Grieg Seafood shall be a leading aquaculture company
Annual Report
2009
Quality seafood from cold waters
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Grieg Seafood
Grieg Seafood ASA is one of the world’s leading fish farming companies, specialising in salmon and trout. We have an annual production capacity of more than 80.000 tons gutted weight. The Group is today present in Norway, British Columbia (Canada) and in Shetland (UK), employing approximately 530 people.
The business development of Grieg Seafood ASA focuses on profitable growth, sustainable use of resources and being the preferred supplier to selected customers. Grieg Seafood ASA was listed at the Oslo Stock Exchange (OSEBX) in June 2007. Our headquarters are located in Bergen, Norway. 3
Sound business
Cool photos from Finnmark by Hung Ngo. Grieg Seafood works in small coastal communities in the far north of Europe and America. We are proud that our efforts create jobs and deliver sustainable growth in areas vulnerable to depopulation
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Key figures See page 9 for more investor related content
60000
Harvest volume (GWE*)
0
1 487 000 000
500
1 068 000 000
1000
1 621 000 000
1500
40000 30000
Harvest volume GTW
20000 10000
2007
2008
0
2009
EBIT
2007
2008
2009
Our markets 2009 3,15
3
153 525
EBIT EBIT/kg GWE 1%
22,6% USA 19,1% UK 50,8% EU
-3,34
2007 2007
Far East
6,6% Canada
- 172 853
121 336
200000 3,5 3,0 150000 2,5 2,0 100000 1,5 1,0 50000 0,5 0 0,0 -0,5 -50000 -1,0 -1,5 -100000 -2,0 -2,5 -150000 -3,0 -200000 -3,5
40 461
Turnover MNOK 50000
48 747
Turnover (NOK)
51 731
2000
2008 2008
2009 2009
EBIT million NOK
before value adjustment of biological assets
EBIT NOK per kilo GWE*
Overview by region Region
Harvest in tonnes GWE* 2009
Sales revenue TNOK
EBIT TNOK
EBIT/kg GWE*
2008
2009
2008
2009
2008
2009
2008
Rogaland
12 000
6 733
374 639
172 718
65 431
-15 972
5,45
-2,37
Finnmark
14 218
14 834
446 353
358 960
68 815
11 708
4,83
0,79
B.C.
10 134
16 326
382 978
524 554
36 626
55 877
3,61
3,42
Shetland
12 395
13 838
408 648
420 662
-4 414
-16 474
-0,36
-1,19
* Gutted weight in kilos
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Letter from the CEO
CEO Morten Vike is optimistic with regards to the future of fish farming. Grieg Seafood has a constant focus on all the responsibilities that comes with food production - food safety, the environment, product quality, strict regulations in addition to the commitment the company has to its employees and the local communities the farms are a part of.
Fish farmer inspecting a net on a farm in Finnmark, Norway. This type of fish cage is called a polar-circle. It measures17 m in diameter and can hold around 100.000 salmon.
Dear shareholders 2009 has been an exciting year for Grieg Seafood. I believe we have taken important steps in the right direction.
In the beginning of 2009, in the midst of the global financial turmoil, we went through the demanding process of establishing an extended credit facility in order to finance the company’s already implemented growth plans. The timing could hardly have been worse. At the same time, it was generally expected that the salmon market would develop favourably due to constraints on the supply side. The positive price development for salmon was already clearly visible from April 2009.
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A demanding year for Grieg Seafood, quickly changed to be a year with overall good conditions. Today, the market balance looks favourable from a price perspective for the next couple of years. Even more important to Grieg Seafood is our own operational development. After a couple of years focusing mainly on implementing the growth plans of the company, 2009 has shown improvements in the underlying operational performance, particularly in Norway. Also in Shetland, despite strong negative financial impact of the compulsory harvest order due to ISA, the underlying operations have shown positive development. Under favourable market and price conditions, it is more important than ever to keep a steady focus on improving operational efficiency. Our focus therefore remains unchanged, with the priority being on implementing our improvement plans.
