bergen 8000 Brugge, P.O. Box 1086 Sentrum P.O. Box 4102 Dreggen Belgium 0104 OSlO 5835 Bergen Tel: +32 50 45 85 85 Norway Norway Fax: +32 50 45 85 86 Tel: +47 21 56 20 00 Tel: +47 81 53 53 30 Email: Europe@marineharvest.com Fax: +47 21 56 20 01 Fax: +47 55 54 72 90 Email: Corporate@marineharvest.com Email: Norway@marineharvest.com Marine Harvest Scotland Marine Harvest Chile Marine Harvest Canada Ratho Park, 1st floor, Ruta 226, Km 8 #124 1334 Island Hwy South Wing, Camino El Tepual Campbell River, 88 Glasgow Road Puerto Montt, BC V9W 8C9 Ratho Station, Newbridge, EH28 8PP Chile Canada Edinburgh, Tel: +56 65 289 700 Tel: +1 250 850 3276 Scotland Fax: +56 65 435 567 Fax: +1 250 850 3275 Tel: +44 131 344 5772 Email: Chile@marineharvest.com Email: Canada@marineharvest.com Fax: +44 131 344 5773 Email: Scotland@marineharvest.com Marine Harvest Faroes Marine Harvest Ireland Marine Harvest Asia, Ternubrekkan 1 Kindrum, Cashel P.O. Singapore office FO-695 Hellurnar letterkenny, 20, Harbour Drive Faroes County Donegal #05-02 PSA Vista Tel: +298 44 47 33 Ireland Singapore 117612 Fax: +298 44 47 59 Tel: +353 74 91 59 071 Tel: +65 6872 2996 Email: Faroes@marineharvest.com Fax: +353 74 91 59 077 Fax: +65 6872 4188 Email: Ireland@marineharvest.com Email: Asia@marineharvest.com Marine Harvest Marine Harvest Japan, Inc. Cold Water Species 1st Floor, 2-26-3, Shinagawa, Hundsnes Chuo-ku, Tokyo, 104-0033 4130 Hjelmeland Japan Norway Tel: +81 3 5541 9301 Tel: +47 51 75 40 00 Fax: +81 3 5541 9302 Fax: +47 51 75 40 44 Email: Coldwater@marineharvest.com 80 ANNUAl rePOrT 2009 MArINe HArVeST ASA PO. Box 1086 Sentrum NO-0104 Oslo Norway Tel: +47 21 56 20 00 Fax: +47 21 56 20 01 www.marineharvest.com
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