Board of directors’ report


  • Earnings driven by highest harvest volume ever on continued strong prices.
  • Harvest volume of 75 000 tonnes as expected.
  • Paid dividends of NOK 4.00 per share due to good profitability during the past two years.
  • High financial flexibility due to strong solidity and liquidity.
  • Seawater production in Norway lower than normal due to low seawater temperatures.
  • Production on Shetland impacted by biological challenges throughout the year.
  • Harmful algae bloom in BC reducing survival and increasing cost.
  • New operations center opened in Rogaland to improve overall operational performance.
  • Smolt expansion projects in Finnmark and Rogaland completed.
  • Launched share saving program for employees.
  • Awarded A- by the Carbon Disclosure Project on actions related to climate change.


The Grieg Seafood Group is one of the world's leading salmon farmers. The Group has licenses for seawater farming and land based smolt production in Finnmark and Rogaland in Norway, British Columbia in Canada, and Shetland in the UK. In 2018, the Group harvested a total of 75 000 tonnes Atlantic Salmon. The entire production is sold through the sales company Ocean Quality.

The Group was established in 1992 and has over the years grown to become a leading industry player through continuous focus on business development. The Group's vision "Rooted in Nature – farming the ocean for a better future", describes how the Group intends to make a difference and what it aims to accomplish. It also encompasses the foundation for the Group's operational development – healthy ocean, sustainable food, profitable growth and innovation, good jobs for everyone, and local value creation. Short term, the Group aims to harvest 100 000 tonnes in 2020 with cost at or below industry average and is simultaneously building a platform for sustainable growth for the longer term. The ambition is built on four strategic focus areas: post-smolt initiatives, digitalization in salmon farming, biosecurity and fish welfare, in addition to continuous evaluations of expansion opportunities.


2018 was a strong year for Grieg Seafood in which the expected harvest volume of 74 623 tonnes was reached, an increase of close to 20 % compared to 2017. This was achieved by maintaining a strict focus on sustainability and driving forward improvements to the farming operations.


Improved utilization of seawater licenses through a higher and more stable biomass has been the most important factor to increase production and harvest volume. Tools such as oxygen sensors and digital assisted feeding are a vital part of our strategy and growth initiatives. Better prediction and industrial monitoring of both feeding and biological development ensure a stable growth according to plan.


2018 started with a strong biomass situation for the industry, in general. However, the Norwegian winter turned out to be the coldest in years, which affected both growth and harvest weight, leading to losses on the spring-release.


The spot price fluctuated from week to week throughout the year, while the contract prices were more stable. Contract prices were in general somewhat higher than spot prices during the year. The contract share was 34 % in 2018 in Norway. As a result of an efficient Ocean Quality sales organization, the Group was able to achieve prices above spot, even with a high share of spot sales.


Access to equipment and measures to timely and effectively address biological challenges has increased costs recent years, and a proactive approach is therefore required to minimize the consequences. Grieg Seafood’s objective is to ensure sustainable growth in the years ahead by combining skilled and motivated people, new technology, and to increasingly farm salmon on nature’s terms.


In the first half of 2018, seawater production in Norway was low due to Pancreas Disease (PD) and low seawater temperatures, while through the fall, biological conditions improved, and production increased. Actions taken in 2017 to improve growth in BC have been successful, but BC was challenged with Harmful Algal Bloom (HAB) through the second and third quarter this year, which gave a lower seawater production. Also on Shetland, seawater growth has been low due to biological challenges related to sea lice and algae. The industry is facing increased biological challenges in general, with sea lice being the most prevalent cause. This has made it difficult to increase production and harvest in the UK in recent years.


Smolt production was good during the year. The Group continues to follow its growth strategy and transferred 26 million smolt to sea during 2018, which was the same as 2017.


Good access to feed raw materials and a strong NOK/USD contributed to a stable feed price throughout 2018. Feed prices are sensitive to marine and vegetable raw material prices, seasonal variation, fish catch, and production.


