Annual report 1999
DOMSTEIN ASA GROUP INCOME STATEMENT - GROUP
Amount in 1000 nok Note 1999 1998
OPERATING INCOME Revenue 1 1.855.807 1.870.640 Revenue reduction 194.619 177.767 Operating income 1.661.188 1.692.873
OPERATING EXPENSES Changes in inventoriesof work in progress and finished goods 8 -24.028 Raw materials and consumables used 1.229.986 1.327.698 Payroll expenses 2,6 190.991 185.249 Depreciation and amortisation expenses 4,5 33.846 31.284 Other operating expenses 3,12 131.392 121.047 Total operating expenses 1.586.223 1.641.250
Operating Profit 74.965 51.623
FINANCIAL INCOME AND EXPENSES Income from subsidiaries and other group entities 9 2.567 1.517 Other financial income 3.701 2.160 Ohter financial expenses 50.117 42.196 Result og finacial items, net 43.849 38.519
Operating result before tax 31.116 13.104
Tax on ordinary result 7 9.271 2.661
Net profit of the year 21.845 10.443
Majority share 21.845 9.493 Minority share 0 950
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 2
BALANCE SHEET - GROUP
Amount in 1000 nok Note 1999 1998
ASSETS
FIXED ASSETS Intangible fixed assets Licences 5 16.636 11.702 Goodwill 5 20.432 18.664 Total intangible fixed assets 37.068 30.366
Tangible fixed assets Buildings and land 4,11 195.022 196.035 Machinery 4,11 143.782 141.925 Ships, rigs, etc. 4,11 2.491 2.401 Equipment and vehicles 4,11 24.575 25.713 Total tangible fixed assets 365.870 366.074
Financial fixed assets Investments in subsidiaries 9 24.188 12.742 Loans to associates 15 22.344 19.944 Investment in shares 8 2.691 2.485 Other receivables 15 27.178 24.307 Total financial fixed assets 76.401 59.478
Total fixed assets 479.339 455.918
CURRENT ASSETS Inventory 16 342.447 332.837
Debtors Account receivables 257.260 172.997 Other receivables 13 33.888 34.164 Total debtors 291.148 207.161
Cash and bank deposits 14.224 12.553
Total current assets 647.819 552.551
TOTAL ASSETS 1.127.159 1.008.469
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 3
BALANCE SHEET - GROUP
Amount in 1000 nok Note 1999 1998
EQUITY AND LIABILITIES
EQUITY Share capital 17 20.150 20.150 Fund 17 217.206 204.562 Total paid in capital and retained earnings 237.356 224.712
Minority 17 03.316 Total equity and minority 237.356 228.028
LIABILITIES Provisions Allocation for liabilities 9 1.080 0 Pension liabilities 6 5.342 4.449 Deferred tax 7 37.831 29.912 Total provisions 44.253 34.361
Other long-term liabilities Liabilities to financial institutions 10,11 337.298 324.383 Other long-term liabilities 10 3.211 2.715 Total long-term liabilities 340.509 327.098
Current liabilities Bank overdraft 11 308.759 229.431 Account payables 123.091 121.823 Taxes payable 7 2.141 1.044 Public duties payable 24.339 23.519 Dividends 10.075 8.060 Other short term liabilities 36.637 35.105 Total current liabilities 505.042 418.982
Total liabilities 889.804 780.441
TOTAL EQUITY AND LIABILITIES 1.127.159 1.008.469
Måløy 15. mai 2000
Olav Hørsdal Rolf Domstein Asbjørn Reinkind Gunnar Domstein Styrets leder Adm. dir.