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We do create economic activity, jobs and development potential for people in many rural areas where alternatives are generally fewer ... There is no doubt that also salmon farming has considerable positive impact for the greater society and people in many rural areas. - Morten Vike, CEO
A number of improvement plans have been implemented and more will follow, including changing area plans to secure and improve the bio-security situation, implementing production improvement projects and establishing management systems to ensure continuous focus on our operational performance. We are also taking steps to improve development of our human capital, thus creating a strong performance culture. After all, the work is done by people. 2009 has been the start of what is expected to be a positive business cycle for salmon farming. At the same time, we have seen rising public concern about the environmental impact of salmon farming. As any other business activity, salmon farming will have to live with the fact that the broader public, are raising critical questions about the impact of our activity. However, the truth is not always best measured by what attracts most media attention. Sometimes one can get the impression that there is a belief that unsustainable farming practices would generate higher profits in the fish farming
business, be it sea lice, escapes or disease. Certainly, the contrary is the truth. It is in the best financial interest of all fish farmers to limit and minimize such negative impact. In fact, sustainable fish farming also means creating sustainable profits and return to shareholders. All human activity creates an environmental footprint. Fish farming is no exception. As an industry and as a company, our work towards minimizing our environmental footprint is based on fact and documentation. We certainly acknowledge that knowledge and what can be considered facts about environmental impact and best practise, is under continuous development. Therefore, we will keep our high focus and priority on developing our own operations to reflect a fact-based best practice. The last year, we have taken several measures that should both minimise the environmental impact and improve our own operational performance. Changes in area management plans in both Shetland and BC are examples of this.
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Sometimes one can get the impression that there is a belief that unsustainable farming practices would generate higher profits in the fish farming business, be it sea lice, escapes or disease. Certainly, the contrary is the truth. - Morten Vike, CEO
The positive impact of fish farming to our society has not received much media attention. Although still a relatively young industry, salmon farming as an industry has become among the most important economic activities in the areas we operate in. We create economic activity, jobs and development potential for people in many rural areas where alternatives are generally scarce. Additionally, there is often strong and positive development in related activities such as the supplier industry, research and development, education and even in the public sector. There is no doubt that also salmon farming has considerable positive impact for the greater society and people in many rural areas.
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At the end of the day, fish farming is a matter of producing food for a growing global population. All food production does create an environmental footprint. Compared to alternative food production, farmed salmon is among the most efficient ways to produce food, measured by the amount of raw materials used as feed to produce a given amount of food, also referred to as the feed conversion rate. We do not only produce food efficiently, we also produce healthy food for people! Morten Vike CEO
Business ethics
Management principles
Grieg Seafood has implemented common ethical guidelines. As part of an active, international business environment, Grieg Seafood accepts a responsibility for ethical awareness. Our activities are closely connected to the community which we are a part of and we wish to broadcast what Grieg Seafood is doing to raise ethical awareness among our employees.
• • • • •
Grieg Seafood emphasises a high ethical standard. We acknowledge that the practice of an unambiguous and national “Code of Conduct” is challenging in business with international operation. Thus, our ethical guidelines are developed with the intention to be a tool to maintain a high ethical standard relative to Norwegian circumstances, and at the same time give clear guidance when our employees dilemmas are in conflict with other management- and business cultures. The guidelines are based on simple principles of transparency and reporting. As an alternative to writing a complex set of detailed rules, we instruct our employees to document and report to superiors when facing corruption, facility payments and other situations that challenge ethical principles. This contributes to an internal discussion of difficult subjects and thus maintaining an ethical awareness. Please visit www.griegseafood.no for details.
We are open and honest Today we shall do better than yesterday We do what we say We are positive and enthusiastic We care
Our objective is to be a leading aquaculture company, while improving our operational and financial performance. We will do this by • building ONE Grieg Seafood Group • building ONE strong performance culture • realizing our targets through people – ALL people • sustainable use of nature • utilizing the skills, experience and capabilities within our group (learning organization). • develop, anchor and implement the concrete action plans required to reach our objectives.
