Annual Report 2005
Part of the Aker group This is Aker Seafoods 1 Highlights 2005 2 Key Figures 2005 3 Letter from the CEO 4 Integrated value chain 6 Harvesting 8 Processing 10 Sales and distribution 12 Corporate social responsibility 14 Annual Report 2005 16 Board of directors 21 Annual accounts 23 Auditor’s Report for 2005 68 Corporate governance 70 Management 71 Shareholder facts 72 This is Aker Seafoods
Aker Seafoods is a leading Aker Seafoods’ harvesting international modern seafood operations are performed by company. The company focuses fifteen active vessels. All vessels on operations for harvesting, harvest cod, saithe and haddock processing and marketing white- in Norwegian territorial waters fish. Aker Seafoods operates north of the 62nd parallel, as well enterprises in Norway, Denmark as for saithe in the North Sea. and the UK. Aker Seafoods controls 28 cod licenses that constitute roughly The company has an integrated 9 % of the total Norwegian cod value chain with strong bonds quotas north of the 62nd parallel. between harvesting and process- ing that gives Aker Seafoods a Aker Seafoods’ processing steady supply of raw materials all operations are performed by year round. The integration ena- eleven fully-owned process- bles the company to supply fresh ing facilities, six of which are in fish products to market 364 days Norway and five in Denmark. In a year. Roughly two-thirds of the addition Aker Seafoods owns raw materials processed by Aker shares of receiving facilities and Seafoods’ Norwegian processing other fishing industry operations. plants are supplied by our own fishing fleet. In sales and distribution, Aker Seafoods has developed close relations with major supermarket chains, processing companies and brand owners in Europe and USA.
Driftsinntekter
2005 -2316 2004 -2402 2003 -2431 e m p l o y e e s 3000 2002 -2992 200 r e v e n u e s year 2005 e b i t d a year 2005 2000 year 2005 EBITDA 100 1000 2005 -1267 181 2316 Harvesting: 337 181 2004 - 162P rocessing: 893 0 0 MNOK 2002 2003 2004 20052003 - 179 O t h e r : 3 7 2002 2003 2004 2005 MNOK 2002 - 72 Highlights 2005
1st quarter In early March, the Norwegian government launched an adjusted By the end of March, and agreement was made to merge the com- structural quota system for the sea-based trawler fleet. Structural panies Norway Seafoods, West Fish-Aarsæther (WFA) and Nordic quota means that quotas from several vessels can be allocated to Sea Holding (NSH) into one of the leading fishing companies in one vessel if the superfluous vessels are removed from the fleet. Europe, Aker Seafoods ASA This has proved beneficial for Aker Seafoods’ operations
2nd quarter Aker Seafoods was listed at the Oslo Stock Exchange in May 2005 This June Aker Seafoods made new agreements that implied a full with the ticker code AKS. Through the listing Aker Seafoods has refinancing of its corporate accounts, to improve the further develop- improved its access to capital and through this increased its financial ment of the company. The refinancing made had better terms for flexibility. Aker Seafoods and a long term perspective.
3rd quarter In august Aker Seafoods acquired Nordic Sea Mehamn AS’ in Gam- Aker Seafoods has strengthened their operational activities in Fin- vik, there will be a gradual starting-up process, with fresh fish being mark by merging West Fish Aarsæther AS and Nordic Sea Holding processed at the plant from 2006. AS into one stronger and more forward-looking harvesting company.
In August Aker Seafoods also made a deal with ICA Sverige AB to In addition Aker Seafoods has located all production of sawed frozen produce fish products for the ICA-chain in the Nordic region. This retail products in Norway to Melbu. contract represents a revenue increase of 30 MNOK, if the contract is continued it will have an annual revenue potential of 50 MNOK. After the parliamentary elections, the newly elected government decided to introduce a pause in the structural scheme offered to the In September Aker Seafoods entered agreements to increase its coastal- and the high sea trawler fleet. ownership share in Lofoten Trålerrederi AS to just above 93 percent, and through this strengthened operations in Nordland by merging In October, through a joint effort with Aker ASA, Aker Seafoods Lofoten Trålerrederi and Havfisk into a stronger and more progres- bought real estate and operational equipment from Aarsæther Vardø sive harvesting company. AS. In the short term Aker Seafoods will run the Whøni-plant with limited fishing activity. 4th quarter In November the Directory of fishing discontinued the maximum In December Aker Seafoods was granted permission by the Ministry quota for saith north of 62°N for vessels with trawling licenses for cod of Fisheries and Coastal Affairs to change the composition of owner- or saith. ship in the harvesting companies. This made it possible to execute the agreements of share purchases entered in September.
aker seafoOdS Annual Report 2005 Key figures 2005
Proforma Proforma Proforma Proforma 2005 2004 2003 2002
MNOK IFRS IFRS NGAAP NGAAP
Revenues 2 316 2 402 2 431 2 992 EBITDA 181 162 179 72 EBITDA margin (%) 7.8 6.7 7.4 2.4 EBIT 98 121 64 -45 Earnings per share (NOK) 0.63 1.11 -0.27 0.12 Total assets 2 750 2 589 2 594 2 835 Total equity 905 830 793 757 Equity ratio (%) 32.9 32.1 30.6 26.7
aker seafoOdS Annual Report 2005 Letter from the CEO Aker Seafoods aims to have the capacity of delivering high-quality fish 364 days a year to quality-conscious European consumers. From the time the fish are landed on our trawlers until they’re lying on dining tables all over Europe, it takes extensive teamwork to bring the prime seafood products all the way to market.
Lasting profitability in the fishing industry ”We wish to create an integrated, market-oriented company that is profitable in every link of the chain – from harvesting and processing to sales and distribution. This strategy enables Aker Seafoods to generate added value for the company’s customers and shareholders.”
President & CEO Yngve Myhre
Today, we are one of the largest employ- to succeed in international competitive mar- Taking a longer view, our industry will more ers in Northern Norway. Around 900 of kets. Yesterday’s solutions will not measure than likely be increasingly internationalised. Aker Seafoods’ 1267 employees work and up to tomorrow’s market demands. From Aker Seafoods aims to be one of the leading live in the districts of Finnmark, Troms or now on, our industry must be given the suppliers of fresh fish for the European sea- Nordland. An additional 50 employees live requisite stability and predictability for giving food market and we must be part and parcel along the coast of Western Norway. We investors the same profit margins that are of the ongoing internationalisation process also have substantial activities in Denmark available to them in other similar industries. in the fishing industry. This means that in the involving almost 300 employees. Aker Sea- years ahead we will consider increasing our foods invested about NOK 50 million in our Future prospects activities beyond Norway’s borders as well. operations along the coasts of Norway and Last year was a year of significant opera- In addition, we must continue to strengthen Denmark in 2005. tional prosperity for Aker Seafoods. Good our distribution channels through alliances in first-hand prices, an improved product mix important markets and implement new, mod- The great seafood resources in the coastal and a high demand for our products have ern fishing technology that helps to improve waters are a renewable resource which, if improved the Group’s operating margins. our efficiency, combined with supplying sustainably managed, can maintain lasting Even so, a great potential still exists for products of even higher quality. communities in the districts in which we efficiency improvements and for simplifying operate. Aker Seafoods wishes to partici- and streamlining the seafood industry in Year of great changes pate in managing these resources, for which Norway and Denmark. Exploiting this poten- 2005 was a year of great changes for the we have quotas to fish, for the benefit of tial is necessary if we are to reach the same fishing industry and Aker Seafoods. Early future generations. margin level as our global competitors. Aker on, we launched the new fishery group Aker Seafoods wants to be an active initiator of Seafoods, which resulted from a merger of From crises and continual readjust- forward-looking initiatives that can increase Norway Seafoods, West Fish-Aarsæther and ments to an industry with lasting our profitability on land and at sea in the Nordic Sea Holding. At the same time, we profitability years ahead. Denmark has issued new announced the stock market listing of the Although the fishing industry is crucial for Nor- fishery regulations for 2006 which are more new aggregate company. The transaction way, its profitability has been too low in the flexible and make it possible to exchange was and is based on the fact that merging the past. Over the last fifteen years, the industry quotas and improve the operating frame- companies would strengthen their opportuni- has managed to free itself from the need for work for fishermen. We expect great things ties as a competitive supplier of high-quality and the use of state subsidy. This has been from these changes and also believe that fish to demanding customers in Europe. a comprehensive and pain -ful conversion the land-based industry will come through process for the industry, but everything now these changes with renewed strength. Aker Seafoods underwent a hectic, demand- appears to be headed in the right direction. ing integration process in 2005. The merger Favourable outlooks in the fresh-food of the three companies, with countless sub- Each year, the Norwegian fishing fleet market and good first-hand prices give sidiaries, was a comprehensive, time-con- lands more than 2.5 million tons of sea- grounds for optimism in the fishing-fleet suming process. The company was listed on food. Ninety per cent of the products are segment of Aker Seafoods. In order to meet the Oslo Stock Exchange on 13 May and, sold on international, competitive markets. the great continental demand for fresh fish, with the assistance of the company’s many This makes the industry one of Norway’s our processing plants were fully active dur- employees, Aker Seafoods has become most internationally-oriented industrial ing the general summer holidays in 2005. attractive to investors. Now the task at hand sectors. The consequences of unlawful But this optimism has a bitter aftertaste. is to deliver the expected results. I would fishing have posed a major challenge to We are uncertain of the consequences like to take this opportunity to thank all our the fishing industry in Scandinavia in recent of the announced structural freeze in the employees and business associates who years, and a few companies have even Norwegian fishing industry, of insufficient have contributed to our favourable develop- lost market shares in the competition with flexibility for optimising our operations and ments and who do their share every day to illegally harvested fish. Recent focus on the of the introduction of district quotas. In the generate profits for Aker Seafoods – based consequences and possible initiatives give view of Aker Seafoods, this freeze combined on raw materials of high-quality fish from grounds for hoping that illegal fishing will with insufficient options for converting the Norway and Denmark. decrease. Nevertheless, the Norwegian and fishing fleet may result in a shortage of raw Danish fishing industries must be among the materials for the processing industry, also in best in terms of efficiency and adaptability the last six months of 2006.
aker seafoOdS Annual Report 2005 Integrated value chain ensures profitability in every link
Aker Seafoods is one of the few fishery companies with a totally integrated value chain. The value chain has strong bonds between harvesting and processing, reducing many of the challenges faced by other seafood companies with regard to a steady supply of raw materials.
aker seafoOdS Annual Report 2005 Salg & distribusjon Integrated value chain
By ownership in the entire value chain, Roughly two-thirds of the raw materi- Aker Seafoods can follow the fish from als processed by Aker Seafoods at its the Barents Sea to the fishmonger’s Norwegian processing plants are sup- counter in Paris or London. This helps plied by our own fleet. This secures Aker to ensure that Aker Seafoods can supply Seafoods’ year-round access to valuable the market with fresh fish products 364 whitefish. In Denmark, a unique platform days a year. of receiving satellites has been estab- lished to secure a continuous supply of Aker Seafoods’ value chain starts with fish for processing. The combination of the harvesting process, where fifteen our own fleet and fine receiving facilities modern fishing vessels manage the ensures steady supplies and profitable supply of whitefish resources north of operations, in the processing-industry the 62nd parallel and in the North Sea. segment as well. Aker Seafoods is Europe’s largest white- fish harvesting company. The trawlers Frequent, extensive market contacts supply the raw materials to through important strategic alliances with Aker Seafoods’ processing plants along Europe’s largest supermarket chains en- the coast of Norway – from Ålesund on able Aker Seafoods to continuously adapt the Sunnmør coast to Vardø in Finnmark. production and harvesting to meet market The strong bonds between the market- needs. This enables the company to opti- ing, processing and harvesting segments mise its activities – generating profitability strengthen Aker Seafoods’ capacity to in every link of its value chain. adjust the harvesting of annual fishing quotas to the products in demand by Aker Seafoods’ model of profitable, our customers. market-sensitive business areas from harvesting and processing to sales and distribution is a unique, distinguishing feature of the company within the Eu- ropean fishing industry. In our view, this ensures the company’s profitability and generates added value for the company’s shareholders.
sales & harvesting processing distribution
External sourcing In Norway Fresh filet from the the costal fleet Frozen filet Sourcing from own fleet In Denmark Other products
Secure and flexible Capacity utilization Strategic alliances form access to whitefish and thus profitability is the bases for a product from own fleet and secured through stable offering adapted to external suppliers. access to raw materials. market needs.
aker seafoOdS Annual Report 2005 Harvesting Aker Seafoods is one of the largest whitefish-harvesting companies in Europe and, in 2005, the harvesting activities were carried out exclusively in Norway. The company’s harvesting activities are an essential part of Aker Seafoods and are regarded a core competency of the Group. At the end of 2005, the fishing fleet consisted of fifteen effective fishing vessels: nine fresh-fish trawlers, five freezer trawlers and one combined fresh-fish/ freezer trawler.
aker seafoOdS Annual Report 2005 Photo: Harald M. Valderhaug operating revenues EBITDA EBITDA- margin Sale & Harvest Processing distribution key figures 2005 MNOK MNOK
operating revenues EBITDA EBITDA- margin
key figures 2004 MNOK MNOK
Aker Seafoods’ fleet mainly operates in the Barents sea and close to the Norwegian coastline.
Every vessel in Aker Seafoods’ fleet ties during more of the year and improved One of the major contributing factors to harvests cod, saithe and haddock in the predictability for operating the remaining increased whitefish prices was the rising Norwegian waters north of the 62nd parallel. vessels of the same fishing company. Ac- demand for fresh fish in Europe and an In addition, the freezer trawlers and a few cording to the new system, licenses are no increased demand for salted fish and a fresh-fish trawlers also harvest fish in the longer temporary, as long as the license- few saithe products in important markets in North Sea. The freezer trawlers are also holder complies with official requirements. Eastern Europe and South America. Unfor- licensed to harvest shrimp but due to a dif- In 2005, Aker Seafoods chose to restructure tunately, there were considerable unex- ficult market situation, shrimp-fishing activi- many of its quotas in accordance with this ploited shares of the 2005 quotas in Norway ties in 2005 have been low. Aker Seafoods scheme and has thereby obtained the basis for a few fish species like saithe and had- owns 28 cod licenses in all (curtailments for harvesting fish using only 14 active ves- dock. Whitefish quotas totalling almost NOK were issued in connection with the structural sels in 2006. 500 million were not harvested in Norway in scheme) which total about 9 per cent of the 2005. A few of Aker Seafoods ASA’s fresh- total Norwegian cod quotas north of the After the elections in autumn 2005, the fish trawlers also had remaining quotas for 62nd parallel. Aker Seafoods quotas amount newly elected government decided to haddock and saithe. For this reason, we will to 30 per cent of the trawler quotas allotted. introduce a pause in the structural-scheme intensify our follow-up with the authorities This means that Aker Seafoods has quota offered to the coastal and high sea trawler for the purpose of increasing our flexibility rights for harvesting some 55,000 tons fleet, at the same time that it launched a by allowing us to transfer quotas among our (round weight) of whitefish. process to evaluate the effects of previ- own vessels and to enable earlier re-alloca- ous schemes. Future structural schemes tion of quotas in the future. A deliberate reduction in the number of will therefore depend on the results of operational vessels during 2004 and 2005 this evaluation. Aker Seafoods strongly Integration (see below) – due to the structural quota emphasises the importance of continued Roughly two-thirds of the raw materials scheme and combined with the fact that fleet flexibility and manoeuvrability in order processed by Aker Seafoods’ Norwegian the quota base has generally been kept to operate efficiently in a highly competitive processing plants are supplied by our own – will gradually lead to higher harvesting international industry. harvesting fleet. Closely integrating our revenues per vessel. In 2005, the company harvesting segment with our processing has reduced its harvesting costs per kilo Market trends facilities helps us to improve our utilisation by approximately 3 per cent, despite rising During the course of 2005, more than of raw materials and to optimise our trawler oil prices and increased crew share costs. 516,000 tons (round weight) of whitefish fleet, measures which also have a beneficial This is the result of the ongoing efficiency- were landed at Norwegian fish receiving effect on our potential earnings. Neverthe- improvement process of restructuring the and processing facilities broken down as less, there is still a potential for increasing the fleet. This effects will further intensify in 224,000 tons of cod, 63,000 tons had- supply of raw materials to our own industry 2006 and 2007 after the effects of the last dock and 228,000 tons saithe1 . This is an from our own fleet if given the opportunities restructuring measures have materialised. increase compared to 2004, when the total to exchange quotas among vessels within harvest of cod, haddock and saithe was the same group of trawlers, for instance. We Structural quota scheme 507,000 tons. This is the result of increased aim for increased flexibility, e.g. letting us The structural quota scheme is an improved saithe harvests. Aker Seafoods’ harvest- transfer a percentage of the cod quotas of regulatory scheme that makes it possible for ing activities harvested almost 58,000 tons our freezer trawlers to our fresh-fish trawl- vessel owners to combine fishing quotas. (round weight) of whitefish and shrimp in ers. Increased flexibility can also assist in The scheme was introduced in March 2005 2005, compared to approximately 52,000 substantially increasing the supply of fish for the high sea trawler fleet. The coastal tons during the same period of 2004. to Norway’s processing segment which in fleet has had similar operating and structural turn can help to reduce layoffs and seasonal schemes since 2003. The present scheme The average first-hand price in 2005 was NOK fluctuations. This is a challenge taken up with makes it possible for the owner of fishing 19.82 per kg/GW for cod, NOK 11.59 for had- the fishery authorities by trade organisations, licenses to combine licenses from two ves- dock, while the price of saithe was NOK 6.43 employees and other supporting participants, sels. If one of the vessels is subsequently per kg/GW1. Compared to 2004, the first-hand but so far no clarification of this issue has condemned, the fishing company will be prices for these fish species have increased been forthcoming. allotted a higher quota for a remaining ves- by almost 16 per cent. The increase resulted sel which is entitled to fish a corresponding from a sharp rise in the demand for whitefish quota. A scheme of this sort facilitates better on important European markets. harvesting efficiency and fishery activi-
1) Source: Directory of fisheries aker seafoOdS Annual Report 2005 Operating revenues EBITDA EBITDA MARGIN Operating revenues EBITDA EBITDA MARGIN year 2005 year 2005 year 2005 year 2005 year 2005 year 2005
processing processing norway year 2004 year 2004 year 2004 DENMARK year 2004 year 2004 year 2004 KEY FIGURES KEY FIGURES
MNOK MNOK MNOK MNOK
sales & harvesting processing distribution
Photo: Scanpix Processing Aker Seafoods’ processing activities are a core competency in the company’s integrated value chain. Ownership to both processing plants and the harvesting segments along the coast of Norway and Denmark secures market adapted production and offering of seafood.
