A difficult quarter, but slightly better than expected

Lerøy Seafood Group (LSG) posted an operating profit before fair value adjustment of biomass of NOK 353 million in Q4 2015, compared with NOK 435 million in Q4 2014. This is equivalent to operating profit before biomass adjustment of NOK 8.5 per kg compared with NOK 10.2 in the same period last year.

* "The price for Atlantic salmon saw a very strong development towards the end of the fourth quarter, producing a higher result for the quarter than projected. At the same time, two factors in particular have had a negative impact on Group earnings in the quarter. One is the sustained political trade barriers involving import of trout into Russia that have had a negative effect on prices realised. The second is the early harvest of salmon in Central Norway that has had a negative effect on both costs and prices realised," explains CEO Henning Beltestad.

In Q4 2015, Lerøy Seafood Group (LSG) reported turnover of NOK 3,564 million,compared with NOK 3,261 million in the same period in 2014. Compared with Q4 2014, the Group's volume of harvested salmon and trout fell by 2%. The Group's profit before tax and before fair value adjustment of biomass was NOK 335 million in Q4 2015 compared with NOK 393 million in Q4 2014.

For 2015 in total, the Group reports turnover of NOK 13,451 million, up 7% from 2014. Operating profit before fair value adjustment of biomass is NOK 1,380 million in 2015 compared with NOK 1,789 million in 2014. The profit figure before tax and before value adjustment of biomass in 2015 was NOK 1,321 million compared with NOK 1,817 million in 2014.

At 31 December 2015, net interest-bearing debt was NOK 2,595 million and the equity ratio 55%.

FARMING SEGMENT - A CHALLENGING QUARTER

Operating profit before fair value adjustment of biomass reported by the Farming segment fell from NOK 299 million in Q4 2014 to NOK 221 million in Q4 2015. The Farming segment harvested a total of 41,697 GWT salmon and trout in Q4 2015, down 2% from the same period in 2014. EBIT/kg fell from NOK 7.0 per kg in Q4 2014 to NOK 5.3 per kg in Q4 2015.

In Q4 2015, Lerøy Aurora achieved operational EBIT per kg of NOK 17.4. Lerøy Midt and Lerøy Sjøtroll are reporting EBIT per kg of NOK 3.2 and NOK - 0.5 respectively for the same period.

* "The prices for salmon and trout have seen an unusual level of fluctuation in the quarter, and we have also been witness to unusually high price disparities for the different sizes of salmon," confirms CEO Henning Beltestad. "These factors, when combined with the early harvest of salmon, result in lower prices realised in the fourth quarter, given that 40% of the slaughter volume for the period was harvested in October," explains Henning Beltestad. "Release from stock costs are extraordinarily high, but the Group has implemented a number of measures and investments that will reduce production costs for salmon and trout," confirms Henning Beltestad.

* "For 2016, the Group has a better supply of own cleaner fish and more knowledge and experience in utilising the advantages of this fish. Furthermore, the Group has made significant increases to its large well boat capacity and equipment for mechanical cleaning. We have high expectations for these measures and look forward to seeing their results already this year, in 2016", says Henning Beltestad.

VAP SEGMENT - GOOD GROWTH IN ACTIVITY

The VAP segment currently comprises four units and the turnover in this segment is up 25% from NOK 437 million in Q4 2014 to NOK 547 million in Q4 2015. The operating margin remains almost unchanged, down from 7.2% in Q4 2014 to 7.1% in Q4 2015.

* "The VAP segment continues to report a positive development," confirms Henning Beltestad in a comment. "The segment has a good underlying development, but there is still room for considerable improvements, including improved exploitation of capacity in several units," confirms Henning Beltestad.

SALES & DISTRIBUTION SEGMENT - POSITIVE DEVELOPMENT IN Q4

The turnover for the Sales & Distribution segment totalled NOK 3,268 million in Q4 2015, up 6% on Q4 2014. The operating margin is up from 2.7% in Q4 2014 to 3.0% in Q4 2015.