Our Values • • •
Open Respectful Ambitious
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Rogaland
Ander Eike (24) works as Operating Manager at Grieg Seafood Rogaland, weathering wind, rain and stormy seas in order to bring the finest salmon products to our customers. - There is a certain charm to working at sea, everyone in our team agrees on that. We are fascinated by the ocean, especially when there is bad wheather and the forces of nature show their power. I quickly become tired of good weather, Eike chuckles. Anders feels that in order to work with aquaculture hands-on, there is a need for certain practical affinity, and that one must be able to stomach bad weather and various natural challenges. Eike also emphasizes that he and his team are highly focused on fish welfare in their work, as well as preserving the area around the farming facilities. – We care a lot about the surrounding areas, partly because most of us actually live nearby. We often go fishing in the local area, so it is important to us that the natural resources found here, are preserved for the future, he says.
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Rogaland in South-Western Norway is mainly a coastal region with deep, cold fjords, white beaches and small islands. The salmon we farm in Rogaland is primarily consumed in Continental Europe.
Our ventures in Rogaland, Norway, are a result of mergers with and acquisitions of smaller fish farming companies in the region. During the last five years, the company has made substantial investments in both smolt production and farming facilities. This has enabled deep water fish farming at depths of up to 40 metres, where the ideal temperature can be upheld for optimal farming conditions all year round. Grieg Seafood Rogaland has three smolt licences on which we base our salmon hatchery. The salmon farming activity in Rogaland has 16 growout licences, where grieg Seafood is also responsible for harvesting and freezing. The company owns 48.7 % of Erfjord Stamfisk AS, a broodstock (roe) company. We employ about 70 people. GLOBAL GAP The operations in Rogaland are certified in accordance with the demanding Global Gap scheme. (www.globalgap.org). This is a voluntary certification agreement originally developed for agricultural production, but has recently been transformed to the relevant parameters for the marine farming industry.
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Finnmark Sponsored by Grieg Seafood Grieg Seafood sponsors numerous community events and sports teams. One of these is the local youth skiing team of Alta in Finnmark. Their coach, Doris Johansen, is certain that the sponsorship deal with Grieg Seafood has made a huge difference to them. – Because of our relations to Grieg Seafood, we were able to host a biathlon cup which 300 individual athletes were able to participate in – which makes it the biggest community event we have for youths in Alta. This would not have been possible a few years ago, says Johansen. Doris feels that she no longer has to worry about whether the team will be able to afford new equipment or to organize new events. – This has helped secure this long tradition of healthy, social activities for our children. And since quite a few of the people here in Alta also work for Grieg, the cooperation between an important employer and our community is beneficial on many levels, says Johansen.
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Finnmark is the Northernmost part of continental Europe, where Norway swings eastward. In the midst of wild and majestic scenery with steep mountains and icy fjords, the conditions are ideal for growing healthy fish of exceptional quality. Operations in Finnmark were established in 1978 by Norwegian fish farming pioneer Harald Volden. In 2006 the Volden Group merged with Grieg Seafood and was renamed Grieg Seafood Finnmark. Grieg Seafood Finnmark has grown significantly in recent years, and now encompasses a smolt hatchery and 24 licensed sites at four clusters in different regions of Western Finnmark. The distance between the production clusters forms a natural barrier to the transfer of disease and therefore represents a lower overall biological risk in Finnmark. Grieg Seafood Finnmark owns and operates the northernmost fish farm in the world, close to the North Cape. Our facilities in Finnmark enjoy the shortest export route to Russia in Norwegian fish farming, including the major cities of Moscow and St. Petersburg. Almost all our Norwegian production is exported, and our most important markets today are the EU, Russia, Japan, China, as well as Ukraine, Taiwan and Korea. Grieg Seafood’s well known trademark Blue Silver™ originates from Finnmark. Grieg Seafood Finnmark produces salmon and trout based on 24 growout licences, complete with harvesting and freezing facility, in addition to 1 smolt production facility. The company employs about 150 people.
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Shetland
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Grieg Seafood Hjaltland is a pioneer in the production of the very best quality salmon from Shetland and is the world’s largest producer of organic salmon.