Aker Seafoods’ processing activities consist Single-frozen fillets constitute an important of eleven fully-owned processing plants, six product segment and a high-priority area of which are in Norway and five in Denmark. of focus for Aker Seafoods from now on. The Group also owns sourcing facilities in Rising consumer demand for high-quality Vardø, Mehamn and Skarsvåg (Norway) local products – largely due to the media’s and owns shares in a sourcing and pro- spotlight on environmental crime and illegal cessing plants in Havøysund, Norway. fishing – will improve Aker Seafood’s pros- The processing activities are a substantial pects in the competition with double-frozen business segment for Aker Seafoods and products from China. the largest in terms of turnover. Like the harvesting division, processing is regarded In the frozen-fish block market, price com- as a core group enterprise. Aker Seafoods petition is stiff due to increasingly efficient Through a geographic spread of processing facilities has made major invest-ments in modern global logistics. This challenges the seg- Aker Seafoods secure a continuous supply to the technology and established first-class ments of Aker Seafoods’ activities that are market. processing plants in both Norway and based on the defrosting of raw materials Denmark. By changing the product mix, when fresh fish are unavailable. Thorfisk has daily deliveries of high quality Aker Seafoods’ processing facilities have fresh fish and fish products directly from increased their margins in recent years, The price of frozen fillets has also risen dur- their own processing plants in Denmark giving the company a good starting point ing the period and the export price per kilo to consumers and HORECA in the Nordic for additional growth and earnings in the of frozen cod fillets was NOK 45.77 in 2005, Region and Europe. years ahead. compared to NOK 44.37 in 2004. The production of finished goods at Nord- Processing Norway The difference in price between frozen and havnen in Greena currently includes pan Aker Seafoods is currently a leading mar- fresh fillets remained the same in 2005. This fried, fired and filled fish products that are ket player in Norway’s whitefish processing makes it exceedingly more profitable for sold both branded and under private labels industry. In Norway, Aker Seafoods pro- Aker Seafoods to re-prioritise the product to customers all over Europe. Thorfisks cesses fresh and frozen fillets (loins, por- mix to include a greater percentage of fresh production also includes a specialized block tions and tails) of cod, saithe and haddock. products. processing for the North European market.
The export of whitefish products is a long- Processing Denmark Integration standing Norwegian tradition. In recent In Denmark Thorfisk AS produces a wide Aker Seafoods receives roughly two thirds years, the Norwegian fishing industry has range of products based on cod, salmon, of its raw materials from its own fleet as an gradually converted to and increased its pro- plaice, saithe, Alaska pollock and trout. Thor- important component of an integrated value duction of fresh, high-quality fillet products. fisk’s products include retail packaged frozen chain. The remainder of the raw materials and fresh fish, semi-fabricated products and are delivered to the plants by the coastal Norway exported more than 8 000 tons of industrial products. All products have the fleet. To maintain a year-round production, fresh whitefish fillets in 20051. This repre- same, high quality for customers focusing on it is important for the processing plants to sents a volume increase of almost 20 per quality, traceability and sustainability. have access to raw materials all year round. cent. Aker Seafoods exported more than As a result, the structural quota regime 3,500 tons of fresh fillet products in 2005, The company is a market leader in Denmark helps to maintain production activities in a 60 per cent increase compared to 2004. within consumer packed fish products in summer, as well. In 2005 the export prices per kilo of fresh modified atmosphere (MAP). For “Thorfisk fillet were NOK 69.27 (cod), NOK 41.00 Frisk Fisk” only raw materials of the highest Over the past decade, the Norwegian white- (haddock) and NOK 22.77 (saithe). The quality are used. Rapid cooling just after the fish industry has seen weak margins. This export prices for fresh whitefish fillets have fish is caught and then keeping it at the right has resulted in a consolidation within the risen by almost 11 per cent compared to temperature is critical to maintain the quality industry, reducing the number of processing 2004. European market preferences have and freshness of the fish all the way to the plants from 35 in 1997 to around 10 today. reoriented towards a heavy demand for customer. This trend contributes to improving the fresh fish. availability of raw materials for the remaining plants.
1) Source: Export council for fish 11 aker seafoOdS Annual Report 2005 Aker Seafoods produce and sell a wide range of frozen and fresh fish products. In the delivery of fresh fish time is the critical factor.
12 aker seafoOdS Annual Report 2005 Photo: Thorfisk AS and Aker Seafoods ASA Sales and distribution The final link of Aker Seafoods integrated value chain is comprised of Sales and Distribution. We run this business area by making extensive use of our business associates and in close cooperation with our cus- tomers.
sales & harvesting processing distribution
Aker Seafoods uses strategic alliances continued growth in product segments such to develop close connections with major as fresh cod and haddock, as well as in fro- supermarket chains, processing companies zen consumer products from Norway. British and brand-name owners in Europe and sales generate approximately 10 per cent of the US. The most important customers of the company’s revenues. our Norwegian processing division include Primex, Findus, Nestlé, Unilever, Pieters, In the Benelux countries, Aker Seafoods Young’s Bluecrest and Seachill. In addition markets its products to processing compa- to these customers, Thorfisk of Denmark nies such as Pieters and to grocery chains delivers consumer-packed fresh-fish prod- such as Carrefour. The most important prod- ucts to Danish retail chains such as Dansk ucts in these markets are fillets, loins and Supermarked, Coop and SuperGros. Fresh- whole fish from both Norway and Denmark. fish products are also sold to large chains Sales to the Benelux countries generate such as Carrefour, Auchan, Système U and approximately 3 per cent of the company’s E. LECLERC. revenues. In the USA, Aker Seafoods works Aker Seafoods has sales offices in Ålesund, Oslo, together with American Seafoods under the Grenaa and Grimsby. Markets FRIONOR brand. Roughly 2 per cent of the The Nordic countries are the most impor- company’s revenues are generated in the tant market for Aker Seafoods representing US market. roughly 30 per cent of Group turnover in 2005. For several years, Aker Seafoods Integration has worked together with Findus on bran- Aker Seafoods’ trawler fleet enables the ded Findus products for retail and industrial group to supply the processing facilities with sales on the Norwegian, Finnish and high-quality fish every day, all year round. Swedish markets. This enables Aker Seafoods’ Sales and Distribution to guarantee customers fresh Through Thorfisk, Denmark is an important fish all year round, which in turn guarantees market for ready-made fish portions and high-quality products with high reliability of products for Danish grocery shops and delivery for the company’s many demanding supermarkets. Thorfisk has a powerful customers. market share in consumer-packed fresh-fish products (MAP) in Denmark. Aker Seafoods Nordic Group aims to expand into other markets in Europe In addition to our extensive use of strategic with its MAP products. alliances, Aker Seafoods owns Nordic Group, a dedicated export company whose France is a primary market for frozen and earnings are primarily generated by exports pre-packed products and fresh products of fresh and frozen whitefish products. Nor- alike. It is also an important market for fro- dic Group operates as a seperate trading zen block products. Aker Seafoods markets entity, and is thus reported as a separate its products direc-tly and indirectly to Car- business area. refour, Auchan, E. LECLERC, Intermarché and Systemè U. French sales represent Nordic Group Key figures approximately 20 per cent of the company’s Amount in million NOK 2005 2004 revenues. Operating revenues 387 383 EBITDA 3,7 0,2 The United Kingdom is an important, grow- EBITDA-margin 1,0% 0,1% ing market for fresh products. It is the lead- ing market for MAP products in general and the prime market for frozen block products. The British market has great potential for
13 aker seafoOdS Annual Report 2005 Corporate social responsibility As one of the largest members of the Norwegian and Danish fishing industry, we shoulder a great social responsibility, and together with the other actors of the fishing industry we are facing challenges that must be dealt with immediately. Social responsibility involves more than conserving nature; it is also a question of sustaining an industry so it can survive and continue to be an important facilitator for activities and employment also in the future.
Sustainable rural development
14 aker seafoOdS Annual Report 2005 Aker Seafoods is one of the biggest privately owned employers in rural Norway.
Complying with current laws and regulations Today’s Norwegian fishing industry has is a matter of course and has nothing to do entered a totally new competitive situa- with our social responsibility. The challenges tion: our production is now competing with facing the fishing industry are too compli- block-frozen fish from China. This forces cated to be countered by legislation alone. prices to decline, thereby threatening the In our view, social responsibility is a long- entire basis for a large coastal population. term commitment, i.e. taking responsibility We must deal with the consequences of this for the consequences of our operations, new competitive situation. We believe the now and in future. solution lies in modernising the way in which we harvest and process fish in Norway. Our primary contribution to a sustainable Improving the way we manage and process fishing industry is by running our business the resources will enable us to sell more fish according to ethically and socially accept- at a greater profit in the future. The proper able standards and, by so doing, by demon- sourcing of raw materials will also keep the strating that it is possible to run a profitable labour-intensive filleting process going all company and lay the groundwork for a year round. If we have a predictable struc- viable industry at the same time. Increas- tural policy, stabilised operations of this sort ing our margins not only means profit but will be able to provide secure workplaces in also long-term opportunities and financial outlying districts. sustainability. If the authorities join forces with the industry Needless to say, overfishing is the greatest to establish an international understanding single challenge facing Aker Seafoods. It for the dangers of overfishing and if the fish- incurs great costs on the authorities and the ing industry obtains a predictable framework industry and threatens to ruin Norway’s fish- in which to operate, it will be possible to run eries, particularly the fishing of cod, forever. profitable fishing operations in Norway, for For this reason, we are extremely supportive future generations as well. of the increased focus by the authorities on ensuring that the fishing and trans-shipment Values vessels respect existing quotas assigned to Values become concrete and visible the Norwegian and Russian fishery zones when people make choices. Ever day we and hope and believe that this will eventu- face dilemmas where we have to choose ally have the desired effect. Yet we can also between different alternatives. Fundamen- help in the struggle to improve the control tally the choices we make are based on and management of the fishery resources. our personal values. The company’s values We alone cannot stop the overfishing that are the product of a long industrial history. is occurring, but we can participate in laying These values express who we are and the the groundwork for a fishing industry where way we do business, and we expect all high quality and traceability are important our employees to act in accordance with factors. them. To be able to harmonize the personal values of our employees, the way they We can also work for better dialogue within are expressed at work, and our company the seafood industry. By being open to our values, is critical in building an organization colleagues abroad and by initiating joint capable of long term value creation. efforts to trace and control quality across national borders, we can help to establish routines and attitudes where they should be found: within the industry itself.
15 aker seafoOdS Annual Report 2005 Annual Report 2005 Aker Seafoods continued its operational improvements in 2005. The operating result before interest, tax, depreciation and amortisation1 (EBITDA) was NOK 181 million for the year on the whole. This was a NOK 19 million increase compared to 2004.
Aker Seafoods is the result of a merger of The company’s primary business areas are Competitive conditions Norway Seafoods, West Fish-Aarsæther harvesting and processing of whitefish. Aker Aker Seafoods competes in a global and Nordic Sea Holding. Aker Seafoods Seafoods is one of the biggest employers in market. The competitiveness of the Norwe- ASA was listed on the Oslo Stock Exchange the Norwegian fishing industry and a leading gian fishing industry has been challenged in May 2005. The largest owner is Aker ASA exporter of whitefish products. for many years by the production and import with an ownership of 66.76 per cent of the of frozen products from low-cost countries, shares. The company has activities in Norway, particularly China. In addition, the structural Denmark and the UK. The primary market quota scheme in Iceland has contributed to Aker Seafoods is a leader of the fishing for Aker Seafoods’ products is Scandinavia toughening the competition encountered by industry in Norway and Denmark. The and the rest of Europe. Norwegian manufacturers in the European company harvests, processes, markets and market for fresh fish. distributes whitefish. The merger in 2005 At year-end, Aker Seafoods had owner- was carried out to improve the ability of the ship interests in trawler owning companies An improvement of the operating framework, companies to supply fresh fillets and other in Nordland and Finnmark which together as well as the effect of the merger in 2005, value-added fillet products to quality con- operate 15 active trawlers and control 28 have helped to improve Aker Seafoods’ scious consumers in Europe. The merger licenses as of 31 December 2005. harvesting activities and to even out the has strengthened the Group, organisation- supply of raw materials to the company’s ally and commercially alike. Within processing in Norway, Aker Seafoods own processing facilities. This has increased owned five production plants as well as the Group’s ability to manufacture a greater The Group’s operating revenues and results three fully-owned and one partly owned proportion of fresh fillet products and led to are in keeping with those communicated receiving facilities at year-end. In Denmark, better profitability and competitiveness in by the Group during the course of the year. Aker Seafoods owns five whitefish process- Aker Seafoods’ processing activities. High, positive, one-off effects in 2004, how- ing plants and one sales subsidiary. Aker ever, mean that the company’s operating Seafoods also has a sales subsidiary in After the merger in 2005, Aker Seafoods revenues and results are somewhat lower the UK. controls about 9 per cent of the total in 2005 than in 2004. In 2005, the company Norwegian fishing quotas north of the has worked to integrate the three merged At the end of 2005, the Group had 1 214 62nd parallel. This is the equivalent of companies into an affiliated group. These employees, 278 of whom were employed roughly 30 per cent of the allotted quotas efforts have optimised and simplified the outside Norway. for the sea-fishery trawler fleet in 2005. Group’s organisational structure, so it is The conventional fleet controls more than better organised for efficient operations Market situation 70 per cent of the total Norwegian cod and for exploiting internal synergies. Historically, the Norwegian whitefish industry quotas north of the 62 parallel. has experienced weak margins which has The merger of the three companies was led to the shutdown of several facilities. The Important events in 2005 implemented with accounting effect from poor margins resulted from overcapacity, In March 2005, the Norwegian government 1 May 2005. The proforma accounting insufficient supply of raw materials and inter- adjusted the structural quota scheme for figures were prepared as if the units were national competition. Norway’s sea-fishery fleet. The structural part of the Aker Seafoods group during the quotas now enable the quotas of several actual reporting periods. In recent years, the demand for fresh fish vessels to be gathered in one vessel in has risen sharply. Aker Seafoods is making return for removing the other vessels Going concern intense efforts to adapt the company’s man- from fishing activities. For Aker Seafoods, Pursuant to Section 3-3a of the Norwegian ufacturing processes and product mix for the the structural quota scheme significantly Accounting Act, it is confirmed that the prevailing market. The company seeks to improves the operating framework. This assumptions of going concern are present. expand its activities in the fresh fish market, improves the company’s options for perio- as it is possible to obtain substantially higher dising harvesting activities, and thereby the operations and competitive margins here than in the frozen-fish market. company’s ability to improve the supply of conditions raw-materials to processing facilities all Aker Seafoods is an integrated fisheries year round. group which owns a number of fishery companies in Norway and abroad.
1) Proforma result before depreciation and amortization as if Aker Seafoods ASA and merged 16 aker seafoOdS Annual Report 2005 entities has been part of the group for the entire reporting period. After the stock market listing in May 2005, Accounts and capital position The net cash flow from investments was Aker Seafoods has had better access to (proforma figures) a negative amount of NOK 117 million in the equity market, thereby increasing the Profit and loss account 2005. Parts of this amount are associated company’s financial flexibility. The increased Aker Seafoods generated operating rev- with the merger of the three companies financial flexibility has enabled Aker Sea- enues of NOK 2 316 million in 2005, com- as well as the ongoing restructuring and foods to strengthen its prerequisites for pared with NOK 2 402 million in 2004. The integration processes. In 2004, the company actively participating in the ongoing restruc- decline in operating income is due to the had a net cash flow from investment activi- turing of the European whitefish industry. inclusion in 2004 of income from a divested ties of NOK 51 million resulting from company, and from the actual divestment of a corporate divestment. In efforts to optimise the company’s organi- the company and a trawler license (see note sational structure, Aker Seafoods has inc- 8 of the Annual Accounts). When adjusted The cash balance is favourably influenced reased its ownership of Lofoten Tråler-rederi for this 2004 income, the company’s operat- by the company’s issue of capital in connec- AS to a little more than 93 per cent at year- ing revenues actually increased in 2005. tion with the company’s listing on the stock end 2005. The increase is primarily the result of favour- exchange. At the end of 2005, the cash able developments in the fishing segment balance amounted to NOK 226 million, com- In 2005, Aker Seafoods took over Nordic owing to increased first-hand prices for fish pared to NOK 105 million at the end of 2004. Sea Mehamn AS’s facilities in the Munici- as well as of the harvest volume. pality of Gamvik and will start up a new Balance sheet and fresh-fish line at the facility in 2006. This Aker Seafoods had an operating profit, liquid asset position will additionally strengthen the company’s before depreciation and amortisation At the end of 2005, the liquid assets of NOK position for supplying the fresh-fish market (EBITDA) of NOK 181 million for 2005, 226 million, together with the cash flow from segment. an increase of NOK 19 million compared continued operation, ensure the Group’s to 2004. ability to meet its present and future obliga- In cooperation with Aker ASA, Aker Sea- tions. This liquid asset position gives Aker foods purchased a property, including oper- The operating profit for 2005 was NOK 98 Seafoods a fine basis on which to develop ating equipment, from Aarsæther Vardø AS. million compared with NOK 121 million in the Group. Aker Seafoods intends to operate the Whøni 2004. The operating profit for 2004 included plant as a receiving facility for fish. one-off operating items of NOK 56 million Short-term interest-bearing liabilities were as the result of divesting a company and reduced during the year from NOK 517 In 2005, Aker Seafoods concluded an a trawler license. When adjusted for these million in 2004 to NOK 171 million in 2005. agreement with ICA Sverige AB regarding one-off operating items, the company Similarly, long-term interest-bearing loans the production of fish products for supply- improved its operating result by NOK 33 increased from NOK 1 166 million in 2005, ing the ICA chain in the Nordic countries. million from 2004 to 2005. compared to NOK 784 million in 2004. Initially, the contract applies to orders up to March 2006 and will generate sales of The company’s net finance expence for Net interest-bearing debt (interest-bearing approximately NOK 30 million. On the 2005 was NOK 53 million compared with debt minus cash holdings and interest-bear- condition that the contract is extended NOK 54 million in 2004. ing fixed assets) were reduced to NOK 892 beyond March 2006, the agreement could million as of 31 December 2005, from NOK amount to an increase in annual revenues Aker Seafoods tax expense in 2005 was 1 003 million as of 31 December 2004. of more than NOK 50 million. NOK 4 million, a decline of NOK 2 million compared to 2004. At year-end, the company’s working capital The Group underwent a total refinancing in (non-interest bearing current assets minus 2005 on favourable terms. Cash flow non-interest bearing short term liabilities), Aker Seafoods’ net cash flow from the exclusive of cash at bank, was NOK 228 The Group has completed a comprehensive company’s operating activities was NOK 114 million, a reduction of NOK 37 million com- restructuring process that will have a favour- million in 2005, compared to NOK 153 mil- pared to the end of 2004. able effect from 2006. lion in 2004. The net cash flow in 2004 was affected by one-off items equalling Aker Seafoods’ total balance sheet NOK 56 million. increased from NOK 2 589 million in 2004 to NOK 2 750 million in 2005. The Group’s
17 aker seafoOdS Annual Report 2005 Annual Report 2005
equity increased during the same period creased from NOK 1 793 million in 2004 tails of cod, saithe and haddock. Process- from NOK 830 million to NOK 905 million. to NOK 2 750 million in 2005. ing Norway reported operating revenues of This results in an equity ratio of 32.9 per NOK 1 117 million, which is similar to the cent as of 31 December 2005, compared Business areas operating revenues for 2004. The operating to 32.1 per cent as of 31 December 2004. Aker Seafoods is divided into three primary profit before depreciation and amortisa- business areas: Harvesting, Processing tion (EBITDA) was NOK 49 million in 2005, Accounts and capital position Norway and Processing Denmark. The com- compared to NOK 44 million in 2004. (accounting figures) pany reports the results of Nordic Group as The actual accounting figures for 2004 a separate business area. The profitability improvement in 2005 is reflect the fact that the establishment of Aker the result of Aker Seafoods’ termination of Seafoods Group did not have accounting Harvesting low-margin production processes and the effect until 1 May 2004. The figures for 2005 As of 31 December 2005, Aker Seafoods’ replacement of them by products with higher reflect the fact that Norway Seafoods, West Harvesting business area consisted of 15 margins. Fish-Aarsæther and Nordic Sea Holding active trawlers: nine fresh-fish trawlers, five were merged with an accounting effect from freezer trawlers and one combined fresh- Processing Denmark 1 May 2005. fish/freezer trawler. In Denmark, Thorfisk manufactures a number of products based on saithe, cod, The operating revenues for 2005 were The Harvesting business area reported haddock, plaice, salmon, tuna and trout, NOK 1 999 million, compared with NOK 971 an operating income of NOK 520 million including consumer-packed ‘ready-to-cook’ million in 2004, while the operating profit in 2005, compared with NOK 471 million fresh-fish products. before deprecation and amortisation was in 2004. In 2005, Harvesting achieved an NOK 138 million for 2005, compared to operating result before depreciation and The Processing Denmark business area NOK 54 million in 2004. amortisation (EBITDA) of NOK 120 million, generated operating revenues of NOK 606 compared to NOK 102 million in 2004. million in 2005, compared with NOK 673 Aker Seafoods achieved an operating profit Adjusted for one-off items of NOK 31 million million in 2004. The operating profit before of NOK 62 million in 2005, while the com- in 2004, Aker Seafoods’ harvesting activities depreciation and amortisation (EBITDA) pany generated an operating profit of have improved by NOK 18 million. was NOK 24 million in 2005, compared to NOK 18 million in 2004. NOK 16 million in 2004. Adjusted for one-off The profitability improvement is the result items of NOK 25 million in 2004, the busi- Aker Seafoods’ net cash flow from the of increased catch volumes, more effective ness area has demonstrated a profitability company’s operating activities was NOK harvesting methods and increased first-hand improvement of NOK 8 million in 2005. 144 million in 2005, compared to NOK 52 prices for important fish species such as million in 2004. cod, saithe and haddock. The result of 2005 Improved profitability resulted from the com- is slightly undermined by high bunker costs pany’s ability to produce increased volumes The net cash flow from investments was a resulting from a high oil price compared to and improve margins in a few of the market negative amount of NOK 120 million in 2005. 2004. segments in which Thorfisk operates. In 2004, the net cash flow from investments was the negative amount of NOK 249 million. Processing Sales and Distribution The Processing business area consists of Aker Seafoods serves some 250 active At the end of 2005, the Group’s cash bal- eleven fully owned manufacturing facilities: customers in Europe and the USA. Market- ance totalled NOK 226 million, compared six in Norway and five in Denmark. ing activities are dispersed over four sales with NOK 89 million in 2004. offices: Ålesund, Oslo, Grenaa (Thorfisk In addition, Aker Seafoods is a minority A/S) and Grimsby (Norway Seafoods Ltd.). Short-term interest-bearing liabilities were shareholder in a processing enterprise and reduced during the year from NOK 283 majority shareholder in several fish receiving The Nordic countries are the largest market million in 2004 to NOK 171 million in 2005. facilities in Norway and Denmark. area (30 per cent), followed by France (20 Similarly, long-term interest-bearing loans per cent), the UK (10 per cent), Benelux (3 increased from NOK 1 166 million in 2005 Processing Norway per cent), as well as Germany and the USA compared to NOK 504 million in 2004. In Norway, Aker Seafoods manufactures (approx. 2 per cent each). Italy and Spain Aker Seafoods’ total balance sheet in- fresh and frozen fillets, loins, portions and are also important markets.