Knut M. Domstein Endre Sekse Jostein Refvik
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 4
CASH FLOW STATEMENT GROUP
Amount in 1000 nok 1999 1998
NET CASH FLOW FROM OPERATING ACTIVITIES Profit/loss before tax 31.116 13.104
Taxes paid 0 0 Depreciation 33.846 31.284 Pension costs, net of contributors -983 0 Profit/loss from sale of fixed assets -967 -93 Items classified as investing or financing activites -2.567 -1.517 Change in inventories -9.610 -25.964 Change in accounts receivables -84.263 16.636 Change in accounts payables 1.268 30.123 Changes in other current balance sheet items 1.390 -12.501 Net cash flow from operating activities -30.770 51.072
NET CASH FLOW FROM INVESTING ACTIVITIES Purchase of shares -18.081 -7.623 Purchase of fixed assets -30.348 -61.168 Proceeds from sale of fixed assets 1.462 2.393 Investment in other financial fixed assets -5.271 -27.972 Net cash provided by investing activities -52.238 -94.370
NET CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of long term debt 46.063 52.457 Repayment of long-term loans -32.652 -44.464 Net change in bank overdraft 79.328 42.695 Dividends paid -8.060 -6.045 Net cash provided by financing activities 84.679 44.643
Net change in cash and cash equivalents 1.671 1.345
Cash and cash equivalents January 1. 12.553 11.208 Cash and cash equivalents December 31. 14.224 12.553
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 5
NOTES - GROUP
Accounting principles The consolidated financial statements for Domstein ASA are prepared in accordance with The Norwegian Accounting Act of 1998.In the preparation of the financial statement; management has used the principles that give the best periodic accuracy of the company’s income statement. The principles used are described below.
Consolidation basis Shares in subsidiaries are eliminated and the cost price for the shares is replaced with the company’s assets and liabilities, valued at cost price for the group. The difference between the purchase price for the shares and the groups share of the acquired company’s equity at the purchase time is analysed and first of all refer to those of the company’s tangible assets (or incurred liabilities) that has values different than those registered. The rest of the company’s equity and the minorities share of the referred excess value is being presented in the balance sheet as minority shares.
Shares in associates are valued in accordance to the equity method an the group’s share of the annual result in the associate company after depreciation of excess value is ascribed the cost price for the share. We use the same methods for handling excess value in both subsidiaries and associates.
Foreign Companies Using the exchange rate at 31.12 for both the income statement and the balance sheet recalculates Foreign Companies. The valuation variances are regulated directly against the equity.
Companies where Domstein ASA directly or indirectly owns more than 50% of the shares are being treated as subsidiaries.
Investments in companies where the group owns between 20 and 50 % of the voting shares, and where the group has substantial influence (associates) are valued by the equity method. In the financial statement of the parent company, the cost method is used to value associates.
Investments in companies where the group owns less than 20% of the voting shares are valuated by the cost method.
Domstein Espana S.L. is left out of the consolidation.
Bank deposits, cash in hand etc. Bank deposits, cash in hand etc includes cash with a short maturity. Fixed assets in tax deduction are included. Means of payment in foreign currencies are valued at the exchange rate of the balance day.
Inventories Inventories are valued at the lower of cost price (the first in first out principle) and net realisable value. The cost price includes direct material cost, direct payment costs and the share of the factory overhead cost for produced goods. It also includes the purchase costs for purchased goods.
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 6
NOTES - GROUP
Property, plant and equipment Tangible fixed assets are activated and depreciated if they will last more than three years and cost more than NOK 15.000, -. Costs concerning normal and periodical maintenance are charged as expenses. Costs of larger replacements and renovation that increases the value of the asset considerably are activated.
Investment deficit are deducted in the purchase cost, so this is registered at net value in the balance sheet. This means that the investment deficit is deducted indirectly in the depreciation through the reduced purchase cost.
Intangible fixed assets and excess value at take over that is expected to have a lasting value are capitalised in the balance sheet. An intangible value that is not refereed to specific items/assets is capitalised as goodwill. Intangible fixed assets and goodwill are depreciated through expected economic life.
Leases Assets that are leased on terms that transfers substantially all the risk and reward incident to Domstein ASA are not capitalised. The agreed rent is registered as current costs.
Research and development Research and development expenses are considered current costs.