Grieg Seafood Hjaltland has its business on Shetland, with activities on 23 farm sites divided between five clusters. Grieg Seafood Hjaltland is the largest salmon producer on Shetland, employing about 180 people. Harvesting is performed by Lerwick Fish Traders Ltd, which is a fully owned subsidiary of GSF Hjaltland. Lerwick Fish Traders Ltd is one of the largest salmon packing and processing companies on Shetland. About 70% of the salmon production is to be delivered as whole fish, and 30% as various types of fillet. The company’s new £4.2 million processing plant houses six trolley kiln smokehouses for smoking both hot and cold salmon. It also boasts an automatic salting line for curing, four slicing lines and a packing line. This means our new facility allows Grieg Seafood Hjaltland a daily production capacity of twelve tonnes of smoked and marinated salmon.
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Grieg Seafood Hjaltland UK Ltd. has developed a large customer network in the UK and in Europe. The sales department sell their own products in addition to fish from external producers. They effectively deliver salmon through distributors to some of the larger UK supermarket chains, such as Tesco, Sainsbury and Morrison.
Organic salmon from Shetland Grieg Seafood Hjaltland UK Ltd is a pioneer in the production of the very best quality salmon from Shetland and is the world’s largest producer of organic salmon. Oily fish, and salmon in particular, is renowned for its health benefits, and with consumer interest demanding ever more healthy and sustainable foods, Grieg Seafood Hjaltland UK Ltd took the strategic decision to venture into producing organic salmon on a wide scale. Having recently acquired sites on which organic salmon were already being reared, the company has the capacity to produce approximately 2,500 tonnes of organic fish per year. This move is in direct response to market demands and demonstrates the company’s flexibility to become even more customer-focused. Organic salmon is a niche product in the market – and this requires us to adapt our farming practices. Our organic fish meet the rigorous welfare standards set by the Organic Food Federation and Naturland.
A space and environment suited to the species The sea pens are situated in the fast-running, wild and clean seas of the North Atlantic: a magnificent natural environment for rearing strong and firm salmon. The strong tidal rip and continual flow of water running through the sites put our Shetland organic salmon in a class of their own. Farms are situated away from the coastline and these exposed sites allow the company to use larger cages with deeper nets, providing better water exchange. The fish have twice as much space as conventional salmon in which to swim with fish stocked at 10kg/cubic metre. This equates to less than 1 per cent fish to 99 per cent water.
Specialized feed The vegetable meal used all comes from sustainable, non-GM, organic sources. Additionally, rather than using industrial fish meal, fish are fed offcuts from fish that have been caught for human consumption. A pigment called astaxanthin produced by a yeast called phaffia rather than synthetically manufactured pigments is also used. The feed is lower in oil content which will lead to a leaner product. Only fish oil is used which means that the omega 3 content per gram of fat will be higher than most conventional salmon.
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British Columbia
Grieg Seafood’s farm sites in Canada are located on the east and west coast of Vancouver Island, and on the mainland north of Vancouver in British Columbia. With more than 25,000 km of fjords and coastline, the western part of Canada has perfect conditions for growing the highest quality Atlantic and Pacific salmon. Grieg Seafood’s operations in British Columbia, Canada’s westernmost province, supply the Canadian, Asian, and much larger neighbouring US market with superb fresh salmon. This is achieved through sustainable production, focused not only on environmental responsibility but also on a strong commitment to people and communities.
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Grieg Seafood’s activities in Canada have expanded considerably during recent years. The last acquisition was made in February 2007, when the Group bought Target Aquaculture including eight production licences and one processing plant. There is growout production both at the west and east side of Vancouver Island, and at Sechelt, northwest of Vancouver. The Group has also made considerable investments in order to modernize the equipment in Canada, along with other efforts to meet environmental challenges.
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We don’t just meet regulation, we help to inform it and improve it.