18 aker seafoOdS Annual Report 2005 Annual Report 2005
Russia and Eastern Europe are expected ing and chemical detergents. Targeted natural environment and are not assessed to be future markets for fresh and frozen measures have been launched to reduce as having a significant harmful impact on the products from Aker Seafoods. In 2005, Aker illness-related absence at our facilities, natural environment. Seafoods participated at the World Food but absence rates are still too high at the trade fair in Moscow with its own stand for individual enterprises. The company’s basic Employment and equal rights the first time. This resulted in many inter- premise is that every harmful impact on Aker Seafoods aims to be an attractive ested contacts and queries. people, the environment or physical facilities employer. The company’s HR policy strives can and must be avoided. to be fair, independent of ethic background, All sales from Norway are centrally invoiced gender, religion and age. Equal rights issues from the Ålesund office, which is also Our working environments are regarded have been incorporated into our HR policy responsible for the sale of fresh products as good, and improvement measures are which aims to prevent sexual discrimina- from Norwegian facilities and for logistics. continually being launched. tion in matters such as wages and salary, Customers receiving frozen products from promotion and recruitment. Norwegian facilities are served by the Oslo Several investments in vessels and land- office, and the Grenå office manages all based facilities have been made to improve Traditionally, the company has recruited sales and logistics functions for Thorfisk, the utilisation of by-products from harvest employees from environments where the which encompasses fresh bulk products, and processing activities. This has resulted number of women and men is equal. At the fresh consumer-packed products and frozen in increasing the utilised portion of the fish, end of the year, the company’s person- processed products. In addition, Thorfisk which in the long term will benefit both the nel structure consisted of roughly 40 per A/S runs quite a number of trading and company and its surroundings. cent women. These women are primarily distribution activities involving products employed in the company’s processing from the Norwegian and Icelandic facilities. In 2005, the average number of employees activities. of Aker Seafoods was 1 267. Of this number, The Grimsby office trades in shrimp prod- 283 were employed outside Norway. There is a shortage of women in the com- ucts from Asia and whitefish products from pany’s harvesting segment but a majority Norway and Denmark. The average sickness-related absence was of women in the processing enterprises. No 8 per cent, which also includes long-term women were members of the company’s The results from the sales functions are absence not covered by the company. The corporate management at the end of the consolidated into the operating results for level of sickness-related absence varies year. The company aims to increase the processing in Norway and Denmark. from one enterprise to the next. Although proportion of women in those parts of the there have been a few ‘close-calls’ and a Group where women are under-represented Nordic Group few people have unfortunately been injured and, similarly, the company aims to increase Nordic Group is a dedicated export during the year, serious occupational the proportion of men wherever men are company whose earnings are primarily accidents have not been reported in 2005. under-represented. generated by exports of fresh and frozen All Norwegian processing enterprises par- whitefish products. Nordic Group generated ticipate in the ‘inclusive working life’ scheme Working-hour schemes in the company are operating revenues of NOK 386 million in and hope that this will help to heighten the the result of unequal positions and are not 2005, compared with NOK 385 million in focus on health and environmental meas- gender-related. Nevertheless, the proportion 2004. The operating profit before deprecia- ures, as well as to reduce sickness-related of employees who work part-time is higher tion and amortisation (EBITDA) was NOK 4 absence. among women and, similarly, overtime is million in 2005, compared to a break-even somewhat higher among male employees. result in 2004. Aker Seafoods is interested in a sustain- able development of fishery resources and One of the five board members elected by Organisation actively monitors whether employees and shareholders is female. The company’s tar- Health, safety and environment management obey current regulations and get for the percentage of female members In recent years Aker Seafoods has pri- quota provisions. In the processing area, of the company’s board members elected by oritised its efforts in the areas of health, Aker Seafoods makes a targeted effort the shareholders is 40 per cent. the environment and safety and in our to reduce the consumption of energy and day-to-day operations we focus on reduc- water. The subsidiaries of Aker Seafoods ing our consumption of energy, packag- do not cause considerable emissions to the
19 aker seafoOdS Annual Report 2005 Annual Report 2005
Financial risks The company’s guidelines are described production to the needs of our key custom- Market risks in the company’s statement on corporate ers in the market. The board also believes Aker Seafoods is exposed to risk associ- governance on page 70 of the company’s that the disclosure of unlawful fishery and ated with the value of the investments in annual report. measures taken to combat this will in the the subsidiaries from price fluctuations in medium and long term also contribute to the raw materials market and finished-prod- Aker Seafoods has based the company’s increased fishing quotas and to improving uct market to the extent these fluctuations guidelines on the Norwegian Code of Aker Seafoods’ margins. alter the subsidiary’s competitiveness and Practice for Corporate Governance of listed earning potential over time. The exposure companies. The company’s guidelines are The company is continually assessing pos- to risk resulting from fluctuations in currency intended to ensure that the company estab- sible strategic upstream and downstream rates is identified and reduced by means of lishes goals and strategies and that these activities to strengthen the company’s core a continual adjustment of the Group’s total are evaluated and analysed. activities. The company has increased its loan portfolio and financial instruments. international ambitions in terms of fishery The Board of Directors of Aker Seafoods activities and will intensify its evaluation of The company continually participates in ASA adopted the Group’s corporate govern- possible structural options in 2006. hedging transactions associated with seg- ance principles in 2005. ments of the Group’s sales in foreign curren- Allocation of the profit cies. There were no open contracts as of 31 After the listing of Aker Seafoods, Aker ASA for the year December 2005, i.e. all contracts are linked owns 66.76 per cent of the shares in the The 2005 profit and loss statement for to future sales. company. The long-term object of Aker ASA the parent company, Aker Seafoods ASA, is to own at least 50.1 per cent of the shares shows an ordinary net profit of NOK 64.6 Credit risk in the company. million. The company’s distributable equity The risk that the other contracting party available, before distribution of dividend, does not have the financial ability to meet Future prospects amounted to NOK 48.8 million as of 31 its obligations is regarded as low, as the loss In 2006, Aker Seafoods will continue to work December 2005. The Board of Directors has on receivables is low historically speaking. on developing profitability improvements proposed that a dividend of NOK 36.5 mil- In addition, the company has contracted resulting from the merger of the three com- lion should be disbursed. credit insurance and letters of credit which panies. Aker Seafoods aims to improve the for all intents and purposes ensure the fulfil- operating profit during the course of 2006. On the basis of this proposition, the Board ment of customer obligations. of Directors proposes that the profit for the Aker Seafoods will continually assess the year to be allocated as follows: Liquid assets risk consequences for the Group’s operations in In Aker Seafoods’ assessment, the liquid 2006, resulting from the government’s tem- Dividends NOK 36.5 million asset position of the company is good, and porary structural freeze and the introduction Retained earnings NOK 28.1 million a decision has been made not to introduce of district quotas. Insufficient flexibility and Total NOK 64.6 million measures that would change the compa- options for conversion in the fishing fleet ny’s liquid assets risk. The due dates of segment may result in raw-material short- After distribution of dividend, the distribut- outstanding amounts are upheld and it has ages for the processing industry in 2006 able equity amounts to NOK 12.3 million. not been deemed necessary to renegotiate as well. Modifying the operating framework or redeem other long-term claims. may have consequences with regard to the Events after the balance supply of fish to the Norwegian processing sheet date Shareholders industry, which will affect the level of profit- On 15 February, authorisation from the Corporate governance guidelines are impor- ability improvements that will be realisable fishery authorities was received regarding tant for the company’s efforts to establish by the company in 2006. ownership modifications, and the merger of trust among the participants in the finance harvesting companies in the group. This will market. This means that Aker Seafoods Aker Seafoods regards it as likely that the contribute to the implementation of the sim- ensures an expedient allocation of respon- high prices for cod, haddock and saithe will plified organisational structure from 2006. sibilities and duties between the company’s remain so in 2006 as well. The demand for managing bodies, i.e. the board of directors fresh fish products will continue and Aker and the executive management. Seafoods will work to adapt the company’s
Oslo, 15. February 2006 The Board of Directors of Aker Seafoods ASA
Leif-Arne Langøy Bjarne Borgersen Leiv Grønnevet Martinus Brandal chairman of the board vice chairman of the board
Lisbeth Berg-Hansen Bjarne Kristiansen Harold Nilsen Andre Steffensen Yngve Myhre president & ceo
20 aker seafoOdS Annual Report 2005 Board of Directors
LEIF - ARNE Chairman Langøy of the board Leif-Arne Langøy, born 1956, President & CEO of Aker ASA, was appointed President & CEO of Aker RGI in 2003. Mr. Langøy is a graduate from the Norwegian School of Economics and Business Administration in Bergen. He has previously served as President & CEO of Aker Kvaerner Yards, and as Managing Director for Aker Brattvaag. Mr. Langøy is the board chairman of inter alia Aker Kvaerner, Aker Yards, Aker Material Handling, Aker American Shipping, Aker Drilling, and is a member of the board of Aker ASA. As per 8 February 2006, Mr. Langøy holds 18.400 shares in Aker Seafoods, and no stock-options. Mr. Langøy has been the Chairman of the board since 2004. Mr. Langøy is a Norwegian citizen.
BJARNE Vice Chairman Borgersen of the board Bjarne Borgersen, born 1953, has a law degree from the University of Oslo. Mr. Borgersen has extensive experience from the Norwegian financial sector, inter alia as CEO of Fokus Bank in the period from 1994 to 2000. In addition to broad experience from senior management, Mr. Borgersen has had several board positions, and is currently Chair- man of the board of Selvaag-Gruppen AS and Pharmaq AS among others. As per 8 February 2006, Mr. Borgersen holds 2.200 shares in Aker Seafoods, and no stock-options. Mr. Borgersen has been member of the board since 2004. Mr. Borgersen is a Norwegian citizen.
LEIV Grønnevet Board member Leiv Grønnevet, born 1943, has an MBA from the Norwegian School of Economics and Business Administration. Mr. Grønnevet has a wide experience related to various sectors of Norwegian and international fishing industry. Mr. Grønnevet served as Parlamentary Secretary in The Norwegian Ministry of Fisheries from 1981 to 1984. For 10 years Mr. Grønnevet was CEO of the Norwegian Fishing Vessel Owners Association. From 1992 to 2003 he was head of the Fisheries Division of Christiania Bank/Nordea. Today Mr. Grønnevet is senior advisor in SINTEF MRB AS, a consulting company. Mr. Grønnevet has been member or Chairman of a number of committees and task forces dealing with fishing industry and fishery research issues and holds today the position as Chairman of the board of Institute of Marine Research (“Havforskningsinstituttet”). As per 8 February 2006, Mr. Grønnevet holds 1.200 shares in Aker Seafoods, and no stock-options. Mr. Grønnevet has been member of the board since 2004.Mr. Grønnevet is a Norwegian citizen.
MARTINUS Brandal Board member Martinus Brandal, born 1960, holds a Bachelor of Science in Electrical Engineering from Oslo University College. Mr. Brandal is in charge of operations, strategy and business development for Aker ASA. In the period from 1985 to 2004, Mr. Brandal held various management positions in the ABB Group, inter alia as Group Senior Vice President at the headquarter in Zurich. Mr. Brandal is a member of the board of inter alia Aker Kvaerner, Aker Yards, Aker Material Handling, Aker American Shipping and Aker Drilling. As per 8 February 2006, Mr. Brandal holds 6.200 shares in Aker Seafoods, and no stock-options. Mr. Brandal has been a member of the board since 2004. Mr. Brandal is a Norwegian citizen.
21 aker seafoOdS Annual Report 2005 Board of Directors
LISBETH Berg-Hansen Board member
Lisbeth Berg-Hansen, born 1963, has a wide experience from various sectors of Norwegian fishing- and aquaculture industry, and she holds and has held a number of major positions in Norwegian politics and organizational life. Mrs. Berg-Hansen has served as Parliamentary Secretary for the Prime Minister, and as a political advisor in The Norwe- gian Ministry of Fisheries. Mrs. Berg-Hansen has also served as Chairman of The Norwegian Seafood Federation (Fiskeri- og Havbruksnæringens Landsforening) and is currently serving as Vice President of the Confederation of Norwegian Business and Industry (NHO). As per 8 February 2006, Mrs. Berg-Hansen holds no shares in the company, and no stock-options. Mrs. Berg-Hansen has been a member of the board since 2005. Mrs. Berg-Hansen is a Norwegian citizen.
BJARNE Kristiansen Board member
Bjarne Kristiansen, born 1955, has worked in the fishing industry since 1973 and has been the chief union repre- sentative since 1996. Mr. Kristiansen is also an employee representative at Aker ASA’s Board of directors. As per 8 February 2006, Mr. Kristiansen holds no shares in Aker Seafoods, and no stock-options. Mr. Kristiansen has been a member of the board since 2004. Mr. Kristiansen is a Norwegian citizen.
HAROLD EGIL Nilsen Board member Harold Egil Nilsen, born 1947, has been employed at the Aker Seafoods’ Hammerfest plant since 1973 He is also an employee representative at Aker Seafoods Finnmark AS’ Board of directors. As per 8 February 2006, Mr. Nilsen holds no shares in Aker Seafoods, and no stock-options. Mr. Nilsen has been a member of the board since 2004. Mr. Nilsen is a Norwegian citizen.
ANDRE Steffensen Board member
Andre Steffensen, born 1968, has been a shipmaster at vessels of Aker Seafoods owned Havfisk since 1995. Mr. Stef- fensen has education as mate and sea captain from Tromsø Maritime School. As per 8 February 2006, Mr. Steffensen holds no shares in the company, and no stock-options. Mr. Steffensen has been a member of the board since 2005. Mr. Nilsen is a Norwegian citizen.
22 aker seafoOdS Annual Report 2005 Annual Accounts
23 aker seafoOdS Annual Report 2005 Aker Seafoods ASA Group Profit and Loss Accounts
Accounts Accounts Proforma 1) Proforma 1)
004 2005 Amounts in NOK million Note 2005 2004 971 1 999 Operating revenues 3 2 316 2 402 2 22 Other income 3 24 8 -533 -1 138 Cost of goods and changes in inventory 5 -1 324 -1 450 -232 -417 Wages and other personnel expenses 6 -478 -494 -154 -328 Other operating expenses 7 -356 -304 4 138 operating profit before depreciation and amortization 181 162 -55 -75 Depreciation and amortisation 11.12 -82 -97 18 - Impairment changes and non recurring items 8 - 56 18 62 operating profit 4 98 121 19 23 Financial income 9 25 29 -39 -69 Financial expenses 9 -78 -83 0 -5 Share of profit of associated companies 13 -5 -9 -3 12 Profit before tax 3 41 58
6 -4 Tax expense 10 -4 -6 8 Profit for the year 37 52
Attributable to: 4 3 Majority interetst (equity holders of the parent) 31 54 -1 5 Minority interest 24 6 -2
48,646,016 Average number of shares 21 -22 48,646,016 48,646,016
0.07 Earnings per share 2) 21 0.63 1.10
1) 2004 og 2005 are proforma, as the Aker Seafoods group was formed 1. May 2004. The merger between West Fish Aarsæther and Nordic Sea Holding AS with accounting effect from 01.05.2005.
2) The majority’s share of this years result/average number of shares.