Assets and liabilities in foreign currency Actual and unrealised currency profits and –losses that occur trough transactions, assets or liabilities are included in the income statement.
Taxes Deferred taxes are calculated by the debt method. In accordance to this method the deferred tax is calculated because of temporary differences between the financially calculated values of the balance sheet and the tax valuations of the balance sheet. The effect of the result is showing as a change in deferred taxes in the balance sheet.
Dividend The dividend from the subsidiaries are registered as revenue in the parent company the same year.
Change in accounting principles 1997. Effectively from December 31. Domstein presents the operating revenue net in the income statement. Sales reductions like freight; import duty insurance etc. is withdrawn from the gross revenue. 1996. Effectively from December31. Domstein introduced using the principle of the current rate of exchange, in appreciation of the current assets and the current liabilities in the future.
Investments in other companies We have made the following purchase and sale of companies. All purchases are handled using the acquisition method.
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 7
NOTES - GROUP
1999 Purchase. Domstein purchased the remaining 34 % of the shares in Svanøy Havbruk AS; thus Domstein holds the company 100 %. In addition Domstein took over 30 % of Ecco International AS and 25,4 % of Enghav AS, so that Domstein also owns these companies 100%. Total investment in shares in subsidiaries is NOK 9,9 million.
In addition Domstein has purchased shares in the associates Sogn Marine Farm AS and Norbait DA. Total investment in associated companies is NOK 7,9 million.
The investment in other shares and parts are NOK 206 000.
1998 Purchase. Domstein took over the last 15 % of the shares in Kungshamninteressentarna AB, so that Domstein owns the company, with subsidiaries 100 %. In addition the company took over 10,3 % of the shares in Ecco Holding AS and 30 % of the shares in Ecco International AS, so that the company with subsidiaries is part of the group as a subsidiary. The company also took over the last 9,8 % of the shares in Nordfjord Fiskeoppdrett AS. The total access of shares in subsidiaries is NOK 4,9 million.
In addition there has been investments in associates for NOK 2,5 million.
1997 Purchase. Domstein ASA merged with Sjølaks Oppdrett AS. Domstein as a result took over the subsidiaries Sjølaks AS, Evjelaks AS, Sjølaks Stamfisk AS, Skjerdal Laks AS and Viking Transport AS. Domstein in also took over an additional 15 % of the shares in Kungshamninteressentarna AB. Total access of shares was NOK 3,9 million.
In addition the investment in associates and other companies was NOK 4,6 million.
1997 Sale. Domstein sold the shares in Firda Settefisk AS.
1996 Purchase. Domstein purchased the shares in the following subsidiaries for a joint amount of NOK 30, 4 million; Bremanger Laks AS, Bremanger Smolt AS, Svanøy Havbruk AS and Kungshamninteressentarna AB.
In addition shares in other companies have been purchased for NOK5, 6 million.
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 8
NOTES - GROUP
1. Sales Income
Amount in NOK 1000 1999 1998
Breakdown on area of operation: Pelagic fish 577.737 702.327 Salt fish/Clip fish 262.471 234.583 White fish fillet 162.320 173.774 Fish Farming 608.943 557.125 Finished goods 244.336 202.831 Total 1.855.807 1.870.640
Breakdown on geographical area: Norway 421.150 400.324 EU-countries 605.873 611.891 The East 495.266 394.044 Other countries 333.518 464.381 Total 1.855.807 1.870.640
2. Payroll costs, number of employees, benefits, loan to employees etc.
Amount in NOK 1000 1999 1998
Salaries 167.922 165.475 Social security tax 16.954 15.848 Pension costs 893 0 Other benefits 5.222 3.926 Sum 190.991 185.249
Average number of employees 630 642
Auditor: The Auditors remuneration for 1999 is NOK 685.000, -. In addition fees for other services add up to NOK 341.010, -.