- Mia Parker, Manager, Regulatory Affairs in BC
Commitment Corporate Social Responsibility begins with meeting the regulatory and social expectations of each operating region, but it does not end there. Each region; Scotland, Norway and Canada, has its own regulatory framework and unique culture. New science adds to our body of knowledge, and regulations evolve to embrace new understanding. British Columbia has long been acknowledged as having a particularly stringent framework which manages salmon farming based on environmental performance. Here, industry representatives work with government regulators, researchers, and academics to carry out research used to inform new and changing legislation. We don’t just meet regulation, we help to inform it and improve it. Around the world, salmon farms are located away from major centres and instead situated near small coastal communities. It is no different in BC, where some of our farms are hours from the nearest village. These small communities provide services which support our farming operations, and we often recruit
talented locals to work for us. It is important to show our appreciation for the support we receive, and to acknowledge that without these communities it would be very difficult to operate effectively in such isolated conditions. The Grieg Foundation focuses on contributions to support and develop children and youth, so we have built on this example and put most of efforts into youth and family programs. In 2009 we sponsored three soccer teams for youth ages 5 to 18, hockey for ages 5-8, and the annual softball clinic in Sechelt. We also sponsored, for the third year, the women’s health clinic in Gold River and the first annual Arts Week, also in Gold River. In Sayward, we sponsor many community events, including the Canada celebration and the senior citizen’s Christmas Dinner. British Columbians are passionate about our native salmon, and we at Grieg Seafood BC are no different. We support salmon enhancement in 3 areas of the province and last year was our third year as lead sponsor for the Sunshine Coast Salmonid Enhancement Society’s annual fundraising dinner. - Mia Parker, Manager, Regulatory Affairs in BC
Grieg Seafood Canada has a crucial proximity to the American market, with transport costs at one to two dollars lower per kg than for our Chilean competitors. Furthermore, the sea temperature near Vancouver Island (7 to 15 °C) is ideal for salmon farming. Grieg Seafood BC owns and operates its own smolt production, harvesting and hatchery facilities and processing plant, with 21 growout licences enabling broodstock production. We employ about 110 people on a permanent basis.
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Healthy products
Value chain Brood stock
Fresh water
Sea water
Harvest/ Package
Grieg Seafood Rogaland Grieg Seafood Finnmark Grieg Seafood B.C. Grieg Seafood Hjaltland
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Value added processing
Sales
Festive food for every occasion
Grieg Seafood labels
Salmon and trout have gone from being gourmet food to a healthy treat that can fit into almost any budget. Besides being an excellent, tasty source of high-quality protein, salmon and trout are also valuable sources of Omega-3 and Vitamin D, which have proven to be essential for a healthy mind and body.
WildWaters™ Grieg Seafood Hjaltland has taken value added processing to the next level by developing WildWaters™, an entire range of truly innovative flavors of luxury marinated and smoked salmon. WildWaters™ was developed in-house and has received highly positive reviews. Customer demand has soared past supply, with a large number of orders already placed by customers in the UK, Germany and Italy. Our WildWaters™ smoked salmon pastrami product has won a coveted Q award in the ‘Fish’ category at the prestigious 2009 Quality Food at The Hurlingham Club in London – fending off stiff competition from Asda, Morrison and Sainsbury’s.
Look younger, live longer All salmon and trout have a high fat content and are rich in beneficial Omega-3s, the long-chain fatty acids believed to have many health benefits, including reduced risk of heart disease, high blood pressure, kidney and bowel disorders, neurological dysfunction (such as depression, schizophrenia, memory loss, Alzheimer’s disease), auto-immune disorders, and facilitates weight loss. The essential fatty acids found in salmon are also powerful anti-inflammatory agents. This is important especially when it comes to skin care, and through a diet rich in Omega-3 you can strengthen cross-hatching of collagen that creates a smooth, supple skin surface. Last, but not least, Vitamin D helps guard against DNA-induced sun damage. In fact, in a recent skin cancer study, people eating diets rich in fish oils and other omega-3 fats had a 29% reduced risk of skin cancer compared to those who got very little.
Blue Silver™
Salmon from fish farms are grown and harvested in a controlled environment where specialists work to ensure consistent quality and optimal food safety. Therefore, when you buy fish from Grieg Seafood, there are no unpleasant surprises.
Close to the North Cape, in the dark blue and icy cold waters of Northern Norway, our premium quality Blue Silver™ salmon and trout are farmed. The Blue Silver™ label signifies high quality Atlantic salmon and Rainbow trout, supplied to specialist retailers, smokers and fish markets. These fish provide a culinary experience reminiscent of the wild Atlantic salmon of the world famous rivers of the Arctic Lapponia region.
Farmed fish are fed a diet that closely replicates what they would be eating in the wild. Because they eat processed, heattreated and pelletized food, farmed salmon don’t have the anisakis roundworms which often infect wild salmon.