Harvest volume in Rogaland in 2018 was 16 293 tonnes, in line with the production plan and down 10 % compared to 2017. Sales revenues amounted to NOK 959.6 million, compared to NOK 1 150.2 million in 2017. The reduction in revenues is mainly explained by lower harvest volumes. In addition, low quality and reduced weight on harvested volumes due to PD resulted in lower prices achieved. EBIT before fair value adjustment of biological assets for the year was NOK 219.6, or NOK 13.48 per kg. Comparable figures for 2017 were NOK 393.1 million and NOK 21.70 per kg.


Seawater production in the beginning of the year was influenced by low seawater temperatures, in addition to challenges related to PD. However, the PD situation has improved, and towards the end of the year two of 13 sites had confirmed PD, compared to seven of 12 sites at the end of 2017. This is expected to contribute to improve harvest weight and quality going forward.


Escalating treatment costs and preventive measures to mitigate biological challenges have contributed to increased harvest cost. Grieg Seafood has over time invested in increased capacity of non-chemical treatments, and is well equipped and prepared to handle possible incidents going forward. Grieg Seafood Rogaland did not carry out any sea lice treatment between July and November 2018. The biological performance has improved, the utilization of the MAB (maximum allowed biomass) has increased and the average survival rate in sea (calculated according to the GSI definition) was 92 %, slightly below target of 93 %.


Larger smolt is an important part of the production strategy and will secure growth and improve biosecurity. Shorter time in the sea reduces fish exposure to biological issues such as sea lice and PD. The ambition is to reduce production time in the sea from 18 to 12 months, by increasing average smolt size to 500 grams by 2020. Through the new smolt facility, Tytlandsvik Aqua, Grieg Seafood will increase its smolt capacity with 1 500 tonnes by 2020. Grieg Seafood Rogaland expects to receive 1 000 tonnes of smolt from this facility in 2019.


The digitalization project is going forward, and in September the new integrated operations center was opened. The project involves utilization of real-time sensor data for decision support. Centralizing tasks, including feeding and camera surveillance, also frees up time for employees to focus on fish welfare. Full coverage of all sites in Rogaland is expected by the end of 2019.






The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).



Grieg Seafood’s 2018 harvest volumes were 74 623 tonnes, compared to 62 598 tonnes in 2017. The higher volumes combined with continued strong prices generated revenues of NOK 7 500.3 million, up from NOK 7 017.5 million in 2017. The higher harvest volume is a result of Grieg Seafood’s overall growth strategy and is mainly related to higher utilization of current production capacity in addition to improved biology and better fish health.


The global supply of Atlantic Salmon has flattened, while underlying demand has strengthened. This resulted in a shortage of salmon and high prices, a situation expected to persist. However, short term price fluctuations may occur, and to offset effects of possible fluctuations, Grieg Seafood has adopted a policy ensuring that some 20–50 % of all production in the coming years is hedged at fixed prices. In 2018, the share of fixed price contracts in Norway was 34 %.


EBIT for the Group before fair value adjustment of biological assets ended at NOK 1 098.8 million in 2018, compared to NOK 904.4 million in 2017. EBIT per kg was NOK 14.72, compared to NOK 14.45 in 2017.


EBIT per kg was positively affected by the increased harvest volume and high spot prices. However, PD, HAB and gill diseases had a negative impact during the year, both in terms of higher cost and lower price achievement. Total farming cost per kg for the Group was NOK 43.10, NOK 0.7 above targeted of NOK 42.40 for. This includes write-downs due to extraordinary mortality of NOK 2.78 per kg.


Fair value adjustments of biological assets were positive by NOK 256.1 million during the year, and the EBIT after fair value adjustment came to NOK 1 354.9 million. In 2017, fair value adjustments of biological assets were NOK -91.5 million, and EBIT after fair value adjustment amounted to NOK 812.9 million.


Net financial items were negatively affected by currency losses on loans and receivables during the period and came to NOK -78 million, bringing pre-tax profit to NOK 1 276.9 million. In 2017, net financial items were negative by NOK 14.5 million and pre-tax profit was NOK 798.5 million.


Taxes for the year amounted to NOK -279.8 million, bringing the profit for the period to NOK 997.1 million. Taxes in 2017 was NOK -197.6 million and net profit ended at NOK 600.9 million.