3. Other operating expenses Amount in NOK 1000 1999 1998
Leasing 10.438 9.677 Loss from accounts receivables 9.958 8.335 Other operating expenses 110.995 103.035 Total 131.391 121.047
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 9
NOTES - GROUP
4. Property, plant and equipment
Equipmen Buildings and Ships and t and Amount in NOK 1000 land Machinery rigs vehicles Total Cost 01.01.99 266.546 271.470 5.631 65.945 543.647 + Additions, purchased 6.155 18.518 635 5.040 25.308 - Retirements 0 2.519 0 381 2.519 Cost 31.12.99 272.701 287.469 6.266 70.604 566.436
Accumulated depreciations 01.01 67.614 129.545 3.230 40.232 200.389 + Ordinary depreciations 10.066 16.230 545 6.130 26.841 - Depreciations of retirements 0 2.088 0 333 2.088 Accumulated depreciations 31.12. 77.680 143.687 3.775 46.029 225.142
Closing balance. 31.12. 195.021 143.782 2.491 24.575 341.294
10 - 40 5 - 10 5 - 10 3-10 Useful life years years years years Depreciation plan Linary Linary Linary Linary
5. Intangible assets
Amount in NOK 1000 Licences Goodwill Total Aquisition cost as of 01.01.99 13.765 23.351 37.116 + Additions 4.934 2.642 7.576 - Retirements 0 0 0 Aquisition cost as of 31.12. 18.699 25.993 44.692
Accumulated depreciation 31.12. 2.064 4.687 6.751 + Ordinary depreciation 0 875 875 - Depreciation of retirements 0 0 0 Accumulated depreciation 31.12. 2.064 5.562 7.626
Balance as of 31.12. 16.635 20.431 37.066
Useful life Forever 20 years Depreciation plan None Linary
Access value connected to buying up fish farms is analysed again. In connection to this, access values are reclassified from goodwill to licensing rights. As a result of reclassifying the depreciation is NOK 688 thousand lower.
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 10
NOTES - GROUP
Goodwill for subsidiaries Balance value Useful life Depreciation Amount in NOK 1000 31.12. plan
Bremanger Fiskeindustri AS 244 20 years Linear Kungshamn Holding AB and 20 years Linear Kungshamninteressentarna AB 9.069 Enghav AS 9.128 20 years Linear Raudeberg Fiskeindustri AS 1.598 20 years Linear Selje Fiskeindustri AS 393 20 years Linear Total 20.432
6. Pension costs, funds and obligations
Amount in NOK 1000 1999 Present value of this year’s pension benefits 651 Interest expenses on pension liability 241 Expected return on pension funds 0 Net pension costs 892
Funds < Liability Accumulated benefit obligation 0 Estimated effect of future salary adjustments 0 Projected benefit obligation 5.342 Unrecognised net actuarial gain/loss 0 Net pension liability 5.342
Economic assumptions: Discount rate 6,0 % Expected raise in salaries/pensions/G-amount 3,0 % Expected return on fund investments 7,0 % Inclination to withdraw 50,0 %
Active employees 519 Age average 38 years. Remaining years of work 18 years.
As actuarial premises for demographically factors and retirement, the most common premises in insurance are underlying the calculations.
