Cermaq reports higher cost in Chile

EWOS improved it`s result due to higher volumes and sales of functional feeds. I`m very satisfied with the combined result given the demanding situation in Chile, and it`s good to see that our strategy to spread risk through geographical diversification and operations in both feed and farming is working. Higher prices Mainstream Group reported a first quarter 2007 EBIT pre fair value of NOK 181.4 million compared to NOK 253.7 million in the same period in 2006, excluding exceptional income. Volumes were 16 percent lower than the same period in 2006. Average salmon prices expressed in NOK were slightly higher than in the first quarter 2006. As reported with the fourth quarter 2006 results, health and sanitation problems continued to affect the salmon industry in Chile. By the end of the first quarter a number of projects to improve conditions were underway in cooperation between major salmon producers. Higher cost in Chile Mainstream Chile volumes in the first quarter were reduced due to lower average harvest sizes and higher mortality rates. Achieved prices for atlantics were adversely affected by a higher proportion of frozen sales (66 percent versus 46 percent in the same period in 2006). Costs of production were higher due to lower growth, higher mortalities and other costs related to health improvement projects. Mainstream Canada volumes were lower compared to the first quarter 2006, because of lower growth following exceptionally cold weather over the winter, and high levels of harvesting in the first quarter of 2006 as a result of the acquisition of Heritage. Compared to the first quarter 2006, margins rose due to higher prices. Mainstream Scotland`s result benefited from continued high prices for atlantics. Mainstream Norway posted a strong result due to slightly higher prices and faster growth over the winter. Langfjordlaks, acquired in November 2006, contributed approximately NOK 7.5 million of EBIT pre fair value. During the quarter, the acquisition of Polarlaks AS and Hammerfest Lakseslakteri was completed. EWOS Group achieved an EBIT pre fair value of NOK 53.4 million in the first quarter 2007, compared to a loss of NOK -13.7 million in the first quarter 2006. Volumes were up in the quarter by 30 percent due to market growth and increased market share. Raw material costs overall were stable and margin was maintained due to higher sales of speciality and functional feeds. Cermaq`s net interest bearing debt decreased by NOK 111.9 million from the end of fourth quarter 2006 to NOK 626.2 million at the end of the first quarter. The decrease is due to strong cash generation from profitable operations, and includes the cash impact of the acquisition of Polarlaks AS and Hammerfest Lakslakteri. The equity ratio at the end of the first quarter was 63.3 percent, up from 61.8 percent at the end of December 2006. Cermaq`s key earnings measure under IFRS is EBIT pre fair value (Operating result before unrealised fair value adjustments). Unrealised fair value adjustments are made in Cermaq`s accounts to arrive at EBIT (Operating result).. The adjustments for fair value relate to valuing live biomass inventory at a market value equivalent rather than cost. Cermaq reports EBIT pre fair value to clearly identify earnings on sales during the period. In the fourth quarter 2006 report Cermaq changed the basis for the calculation of unrealised fair value adjustments and restated all comparative periods accordingly.