The parent Company’s financial statements are prepared according to Norwegian accounting principles (NGAAP).


The parent Company recorded an operating loss of NOK -61.7 million in 2018, compared to NOK -44.7 million in 2017. The decrease is mainly due to higher cost from exercising options compared to 2017.


In 2018, Grieg Seafood refinanced the syndicate loan into two currencies, NOK and EUR. The EU is the largest market, and the EUR loan would act as a hedge against currency fluctuation. By the end of the year, the NOK had depreciated against the EUR, providing a net unrealized currency loss of NOK 16.1 million. The Company provides loans to subsidiaries in foreign currency. The appreciation of the GBP and CAD towards NOK in 2018 resulted in a net loss of NOK 4.2 million compared to a currency gain of NOK 22.3 million in 2017.


Accrued dividend from Ocean Quality in the amount of NOK 20.1 million (NOK 25.4 million in 2017) and Group contributions from subsidiaries in the amount of NOK 611.0 million (NOK 534.5 million in 2017), contributed to a positive financial result. Interest expenses from external financing have increased slightly in 2018. This is due to increased funding compared to 2017. The Group has been in compliance with covenants throughout the year, which has a positive effect on the interest margin.  The equity ratio at year-end was 41 % , similar as last year.


During the year, there have been two dividend payments of NOK 2.00 per share. Total payment for the year was NOK 441.7 million, or NOK 4.00 per share. The last payment was according to proxy approved on the AGM (Annual General Meeting) on 12 June 2018.


The parent Company´s net cash flow from operations in 2018 was NOK -174.6 million, compared to NOK -120.3 million in 2017.


Cash flow from investing activities was NOK 500.9 million (NOK 609.9 million). The decrease is due to increased deposits to subsidiaries in 2018.


Net cash flow from financing activities was NOK -478.0 million (NOK -715.5 million). In 2018, dividends were paid while loans to subsidiaries were repaid.


There was a net change in cash and cash equivalents of NOK -151.7 million. Available cash at 31 December 2018 was NOK 5.8 million.



The aim of the Group is to offer competitive return on invested capital to the shareholders through a combination of dividends and share price appreciation.


The Group´s dividend strategy is that the dividend over time should average 25-35 % of the Group's net profit after tax, adjusted for the impact of fair value adjustment of biological assets. At the same time, the Group’s net interest-bearing debt per kg harvested salmon should remain between NOK 15–20.  Based on the good cash flow and strengthened balance, the Board proposes a dividend for the fiscal year 2018 at the same level as last year and with the same payout profile. The Board will recommend to the Annual General Meeting to approve a dividend of NOK 2.00 per share and at the same time seek approval for an authorization to pay out dividend based on the annual financial statements for 2018.


The parent Company, Grieg Seafood ASA, recorded a profit for 2018 of NOK 415.4 million, which the Board proposes to the Annual General Meeting to allocate as follows:


Provision for dividends                                     NOK 220.9 million

Transfer to retained equity                               NOK 194.5 million

Total allocated                                                    NOK 415.4 million



Forecasts based on conservative salmon prices indicate a positive and good cash flow going forward. Demand for salmon remains strong, and low supply and capacity growth is expected in Norway, the UK, and Chile. Accordingly, a strong market is likely in the time ahead. The trend towards higher consumption of fish is still strong in Europe, Asia, and the USA, which is expected to contribute to positive cash flow.


The Group has more fish in sea at the end of 2018 than the prior year, which is a good starting point for increased harvest in 2019. This is also in line with Group strategy. Costs in 2018 were at the same level as prior years, mainly due to biological challenges, especially in Shetland and BC, as well as higher costs related to preventive measures. Continuous measures to improve operational efficiency have been and are implemented, which in turn will contribute to the lower cost of fish harvested.


Strong cash flow both in 2017 and 2018 provides a good basis for down payment of debt. In 2018, the Group completed a refinancing to align the Group's financing with its growth ambitions.


The Board is of the opinion that the financial statements give a true and fair presentation of the Group’s assets and liabilities, financial position, and financial results. Based on the above account of the Group’s results and financial position, and in accordance with the Norwegian Accounting Act, the Board confirms that the annual financial statements have been prepared on a going concern basis, and that the requirements for so doing are met.