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 11
NOTES - GROUP
7. Taxes
Temporary differences that are the cause of deferred taxes, and changes in temporary differences: Temporary differences Amount in NOK 1000 1999 1998 Change Inventory 100.216 104.749 -4.533 Property, plant and equipment 85.473 68.313 17.160 Profit and loss account 1.109 1.386 -277 Accounts receivables 1.526 -1.134 2.660 Other temporary differences -4.720 0 -4.720 Shares 1.339 -273 1.612 Pension liabilities -5.342 -4.449 -893 Not used compensation -625 -176 -449 Losses carried forward -43.864 -61.588 17.724 Temporary differences 135.112 106.828
Tax rate 28 % 28 %
Deferred tax 37.831 29.912
Specification of tax expence
Amount in NOK 1000 1998 1998
Deferred tax 6.404 2.010 Tax payable 1.395 0 Tax refund -267 597 Tax (abroad) 1.739 54 Income tax expence 9.271 2.661
Specification of tax in the balance sheet
Amount in NOK 1000 1999 1998
Tax refunds 598 1.012 Tax payable 1.543 32 Tax payable 2.141 1.044
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 12
NOTES - GROUP
Specification of losses carries forward
At the end of 1999 the group has NOK 43.846 thousand in losses carry forward, which expire the following years:
Amount in NOK 1000
2006 1.175 2007 7.835 2008 4.981 After 2008 29.855 Total 43.846
8. Shares and parts in other companies
Amount in NOK 1000 Registered value
Nordnorsk Vekst AS 1.030 Nordvaranger Eiendom AS 102 Kystbedriftenes Helsetjeneste 169 Nordvest Forum AS 10 Sarl Norscott S.L 63 Lupis AS 10 Information office for fish. And Havbruk in Sogn and Fjordane. 8 Royal Norwegian Crab AS 200 Domstein Espana S.L 0 Unidos A/L 9 Norsk Lakseavlslag AS 502 Domstein Italia S.R.L 64 Shares held trough Ecco Holding AS 0 Shares held trough Kungshamn Holding AB 524 Total 2.691
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 13
NOTES - GROUP
9. Associates
Amount in NOK 1000 Byrknes Ervik Gripfisk Sandnes Sogn Vest Brønn- Fiskemot- Sjøfisk Skips- Fiske- Marine Norbait Company båtservice AS tak AS Invest AS invest AS oppdrett AS Farm AS DA Total Share 50,0 % 37,0 % 50,0 % 50,0 % 35,0 % 40,0 % 50,0 %
Balance as of 01.01 50 2.409 2.010 4.884 3.389 0 0 12.742 Additions 0 0 0 0 0 7.400 500 7.900 Share of income 1 175 3.019 494 457 0 -1.580 2.566 Share of dividend 0 100 0 0 0 0 0 100 Balance as of 31.12 51 2.484 5.029 5.378 3.846 7.400 -1.080 23.108
10. Other long - term debts
Debt that falls due more than five years after year end 1999 1998
Debt to credit institutions 181.810 161.767 Other long – term debt 0 0 Total 181.810 161.767
Instalment profile: 2000 2001 2002 2003 2004 After Total 35.316 34.345 31.460 28.843 28.735 181.810 340.509
11. Mortgages and guaranty
Domstein ASA has a group account system in Cristiania Bank og Kreditkasse. There is surety between the companies that are part of the group account system for any obligation at this time and in the future.
Amount in NOK 1000 1999 1998 Value of mortgaged debt 646.057 556.529
Value of mortgaged property Accounts receivable 257.260 172.997 Inventory 342.447 332.837 and land 195.022 196.035 Machinery, equipment and vehicles 168.357 167.638 Ships, rigs etc. 2.491 2.401 Total 965.577 871.908
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 14
NOTES - GROUP
There are guaranties for different creditors and bank connections.
Amount in NOK 1000 1999 1998
Amount of guaranty 5.340 6.477
12. Lease agreement
Måløy Fiskeindustri AS rents from SIVA a quay and a cold store at Trollebø, Måløy. The leasing agreement lasts for 15 years, from 1993, with a right to re-purchase. Lease for 1999 is registered with NOK 4,4 million.
13. Short term receivables
In other debtors we find v.a.t. Due to us, loans, prepayment, and occured cost.
Amount in NOK 1000 1999 1998
V.a.t due to us 22.461 24.443 Prepayment 9.231 7.894 Other debtors, loans etc. 2.196 1.827 Total 33.888 34.164
14. Bank overdraft
Amount in NOK 1000 1999 1998
Limit at 31.12. 340.000 305.000
15. Long term receivables
Amount in NOK 1000 1999 1998
Loans to associates 22.344 19.944 Loans to employees 1.591 1.374 Prepaid deliverance’s * 22.713 20.653 Loans to other companies 2.874 2.280 Total 49.522 44.251
* Prepaid deliverances are loans to rearmament of Russian ships
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 15
NOTES - GROUP
16. Inventory
Amount in NOK 1000 1999 1998
Finished goods 232.285 222.033 Work in progress 105.107 106.545 Semi - raw material 5.055 4.259 Total 342.447 332.837
17. Group equity
Capital stock in the parent company Domstein ASA consists of 4.029.900 shares à NOK. 5,-.