*"The Sales & Distribution segment plays a key role in the Group's ambition to drive demand for seafood by launching new products and pioneering new markets. The segment not only sells its own production of salmon and trout, but also has a high level of sales activity in cooperation with third parties, ensuring a wide product range for the Group within seafood," confirms CEO Henning Beltestad.

* "We are proud to confirm that our Sales & Distribution segment can once again report an increase in turnover and operating margin in the fourth quarter," comments Henning Beltestad. He goes on to add: "It is also positive to see the potential for continued development in this segment. There is still extensive unexploited capacity in several fish-cuts and we can therefore see a major potential to increase activities and earnings within this part of the value chain in the years to come."

MARKET AND OUTLOOK

It is of decisive importance that the Group and the Norwegian fish farming industry as a whole uphold the capacity for sustainable operations in the future. The authorities and the industry must collaborate to ensure that future framework conditions are based on fact-based knowledge, so that such conditions continue to generate growth and increased value generation in the years to come.

The Group has made substantial investments in the use of cleaner fish. In locations where cleaner fish have been in use, the Group has achieved positive results. However, as previously reported, the Group will not reach full-scale utilisation of cleaner fish in all locations until 2016. The Group also acknowledges that the farming of lumpfish remains in the start-up phase, and that there will be improvements in both the production and use of lumpfish that

will gradually yield improvements in the production of salmon and trout. Cleaner fish represent an important tool, but other measures are also required to achieve optimal production including mechanical cleaning and fresh water treatment. In 2016, the Group will have a much higher well boat capacity, thereby increasing their capacity to carry out fresh water treatment. The Group will also significantly increase its capacity for mechanical cleaning.

In 2015, the Group was in a transitional phase, requiring extraordinarily high direct and indirect treatment costs in addition to major costs for prevention.

Prevention costs are estimated to increase in 2016, but the Group has a specific target to reduce the number of treatments, thereby reducing direct and, not least, indirect treatment costs in 2016.

The Norwegian krone has weakened against key currencies. This dynamic is positive for prices realised for salmon but also means - all other factors being equal - higher feed prices. At the time of writing, the best estimate is that feed costs for fish harvested in 2016 will see an increase when compared with 2015. Despite this, the Board has identified the potential for cost reductions in other areas in 2016.

One very positive factor was the re-establishment of imports to parts of the EAEU customs union towards the end of October 2015. At the time of writing, it appears that there are very limited opportunities for growth in the global supply of salmon and trout for the next few years. This gives rise to expectations for a good market in 2016. The Board of Directors has a positive outlook due to their confidence in the potential for substantial improvements to own production.

The firm of analysts, Kontali, currently estimates a decline in the supply of Norwegian salmon in 2016. The industry has not reported a growth in Norwegian production since 2012. Given the prevailing political framework, neither are there any prospects for growth in the medium term. It is important that the industry and political premise setters do their utmost to ensure that the industry can exploit its potential for a lasting increase in value generation and increased employment. It is crucial that Lerøy and the industry are able to solve current challenges, but of equal importance is the willingness among both local and national politicians to take a long-term perspective towards decision-making and framework development in order to allow the industry to fully exploit its major potential. The rapid response from the Norwegian authorities to the

industry's need to implement provisional growth in maximum allowable biomass (MAB) for trout, as a result of the above-mentioned trade barriers, is extremely positive for value generation and facilitates continuity in employment.

The Group currently estimates a total harvest volume of 183,000 GWT for 2016, including the share of LSG's volume from associates.

The management and Board of Directors currently expect the Group to achieve a higher profit in 2016 than in the year that has passed, based on the potential for improved productivity and the positive market outlook.

Questions and comments may be addressed to the company's CEO, Henning Beltestad, or to the CFO, Sjur S. Malm.