The group is exposed to risks in numerous areas, such as biological production, change in salmon prices, the risk of political trade barriers, as well as financial risk such as changes in interest rates, exchange rates, and liquidity.


The Group’s internal controls and risk exposure are subject to continuous observation and improvement, and the task to reduce risk in different areas has a high priority. The management has established a framework for managing and eliminating most of the risk that can prevent the Group from attaining its goals.


For further information see the risk management section and the principles of corporate governance in this Annual Report.



The Group operates within an industry characterized by high volatility, which entails greater financial risk. The financial risk is managed by a central unit at the Group’s head office. 2018 provided a good financial market for the aquaculture industry, with good access to liquidity in the market.


The Group has renegotiated its syndicated bank loan agreement, which will secure the working capital needed to achieve stated growth targets. The agreement matures in five years. Financial and contractual hedging is a matter of constant consideration, in combination with operational measures. The management draws up rolling liquidity forecasts extending over five years. These forecasts are based on conservative assumptions for salmon prices and form the basis for calculating liquidity requirements. This forecast also forms the basis for financing needs. At the end of 2018, the Group had NOK 793 million in available liquidity. The revolving credit is flexible, as it can be drawn upon within a month, or for a longer period, depending on the Group´s need for liquidity.



In converting the operating income and balance of foreign subsidiaries, the Group’s major currency exposure is to CAD and GBP. The strategy is to reduce the currency risk by funding the business in their local currencies. All long-term loans from the parent company to subsidiaries are in local currency. Such loans are regarded as a net investment, as they are not repayable to the parent company. The subsidiaries will always require long-term funding. The currency effect of the net investment is included in the consolidated statement of comprehensive income (OCI) for the Group.


Income and currency risk have been transferred to the sales company, Ocean Quality. The production companies sell in local currencies to the sales company, which hedges its transactions against currency fluctuations related to CAD/USD, EUR/NOK, GBP/EUR and USD/NOK and, if required, other currencies.


At year-end, contracts are concluded until the first quarter of 2021. Long term foreign currency contracts are hedging instruments, where unrealized currency gain or losses is recognized through other comprehensive income (OCI) in the statement. The currency situation is continuously assessed against the volatility of the currencies. The remaining net exposure is frequently monitored.



The Group is exposed to interest rate risk through its loan activities and to fluctuating interest rate levels in connection with financing of its activities in the various regions. The Group's existing loans are based on floating rates, but separate fixed rate contracts have been entered into to reduce interest rate risk. It is the Group´s policy to have between 20-50 % of its interest-bearing debt hedged through interest rate swap agreements. A given proportion shall be at a floating rate, while consideration will be given to entering and exiting hedge contracts for the remainder. The interest rate swap agreement changes with the three months NIBOR.



In line with the Group's growth strategy, to harvest 100 000 tonnes in 2020 and ensure sustainable growth, the interest-bearing liabilities have has increased. The Group has invested substantial amounts during the year and built up biomass, as well as paid out dividend. The refinancing this year has made the Group financially equipped to carry out further investments in increased smolt stocking and new locations for sea production.

At year end, the Group had a good level of free liquidity. Ocean Quality has factoring agreements for its operations in Norway and UK, implying transfer of credit-insured receivables to the factoring company. This enables early settlement of trade receivables. The factoring agreement is a financial arrangement, as the factoring company does not take on credit risk. Management monitors the Group’s liquidity reserve, which comprises a loan facility and bank deposits, as well as cash equivalents based on expected cash flows. This is carried out at Group level in collaboration with the operating companies. The management and the Board seek to maintain a high equity ratio to be well positioned to meet financial and operational challenges. Considering the dynamic nature of the industry, the Group aims to maintain flexibility of funding.



The greatest operational risk is related to biological developments with regards to both the smolt and the aquaculture operations. Book value of live fish in the balance sheet at year end was NOK 3 195 million. To reduce risk, the Group focuses on production of Atlantic Salmon as its main product. Training of employees and establishing good internal routines to reduce operational risk is a priority.