24 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group Balance Sheet pr. 31 December
Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million Note 2005 2004
ASSETS 628 803 Vessel, property, plant and equipment 11 803 827 543 877 Intangible assets 12 877 855 31 105 Deferred tax assets 10 105 105 3 5 Investments in associates companies 13 5 3 1 5 Other shares 14 5 2 184 205 Interest-bearing long-term receivables 15 205 184 1 Pension assets 27 1 - - 7 Other non-current assets 16 7 13 1 390 2 006 total non-current assets 2 006 1 989 109 204 Inventories 17 204 197 197 299 Other trade and other interest-free receivables 18 299 290 8 14 Interest-bearing short-term receivables 19 14 8 89 226 Cash and cash equivalents 20 226 105 403 743 total current assets 743 600 1 793 2 750 total assets 2 750 2 589
eQUITY AND LIABILITIES 100 243 Paid in capital 22 243 100 557 652 Translation and other reserve 22 652 557 -7 -10 Retained earnings -10 126 0 886 total equity attributable to equity holders of the parent 886 783 33 20 Minority interest 27 20 47 905 total equity 905 830
504 1 166 Interest-bearing loans 25 1 166 784 164 212 Deferred tax liabilites 10 212 215 16 19 Pension liability 27 19 21 - 2 Other interest-free long-term liabilities 2 - 684 1 399 total non-current liabilities 1 399 1 020
283 171 Interest-bearing short-term debt 28 171 517 143 273 Trade and other payables 273 222 - 2 Income tax payable 10 2 0 426 445 total current liabilites 445 739 1 110 1 844 total liabilites 1 844 1 759 1 793 2 750 total equity and liabilities 2 750 2 589
Oslo, 15 February 2006 For Aker Seafoods ASA
Leif-Arne Langøy Bjarne Borgersen Leiv Grønnevet Martinus Brandal chairman of the board vice chairman of the board
Lisbeth Berg-Hansen Bjarne Kristiansen Harold Nilsen Andre Steffensen Yngve Myhre president & ceo
25 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group Statement of changes in equity
ACCOUNTS Paid IN retained Minority- total
Amounts in NOK million Note capital earnings Total INterest equity Balance NGAAP at establishing 1 May 2004 2004 - 657 34 691 IFRS adjustments - -7 -7 - -7 Net income recognised directly in equity - -7 -7 - -7 Profit for the year 4 4 -1 3 Total recognised income and expense for 2004 - -3 -3 -1 -4 Currency translation differences - -6 -6 - -6 Balance at 31. December 2004 22 657 -9 648 33 681 Effects of implementing IAS 39 2 2 - 2 Balance at 1 January 2005 657 -7 650 33 683 Other recognised directly in equity -5 -5 - -5 Net income recognised directly inequity - -6 -6 - -6 Profit for the year 3 3 5 8 Total recognised income and expense - -3 -3 5 2 Acquisition of minorities - - - -19 -19 Shares issued 239 - 239 - 239 Balance at 31 December 2005 22 896 -10 886 20 905
PROFORMA Paid IN retained Minority- total
Amounts in NOK million Note capital earnings Total INterest equity Balance at 1 January 2004 657 72 729 49 778 IFRS adjustments - 2 2 - 2 Profit for the year 54 54 -2 52 Total recognised income and expense - 56 56 -2 54 Balance at 31 December 2004 657 128 785 47 832 Effects of implementing IAS 39 -2 -2 - -2 Balance at 1 January 2005 22 657 126 783 47 830 Other recognised directly in equity -10 -10 - -10 Currency translation differences - -6 -6 - -6 Net income recognised directly in equity - -16 -16 - -16 Profit for the year 31 31 6 37 Total recognised income and expense - 15 15 6 21 Acquisition of minorities - - - -33 -33 Shares issued 238 -151 88 - 88 Balance at 31 December 2005 22 895 -10 886 20 905
26 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group Cash Flow Statement
Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million Note 2005 2004 -3 12 Profit before tax 41 58 22 41 Net interest expences 48 57 -21 -5 Sales los ses/gains (-) and write-downs -5 -60 55 75 Depreciation and amortization 82 97 - 5 Share of earnings in associated companies 5 9 5 17 Interest income 19 13 -27 -58 Interest expenses -67 -70 - -2 Taxes paid -2 2 -6 3 Unrealized foreign exchange gain/loss and other non-cash items 4 -7 27 54 Changes in other net operating assets -11 53 144 Net cash flow from operating activities 114 153
- 16 Proceeds from sales of vessel, property, plant and equipment 8 80 - -2 Proceeds from sale of shares and other equity investments - 1 -25 -72 Acquisition of vessels, property, plant and equipment -65 -38 -123 -52 Acquisition of shares and equity investments in other companies -24 -0 - 25 Effect of combining of businesses/merger - - -101 -36 Net cash flow from other investments -36 9 -249 -120 Net cash flow from investing activities -117 51
447 1,300 Proceeds from issuance of long-term interest-bearing debt 1,300 3 - 28 Proceeds from issuance of short-term interest-bearing debt 51 - -72 -1,286 Repayment of long-term interest-bearing debt -1,296 -172 -130 -16 Repayment of short-term interest-bearing debt -19 -0 -7 88 Share issue 88 -4 113 Net cash flow from financing activities 124 -174
41 137 Net change in cash and cash equivalents 121 29 48 89 Cash and cash equivalents as of 1 January 105 76 226 cash and cash equivalents as of 31 December 0 226 105
27 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group Notes
NOTE 1: Accounting principles acquisition. The additional cost of acquisition above the fair value of the net assets of the subsidiary acquired measured at the date of STATEMENT OF COMPLIANCE AND THE change of control is recorded as goodwill (see “Intangible assets” for BASIS FOR PREPARING THE ACCOUNTS accounting policy on goodwill). Aker Seafoods is a Norwegian company and presents its accounts in accordance with International Financial Reporting Standards Subsidiaries acquired during the year are included in the con- (IFRS). This is the company’s first presentation of consolidated solidated financial statements from the date at which the control financial statements in accordance with IFRS. IFRS1 has been is transferred to the Group. The financial statements of divested sub- applied. sidiaries are included in the consolidated statements up to the date at which said control is relinquished. An explanation of how the transition to IFRS has affected the report- ing of the Group’s financial position, financial results and cash flow is Where necessary, the accounting policies of subsidiaries have been presented in Note 37. adjusted to ensure consistency with the accounting policies adopted by the Group. The consolidated financial statements are presented in Norwegian Kroner (NOK), which is the functional currency of the parent com- All intercompany transactions, receivables, liabilities and unrealised pany. The financial statements were prepared on the basis of prin- gains are eliminated by the preparation of the consolidated statements. ciple of historical cost, except for the following assets and liabilities that are recognised in the balance sheet at the fair value: financial For want of more specific guidelines, the Group has consistently derivatives, financial instruments held for turnover, financial instru- used the booked value method in its accounting of all ordinary trans- ments classified as accessible for sale and investment property. actions which include the transfer of control.
The preparation of the financial statements in conformity with IFRS Investment in an associate company requires management to make assessments, estimates and as- The Group’s investments in associate companies are booked ac- sumptions that effect the application of guidelines and principles, cording to the equity method of accounting. An associate company as well as recognised amounts of assets and liabilities, income and is usually defined as an entity in which the Group generally holds expenses. The estimates and associated assumptions are based on between 20% and 50% of the voting rights and over which the historical experience and various other factors that are considered Group has significant but not controlling interest. Share options, con- to be reasonable under the circumstances. Actual results may differ vertibles and other equity instruments are included in assessments from these assumptions. of whether there is significant interest in an entity.
The estimates and underlying assumptions are reviewed on an ongo- Investments in associate companies are carried to the balance ing basis. Changes in accounting estimates are recognised in the sheet at cost plus post-acquisition changes in the Group’s share period in which the estimate changes arise, if the changes only affect of net assets of the associate company, less any impairment loss. this period. Where changes also affect future periods, the effect of the The income statement reflects the share of the operating profit/loss changes is distributed on the present and future reporting periods. of the associate company as financial income/expense. Where a change has been recognised directly in the associate company’s The principal accounting policies applied in the preparation of the equity, the Group recognises its share of the change and recognises financial statements are set out below. this, where applicable, under changes in the equity.
The 2005 financial statements were approved by the board of direc- When the Group’s share of the loss exceeds the amount of the tors for publication on 15 February 2006. investment in an associate company, the Group’s booked value is reduced to zero and additional losses are not recorded, unless the Group has incurred or provided security for liabilities linked to the GROUP ACCOUNTING AND CONSOLIDATION associate company. PRINCIPLES Minority interests Subsidiaries Minority interests are disclosed separately from the consolidated The 2005 consolidated financial statements of Aker Seafoods in- shareholders’ equity and liabilities and are recorded as a separate clude the financial statements of the parent company, Aker Seafoods deduction on the income statement. ASA, and its subsidiaries. Subsidiaries are those entities in which Aker either owns, directly or indirectly, over fifty per cent of the vot- Foreign currency translation and ing rights, or otherwise has a controlling interest over the company’s transactions operating and financial management. Share options, convertibles and other equity instruments are considered when assessing Functional currency whether an entity is controlled. The items included in the financial statements of each subsidiary in the Group are initially recognised in the functional currency, i.e. the Acquisition of subsidiaries is recognised using the purchase method currency that best reflects the economic substance of the underlying of accounting. The cost of an acquisition is measured as the fair events and circumstances relevant to the subsidiary in question. value of the assets acquired, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the
28 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
The consolidated financial statements are presented in Norwegian Classification expenses for vessels are carried to the balance sheet. Kroner (NOK), which is the functional currency of the parent com- Depreciation of classification expenses on the balance sheet are pany. calculated using the straight-line method over the period estimated until the next classification. Transactions and balances Foreign currency transactions are translated into NOK using the ex- Gains and losses on disposals are determined by comparing the change rates prevailing at the dates of the transactions. Receivables disposal proceeds with the booked value; the resulting amount is in- and liabilities in foreign currencies are translated into NOK at the cluded in the operating profit. Assets to be disposed of are reported exchange rates in force at the balance sheet date. at the lower of booked value and fair value, less selling costs.
Foreign exchange gains and losses resulting from the settlement Component cost accounting of such transactions and from the translation of monetary assets The Company allocates the amount initially recognised in respect of and liabilities denominated in foreign currencies are recognised in an item of vessel, property, plant or equipment to its significant parts the income statement. Foreign exchange differences arising from and depreciates separately each such part over its useful service translations of operating items are recognised in operating profit in life. the income statement. Translation differences arising in respect of translating financial assets and liabilities are recognised net as a financial item in the income statement. INTANGIBLE ASSETS
Group companies Goodwill Income statements and cash flows of subsidiaries, whose functional Goodwill on acquisition is initially measured at the acquisition cost, currency is not NOK, are translated into NOK at weighted average which is the surplus of the cost of the merger beyond the acquir- exchange rates for the period for such translations. Balance sheet ing company’s share of the net fair value of the identifiable assets, items are translated at the exchange rates ruling on the balance sheet liabilities and contingent liabilities. date and the translation differences are booked to the equity. When a foreign entity is sold, translation differences are recognised on the Goodwill represents the additional value of the costs of acquisi- income statement as part of the gain or loss regarding the sale. tion over the fair value of the Group’s share of the net assets of the acquired subsidiary/associate company at the date of the acquisi- tion. Goodwill for acquisition of shares in associate companies is VESSELS, PROPERTY, PLANT AND EQUIPMENT recognised under investments in associate companies.
General After the acquisition date, goodwill is measured at acquisition Vessels, property, plant and equipment acquired by Group compa- cost less any cumulative impairment loss. Goodwill is reviewed nies are stated at historical cost, except for the assets of acquired for impairment annually (or more frequently if events or changes subsidiaries that were recognised at fair value at the date of acquisi- in circumstances indicate that the balance-sheet value may have tion. Depreciation is calculated using the straight-line method and decreased). adjusted for any impairment losses. At the acquisition date, any goodwill acquired is allocated to each The booked value of vessels, property, plant and equipment on the of the cash-generating units expected to benefit from the merger’s balance sheet represents the acquisition cost less cumulative de- synergies. A possible impairment loss is determined by assessing preciation and any impairment loss. Interest costs on loans obtained the recoverable amount of the cash-generating unit with which the to finance the construction of property, plant and equipment are goodwill is associated. If the recoverable amount of the cash-gen- capitalised during the period of time that is required to complete and erating unit is less than the balance-sheet value, the impairment is prepare the asset for its intended use. Other borrowing costs are recognised. Where goodwill is part of a cash-generating unit and if expensed. parts of the business within that unit are disposed of, the goodwill associated with the divested business is included in the book-sheet Land is not depreciated, but other fixed assets in use are depreci- value of the business when determining the gain or loss for dispos- ated using the straight-line method. The expected utilisable service ing of the operation. Goodwill disposed of in this circumstance is life of assets with a long service life is assessed annually and, where measured on the basis of the relative values of the divested busi- they differ significantly from previous estimates, depreciation periods ness and the portion of the cash-generating unit retained. are changed accordingly. Negative goodwill in the event of acquisition is recognised directly in Ordinary repairs and maintenance costs are recognised in the the income statement. income statement during the financial period in which they are incurred. The costs of major renovations and conversion projects Other intangible assets are included in the related asset’s balance sheet value when such Expenditure on acquired patents, trademarks and other licenses is costs are expected to generate future economic benefits in excess carried to the balance sheet and amortised using the straight-line of the originally assessed functional standard of the asset. Major method over the useful service life of the assets. Fishing concessions renovations and conversion projects are depreciated over the useful and other intangible assets are not amortised but are reviewed for im- service life of the related assets. pairment annually (or more frequently if events or changes in circum- stances indicate that the balance-sheet value may have decreased).
29 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
FINANCIAL INVESTMENTS Leases where a significant portion of the risks and rewards of All investments are initially recognised at acquisition cost, which is ownership are retained by the lessor are classified as operating the fair value of the payment, including acquisition charges associ- leases. Payment made under operating leases, less any incentives ated with the investment. received from the lessor, is charged to the income statement using the straight-line method over the period of the lease so that it is a After initial recognition in the balance sheet, investments classified constant periodic interest rate calculated on the basis of remaining as ‘available for sale’ are measured at fair value. Gains or losses liability on the balance sheet. on available-for-sale investments are recognised as a separate component of equity until the investment item is sold, collected or otherwise disposed of, or until it appears that the value of the LONG-TERM RECEIVABLES investment has decreased, at which time the cumulative gain or loss Other long-term receivables are measured at net present value previously reported as a separate component of equity is recognised when the expected payments reach maturity in the long term and in the income statement. are not interest bearing.
Other long-term investments that are intended to be held to maturity are subsequently measured at amortised cost using the gross-re- INVENTORIES demption yield method. Amortised cost is calculated by taking into Inventories are recognised at the lower of acquisition cost or net account any discount or premium for purchase during the period to realizable value. Acquisition cost is determined by the first-in, the closing of the accounts. For investments booked at amortised first-out (FIFO) method. The cost of finished goods and work in cost, gains and losses are recognised in the income statement when progress comprises acquisition cost, costs of raw materials, direct the investments are deducted or impaired, as well as through the labour, other direct costs and related production overheads (based amortisation process. on normal operating capacity) but excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. IMPAIRMENT OF FIXED ASSETS Property, plant and equipment and other non-current assets are assessed for possible impairment whenever events or changes in GOVERNMENT GRANTS circumstances indicate that the balance-sheet value of an asset may Government grants are recognised at fair value where there is rea- not be recoverable. sonable assurance that the grant will be received and all the binding terms of the grant will be complied with. For the purpose of assessing the impairment, assets are grouped at the lowest levels for which there are separately identifiable, mainly independent, cash flows. Impairment loss arises when the TRADE RECEIVABLES book-sheet value of the asset exceeds the recoverable amount. Trade receivables are recognised at their anticipated realizable The recoverable amount is the highest net selling price of the asset value, which is the original invoice amount less an estimated allow- and its utility value. The utility value is determined by reference to ance for impairment loss on these receivables. Such an estimated discounted future net cash flows expected to be generated by the impairment loss on trade receivables is made when there is objec- asset. tive evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. A previously recognised impairment loss is reversed only if a change occurs in the estimates used to determine the recoverable amount, yet not to an extent higher than the carrying amount that would have CASH AND CASH EQUIVALENTS been determined had no impairment loss been recognised in prior Cash and cash equivalents comprise cash at bank and in hand, years. deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included under loans in current LEASES liabilities on the balance sheet. Leases for property, plant and equipment on terms that essentially transfer the risks and rewards of ownership to the Group are classi- fied as finance leases. Finance leases are capitalised at the incep- SHARE CAPITAL tion of the lease at the lowest fair value of the leased property or the Ordinary shares are classified as equity. present value of the minimum rental payments. Rental payments are apportioned between the finance charges and reduction of the Additional costs directly associated to the issue of new shares or lease liabilities. Finance charges are booked directly as a financial options are recognised in the equity as a deduction after provision expense in the income statement. for tax.
Property, plant and equipment acquired under finance leases are If a Group company buys its own shares, the remuneration, includ- depreciated over the shorter of the useful service life of the asset or ing costs directly associated with this, are carried to a deduction the lease term. from the equity.