Capital Other Translation Sum Amount in NOK 1000 stock* Tied funds equity Minorities differences Equity
Equity at 31.12.98 20.150 102.689 105.222 3.316 -1.977 229.400 Unsecured pension plans 0 0 -4.449 0 0 -4.449 Deferred taxes 0 0 1.832 0 0 1.832 Deferred tax from cahnge of princ 0 0 1.245 0 0 1.245 Equity at 01.01.99 20.150 102.689 103.850 3.316 -1.977 228.028
Profit of the year 0 0 21.845 0 0 21.845 Allocation to dividend 0 0 -10.075 0 0 -10.075 Retirement of minorities 0 0 789 -3.316 0 -2.527 Direct equity registrations 0 0 -100 0 0 -100 RTranslation differences 0 0 0 0 185 185 Equity at. 31.12.99 20.150 102.689 116.309 0 -1.792 237.356
* = Capital stock and tied funds in the parent company Domstein ASA.
1997.In January Domstein ASA did a shaped emission. 827.400 shares at NOK 5,- were issued. At the same time there was a share split of excising capital stock, so that the company’s capital stock consisted of 3.720.000 shares after the emission. Further, in January Domstein ASA merged with Sjølaks Oppdrett AS. In that connection 309.900 shares at the price of NOK 5,- were issued, and a merging compensation of NOK 9.400.000 was given to the shareowners of Sjølaks Oppdrett AS.
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 16
To the Annual Shareholders' Meeting of Domstein ASA
AUDITOR'S REPORT FOR 1999
We have audited the annual financial statements of the Domstein ASA as of 31 December 1999, showing a profit of NOK 11.777.478,- for the parent company and a profit of NOK 21.845.000,- for the group. We have also audited the information in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit The financial statements comprise the balance sheet, the statements of income and cash flows, the accompanying notes and the group accounts. These financial statements are the responsibility of the Company’s Board of Directors and Managing Director. Our responsibility is to express an opinion on these financial statements and on the other information according to the requirements of the Norwegian Act on Auditing and Auditors.
We conducted our audit in accordance with the Norwegian Act on Auditing and Auditors and generally accepted auditing standards. Generally accepted auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. To the extent required by law and generally accepted auditing standards, an audit also comprises a review of the management of the Company’s financial affairs and its accounting and internal control systems. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, • the financial statements are prepared in accordance with the law and regulations and present the financial position of the Company and of the Group as of 31 December 1999, and the results of its operations and its cash flows for the year then ended, in accordance with generally accepted accounting principles • the Company’s management has fulfilled its duty to maintain the Company’s accounting process in such a proper and well-arranged manner that the accounting process is in accordance with the law and generally accepted accounting practices • the information in the Board of Directors’ report concerning the financial statements, the going concern assumption, and the proposal for the allocation of the profit/coverage of the loss is consistent with the financial statements and complies with the law and regulations.
Florø, May 15 2000 DELOITTE & TOUCHE
Tore Jakob Madsen State Authorised Public Accountant
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 17
Annual Report of the Board of Directors of Domstein ASA for 1999
Domstein ASA's result
Domstein ASA is a holding company for the Domstein group. The company's business comprises administration of the group as well as staff functions for the organisation, finance, IT and project development.
In 1999 the company had an operating revenue of NOK 13.4 million and a result after taxes of NOK 11.8 million. The board proposes that the result be allocated as follows:
Allocation for dividends NOK 10,074,750 Transferred from the distributable reserve NOK 1,703,728
The board proposes that a dividend of NOK 2.50 per share be paid.