The aquaculture industry has experienced major issues with sea lice and algae in recent years. The Group collaborates actively with authorities and other aquaculture players to implement measures and initiate activities to reduce biological risk. One of the initiatives is joint fallowing and zoning. A digitalization process has been initiated across the Group to facilitate operational improvements. Through utilization of sensor technology, the ambition is to reduce the algae challenges in BC and on Shetland. The introduction of sensor technology to monitor algal blooms enables the Group to determine at an early stage the type of algae and the appropriate feeding response. This is of vital importance as different types of algae has various effect on the salmon.


With regards to sea lice, which are developing resistance to pharmaceuticals, there is an ongoing development from pharmaceutical to mechanical treatment. In preventing sea lice, use of wrasse is also a proven remedy, and has provided good results in Rogaland.


The Group has a zero-tolerance policy for escapes. Grieg Seafood Shetland reported two escape incidents during the year, with 22 212 escaped fish.


Salmon price developments are highly volatile, with great fluctuations within relatively short time spans. However, there has been a stable increase in the demand for salmon over recent years, while the growth in supply has been limited. This development is expected to continue going forward. Supply is also impacted by other factors, such as government regulations, sea temperatures, outbreaks, diseases, and other indirect and direct factors, which affect production and hence also supply.



There are several issues that could affect the trade flows of salmon in 2019. The Brexit outcome represents an uncertainty for the Scottish industry and the Norwegian exporters. If the UK leaves the EU, the salmon industry will experience operational and economic changes for the trade between the UK and the rest of the world. Nearly 70 % of the Scottish salmon was destined for other markets than the domestic in 2018. For Grieg Seafood Shetland, 40 % of the volume in 2018 was going to other markets. However, the Board believe potential problems around an exit will be temporary, but some challenges must be assumed in the adaptation.


For further information about financial risks (currency, interest rate, credit, and liquidity), refer to note 3 to the Group financial statements.


Sustainability lays the foundation for Grieg Seafood’s operations – it is the license to operate and the motivation to perform. Sustainability is also core business, driving results and generating value for all stakeholders.


Grieg Seafood’s overarching goal is to sustainably produce food in the ocean, expressed in the Company’s vision "Rooted in nature – farming the ocean for a better future".


This sustainability strategy is built on five pillars:


  • Rooted in healthy oceans
  • Rooted in sustainable food
  • Rooted in profit and innovation
  • Rooted in people
  • Rooted in local value creation


The pillars define our focus areas, founded in external expectations to the Company and the Company’s own goals and ambitions. The Board is proud of the award where the Company received the second highest grade, A-, by the Carbon Disclosure Project for its work to cut carbon emission.


The Company’s reporting on corporate social responsibility is based on several standards, such as  the Global Reporting Initiative (GRI) and the Global Salmon Initiative (GSI). The sustainability strategy is described in Part 1, while the measures and results are presented in Part 2 of this Annual Report.



Innovation and research in biology and technology is a prerequisite for sustainable farming, maintaining healthy oceans, and farming profitability going forward.


Grieg Seafood continuously allocates resources for research and development. Through active participation in national research projects and local test and trial projects in the regions, the Group contributes to industry development.


Active projects report on progress throughout the year. The project plan is reviewed annually, summarizing completed projects and prioritizing new. The Group's R&D focus is towards operational projects contributing to short and long-term solutions to biological and technical challenges and improved operational efficiency.


The projects are numerous and broad, covering areas from fish health and fish welfare to effective use of large units, feeding control, and optimization of smolt production in large recirculation units.



To reach goals and to solve challenges, Grieg Seafood needs the best people, regardless of gender or background. The Group has a majority of male employees and managers. In total (including Ocean Quality) 819 people were employed at 31 December 2018 in the Group, whereof 641 were men and 178 were women. The employment policy facilitates the maintenance and recruitment of qualified employees of both genders. A good work environment is key to attract and retain the best talent.


Human resources are managed locally according to local rules and instructions, and in accordance with Group guidelines. The Company continuously works to strengthen global routines and guidelines for HR and HSE-work throughout the Group and works actively to reduce sick leave and the number of HSE incidents. The working environment is considered to be good.