30 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
The translation reserves includes all currency differences that arise liabilities and the deferred tax is attributable to the same taxable unit when translating accounts for enterprises abroad, as well as the and same tax authority. translation of liabilities that safeguard the net investments of Aker Seafoods in foreign subsidiaries. PENSION OBLIGATIONS The fair value reserves include the cumulative net change in fair val- The Group has both defined benefit plans and contribution plans. ue of investments available for sale until the investment is deducted. With regard to defined benefit plans, the liability is recognised at the present value of the defined benefit obligation at the balance sheet date minus the fair value of the plan’s assets, including adjustments INTEREST-BEARING LIABILITIES for actuarial gains/losses and past service costs. The defined benefit All loans and credits are initially recognised at cost, i.e. the fair value obligation is calculated by independent actuaries and measured as of the remuneration received less the directly attributable issue the present value of the estimated future cash payments. The cost costs. of providing pensions is charged to the income statement so as to spread the regular costs over the employees’ period of service. After initial recognition, interest-bearing liabilities are measured at amortised cost using the gross-redemption yield method and any Actuarial gains and losses arising from experience adjustments, difference between the amount received (less transaction costs) and changes in actuarial assumptions and amendments to pension plans the redemption value is recognised on the income statement over are recognised over the average remaining period of service of the the period of the loan. Amortised cost is calculated by taking into ac- employees concerned. count any issue costs and any discount or premium on settlement. For defined contribution plans, contributions are paid to pension Gains and losses are recognised as a net profit or loss when the insurance plans. Once the contributions have been paid, there are liabilities are deducted or impairment occurs. no further payment obligations. Contributions to defined contribution plans are charged to the income statement in the period to which the contributions relate. INCOME TAXES Income tax on the result for the year consists of current tax and deferred tax. PROVISIONS A provision is recognised when the Group has a present liability Current tax is comprised of expected payable tax on the year’s taxa- (legal or implicit) resulting from a past event and it is probable ble result at the adopted or the expected rates of tax on the balance (i.e. more likely than not) that a contribution of resources entailing sheet date and any corrections of payable tax for previous years. economic payment will be required to settle the liability, and a reli- able estimate of the amount of the liability can be made. Provisions Deferred tax is set aside using the balance-sheet liability method are reviewed at each balance sheet date and adjusted to reflect the by considering all temporary differences at the balance sheet date current best estimate. between the balance-sheet value of assets and liabilities in the financial reporting and tax-related assessments. The amount of the provision is calculated as the cash value of the risk adjusted expenditures expected to be required to settle the Deferred tax assets must be recognised for all deductible temporary liability, determined using the estimated risk-free interest rate as differences, deferrable unused tax assets and unused tax-re- discount rate. Where discounting is used, the balance-sheet value of lated losses to the extent it is probable that a taxable profit will be the provision increases in each period will reflect the gradual phase- available whereby the deductible temporary differences and the out of the discount. This increase is recognised as interest expense. deferrable unused tax assets and unused tax-related losses can be utilised. The balance-sheet value of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no FINANCIAL RISK MANAGEMENT longer probable that sufficient taxable profit will be available to allow The Group is exposed to a variety of financial risks through the all or part of the deferred tax asset to be utilised. Expected utilisation Group’s activities: market risk (including exchange-rate fluctuations, of tax losses are not discounted when calculating the deferred tax fair value interest risk and price risk), credit risk, liquidity risk and asset. cash-flow interest-rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and Deferred tax assets and liabilities are measured according to the seeks to minimise potential adverse effects on the Group’s financial tax rates that are expected to apply to the year when the asset is performance. The Group uses derivative financial instruments to realised or the liability is settled based on tax rates (or tax laws) that hedge certain risk exposure. have been enacted or essentially enacted at the balance sheet date. Risk management is subject to general policies worked out by the Tax-related consequences relating to items recognised directly in board of directors. The board sets out the general guidelines for equity are recognised in equity and not in the income statement. overall management of financial risks and policies for specific areas such as currency risks. Deferred tax assets and liabilities are to be offset if there is a statutory right to offset the period’s tax assets and the period’s tax
31 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Accounting of derivative financial instruments Comparative data is normally prepared in the event of changes in and hedging activities. reportable segments. Derivative financial instruments are recognised in the balance sheet at fair value. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged. At the date a DIVIDENDS derivative contract is concluded, the Group designates the derivative Dividends are recorded in the Group’s financial statements in the as either a hedge of the fair value of a recognised asset or liability period in which they are approved by the Group’s shareholders. (fair value hedge), or a hedge of a forecasted transaction (cash flow hedge) or of a binding agreement (fair value hedge). EARNINGS PER SHARE Changes in the fair value of derivatives that are classified and qualify The calculation of basic earnings per share is based on the profit as fair value hedges and that are highly effective both prospectively attributable to ordinary shares using the weighted average number and retrospectively are recorded on the income statement, along of shares outstanding during the year after deduction of the average with any changes in the fair value of the hedged asset or liability number of treasury shares held over the period. The calculation of that is attributable to the hedged risk. Changes in the fair value of diluted earnings per share is consistent with the calculation of basic derivatives that are classified and qualify as cash flow hedges and earnings per share while at the same time having the effect for all that are highly effective both prospectively and retrospectively are dilutive potential ordinary shares that were outstanding during the recognised in the equity. period, i.e.:
Changes in the fair value of derivatives that do not qualify for hedge • The net profit for the period attributable to ordinary shares is accounting under IAS 39 are recognised immediately on the income increased by the post-tax amount of dividends and interest statement. recognised in the period in respect of the dilutive potential ordinary shares and adjusted for any other changes in income or expense that would result from the conversion of the dilutive RELATED PARTY TRANSACTIONS potential ordinary shares. All transactions, agreements and business activities with related • The weighted average number of additional ordinary shares that parties are conducted according to ordinary business terms and would have been outstanding, assuming the conversion of all conditions. dilutive potential ordinary shares, increases the weighted average number of ordinary shares outstanding.
REVENUE RECOGNITION POLICIES Revenue is only recognised if it is probable that future economic COMPARATIVES benefits will accrue to Aker Seafoods and these benefits are reliably When necessary, comparative figures have been adjusted to con- measurable. Revenues in this context include gross infusion of eco- form to changes in the presentation of financial statements for the nomic gain received by Aker Seafoods at its own expense. current year.
Revenues from the sale of products are recognised in the income statement when Aker Seafoods has transferred the most essen- CONVERTIBLE BONDS tial risk and rewards of ownership to the buyer and no longer has Convertible bonds that can be converted to share capital at the control or administrative influence over the products. Revenues from option of the lender, where the number of shares issued does services are recognised in the income statement in proportion to the not vary with the changes in their fair value, are accounted for as degree of completion of the transaction at the balance sheet date. compound financial instruments. Transaction costs related to the The degree of completion is assessed on the basis of a review of issue of a compound financial instrument are allocated to the liability the performed work. and equity component in proportion to the allocation of proceeds. The equity component of the convertible notes is calculated as the excess of the issue proceeds over the present value of the future SEGMENT INFORMATION interest and principal payments, discounted at the market rate of The segmentation is based on dominant sources and nature of the interest applicable to similar liabilities that do not have a conversion risks and returns of the Group as well as the Group’s internal report- option. The interest expense recognised in the income statement is ing structure. calculated using the gross-redemption yield method.
Aker Seafoods Group uses business segments as reporting seg- ments. RECENTLY PUBLISHED ACCOUNTING STANDARDS AND STATEMENTS The Group comprises the following business segments (descending in order of revenue); Early utilisation • Processing Norway The supplementary requirements for publication resulting from • Processing Denmark amendments of IAS 19 “Employee Benefits – Actuarial Gains and • Harvesting Losses, Group Plans and Reporting” are included in the financial • Nordic Group statements.
32 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
IFRS and IFRIC interpretations not yet in force. Proforma INFORMATION In the officially audited accounts for 2005 (“Accounts 2005”), the The Group has not implemented the following IFRS and IFRIC inter- profit and loss accounts are presented with the inclusion of financial pretations that are issued but not yet in force: results from the acquired companies West Fish-Aarsæther and IFRS 6 Exploration and Evaluation of Mineral Resources. Nordic Sea Holding from the date of purchase, which for accounting This standard is not relevant to the Group’s activities. purposes was 1 May 2005. IFRS 7 Financial Instruments: Disclosures. The official accounts for 2004 (“Accounts 2004”) show the result This standard comes into force for financial years starting on or from Aker Seafoods ASA (name at the time: Norway Seafoods after 1 January 2007. This standard introduces new requirements to Europe AS) established with effect for accounting purposes from 1 improve the reporting of financial instruments. The Group plans to May 2004. implement this from the date at which it comes into force. For the purpose of presenting comparative financial information, pro- Amendments to the fair value alternative in “IAS 39 Financial instru- forma financial statements for 2005 and 2004 have been prepared, ments: Book-keeping and Measurement” come into force from 1 as if the founding of Aker Seafoods ASA as well as the purchases of January 2006. the companies West Fish-Aarsæther and Nordic Sea Holding had been made with effect for accounting purposes from 1 January 2004 As the Group has not made use of the fair value alternative before, (proforma profit and loss accounts, balance sheet, cash flow and the coming into force will not have any effect on the financial state- notes). ments. Amendment of IAS 21 “The Effects of Changes in Foreign Exchange Rates”, issued in December 2005, comes into force for The proforma financial statements are provided for informative pur- financial years beginning on or after 1 January 2006. The Group will poses only, and are not necessarily indicative of the actual financial initiate this when it takes effect. results that would have been achieved if the transactions had actu- ally taken place during the course of the periods presented. IFRIC 4 Determining Whether an Arrangement Contains a Lease. The most important assumptions for the proforma financial state- The interpretation comes into force from 1 January 2006. The Group ments are summed up below. will initiate this when it comes into force. • Aker Seafoods ASA proforma financial statement has considered IFRIC 5 Rights to Interests Arising from Decommissioning, Restora- the financing that took place in June 2005. tion and Environmental Rehabilitation Funds. • The acquisition value of Aker Seafoods ASA above the book value Implementation of the interpretation is required in financial years is allocated for concessions and is not depreciated. commencing on or after 1 January 2006, but it is not deemed to be relevant to the Group.
IFRIC 7 Applying the Restatement Approach under IAS 29: Financial Reporting in Hyperinflationary economies.
The interpretation must be applied in financial years commencing on or after 1 March 2006, but is not deemed to be relevant to the Group.
33 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
note 2 Business combination
In May 2005, Aker Seafoods ASA acquired 100% of the shares in West Fish-Aarsæther AS (WFAa) and 18.11% of the shares in Nordic Sea Holding AS (NSH). WFAa’s shareholding in NSH was 46.97%, so Aker Seafoods’ total acquisition amounted to 65.08% of NSH. The remuneration consisted of shares in Aker Seafoods ASA. At the same time, Aker Seafoods purchased the remaining 34.92% of NSH. The remuneration consisted of cash.
During the eight-month period up to 31 December 2005, the subsidiary contributed a loss of NOK 4 million to the consolidated annual result. If the acquisition had been made at 1 January 2005, the Group’s operating revenues would have been NOK 2,316 million and the profit would have been NOK 37 million. The subsidiary contributed a profit of NOK 25 million for the year on the whole.
Detalis of net assets acquired and goodwill are as follows:
Purchase consideration - Cash paid 4 - Direct costs relating to the acquisition 4 - Fair value of shares issued (note xx) 151 Total purchase consideration 159 Fair value of net assets acquired 159 Goodwill 0
The acquisitions have had the following effect on the group’s assets and liabilities:
The assets and liabilities arising from the acquisition are as follows Fair Fair value Acquiree’s
Amounts in NOK millions VALue ADJustments carrying amount Property, plants and equipment 202 202 Shares and long term receivables 15 15 Intangible assets 377 141 236 Inventories 88 88 Kundefordringer og andre fordringer 97 97 Other trade and other interest-free receivables 16 16 Interest-bearing loans and deferred tax liabilities -553 -38 -515 Trade and other payables -83 -83 Net assets 159 103 55 Purchase consideration settled in cash 4 Assets acquired *) 155
Cash and cash equivalents in subsidiary acquired 16 Cash outflow on acquisition 12
*) Fair value of the payment shares was based on the share price.
The capital gain of the acquisition is allocated in its entirety to the fishing licenses acquired.
In December 2005, shares were also purchased in Lofoten Trålrederi AS. The ownership interest in Lofoten Trålerrederi AS after the pur- chase is 93.25 %. The remuneration was NOK 42.8 million and the capital gain of NOK 17.7 million was allocated in its entirety to fishing LICENSES. NOK 5 million of the capital gain has been set aside for deferred tax.
No subsidiaries were acquired in 2004 after the founding of the Aker Seafoods ASA Group in May 2004.
34 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
note 3 Business and Geographical Segments
Segment information is presented in respect of the Group’s business and geographical segments.The primary format, business segments, is based on the Group’s management and internal reporting structure. The operating companies in the Group which represent the different business segments provide different products and services and they are subject to different risk and returns. See the Board of directors’ report for a description of the operating companies.
Operating revenue in geographical segments are based on the geographical location of customers whereas Segment assets and Capital expenditure are based on geographical location of the companies. Inter-segment pricing are set on an arm’s length basis in a manner similar to transactions with third parties.
Accounts 2005 – Business segments Processing Processing Nordic Proforma
Amounts in NOK million Note Harvesting Norway Denmark GrouP other consolidated External operating revenues 284 849 606 281 0 2021 Inter-segment revenues 137 16 0 2 -155 0 Operating revenues 4 0 -1 021 EBITDA 41 4 -12 138 Depreciation and amortization 11, 12 -37 -23 -15 0 0 -75 Impairment changes and non recurring items 8 0 0 0 0 0 0 Operating profit 45 18 -12 62 Share of earnings in associated companies 13 -1 0 0 0 -4 -5 Net financial itmes 9 -19 -7 2 -2 -19 -45 Profit before tax 11 11 1 -35 12 Tax expense 10 0 0 -4 0 0 -4 Profit for the year 11 7 0 -35 8
Vessels, property, plant and equipment 11 501 238 55 0 9 803 Intangible assets 12 253 5 0 0 619 877 Investment in associates 13 14 131 0 0 -135 10 Inventories and interest-free receivables 17 29 108 23 48 -4 204 Other assets 1) 16 388 376 107 63 -78 856 Total assets 11 185 111 411 0
Trade and other payables 53 56 37 25 18 189 Current Provisions not including Dividend payable 16 54 14 0 2 86 Other liabilities 2) 1012 418 7 64 68 1569 Total liabilities 1081 1844
Capital expenditure 3) 11, 12 438 82 12 2 164 698
35 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Accounts 2004 – Business segments Processing Processing Nordic Proforma
Amounts in NOK million Note Harvesting Norway Denmark GrouP other consolidated External operating revenues 89 434 450 0 0 973 Inter-segment revenues 101 22 0 0 -123 0 Operating revenues 190 456 450 0 -1 EBITDA 0 0 4 Depreciation and amortization 11, 12 -26 -14 -14 0 0 -55 Impairment changes and non recurring items 8 0 0 18 0 0 18 Operating profit - 12 0 0 18 Share of earnings in associated companies 13 -1 0 0 0 0 -1 Net financial itmes 9 -13 -5 1 0 -2 -19 Profit before tax -17 4 13 0 -2 -3 Tax expense 10 4 1 0 0 1 6 Profit for the year -1 13 0 -1
Vessels, property, plant and equipment 11 301 265 62 0 0 628 Intangible assets 12 80 5 0 0 457 542 Investment in associates 13 1 75 0 0 -72 4 Inventories and interest-free receivables 17 20 65 29 0 -5 109 Other assets 1) 16 63 252 152 0 43 510 Total assets 4 43 0 423 1793
Current Provisions not including Dividend payable 0 0 0 0 143 143 Other liabilities 2) 435 353 57 0 122 967 Total liabilities 4 0 1110
Capital expenditure 3) 11, 12 84 12 8 0 456 560
Proforma 2005 – Business segments Processing Processing Nordic Proforma
Amounts in NOK million Note Harvesting Norway Denmark GrouP other consolidated External operating revenues 309 1038 606 386 0 2339 Inter-segment revenues 210 78 1 -289 0 Operating revenues 0 111 0 - 40 EBITDA 120 4 4 4 -15 181 Depreciation and amortization 11, 12 -41 -26 -15 0 -1 -82 Operating profit 4 -1 Share of earnings in associated companies 13 -1 0 0 0 -4 -5 Net financial itmes 9 -23 -9 2 -2 -21 -53 Profit before tax 14 11 1 -41 41 Tax expense 10 -4 0 -4 Profit for the year 56 14 1 -41
Vessels, property, plant and equipment 11 501 238 55 0 9 803 Intangible assets 12 253 5 0 0 619 877 Investment in associates 13 14 131 0 0 -135 10 Inventories and interest-free receivables 17 29 108 23 48 -4 204 Other liabilities 2) 16 388 376 107 63 -78 856 Total liabilities 11 185 111 411 0
Trade and other payables 53 56 37 25 18 189 Current Provisions not including Dividend payable 16 54 14 0 2 86 Other liabilities 2) 1012 418 7 64 68 1569 Total liabilities 1081 1844
Capital expenditure 3) 11, 12 29 32 12 0 21 94
36 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Proforma 2004 – Business segments Processing Processing Nordic Proforma
Amounts in NOK million Note Harvesting Norway Denmark GrouP other consolidated External operating revenues 276 1068 673 384 9 2410 Inter-segment revenues 195 49 0 1 -245 0 Operating revenues 471 111 - 410 EBITDA 102 44 16 0 0 162 Depreciation and amortization 11, 12 -49 -27 -20 0 -1 -97 Impairment changes and non recurring items 8 31 0 25 0 0 56 Operating profit 1 1 0 0 121 Share of earnings in associated companies 13 -1 0 0 0 -7 -9 Net financial itmes 9 -25 -12 -1 -1 -16 -54 Profit before tax 0 -1 -24 Tax expense 10 -2 -6 0 0 1 -6 Profit for the year 56 -1 0 -1 -
Vessels, property, plant and equipment 11 437 326 62 0 1 827 Intangible assets 12 253 5 0 2 701 960 Investment in associates 13 1 5 0 2 1 9 Inventories and interest-free receivables 17 38 103 29 39 -5 204 Other assets 1) 16 68 299 152 49 21 589 Total assets 4 0
Trade and other payables 25 30 0 21 151 226 Other liabilities 2) 599 502 57 46 328 1533 Total liabilities 479 1759
Capital expenditure 3) 11, 12 0 0 8 0 0 8
1) Other assets include Deferred tax assets, Financial assets, Interest-bearing receivables and Cash and Cash equivalentes. 2) Other liabilites include Non-current liabilities, Interest-bearing short-term debt, Income tax payable and Dividend payable. 3) Capital expenditure comprises additions to property, plant and equipment (note 11) and Intangible assets (note 12). Including additions resulting from acquisitions through business combinations. note 4 Operating revenues and other income
Geographical segments Operating revenues by customer location Accounts Accounts Proforma Proforma
Amounts in NOK million 2005 2004 2005 2004 Norway 467 204 554 530 EU 1 291 710 1 436 1 479 North America 137 15 204 241 Asia 61 19 62 90 Other 43 23 60 63 Total 1 999 971 2 316 2 402
Geographical segments Capital expenditure by company location Accounts Accounts Proforma
Amounts in NOK million 2005 2004 2004 Norway 2 565 1 550 2 346 EU 185 243 243 Total 750 1 793 2 589
Analysis of sales by categori Accounts Accounts Proforma Proforma
Amounts in NOK million 2005 2004 2005 2004 Operating revenues 1999 971 2 316 2 402 Services and other income 22 2 24 8 Total 2021 973 2 340 2 410
37 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
note 5 Cost of goods and change in inventory
Cost of goods and change in inventory consist of Accounts Accounts Amounts in NOK million Proforma Proforma
004 200 2005 2004 490 1 125 Cost of goods 1 306 1 397 43 13 Change in inventory 18 53 1 138 total 1 324 1 450
note 6 Wages and other personell expenses
Wages and other personnel expenses consist of: Accounts Accounts Amounts in NOK million Proforma Proforma
004 200 2005 2004 200 375 Wages 425 436 4 16 Social security contributions 17 10 14 17 Pension costs (note 28) 17 12 14 10 Other expenses 19 36 417 total 478 494 1 095 - Average number of employees 1 267 1 473
note 7 Wages and other operating expenses
Other operating expenses consist of Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 1 5 Rent and leasing expenses (note 26) 6 3 1 4 Impairment loss on trade receivables 4 -1 152 319 Other operating expenses 346 303 154 328 total other operating expenses 356 304
Payments/fees to auditors for the Aker Seafoods ASA Group are included in Other operating expenses.
Accounts Accounts O ordinary Consulting Proforma Proforma
004 2005 Amounts in NOK thousands auditing services 2005 2004 88 825 Aker Seafoods ASA 219 606 825 88 392 2 986 Subsidiary companies 2 268 899 3 167 1 929 480 3 811 total 2 487 1 505 3 992 2 017
Consulting services consists of the following: Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK thousands 2005 2004 - 374 Other assurance services 374 - 266 Tax advisory services 266 138 225 Non-audit services 356 377 395 509 Merger cost and other operating expenses 509 395 1 374 total 1 505 772
38 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Note 8 Impairment changes and non recurring items
Impairment changes and non recurring items include impairment losses on goodwill, impairment loss and impairment reversal on property, plant and equipment, major losses on the sale of operating assets, restructuring costs and other material matters not expected to be of a recurring nature.