The group's result
Million NOK 1999 1998 Net operating revenue 1,661.2 1,692.9 Operating profit 75 51.6 Result before taxes 31.1 13.1 Annual result 21.8 10.4 Balance 1,127.1 1,008.5 Short-term liabilities 505 418.9 Shareholders' equity 237.4 228
Results by category (unrevised) (1998 in brackets)
Thousand NOK Operating revenues Operating profit Pelagic fish 532,413 ( 35,127 (25,168) 647,178) White fish 173,066 ( -599 ( -5,345) 193,953) Clipfish 253,302 ( -9,555 ( 6,696) 223,922) Farmed fish 520,139 ( 42,777 (21,883) 468,261) Finished products 205,183 ( 7,215 ( 3,221) 187,868) Group 1,661,188 74,965 (51,623) (1,692,873)
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 18
Industrial division
The industrial division consists of the following companies: Domstein Fish AS, Måløy Fiskeindustri AS, Raudeberg Fiskeindustri AS, Selje Fiskeindustri AS, Bremanger Fiskeindustri AS and Fish Forwarding AS, Norbait DA (50%), Ervik Sjøfisk Invest AS (50%) and Vadsø Reke- og Fiskeindustri AS (50%). The division is run by Managing Director Gunnar Domstein.
Pelagic fish
The resource situation for both mackerel and herring is stable. The quotas for Norwegian spring spawned herring have been somewhat reduced, while the quotas for mackerel and herring in the North Sea have increased. Permission has been given for significant capelin fishing in the Barents Sea. No significant changes in the pelagic fish resource base or quotas are expected in the next few years. The board therefore considers the raw material situation to be satisfactory.
The markets for both herring and mackerel have been strongly marred by the economic situation in Eastern Europe. The market has normalised during the second half of the year. However, prices have come under very strong pressure due to increased competition from other Norwegian producers. The board considers the market prospects to be favourable, but believes there is a need for structural initiatives in the pelagic industry.
White fish
The raw material situation for white fish has developed badly. Cod quotas in the Barents Sea have been drastically reduced. To ensure access to raw materials, Domstein has signed fixed delivery contracts with Norwegian and Russian fishing vessels. Emphasis is being put on increasing the production of other species of fish, including saithe.
The shortage of raw materials led to large price rises for all white fish products in the first six months of 1999. Meanwhile, the market has reacted negatively to the high prices and sales of some products have experienced a drastic reduction. The market prices of saithe products fell heavily during the second half of the year. At the same time the export of clipfish to Brazil halved due to devaluation. The white fish business, both frozen fillet and clipfish, has therefore provided a negative result for 1999.
The board considers the availability of raw materials to be insufficient to maintain the satisfactory utilisation of capacity and profitability in white fish production. The board has therefore decided to wind up white fish
ANNUAL REPORT 1999 – DOMSTEIN ASA Page 19 production. The production of frozen fillet will be reduced during the first six months of 2000.
Finished products division
The finished products division consists of the following companies: Kungshamn Holding AB, Festab AB, Ecco Holding AS, Enghav AS, Domstein Sverige AB, Festab Polen AB. The division is run by VD Bengt Gunnarsson.
The product range consists of processed fish products such as fish pies, readymade dishes, breadcrumbed and filled portions and cod roe caviar. The products are marketed in Norway and Sweden with an emphasis on brand building. The strategy involves becoming a leading supplier of finished fish products in these markets, as well as expanding the business to other markets.
Domstein strengthened its position in the Scandinavian finished product market significantly in 1999 thorough co-operation and delivery contracts with the leading grocery chains in Norway and Sweden. This has contributed to the favourable development in the result. The board will continue these efforts. Work is being done on, amongst other things, developing a new range of fresh readymade fish dishes, due for launch in 2000.
