Revenue decline for Akva group

According to a message from Akva group ASA sales volumes were heavily affected by restrictive investment policies in the salmon industry in general. AKVA has started the work to restructure the organization to achieve lower cost, improved flexibility and efficiency.

Operations and profit Operating revenues in 2Q were 164.3 MNOK (259.8) and the EBITDA was MNOK 0.4 (28.0). YTD operating revenues were 316.7 MNOK (467.1) with an EBITDA of -2.9 MNOK (44.3). For 2Q depreciation and amortisation amounted to 7.8 MNOK (6.5). EBIT in the period was -7.4 MNOK (21.6). Net interest expense was -2.4 MNOK (-1.4). Other financial income was -0.6 MNOK (-1.8). Profit before tax for the second quarter was -10.4 MNOK (18.3). Net profit after allowing for taxes of -1.2 MNOK (5.3) was -9.2 MNOK (13.0).

The YTD depreciation and amortisation amounted to 15.6 MNOK (12.5). YTD EBIT was -18.5 MNOK (31.8). Net interest expense was -4.3 MNOK (-2.6). Other financial income was -0.2 MNOK (-2.1). Profit before tax for 1H was -23.0 MNOK (27.1). Net profit after allowing for taxes of -5.0 MNOK (7.9) was -18.0 MNOK (19.2). Due to the reduced business volume in 1H the company has introduced further cost reduction measures both in OPTECH and INTECH.

Operations Technology (OPTECH) The operating revenues for OPTECH in 2Q were 81.5 MNOK (105.4). The EBITDA for 2Q was -2.4 MNOK (16.5). YTD operating revenues were 154.4 MNOK (198.1) with an EBITDA of -6.8 MNOK (22.3).

Generally the market situation is challenging for OPTECH, competitive pressure has also been reducing margins on achieved sales. Operationally OPTECH continue to focus on customer service, product enhancement, organisational integration, general operational improvements and lowering of cost. Due to the low business volume during 2Q the company has implanted tasks to reduce the costs further and has a continuous focus on cost reduction.

Infrastructure Technology (INTECH) The operating revenues in 2Q were 82.8 MNOK (154.4). The EBITDA in the period was 2.8 MNOK (11.5). YTD operating revenues were 162.3 MNOK (269.0) with an EBITDA of 4.0 MNOK (22.0).

The operation in Chile has been downscaled to adapt to the prevailing situation. The Norwegian operations in INTECH continue to focus on achieving economies of scale benefits in the main production facility. Generally the feed barge market situation has been challenging and competitive pressure has reduced achieved margins.

Balance sheet and cash flow Working capital in the group balance sheet, defined as non-interest bearing current assets less non-interest bearing current liabilities was 141.3 MNOK down from 168.2 MNOK at the end of 1Q. Measures have been implemented to further reduce the working capital level.

Gross interest bearing debt amounted to 193.9 MNOK at end of 2Q vs. 198.6 MNOK in 1Q. Cash and unused credit facilities amounted to 54.9 MNOK. Total assets and total equity amounted to 653.1 MNOK and 293.6 MNOK, respectively, resulting in an equity ratio of 45.0% at the end of 2Q 2009.

Investments in 1H 2009 amounted to 15.9 MNOK whereof 3.8 MNOK is capitalized R&D expenses in accordance with IFRS.

The sale of the none-core activities in Surefish Inc and Wavemaster Net Services will improve the financial flexibility of the company.

A waiver extending through 3Q 2009 relating to the financial covenants of the major credit facilities and loans was agreed with the company's main bank in 2Q.

Shareholder issues Earnings per share for 2Q 2009 were NOK -0.53 (0.76). The calculation is based on 17.222.869 shares average. YTD earnings per share were NOK -1.04 (1.12).

Market and future outlook The general market situation for salmon has been strong through the second quarter. The uncertainty created by the global financial turmoil has caused the salmon companies to hold back on investments, however with the prevalent market situation AKVA has expectations that the market will normalize in the second half of 2009.

The challenging fish health situation in the Chilean market has created severe problems for the Chilean salmon industry. AKVA has down scaled its operations in this market to match the dismal outlook for the coming years.

Due to the challenging situation AKVA has started the work to restructure the organization to achieve lower cost, improved flexibility and efficiency. The company will continue to meet the challenging situation by an uninterrupted cost reduction focus, protection of margins and reduced capital binding.

The general underlying investment demand from the salmon farming industry in Norway and the UK remains relatively strong. Despite most companies making strong profits, they have all been focussing on reducing capital investment and working capital. At the moment there are some signs of the companies are coming back to a more normalised situation on capital expenditure.

The market outlook for recirculation smolt production facilities continue improving and is expected to lead to significant deliveries going forward.

The order backlog was 183 MNOK (305) at the end of 2Q 2009, which is a weakening of 122 MNOK compared to the same time last year. The decline is mainly related to lower order inflow from the Norwegian and Chilean market. The total prospects mass continue at a relatively high level confirming the underlying demand. However, as mentioned due to the global financial turmoil the market players are generally holding back on their capital expenditure.