Our Blue Silver™ trout and salmon contain an, optimal fat content, appetizing red flesh and silver colored skin. They come as both frozen and fresh products.
Consistent quality, safe food
All in all, salmon and trout are versatile, festive, and easy to use a touch of healthy elegance at a very affordable price.
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Investor
Grieg Seafood’s ambition is to deliver a high and stable return to its shareholders. The financial target of the company is to maintain an equity share of at least 30%. Grieg Seafood aims to provide investors, the capital market and other interested parties with timely and relevant information in order to enable a correct valuation of the company - and a reduced risk for investors. Company information will be provided to the Stock Exchange and by public presentations each quarter. In addition, the company web page: www.griegseafood.no will be kept up to date with public information about the company, mandatory information and general investor presentations.
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Dividend policy Grieg Seafood has an objective to pay an annual dividend to its shareholders. The dividend should normally be in the range of 25-30% of the profit after tax.
Shareholders As at 31.12.09, the company had 1031 shareholders of which 951 were based in Norway and 80 were international investors. See note 27 in the Financial Statement.
Analyst coverage There are many leading analysts that follow the Grieg Seafood stock. In alphabetical order we will mention Carnegie, DnB Nor Markets, First Securities, Handelsbanken Capital Markets, Pareto Securities, and RS Platou Securities, Argo Securities, Fonds Finans and Nordea Markets.
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Grieg Seafood comply with Norwegian recommendations for good corporate governance. For complete and updated information about the company, please refer to www.griegseafood. no. The annual report for 2009 is also available on our webpage.
Management
Board of Directors
CEO Morten Vike
Chair: Per Grieg jr.
CFO
Vice chair:
Atle Harald Sandtorv
Anne-Grete Ellingsen Board members:
Rogaland
Shetland
B.C.
Finnmark
Alexander Knudsen
Michael Stark
Peter Gibson
Håkon Volden
Terje Ramm Harald Ingebrikt Volden Wenche Kjølås
Largest shareholders of Grieg Seafood ASA at 31.12.2009 GRIEG HOLDINGS AS HALDE INVEST AS TEIGEN SKANDINAVISKA ENSKILDA BANKEN ODIN NORGE ODIN NORDEN YSTHOLMEN AS DNB NOR SMB METEVA AS OTHER SHAREHOLDERS
Production capacity
Shareholding 43,46 % 16,57 % 8,96 % 4,27 % 3,44 % 3,26 % 2,57 % 2,17 % 1,25 % 14,05 %
Financial 2009 ROCE * EK % NIBD ** NIBD/EBIDTA
10,2 % 38,5 % 1 374 4,87
* Return On Capital Employed, after biomass adjustment ** Net Interest Bearing Debt in million NOK
Price development
Harvest 2009. Total harvest 48 747 tons GWE
Salmon price/kg in NOK
Production capacity. Total capacity 84.000 tons GWE
GSF Share in NOK
30000
50 45
25000
40 35
20000
30 25
15000
20
10000
0
Rogaland
Finnmark
BC
20 000
12 395
20 000
10 134
28 000
14 281
16 000
12 000
5000
15
Shetland
10 5 0 2008
2009
2010
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Clean environments
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23
ar tgarden
Grieg Seafood ASA P.O. 234 Sentrum N-5804 Bergen Norway Visit address Grieg-Gaarden C. Sundtsgate 17/19 N-5804 Bergen Norway Tel.: +47 55 57 66 00 E-mail: info@griegseafood.no
www.griegseafood.no Grieg Seafood Rogaland AS Helgøy N-4174 Helgøysund Norway Tel.: +47 51 71 40 00 E-mail: rogaland@griegseafood.no
Grieg Seafood Finnmark AS Markedsgata 3 Postboks 1053 N-9510 Alta Norway Tel.: +47 78 44 95 95 E-mail: finnmark@griegseafood.no
Grieg Seafood BC Ltd #200 – 1170 Shoppers Row Campbell River BC V9W 2C2 Canada Tel: +1-250-286-0838 E-mail: info@griegseafood.ca
Grieg Seafood Hjaltland UK Ltd. Gremista Lerwick Shetland ZE1 0PX Tel: +44 1595 74 1800 E-mail: info@griegseafood.co.uk