Fish farming division
The fish farming division consists of the following companies: Domstein Salmon AS, Florø Fiskeindustri AS, Nordfjord Fiskeoppdrett AS, Olderøy Fiskeoppdrett AS, Gulen Fiskeoppdrett AS, Bremanger Laks AS, Bremanger Smolt AS, Nordfjordlaks AS, Sjølaks AS, Sjølaks Stamfisk AS, Evjelaks AS, Viking Transport AS, Skjærdallaks AS, Svanøy Havbruk AS, Sandnes Fiskeoppdrett AS (30%) and Sogn Marine Farm AS (40%). The division is run by Managing Director Harald Kvalheim.
Domstein's fish farming division was merged with Fjord Seafood ASA in 1.1.2000. Domstein initially received 40% of the shares in the merged company, but will, following the resolved capital expansion and participation in its dispersion sales, have 28% of the shares. The head office for Fjord Seafood ASA will be in Brønnøysund, whilst the sales organisation will be located in Måløy. The company plans its introduction to the stock exchange in September 2000.
Domstein's fish farming business has experienced a significant improvement in its result in 1999. This is due to increased market prices for salmon and trout, as well as lower production costs. Salmon prices have further increased during the first half of 2000. Developments in the foreign exchange markets will be of great significance for future price ANNUAL REPORT 1999 – DOMSTEIN ASA Page 20 developments. The board expects a strong, favourable development in the fish farming business's result as a result of the high prices, lower production costs and operational synergies in Fjord Seafood ASA.
Investments
In 1999, a total of NOK 30.3 million of investments were made. The board is placing great emphasis on maintaining and developing the group's companies so that they lead the field, both nationally and internationally, as far as technology, quality assurance and the environment are concerned.
Environment
The board places a great deal of emphasis on the group having high environmental standards. Our own activities, and activities linked to us, will therefore be conducted in accordance with the principles of sustainable development. Products, the consumption of raw materials and contributory factors shall be evaluated with respect to the natural resources base and environmental effects. The board has decided that environmental management systems will be developed and that the authorities and market's requirements concerning environmental standards shall be observed. Great emphasis is placed on stimulating environmental awareness among employees through training and information.
The group only uses electrical power as a power source and the cold storage companies use surplus power for heat recycling. No discharges are made into the air, however the cooling medium is ammonia, which according to analyses means it is in hazard class 2 in an industrial safety context.
All of the group's companies have discharge permits for water used in processing and have arranged for the necessary cleaning systems that the discharge permits require. No uncontrolled discharges have been registered. Packaging is sorted for recycling and the amount of waste sent to the municipal waste disposal site has been reduced in relation to previous years. Special waste is primarily limited to oil spills from the cold storage compressors and is delivered to approved reception stations.
Måløy Fiskeindustri AS is certified in accordance with the EU's arrangement for environmental management and environmental audits (EMAS).
Working environment
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All activities have associated health and safety services through a communal company health service. During the last few years the group has particularly focused on absence due to sickness and its causes. It has included Health, Environment and Safety thinking in all of its investment plans. Besides this, initiatives have been set in motion during the financial year to counter particularly repetitive work. The total amount of absence due to sickness in the individual entities varies from 14.3% down to 5%. The average is less than 12%, a bit lower than the average for the trade. Analyses for 1999 shows that work related absence could be as low as one third of the total absence. The work on surveying and countering work related absence will continue. The board considers the working environment to be good.
Outlook
The board has led the way in undertaking structural initiatives aimed at improving the profitability of the industry. There is a need for fundamental changes in both the white fish industry and the pelagic industry in order to adapt capacity to the resource base and utilise the market potential. The board considers the chance of reaping structural benefits to be good. The board expects a substantial improvement in the result for 2000.
Continued operation
The board and the Managing Director believe it is right to state that the accounts are presented on the basis, and assumption of, the continued operation of the company.
Måløy, 15th May 2000
Olav Hørsdal Asbjørn Reinkind Gunnar Domstein Knut Magne Domstein (Chairman)
Endre Sekse Jostein Refvik Rolf Domstein (Managing Director)
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