The items are as follows: Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 18 - Norlax - sales gain and operations - 25 - - Sale of vessel and licences - 31 18 - total - 56
In July 2004 the wholly owned subsidiary Norlax AS was sold with a sales gain of NOK 14 million. Until the sale in July, Norlax AS had gener- ated an EBITDA of NOK 11 million.
The subsidiary Nordic Sea Holding sold the vessel M/Tr Øksnesfisk with its two cod licenses. The sale resulted in a sales gain of NOK 31 million. note 9 Financial income and financial expenses
Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 5 17 Interest income 19 13 - 1 Dividend income 1 - 14 5 Other financial income 5 15 19 23 Financial income 25 29 -27 -58 Interest expense -67 -70 -5 -6 Net foreign exchange loss -6 -5 -7 -5 Other financial expenses -5 -8 -39 -68 Financial expenses -78 -83 -20 -45 Net financial items -53 -54 note 10 Tax
INCOME TAX EXPENSE Recognised in the income statement: Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 Current tax expense: -3 -2 Current year -2 -3 -3 -2 total current tax expense -2 -3
Deferred tax expense: 9 -2 Origination and reversal of temporary differences -2 -3 9 -2 Total deferred tax expense -2 -3
6 -4 total income tax expense in income statement -4 -6
Reconciliation of effective tax rate: Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 -3 12 Profit before tax 41 58 - -3 Nominal tax rate Norway 28% -11 -16 6 -1 Utilisation of previously unrecognised tax losses 7 10 6 -4 total income tax expense in income statement -4 -6
The weighted average applicable tax rate was 28 % (2004: 28%).
39 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
DEFERRED TAX ASSETS AND LIABILITIES Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 0 25 Deferred tax assets 25 - 0 -25 Deferred tax liabilities -25 0
Deferred assets have not been recognised in respect of the following items: Basis for deferred tax Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 Deductible temporary difference 0 166 Tax losses 166 186
The Company evaluates the non recognised deferred tax asset not to be booked in the balance sheet as of 31.12.2005. The Company will evaluate the effect of the integration of the merged entities in 2006.
The gross movement on the deferred income tax account is as follows Accounts Accounts Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 0 -133 Beginning of the year -110 -113 0 1 Exchange differences 1 0 -124 23 Acquisition of subsidiary 0 0 -9 2 Income statement charge 2 3 -133 -107 Balance pr 31. December -107 -110 31 105 Deferred tax assets 105 105 -164 -212 Deferred tax liabilities -212 -215 -133 -107 End of the year -107 -110
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax assets Provisions Pension
Amounts in NOK million of assetS tAX losseS AND other Total 1 April 2004 7 1 14 22 Charged/(credited) to the income 3 3 3 9 31 December 2004 10 4 1 1 (Credited)/charged to the income 0 12 0 12 Acquisition of subsidiary 5 52 4 61 Exchange differences 0 1 0 1 31 December 2005 1 0 1 105
Deferred tax liabilities: Provisions Pension
Amounts in NOK million of assetS AND other Total 1 April 2004 -165 -50 -215 Charged/(credited) to the income 0 -3 -3 31 December 2004 -165 -53 -218 (Credited)/charged to the income 0 10 10 Charged to equity 0 -4 -4 31 December 2005 -165 -47 -212
40 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
note 11 Vessels, property and equipment
Movements in vessels, property plant and equipment for 2005 are shown below Machinery Buildings Accounts
Amounts in NOK million Vessels Vehicles Houses Total Cost balance at 1 January 2005 613 397 319 1 329 Acquisitions through business combinations 278 268 203 749 Other acquisitions 26 36 12 73 Disposals -11 -13 -3 -27 Effect of movements in foreign exchange -4 -4 -8 Cost balance at 31 December 2005 0 4 117
Depreciation and impairment losses at 1 January 2005 291 269 141 701 Depreciation charge for the year 33 32 18 82 Acquisitions through business combinations 139 238 152 529 Disposals 1 7 8 Effect of movements in foreign exchange -3 -3 -6 Depreciation and impairment losses at 31 December 2005 464 4 08 1 314
Book value at 31 December 2005 441 14 0 03
Movements in property plant and equipment for 2004 are shown below Machinery Buildings Accounts
Amounts in NOK million Vessels Vehicles Houses Total Cost balance at 1 January 2004 670 403 318 1 391 Other acquisitions 11 17 4 32 Disposals -68 -23 -3 -94 Cost balance at 31 December 2004 1 19 1 329
Depreciation and impairment losses at 1 January 2004 268 245 133 646 Depreciation charge for the year 23 24 7 55 Depreciation and impairment losses at 31 December 2004 1 140 01
Book value at 31 December 2004 128 1
Proforma 2004 Machinery Buildings Accounts
Amounts in NOK million Vessels Vehicles Houses Total Cost balance at 1 January 2004 971 656 518 2 145 Other acquisitions 11 23 4 38 Disposals -91 -30 -3 -124 Cost balance at 31 December 2004 1 4 1 059
Depreciation and impairment losses at 1 January 2004 390 467 278 1 135 Depreciation charge for the year 43 40 14 97 Depreciation and impairment losses at 31 December 2004 4 0 1232
Book value at 31 December 2004 458 14
Depreciation period 2-30 år 3-20 år 20-50 år Depreciation method Straight line Straight line Straight line
41 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
note 12 Intangible assets
Movements in intangible assets for 2005 are shown below other
Amounts in NOK million GoodwILL INtangibles Total
Cost balance at 1 January 2005 7 543 550 Acquisitions through business combinations 4 317 321 Other acquisitions 21 21 Cost balance at 31 December 2005 11
Amortisation and impairment losses at 1 January 2005 7 0 7 Acquisitions through business combinations 2 7 9 Depreciation and impairment losses at 31 December 2005 16
Book value at 31 December 2005
The balance sheet value of the other intangible assets at 31 December 2005 consists of 27.7 cod licenses, 6 shrimp licenses and 2 greater silver smelt licenses. . 1) Other acquisitions related to the purchase of minority stakes in trawling companies where the capital gain is ascribed to licenses.
Movements in intangible assets for 2005 are shown below other
Amounts in NOK million GoodwILL INtangibles Total Cost balance at 1 January 2004 9 565 574 Other acquisitions 3 3 Disposals -27 -27 Reclassification -2 2 0 Cost balance at 31 December 2004 4 0
Amortisation and impairment losses at 1 January 2004 Amortisation for the year 7 7 Depreciation and impairment losses at 31 December 2004 0
Book value at 31 December 2005 0 4 43
At the end of 2005, the Aker Seafoods Group owns 27.7 cod licenses, 6 shrimp licenses and 2 greater silver smelt licenses. In 2005 a cod license entitled the holder to harvest 716 tons of cod, 287 tons of haddock and 652 tons of saithe north of the 62nd parallel. The shrimp licenses and greater silver smelt licenses are not limited by quantity.
In spring 2005, The Ministry of Fisheries and Coastal Affairs chose to introduce a structural quota scheme for the sea fishery fleet. This had also been possible previously by means of the single quota scheme, but this scheme encumbered the structured quota with a limited duration (18 years). The new structural quota scheme made it possible to combine quotas by gathering more than one quota in one vessel without limiting the quota in time. Because current fishing quotas are far lower than the harvesting capacity of a modern trawler, it is possible to substantially improve efficiency by gathering more than one quota in a single vessel. This has also increased the demand for cod licenses from fishing companies with surplus harvesting capacity. The prices for cod, saithe and haddock have also risen in the last two years, which also increases the earnings per license. The shrimp situation has differed, however, by virtue of low prices the last two years. The Aker Sea- foods Group has only harvested shrimp to a limited extent in 2005, as vessels have been deployed on other, more profitable operations.
In connection with the presentation of the 2005 financial statements, an external valuation of the licenses was performed. The cod licenses were valued at between NOK 39–43 million per license, the shrimp licenses at NOK 3–5 million per license and the greater silver smelt licenses at NOK 4 million per license. The value assessments is based on the market value of this type of license.
42 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 13 Investments in associates
Proforma Amounts in NOK million 2005 2004 Beginning of the year 3 3 Acquisitions 2 0 Disposals 0 0 Share of loss/profit (see note 10) 0 0 End of the year 5 3
Proforma The movements of investments in associates companies are allocated on companies as follows 2005 Balance beginning Acquisitions Share of loss/ Balance end Writedown
Amounts in NOK million of the year and disposals profit of the year receivables Tobø Fisk AS 2 0 2 Artic Innomar AS 0 1 1 Other shares in associated companies 1 1 2 1 Kystfisk Vardø AS 0 0 3 Berlvågtrål III AS 0 0 1 Total 3 2 0 5 5
Of total share from associated companies of NOK -4.7 million, NOK 4.5 million arise from write down of receivables towards associated companies. Share from associated companies of NOK -9 million in 2004 arises from arise from write down of receivables towards associ- ated companies.
NOTE 14 Share investments
Other share investments comprise the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 1 5 Share in other companies 5 2 1 5 total 5 2
The other share investments are allocated as follows 1 5 Available for sale 5 2 1 5 total 5 2
NOTE 15 Interest-bearing long-term receivables
Financial interest-bearing long-term receivables consist of the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 178 178 Interest bearing long term receivable - Aker Seafoods Holding AS 178 178 6 28 Other interest-bearing long-term receivables 28 6 184 205 total 205 184
Interest rate on interest-bearing long-term receivables are as follows Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 Interest bearing long term receivable - Aker Seafoods Holding AS Nibor + 1,75 Nibor + 1,75 Other interest-bearing long-term receivables Nibor + 1,75 Nibor + 1,75 total
43 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 16 Other non-current assets
Other non-current assets consist of the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 7 Other interest-free long-term receivables 7 13 - 7 total 7 13
Total other non current asset and interest-bearing long-term receivables are allocated as follows Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 7 Loans and receivables 7 13 - 7 total 7 13
NOTE 17 Inventories
Inventory comprises the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 40 51 Raw materials 51 61 12 10 Work in progress 10 12 57 143 Finished goods 143 124 109 204 total 204 197
Out of the total inventories in Aker Seafoods Consolidated accounts as of 31 December 2005 NOK 42 million are valued at market value with deduction of sales expenses. Remaining inventories are valued at full production cost.
NOTE 18 Trade and other interest-free receivables
Trade and other interest-free receivables consist of the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 170 253 Trade receivable 253 248 27 45 Other short-term interest-free receivables 45 42 197 299 total 299 290
In 2005 the group has recognised a loss of NOK 4,08 mill. (2004: NOK - 1,1 mill.) for the impairment of its trade receivables. The loss has been included in other operating expenses in the income statement (see note 7).
NOTE 19 Interest-bearing short-term receivables
Interest-bearing short-term receivables consist of the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 8 14 Interest-bearing short-term receivables with interest rate 14 8 0 Other interest-bearing short-term receivables 0 8 14 total 14 8
44 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 20 Cash and cash equivalentes
Cash and cash equivalents comprise the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 89 218 Cash and cash equivalentes 218 98 - 8 Bank deposits with restrictions 8 7 89 226 cash and cash equivalentes 226 105 - - Bank overdrafts - - 89 226 cash and cash equivalentes in the statement of cash flows 226 105
NOTE 21 Earnings per share and dividend per share
Earnings per share Accounts AccountS Proforma Proforma
004 2005 Amounts in NOK million 2005 2004 4 3 Profit attributable to equity holders of the Company 31 54 Reconciliation items (individual for each class of instrument) 0 0 4 3 Profit used to determine diluted earnings per share 3 1 54
100 000 48 646 016 Weighted average number of ordinary shares in issue 48 646 016 48 646 016 100 000 48 646 01 weighted average number of ordinary 48 646 016 48 646 016 shares for diluted earnings per share
.50 0.07 Diluted earnings per share (NOK per share) 0.63 1.10
1 000 5 Par value per share 5 5
Dividend per share There is not paid any dividends in 2004 and 2005. At the shareholders’ meeting on 29 March 2006 the Board of Directors will propose a dividend of NOK 0,75 per share, which totally amounts to NOK 36,5 million. The consolidated annual accounts do not reflect the proposed dividends.
NOTE 22 Paid in capital
The total authorised and issued number 48 646 016 par value of NOK 5. All issued shares is fully paid.
Share Share premium Accounts total
Amounts in NOK million Capital reserve PAID in capital 1. January 2004 100 557 657 31. December 2004 100 557 657 Reclassification 100 -100 - Paid in capital 12. May 2005 26 125 151 Paid in capital 12. May 2005 17 70 87 31. December 2005 243 652 895
Number of shares Share number of
Amounts in NOK million Capital Par value shares 1. January 2005 100 1 000 100 000
Split from par value NOK 1 000 till par value NOK 5 100 5 20 000 000 Reclassification 29. March. 2005 100 5 20 000 000 Paid in capital 12. May 2005 26 5 5 197 740 Paid in capital 12. May 2005 17 5 3 448 276 Share Capital/Shares 31. December 2005 243 5 48 646 016
45 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 23 Group entities
The largest subsidiaries in the Aker Seafoods Group accounts are presented in the table below. Company shareholdings owned directly by Aker Seafoods ASA are emphasized.
Group’s Group’s share Business address
ownership (in %) IN votes (in %) City/location Country Owned directly Aker Seafoods Finnmark AS 100 % 100 % Hammerfest Norway Aker Seafoods Melbu AS 100 % 100 % Melbu Norway Aker Seafoods JM Johansen AS 100 % 100 % Stamsund Norway Aker Westfish AS 100 % 100 % Oslo Norway Thorfisk AS 100 % 100 % Grenå Denmark Norway Seafoods UK Ltd. 100 % 100 % Grimsby England
Owned indirectly Hammerfest Industrifiske AS 60 % 60 % Hammerfest Norway Norway Seafoods Hammerfest Eiendom AS 100 % 100 % Hammerfest Norway Nordkapp Holding AS 100 % 100 % Måsøy Norway Nord Norsk Sjømat AS 100 % 100 % Melbu Norway Havfisk AS 100 % 100 % Stamsund Norway Lofoten Trålerrederi AS 93.3 % 93.3 % Stamsund Norway Makkaur Havfiske AS 100 % 100 % Mehamn Norway Sletnestrål AS 100 % 100 % Honningsvåg Norway Helnestrål AS 100 % 100 % Mehamn Norway Grønlandstrål AS 100 % 100 % Ålesund Norway Båtsfjord Havfiskeselskap AS 93.75 % 93.75 % Båtsfjord Norway Kjøllefjord Havfiskeselskap AS 91.07 % 91.07 % Kjøllefjord Norway Vadsøfisk AS 100 % 100 % Vadsø Norway Vardø Havfiske AS 97.14 % 97.14 % Vardø Norway Finnmark Havfiskeselskap AS 100 % 100 % Ålesund Norway Skjøtningberg AS 100 % 100 % Kjøllefjord Norway Aker Seafoods Båtsfjord AS 100 % 100 % Båtsfjord Norway Aker Seafoods Kjøllefjord AS 100 % 100 % Kjøllefjord Norway West Fish Industrier AS 100 % 100 % Ålesund Norway Skarsvågfisk AS 100 % 100 % Skarsvåg Norway Nordic Group AS 62.5 % 62.5 % Trondheim Norway West Fish Aarsæther AS 100 % 100 % Ålesund Norway Nordic Sea Holding AS 100 % 100 % Tromsø Norway Nordic Sea Trawlers AS 100 % 100 % Båtsfjord Norway West Fish Sales AS 100 % 100 % Ålesund Norway West Fish AS 100 % 100 % Ålesund Norway West Fish Eiendom AS 100 % 100 % Ålesund Norway Nordtraal AS 100 % 100 % Stamsund Norway
In the consolidated accounts of Aker Seafoods, the following exchange rates have been used in translating the accounts of foreign subsidiaries and associated companies: average rate at Average rAte at
Country Currency rate 200 1 Dec. 2005 rate 2004 1 Dec. 2004 Great Britain GBP 1 11.72 11.65 12.34 11.62 USA USD 1 6.44 6.75 6.74 6.03 Denmark DKK 100 107.45 107.16 112.53 110.47 Sweden SEK 100 86.33 84.70 91.74 90.97 The European Union EUR 1 8.01 8.01 8.37 8.23
Average rate at 31. December are used in result and balance sheet.
46 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 24 Minority interest
Minority interest in 2004 are mainly 31,78 % in Lofoten Trålerrederi AS.
Minority Accounts Proforma Minority
Amounts in NOK million interest 2005 2004 INterest Lofoten Trålerrederi AS 6.7 % 8.3 33.0 31.8 % Båtsfjord Havfiskeselskap AS 6.3 % 2.7 2.8 6.3 % Kjøllefjord Havfiskeselskap AS 8.9 % 0.5 0.3 8.9 % Vardø Havfiskeselskap AS 2.9 % 0.2 0.2 2.9 % Vadsøfisk AS 0.0 % 0.0 2.3 19.5 % Nordic Group AS 37.5 % 7.9 7.9 37.5 % 20 47
NOTE 25 Interest-bearing loans and liabilities
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 30.
Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 Interest-bearing loans and credits 388 772 Secured bank loans in NOK 772 622 - 394 Unsecured bond issues 394 - - - Convertible bonds - 18 116 - Loan in EUR - 116 - - Other - 28 04 11 total non-current liabilities 1166 784 Current liabilities 281 29 Current portion of secured bank loans 29 422 1 136 Secured bank facility 136 82 1 6 Other 6 13 171 total current liabilities 171 517
The Group’s interest-bearing debts have the following repayment profile broken down by loan type Due/year Amounts in NOK million Secured bank loans Unsecured bond issues 2006 29 2007 52 2008 52 2009 52 2010 52 400 After 2010 563 Total 800 400
The Group’s interest-bearing debts were refinanced in full in 2005. All debts are in Norwegian kroner. The trawler fleet and shares in the trawling companies provide security for the secured debt. The loan matures in 2015, The bond loan is placed in the Icelandic market and is listed on the ICEX. The bond loan is unsecured and matures in 2010. Aker Seafoods ASA has covenants in the loan agreements that are linked to minimum equity ratio.
47 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Mortgage charges The Aker Seafoods ASA Group has a consolidated accounts scheme. The participants/companies in the scheme are liable jointly and sever- ally as guarantors for each outstanding amount under the consolidated accounts agreement.