To strengthen the Company’s culture and encourage loyalty among employees, Grieg Seafood launched a new share saving program, giving employees the opportunity to become shareholders in the Company. It is the Board’s intention that the program shall be a continuing part of the Company’s employee incentive scheme.


The Board wishes to thank the employees for their effort in 2018.


The Company’s employee policy is described in detail under the section “Rooted in people” in this Annual Report.



Grieg Seafood ASA has adapted The Norwegian Code of Practice for Corporate Governance, last revised on 17 October 2018, and seeks to comply where applicable with this Code of Practice.


The Company’s compliance with corporate governance is disclosed in the corporate governance statement in this Annual Report and on the website



In February 2019, the European Commission Director General Competition performed an inspection at Grieg Seafood Shetland to explore potential anticompetitive behavior in the salmon industry. Grieg Seafood aims to be open, transparent and forthcoming and will provide all necessary information requested by the European Commission in its investigation. Currently, there is no new information.



Profitability in the salmon farming industry is volatile, and there will always be uncertainty related to the assessment of future prospects. In 2018, sea lice levels above expectations reduced harvest weights and overall volume growth. Going forward, improved competence and increased capacity for disease treatments and sea lice handling, as well as increased use of large smolt, are some of the initiatives expected to improve biology. For 2019 global supply of Atlantic Salmon is expected to increase 4–6 %.


Underlying demand for Atlantic Salmon is strong. A growing Asian middle class, which is both able and willing to purchase high-quality food, and has stronger preferences for healthy and sustainably produced food in the US and Europe, drives demand. Demand is expected to absorb increased supply, supporting continued strong prices going forward. So far in 2019, prices are up compared to last year, while outlook for increased harvest volume in the fall is expected to dampen prices somewhat during second half of the year.


Grieg Seafood has a clear ambition of sustainable growth going forward. To fulfill this ambition, several opportunities will be pursued, including acquisitions, joint ventures, and development of new concepts. The Company’s application for ten development licenses for the offshore fish farming concept “Blue Farm” was rejected in 2018. The decision is appealed. However, short term, improved utilization of current capacity is Grieg Seafood’s priority for growth. Flexibility in use of existing sites allows for a higher capacity utilization while also providing for better biology. The Group continuously works with local communities and authorities to secure access to new, good locations.


Another priority is the Company’s post-smolt strategy. Larger smolt are more robust and resilient and require less production time in the sea. This will drive growth, improve biology and fish welfare, and ultimately reduce cost. Being self-supplied is a priority. Capacity expansions are ongoing, and the Company expects to see positive results from this already in 2019.


In 2018, a the new "the traffic light system" for the regulation of future growth of the Norwegian salmon farming industry was implemented. The system defines 13 production areas along the coast. Depending on the sanitary situation, an area can be allowed for up to 6 % growth. Finnmark is considered a “green area”, giving Grieg Seafood the opportunity to acquire additional production capacity. Rogaland however, is a yellow area, with expansion opportunities currently on hold. Consequently, access to sufficient amounts of large smolt becomes even more important to secure growth.


For 2019 and 2020, Grieg Seafood targets harvest volumes of 82 000 and 100 000 tonnes, respectively. The stocking of larger smolt is important to ensure future growth, and in 2019 Grieg Seafood plans to stock 26 million smolt.


Throughout 2018, initiatives to improve operational efficiency are already providing promising results. This work will continue across the organization and combined with a continuous development of competences and the building of a culture for knowledge sharing, the Board has high expectations for the development of Grieg Seafood going forward.




We hereby confirm that the financial statements for the period from 1 January to 31 December 2018 to the best of our knowledge have been prepared in accordance with applicable accounting standards and give a true and fair view of the Group and of the Group’s assets, liabilities, financial position, and overall results. We also confirm that the Board of Directors’ Report gives a true and fair view of the development and performance of the business and the position of the Company and the Group, as well as a description of the principal risks and uncertainties facing the Company and the Group.



Bergen, 11 April 2019

The Board of Directors of Grieg Seafood ASA