Debts secured with collateral Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 504 772 Secured bank loans in NOK 772 738 281 29 Current portion of secured bank loans 29 422 1 136 Secured bank facility 136 82 937 937 1 242
Book value of assets placed as security 870 906 Vessels, property, plants, inventories and receivables 906 1251
NOTE 26 Operating leases
Non-cancellable operating lease rentals 2005 - 2004 Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 1 5 Between one and five year 6 3 - - More than five years - - 1 total 6 3
NOTE 27 Pension expenses and pension liabilities
The Aker Seafoods Group’s Norwegian companies mainly cover their pensions through group pension plans in life insurance companies. Under IAS 19 Employee Benefits, the plans have been treated for accounting purposes as defined benefit plans. Certain companies have pension plans for which the employer provides an agreed-upon contribution that is managed in separate pension savings plan, (defined contribution plans). The contributions are recorded as pension expenses for the period. The Group also has uninsured pension liabilities for which provisions have been made. Actuarial calculations have been made to determine pension liabilities and pension expenses in connection with the Group’s defined benefit plans. The following assumptions have been made when calculating liabilities and expenses in Norway:
2004 005 2005 2004 6,5 % 5,5 % Expected return 5,5 % 6,5 % 5,5 % 4,5 % Discount rate at 31 December 4,5 % 5,5 % 3,0 % 3,0 % Wage growth 3,0 % 3,0 % 2,5 % 2,5 % Social security base adjustment/inflation 2,5 % 2,5 % 2,0 % 2,0 % Pension adjustment 2,0 % 2,5 %
Pension expense recognised in the income statement Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 1 4 Current service cost 4 2 1 3 Interest cost 3 2 - -3 Expected return on pension funds -3 -1 - 2 Amortization of past service cost 2 - 6 Net pension expenses 6 3 9 11 Contribution plans (employer’s contribution) 11 9 11 17 total net pension expenses 17 12
48 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Net pension funds and liabilities Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 16 13 Defined Benefit obligation funded plans 13 18 - 5 Defined Benefit obligation unfunded plans 5 - - -1 Fair value of plan assets -1 - 16 17 Present value of net obligations 17 18 1 Unrecognised Past service costs 1 3 16 18 Net liability recognised in the balance sheet 18 21
1 Pension funds 1 16 19 Pension liability 19 21
Changes in the present value of the defined benefit obligations are as follows Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 0 21 Net liability at the beginning of the year 21 4 16 6 Net expense recognised 6 18 -9 Benefits paid -9 - Translation difference - 16 18 Net liability at the end of the year 18 21
NOTE 28 Interest-bearing short-term debt
Interest-bearing short-term debt comprises the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 1 136 Bank overdrafts 136 82 282 35 Other interest-bearing short-term debt 35 435 171 total 171 517
Other Interest-bearing short-term debt comprises the following items Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 281 29 Current portion of longt term interest bearing debt 29 423 1 5 Other interest-bearing short-term debt 5 12 35 total 35 435
NOTE 29 Net interest-bearing debt
Other interest-bearing short-term debt Accounts Accounts Accounts Proforma
004 2005 Amounts in NOK million 2005 2004 89 226 Cash and bank deposits 226 105 184 205 Financial interest-bearing fixed assets 205 184 8 14 Interest-bearing short-term receivables 14 8 281 445 Total interest-bearing assets 445 297 -504 -1 166 Interest-bearing long-term debt -1 166 -784 -283 -171 Interest-bearing short-term debt -171 -517 -787 -1 337 Total interest-bearing debt -1 337 -1 301 -506 -892 Net interest-bearing debt(-)/asset(+) -892 -1 003
49 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 30 Financial instruments
Ordinary activities generate exposure to credit risks, interest-rate risks and foreign exchange risk. Financial derivatives are used to hedge against exchange-rate fluctuations.
Credit risk The executive management has laid down the guidelines for credit facilities, and the exposure to credit risk is followed up continually. Credit insurance is contracted for all customers requesting credit greater than NOK 100,000. Losses on receivables compared to consolidated oper- ating revenues were approximately 0.18% and 0.05% in 2005 and 2004 respectively. Security is not required for financial assets.
No significant concentration of credit risk existed on the balance sheet date. The maximum credit risk exposure is reflected in the balance- sheet value of each financial asset, including financial derivatives.
Interest-risk
Hedging The Group does not hedge against exposure to fluctuations in interest rates on deposits. The interest rate on interesting-bearing financial assets is also floating. Accordingly, the Group is exposed to interest-rate fluctuations on its net interesting-bearing debt which amounted to NOK 892 million at 31 December 2005.
Effective interest rate The following table shows the redemption yield on the balance sheet date for interest-bearing financial assets and interest-bearing financial liabilities. Repricing of all interest-bearing financial assets and liabilities occurs every three and six months as this is also the intervals used for setting interest rates on margins. All interest-bearing financial assets and interest-bearing financial liabilities have floating interest rates.
2005 2004
effective effective
Amounts in NOK million Note INterest rate INterest rate Cash and cash equivalents 20 1.7 % 1.8 % Interest-bearing short-term receivables 19 4.1 % 3.9 % Interest-bearing long-term receivables 15 4.1 % 3.9 % Interest-bearing long-term loans and credits 25 4.5 % 6.0 % Unsecured bond loans 25 5.4 % - Operating facility 25 4.2 % 4.5 %
Foreign exchange risk The Group is exposed to foreign-exchange risks in sales in other currencies than NOK. The Group is primarily exposed to foreign-exchange risks involving EUR, GBP and USD.
Roughly 50% of all receivables in EUR and GBP are hedged. Roughly 50% of the foreign-exchange risk is associated with anticipated sales. The subsequent six months are also hedged at all times. Forward foreign exchange contracts are used for hedging the foreign-exchange risk. All forward foreign exchange contracts expire less than one year after the balance sheet date.
The Group ensures that the net exposure linked to other monetary assets and liabilities in foreign currency is kept at an acceptable level by buying and selling foreign currency at the current rate of exchange when it is necessary to manage a short-term imbalance.
Aker Seafoods’ portfolio of currency derivatives at 31 December 2005, which hedges against future sales, consists of the following curren- cies and times of maturity. The amounts indicate the underlying principal.
Arter
Amount million 2006 2006 Total Sales, EUR 178 0 178 Sales, GBP 35 0 35 Total sales 212 0 12
Purchases, EUR 0 0 0 Purchases, GBP 0 0 0 Total purchase 0 0 0 Net position 212 0 12
50 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Anticipated transactions Forward foreign exchange contracts hedging anticipated transactions are classified as cash-flow hedges. The contracts are valued at fair value. The fair value of forward foreign exchange contracts per 1 January 2004 is adjusted against the hedging reserves on the opening bal- ance sheet at the same date. The net fair value of forward foreign exchange contracts used for hedging anticipated transactions was NOK 0 million at 31 December 2005.
Recognised assets and liabilities Changes in the fair value of forward foreign exchange contracts used as financial hedging of monetary assets and liabilities in foreign currency, but which are not booked as hedging transactions, are recognised in the income statement. Changes in the fair value of forward foreign exchange contracts and exchange gains and losses on monetary assets and liabilities are recognised in “net financial expenses” (see note 9). The fair value of forward foreign exchange contracts – used as financial hedging of monetary assets and liabilities in foreign currency at 31 December 2005 and recognised as short-term non-interest-bearing receivables – was NOK 0 million.
Fair values Fair values and balance-sheet values are as follows: Assets +, Liabilities (-) Balance- Fair Balance- Fair
sheet value value SHeet value value Amounts in NOK million 2005 2005 2004 2004 Other share investments 5 5 3 3 Interest-bearing external receivables 205 205 184 184 Trade receivables 253 253 248 248 Cash and cash equivalents 226 226 105 105 Forward foreign exchange contracts: Assets 0 0 0 0 Liabilities 0 0 0 0 Long-term interest-bearing debt (see specification in separate note) -1 166 -1 166 -784 -784 Short-term interest-bearing debt (see specification in separate note) -171 -171 -517 -517 Trade creditors -273 -273 -222 -222 -921 -921 -983 -983 Unrealised (losses) / gains 0 0
Fair value is based on the market price quoted at the balance sheet date or the discounted value of future cash flows. By using the discount cash-flow method, future cash flow estimates are based on the best estimate of the management. The discount rate is the going rate of inter- est for similar instruments on the balance sheet date. Nominal amounts are regarded as reflecting fair value for claims/liabilities with a term of more than one year and for this reason are not shown in the table.
NOTE 31 Contingencies and capital commitments CONTINGENT LIABILITIES
Guarantee obligations At year-end 2005 and 2004, the Aker Seafoods Group had guarantee obligations not shown on the balance sheet in the amount of NOK 28 mill. and NOK 30 mill. The guarantees are payment bonds provided on behalf of the subsidiaries.
Legal claims The company Artic Kiberg AS has sued the subsidiaries Vardø Havfiskeselskap AS, Båtsfjord Havfiskeselskap AS and Kjøllefjord Havfiske- selskap AS for failure to meet their obligation to deliver to Kiberg. The claim for damages amounts to almost NOK 2.4 million and the legal proceedings are scheduled to begin at Finnmark Court on 26 February 2006.
CONTINGENT ASSETS No such items/information in the existing notes.
51 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 32 Transactions and agreements with related parties
The consolidated financial statements for Aker Seafoods ASA include the following transactions and intercompany accounts with Aker ASA, as well as with companies in which Aker ASA has controlling interest.
The transactions with related parties are listed below:
Transactions with related parties 200 004 Operating revenues 6 2 Operating expenses -5 Financial revenue 7 3 Financial expenses -4 Short-term receivables 14 8 Long-term receivables 178 178
Services are provided on an arm’s length basis.
NOTE 33 Total salary and other remuneration for the Board, CEO and other group management
Little activity occurred in the company from January–April 2005 and in 2004, and salaries were expensed in Aker Seafoods Holding AS.
NOK 855 112 has been disbursed in ordinary salary and NOK 53,276 has been disbursed as other remuneration for the CEO from May–De- cember 2005. The CEO and managerial staff are included in a bonus plan. The bonus is based on profit performance/budget performance and other target criteria. All employees of Aker Seafoods ASA, including the CEO and managerial staff, are covered by a group pension scheme which is part of the employment contract.
O other
C ceo Management Salaries and other remuneration 908 388 2 127 207 Pension benefits 55 300 188 062 Total 9 6 315 269
NOK 425,000 has been expensed as directors’ fees for 2005. The company has no obligations to the chairman of the board besides an ordinary director’s fee.
NOTE 34 Remuneration agreement in the event of cessation of the employment relationship/pension
The CEO is guaranteed 12 months’ salary at the time of termination. Other members of the management group do not have a redundancy pay agreement, besides the ordinary 3 months’ notice of termination.
52 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 35 Shares owned by the president and chief executive officer, board of directors and corporate assembly, and senior employees of Aker Seafoods asa
The following shareholdings were owned by board members and group management and their related parties at 8 February 2006:
Board: Shares Leif-Arne Langøy (through LAPAS AS) 18 400 Bjarne Borgersen 2 200 Martinus Brandal 6 200 Leiv Grønnevet 1 200
Senior employees Yngve Myhre 4 200 Bent M. Skisaker 1 600 Bjørnar Kleiven 3 200 Trond Williksen 1 600 Morten Hyldborg Jensen 1 600
Options agreements have not been concluded between Aker Seafoods ASA and managerial staff or union representatives.
An overview of the 20 largest shareholders at 2 February 2006
Largest shareholders AKER SEAFOODS HOLDING AS 66.76 % BANK OF NEW YORK. BR BNY GCM CLIENT ACCOUNT 7.41 % CREDIT SUISSE SECURI (EUROPE) PRIME BROKE 3.96 % ODIN NORGE 3.14 % ODIN NORDEN 3.12 % DEUTSCHE BANK AG LON PRIME BROKERAGE FULL 1.79 % BANK OF NEW YORK. BR S/A EQUITY TRI-PARTY 1.45 % GÅSØ NÆRINGSUTVIKLIN 1.15 % STATE STREET BANK & CLIENT OMNIBUS D 1.13 % KENTRA AS 1.09 % MORGAN STANLEY AND C CLIENT EQUITY ACCOUNT 0.90 % JPMORGAN CHASE BANK S/A THE TRUST OF BT 0.79 % HOLBERG NORGE VERDIPAPIRFONDET V/HOLBERG FONDSFORVA 0.64 % PACTUM AS 0.62 % FRØY SJØTRANSPORT AS V/HELGE GÅSØ 0.54 % FORUM FUNDS-POLARIS FUND 0.49 % UNION BANK OF CALIFO UBOC GLOBAL CUSTODY 0.45 % MP PENSJON 0.44 % GOLDMAN SACHS INTERN EQUITY NONTREATY CUS 0.43 % DEUTSCHE BANK AG LON PRIME BROKERAGE - PR 0.41 % Others 3.29 % Total 100 %
53 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
NOTE 36 Events after the balance sheet day
There are no material events after the balance sheet date which relates to 2005.
NOTE 37 Explanations for the transition to IFRS
This is the Group’s first presentation of consolidated financial statements pursuant to IFRS. The accounting principles in Note 1 are applied to the presentation of the 2005 consolidated financial statements and to comparable informa- tion for 2004, i.e. the financial statements for the period 1 May – 31 December 2004 and the proforma figures for 2004.
For the presentation of the opening balance sheet for 2004 in accordance with IFRS, the Group has adjusted the amounts presented in previous financial statements in accordance with NGAAP (Norwegian Generally Accepted Accounting Principles). In the following tables, the effect of the transition on the Group’s income statement and balance sheet is explained.
Pensions All cumulative actuarial gains and losses related to the Group’s performance plans are recognised in the accounts at the time of transition to IFRS in accordance with IFRS 1 (voluntary exemptions). This has led to a net increase in the pension obligations in the financial statements (proforma) of NOK 21 million at 1 January 2004. Similarly, changes have reduced the pension expenditure by NOK 10.6 million in the 2004 income statement.
Tangible fixed assets – allocation of classification costs For the transition to IFRS, a reclassification of the valuation of vessels has been carried out. The various primary components that make up a vessel are broken down by classifying and depreciating the hull, main engine, technical equipment, etc., according to the assumed service life of the components. Classification cost provisions have also been carried back. This has led to an increase in the book value of vessels, etc., by NOK 2 million, while the carrying back of classification costs amounts to NOK 4.7 million. Total classification expenses of NOK 2.7 million have been carried back in the 2004 income statement.
Intangible assets Goodwill may no longer be amortised according to IFRS, but the book value of goodwill must be reviewed annually for impairment. In accordance with NGAAP, deferred tax is recognised according to the net present value method. The fishing licenses are assumed to be permanent and the present value of deferred tax approaches zero. IFRS prohibits the discounting of deferred tax. A total of NOK 128 million has been recognised as increase in deferred tax liability.
Tax Changes in tax expense and deferred tax break are included on the basis of changes regarding the value of the pension obligations, intangi- ble assets and tangible fixed assets.
Interest-bearing debt and credits The Group had breached the covenants regarding parts of the long-term interest-bearing debt at 1 January 2004. As a result of this breach, NOK 202 million has been reclassified as short-term interest-bearing debt.
Carried-back group overhead allocation In 2003, NOK 15 million had been set aside as group overhead allocation. In connection with the transition to IFRS, this has been carried back and credited to the equity.
54 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Accounts NGAAP Adjustment IFRS IFRS
Amounts in NOK million Note 1.december 2004 Assets Vessel, property, plant and equipment 11 625 3 628 Intangible assets 12 415 128 543 Deferred tax assets 10 30 1 31 Investments in associates companies 13 3 0 3 Andre aksjeinvesteringer 14 1 0 1 Interest-bearing long-term receivables 15 184 - 184 Total non-current assets 1 258 133 1 390
Inventories 17 109 - 109 Other trade and other interest-free receivables 18 197 - 197 Interest-bearing short-term receivables 19 8 - 8 Cash and cash equivalents 20 89 - 89 Total current assets 403 - 403
Total assets 1 661 133 1 793
EQUITY AND LIABILITIES Paid in capital 22 100 - 100 Translation and other reserve 22 557 - 557 Retained earnings -9 2 -7 Total equity attributable to equity holders of the parent 648 2 650 Minority interest 27 33 - 33 Total equity 681 2 683
Interest-bearing loans 25 785 -281 504 Deferred tax liabilites 10 36 128 164 Pension liability 27 10 6 16 Other interest-free long-term liabilities - - - Total non-current liabilities 831 -147 684
Interest-bearing short-term debt 28 1 282 283 Trade and other payables 147 -4 143 Income tax payable 10 - - - Total current liabilites 148 278 426 Total liabilites 979 131 1 110
Total equity and liabilities 1 661 133 1 793
55 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
PROFORMA Adjustments Adjustments
NGAAP IFRS IFRS NGAAP IFRS IFRS
Amounts in NOK million Note 01.01 2004 1.12 2004 Assets Vessel, property, plant and equipment 11 948 2 950 824 3 827 Intangible assets 12 763 128 891 727 128 855 Deferred tax assets 10 89 32 121 91 14 105 Investments in associates companies 13 1 - 1 3 - 3 Other shares 14 0 0 0 1,6 - 2 Interest-bearing long-term receivables 15 125 0 125 184 - 184 Pension funds 27 2 -2 - 1 - 1 Other assets 16 14 -0 14 15 -3 12 Total non-current assets 1 942 160 2 102 1 847 143 1 989
Inventories 17 268 - 268 197 - 197 Other trade and other interest-free receivables 18 332 - 332 290 - 290 Interest-bearing short-term receivables 19 - - - - - Cash and cash equivalents 20 76 - 76 105 - 105 Total current assets 676 - 676 592 - 592
Total assets 2 618 160 2 778 2 438 143 2 581
EQUITY AND LIABILITIES Paid in capital 22 100 - 100 100 - 100 Translation and other reserve 22 557 - 557 557 - 557 Retained earnings 72 5 76 128 -2 126 Total equity attributable to equity holders of the parent 729 5 733 785 -2 783 Minority interest 27 49 - 49 47 - 47 Total equity 778 5 783 832 -2 830
Interest-bearing loans 25 1 401 -202 1 198 1 219 -435 784 Deferred tax liabilites 10 75 157 231 75 140 215 Pension liability 27 16 19 35 13 8 21 Other interest-free long-term liabilities 1 -1 - - - - Total non-current liabilities 1 492 -28 1 464 1 307 -287 1 020
Interest-bearing short-term debt 28 83 202 285 82 435 517 Trade and other payables 265 -19 246 225 -3 222 Income tax payable 10 0 - 0 0 - 0 Total current liabilites 348 183 531 308 432 740 Total liabilites 1 840 155 1 995 1 614 145 1 759
Total equity and liabilities 2 618 160 2 778 2 446 143 2 589
56 aker seafoOdS Annual report 2005 Aker Seafoods ASA Group – Notes
Total equity and liabilities Accounts Proforma 1
2004 2004 Profit/loss cf. NGAAP -4 45 Pension expenditure 11 11 Change, provision for classification reserves -3 -3 Currency hedge, future sales 2 2 Change, deferred tax -3 -3 Profit/loss cf. IFRS 3 52
Change in equity Proforma Accounts Proforma
01-01-04 31-12-04 31-12-04 Equity cf. NGAAP 729 648 785 Pension expenditure -21 -6 -11 Reclassification, valuation vessel 2 3 3 Carried back classification provisions, vessel 5 3 3 Carried back group overhead allocation 15 Change, deferred tax net 3 2 2 Currency hedge, future sales 1 Equity cf. IFRS 733 650
57 aker seafoOdS Annual report 2005 Aker Seafoods ASA Profit and Loss Accounts
Amounts in NOK 1 000 Note 2005 2004 Wages and other personnel expenses 2 -6 365 - Other expenses 2.3 -3 350 -88 Operating profit -9 715 -88
Net financial items 4 73 497 -4 804 Profit after financial items 63 782 -4 892
Tax on ordinary profit 5 857 1 363 Profit/loss for the year 64 639 -3 529
ALLOCATION OF PROFIT/LOSS FOR THE YEAR Profit/loss for the year 64 639 -3 529 Dividends -36 485 - Transferred from/allocated to (-) retained earnings -28 154 3 529 Total 0 0
58 aker seafoOdS Annual report 2005 Aker Seafoods ASA Balance Sheet as of 31 December
Amounts in NOK 1 000 Note 2005 2004 Assets Deferred tax assets 11 6 917 1 363 Total intangible assets 6 917 1 363
Shares in subsidiaries 8 748 150 748 000 Shares in associated companies 7 3 844 Shares in other companies 200 - Long- term receivables from Group companies 6 270 466 139 884 Other long-term receivables 6 196 983 176 206 Total financial fixed assets 1 219 643 1 066 090 Total non-current assets 1 226 560 1 067 453
Short-term receivables on Group companies 6 156 736 30 110 Other short-term receivables 6 13 513 24 803 Cash and cash equivalents 18 16 097 101 493 Total current assets 186 346 156 406 Total assets 1 412 906 1 223 859
EQUITY AND LIABILITIES Share capital 243 230 100 000 Share premium reserves 655 646 557 105 Total paid in equity 898 876 657 105 Other equity 19 257 -3 529 Total retained earnings 19 257 -3 529 Total equity 9 918 133 653 576
Pension liability 12 2 595 - Total provisions 2 595 -
Long-term debt to Group companies 10 51 477 62 450 Other long-term debt interest- bearing 10 393 817 442 188 Total other long-term debt and provisions 445 294 504 638
Short-term debt to Group companies 10 26 707 61 027 Group contribution 12 128 - Other short-term debt 8 049 4 618 Total short-term debt 46 884 65 645 Total equity and debt 1 412 906 1 223 859
Oslo, 15 February 2006 For Aker Seafoods ASA
Leif-Arne Langøy Bjarne Borgersen Leiv Grønnevet Martinus Brandal chairman of the board vice chairman of the board
Lisbeth Berg-Hansen Bjarne Kristiansen Harold Nilsen Andre Steffensen Yngve Myhre president & ceo
59 aker seafoOdS Annual report 2005 Aker Seafoods ASA Cash Flow Statement
Amounts in NOK 1 000 2 005 2004 Profit after financial items 63 782 -4 892 Unrealized foreign exchange loss/gain (-) 3 966 -7 101 Change in short term items etc. -160 107 48 970 Cash flow from operating activities -92 359 36 977
Proceeds from sales of tangible fixed assets 6 115 184 3 610 Payments for acquisitions of tangible fixed assets 6 -60 802 -115 500 Cash flow from investments activities 54 382 -111 890
Restructuring - -140 394 Proceeds new interest- bearing debt 10 403 881 323 180 Payments interest- bearing debt 10 -539 000 -6 500 Paid in capital 9 87 700 - Cash flow from financing activities -47 419 176 286
Cash flow for the year -85 396 101 373 Bank deposits cash in hands etc in the beginning of the period 101 493 120 Bank deposits cash at hands etc in the end of the period 16 097 101 493
60 aker seafoOdS Annual report 2005 Aker Seafoods ASA
Notes
Note 1: Accounting principles recoverable amount, the asset is written down to the recoverable amount. The recoverable amount is the greater of the net selling The accounts are prepared according to the Norwegian Accounting price and value in use. In assessing value in use, the estimated Act 1998 and generally accepted accounting principles in Norway. future cash flows are discounted to their present value.
Subsidiaries and investments in associates Research and development Subsidiaries and investments in associates are valued by the cost Research and development costs are capitalized providing that a method in the company accounts. The investment is valued at the future economic benefit associated with development of the intan- acquisition cost price of the shares, providing that write down is not gible asset can be identified. Otherwise, the costs are expensed required. Write down to fair value will be carried out if the reduction as incurred. Capitalized research and development are amortized in value is caused by circumstances which may not be regarded as linearly over the economic lifetime incidental, and deemed necessary by generally accepted accounting principles. Write downs are reversed when the cause of the initial Pensions write down are no longer present. Pension costs and pension liabilities are estimated on the basis of linear earnings and future salary. The calculation is based on as- Dividends and other distributions are recognized in the same year sumptions of discount rate, future wage adjustments, pension and as appropriated in the subsidiary accounts. If dividends exceed with- other payments from the national insurance fund, future return on held profits after acquisition, the exceeding amount represents reim- pension funds and actuarial assumptions for deaths, voluntary resig- bursement of invested capital, and the distribution will be subtracted nation etc. Pension funds are valued at fair value and deducted from from the value of the acquisition in the balance sheet. net pension liabilities in the balance sheet. Changes in the pension obligations due to changes in pension plans are recognized over the Sales revenue estimated average remaining service period. When the accumulated Sales revenues are recognized at the time of delivery. Revenue from effect of changes in estimates, changes in assumptions and devia- services are recognized at execution. The share of sales revenue tions from actuarial assumptions exceed 10 percent of the higher of associated with future services are recorded in the balance sheet as pension obligations and pension plan assets, the excess amount is deferred sales revenue, and are recognized at the time of execution. recognized over the estimated average remaining service period.
Valuation and classification principles Income tax of balance sheet items Tax expenses in the profit and loss account comprise both tax payable Net current assets comprise creditors due within one year, and for the accounting period and changes in deferred tax. Deferred tax is entries related to goods circulation. Other entries are classified as calculated at 28 percent on the basis of existing temporary differences fixed assets and/or long term debts. Current assets are valued at between accounting profit and taxable profit together with tax deduct- the lower of acquisition cost and fair value. Short term debts are ible deficits at the year end. Temporary differences both positive and recognized at nominal value. negative, are balance out within the same period. Deferred tax assets are recorded in the balance sheet to the extent it is more likely than Fixed assets are valued by the cost of acquisition, in the case of non not that the tax assets will be utilized. To what extent group contribu- incidental reduction in value the asset will be written down to the fair tion not is registered in the profit and loss, the tax effect of group value amount. Long term debts are recognized at nominal value. contribution is posted directly against the investment in the balance.
Trade and other receivables Cash flow statement Trade receivables and other current receivables are recorded in the The cash flow statement is presented using the indirect method. balance sheet at nominal value less provisions for doubtful debts. Cash and cash equivalents includes cash, bank deposits and other Provisions for doubtful debts are calculated on the basis of individual short term highly liquid placement with original maturities of three assessments. In addition, for the remainder of accounts receivables months or less. outstanding balances, a general provision is carried out based on expected loss. Use of estimates The preparation of the financial statements requires management to Foreign currency translation make estimates and assumptions that affect the reported amounts Foreign currency transactions are translated using the year end in the profit and loss statement, the measurement of assets and li- exchange rates. abilities and the disclosure of contingent assets and liabilities on the balance sheet date. Actual results can differ from these estimates. Short term investments Short term investments (stocks and shares classified as current as- Contingent losses that are probable and quantifiable is expenced as sets) are valued at the lower of acquisition cost and fair value at the occurred. balance sheet date. Dividends and other distributions are recognized as other financial income. Important events during the year Aker Seafoods ASA was listed on Oslo Stock Exchange on 13. May Property, plant and equipment 2005. Property, plant and equipment is capitalized and depreciated over the estimated useful economic life. Direct maintenance costs are In parallel to the listing, Aker Seafoods ASA purchased the fishery expensed as incurred, whereas improvements and upgrading are companies West-Fish Aarsether AS and Nordic Sea Holding, assigned to the acquisition cost and depreciated along with the as- through a wholly owned subsidiary. set. If carrying value of a non current asset exceeds the estimated
61 aker seafoOdS Annual report 2005 Aker Seafoods ASA – Notes
Note 2 Wages and other personnel expenses
Wages and other personnel expenses consist of the following Amounts in NOK 1 000 2005 Wages and salaries 4 587 Social security 883 Pension cost 895 Total 6 365 Average number of employees 13
In the period Jan-April 2005 and in 2004 the operation in the company were limited, and wages where expenced in Aker Seafoods Holding AS. NOK 855 112 has been disbursed in ordinary salary and NOK 55 276 has been disbursed as other remuneration for the CEO from May-De- cember 2005. In addition NOK 55 300 has been disbursed in pension premium for the CEO. The CEO has 12 months remuneration guaran- tee with notice. The CEO and managerial staff are included in a bonus plan. The bonus is based on profit performance/budget performance and other target criteria. All employees of Aker Seafoods ASA, including the CEO and managerial staff, are covered by a group pension scheme which is part of the employment contract.
Note 3 Auditor’s fee
Auditor’s fee is included in other expenses and consists of the following ordinarY other other
Amounts in NOK 1 000 audit StatementS Services 2005 2004 Audit 19 114 492 825 88
Note 4 Net financial items
Net financial items consists of the following Amounts in NOK 1 000 2 005 2004 Interest income external 4 261 2 220 Interest income group companies 19 988 3 761 Received group contribution from subsidiaries 25 729 - Dividends 62 051 - Other financial items (mainly foreign exchange) 11 603 11 884 Total financial income 123 632 17 865 Interest expense external -28 094 -13 824 Interest expense group companies -4 192 -99 Other financial expenses (mainly foreign exchange and bank expenses) -17 849 -8 746 Total financial expenses -50 135 -22 669 Net financial items 73 497 -4 804
62 aker seafoOdS Annual report 2005 Aker Seafoods ASA – Notes
Note 5 Estimated taxable income
Tax expense Amounts in NOK 1 000 2 005 2004 Profit before tax 63 782 -4 892 Net not deductible items -83 616 39 Change in temporary differences 1 603 70 Estimated taxable income -18 231 -4 783 Tax payable (28%) - -
Taxable income Tax payable in the Profit and Loss account - Change in deferred tax 5 554 1 363 Tax not throw the profit and loss (directly throw equity) -4 697 - Taxable income 857 1 363
Deferred tax is described in note 11. The 2005 figures are based on estimates of different non deductible taxable income, non deductible items and differences between account- ing and taxable items. The final items will be calculated in the income-tax return, and may deviate from the estimates above.
Note 6 Receivables
Receivables consists of the following 2005 2004 Due within 1 year - - Due after 1 year 467 449 316 090 Total 467 449 316 090
Interest conditions are according to marked conditions. Other short-term receivable consists mainly of account receivable from other group companies. Other short-term receivable on group companies consists mainly of interest bearing receivable of NOK 85 million, and group contribution of NOK 26 million.
Note 7 Shares etc
Shares in associated companies consist of the following Head quarterS ownerSHIP eQuity as of Profit after Book value
Amounts in NOK 1 000 In % 31 Dec 1) financial items 1) 2005 Tobø Fisk AS Havøysund 38.35 -519 -163 2 744 Arctic Innomar Hammerfest 20.00 600 Nordkapp Holding AS Nordkapp 51.00 -303 442 500 Total 3 844
1) Equity and profit (share of the company) is based preliminary estimates and could deviate from final amounts. The shares are valued according to the historical cost method. The shares are purchased from the parent company Aker Seafoods Holding AS in 2004 at market value NOK 1.5 million and by NOK 1.2 million in 2005.
63 aker seafoOdS Annual report 2005 Aker Seafoods ASA – Notes
Note 8 Shares in subsidiaries
Shares in subsidiaries consist of the following as of 31 December Head- ownership Profit Book
Amounts in NOK 1 000 Quarters in % 1) Equity AFter tax value Aker Seafoods J.M. Johansen AS Stamsund 100 91 685 3 218 200 000 Aker Seafoods Melbu AS Melbu 100 158 237 -3 104 193 000 Thorfisk AS Grenaa 100 186 723 10 957 170 000 Aker Seafoods Finnmark AS Hammerfest 100 59 950 7 873 180 000 Nortraal AS Stamsund 100 158 -428 40 Aker Westfish AS Oslo 100 -2 928 -4 219 110 Norway Seafoods UK Ltd. Grimsby 100 -373 -445 5 000 Total 48 150
1) Ownership and voting power are the same for all companies. Nortraal and Aker Westfish shares aquired in 2005. Other shares are purchased from Aker Seafoods Holding AS in 2004 to market value.
Note 9 Equity
The shares in Aker Seafoods ASA as of 31.12.05 consists of 48 646 016 shares at par value NOK 5 per share. All shares has equal voting power.
The largest share holders Per cent AKER SEAFOODS HOLDING AS 66.76 BANK OF NEW YORK, BR BNY GCM CLIENT ACCOU NOM 7.41 CREDIT SUISSE SECURI (EUROPE) PRIME BROKE NOM 3.96 ODIN NORGE 3.14 ODIN NORDEN 3.12 DEUTSCHE BANK AG LON PRIME BROKERAGE FULL NOM 1.79 BANK OF NEW YORK, BR S/A EQUITY TRI-PARTY 1.45 GÅSØ NÆRINGSUTVIKLING AS 1.15 STATE STREET BANK & CLIENT OMNIBUS D NOM 1.13 KENTRA AS 1.09 MORGAN STANLEY AND C CLIENT EQUITY ACCOUN NOM 0.9 JPMORGAN CHASE BANK S/A THE TRUST.OF BT 0.79 HOLBERG NORGE VERDIPAPIRFONDET V/HOLBERG FONDSFORVA 0.64 PACTUM AS 0.62 FRØY SJØTRANSPORT AS V/HELGE GÅSØ 0.54 FORUM FUNDS-POLARIS FUND 0.49 UNION BANK OF CALIFO UBOC GLOBAL CUSTODY NOM 0.45 MP PENSJON 0.44 GOLDMAN SACHS INTERN EQUITY NONTREATY CUS NOM 0.43 DEUTSCHE BANK AG LON PRIME BROKERAGE - PR 0.41 Others 3.29 Total 100
Changes in shareholders equity in 2005 are shown below Share Share premiuM total paid-IN other retAINED total
Amounts in NOK 1 000 Capital reserve Capital equitY eARNINGS eQUITY Equity as of 01.01. 100 000 557 105 657 105 -3 529 -3 529 653 576 Reclassification 100 000 -100 000 - - - Paid in capital 43 230 198 541 241 771 - 241 771 Implementation IFRS pension, and other - -5 369 -5 369 -5 369 Dividends - -36 485 -36 485 -36 485 Profit and loss - - 64 639 64 639 64 639 Equity as of 31.12. 243 230 655 646 898 876 19 256 19 257 918 133
64 aker seafoOdS Annual report 2005 Aker Seafoods ASA – Notes
Note 10 Debt
External Interest bearing long-term debt externals as shown below Amounts in NOK 1 000 Foreign exchange 2005 2004 NOK 445 294 392 000 EUR - 50 188 Total 445 294 442 188
External interest bearing long term debt of NOK 400 million is reduced by capitalized borrowing cost of NOK 6 million.
Interest bearing long term debt external is distributed among loans in Norwegian and foreign currency as shown below DEBT TO
CREDIT GROUP
Amounts in NOK 1 000 Institutions / Bonds DEBt total 2006 - - 2007 - - 2008 - - 2009 - AFTER 2009 -393 817 -51 477 -445 294 Total 2005 -393 817 -51 477 -445 294 Total 2004 -442 188 -62 450 -504 638
The company has cross guarantees towards other group companies. Interest terms are set on commercial basis. Average yearly interest rate on the loans against credit institutions is 6 months Nibor + 2.8% margin. The bond loan is placed in the Icelandic market and is listed on the ICEX. The bond loan unsecured and matures in 2010. Aker Seafoods ASA has obligations in the debt agreement related to minimum equity.
Note 11 Deferred tax
The table below shows the difference between book and tax value at the end of 2005, and deferred tax liability at the end of 2005 and change in deferred tax
Amounts in NOK 1 000 2004 200 DIFFerence Unrealised loss -70 -70 Pension - -1,673 1 673 Change in differences -70 -1,673 1 603 Tax losses carried forward -4 798 -23 030 Total basis, deferred tax -4 868 -24 703 Net deferred tax 28% -1 363 -6 917 -5 554
Tax expense is shown in note 5.
65 aker seafoOdS Annual report 2005 Aker Seafoods ASA – Notes
Note 12: Pension costs and liabilities
The company acquired the pensions liability/assets from Aker Seafoods ASA in 2005. The company covers its pensions mainly through a group pension plan in a life insurance company. The plan has been treated for account- ing purposes as a defined benefit plan. Aker Seafoods ASA also has uninsured pensions liabilities. Actuarial calculations have been done to estimate pension liabilities and pension costs based on the following assumptions:
Expected return 5.5 % Discount rate 4.5 % Wage increases 3.0 % Social security base adjustment/inflation 2.5 % Pension adjustment 2.0 %
PENSION Expenses uNDer- Over-
FUNDED FUNDED
Amounts in NOK 1 000 PLANS 1) plan 1) 2005 Present value of the year’s pension earnings -922 -922 Interest cost on accrued pension liabilities -148 -1 621 -1 769 Expected return on pension funds 1 946 1 946 Allocated effect of change in estimates and pension plans -71 -71 Change in social security -79 - -79 Net pension expenses -227 -668 -895
NET PENSION LIABILITIES/ASSETS AS OF 31 DECember uNDer- Over-
FUNDED FUNDED
Amounts in NOK 1 000 PLANS 1) plan 1) 2005 Present value of accrued pension liabilities -2 292 -29 984 -32 276 Value of future wage increases -295 -1 617 -1 912 Calculated pension liabilities -2 587 -31 601 -34 188 Value of pension funds - 30 897 30 897 Estimated net pension assets/ (-liabilities) -2 587 -704 -3 291 Amortization 2) 312 1 626 1 938 Social security -320 -320 Net pension funds/(liabilities) 3) -2 595 922 -1 673 Net pension funds/(liabilities) in the balance sheet 3) -2 595 922 -1 673 Number of persons - 43
1) Under-funded plans: The value of the pension liability exceeds the value of the pension funds. Over-funded plans: The value of the pension funds exceeds the value of the pension liability. 2) Amortization: The effect of changes in estimates and pension plans not recorded in the profit and loss account. 3) A provision is made for employment tax on contracts with net pension liabilities.
Aker Seafoods ASA’s net liabilities are presented in the balance sheet as an interest-free long-term liability. Net pension funds are recorded in the balance sheet as interest-free long-term receivables. Pension funds are invested in accordance with the general guidelines for life insurance companies. Recorded pension liabilities are calculated on the basis of estimated pension liabilities and accrued in accordance with generally accepted accounting principles. The pension liability recorded in the accounts is not the same as the pension rights legally earned as of 31 December. In 2005 implementation of IFRS has taken place regarding pension. The underfinanced plan has implementation effect with NOKT 1 177 and the overfinanced plan has an effect of 3 249. These effects cause a reduction in the equity with 28% tax taken into account.
66 aker seafoOdS Annual report 2005 Aker Seafoods ASA – Notes
Note 13 Financial market risk
The company are exposed to risk associated with the value of the investments in subsidiaries, due to changes in market prices for raw ma- terials and semi-processed goods, to the extent that such fluctuations result in changes to these companies’ competitiveness and earnings potential over time.
The company enter into ongoing hedging transactions related to individual subsidiaries’ sales in foreign currencies. Such hedging is done to reduce the exchange rate risk affecting sales contracts. Unrealized recorded loss on hedge contracts as of 31.12 is NOK 2.2 million. The effect is recorded directly against equity.
NOTE 14 Leasing agreement
The company hire administrative services and office from Aker ASA according to market conditions.
NOTE 15 Guarantee obligations
The company has guarantee obligations of NOK 800 mill related to debt in subsidiaries. The group has group account system with cross guarantees. There is no pledge on the companies assets.
NOTE 16 Events after the balance sheet date
No specific events have occurred.
NOTE 17 Legal disputes
There are no material legal disputes or contingencies as of 31.12.2005.
NOTE 18 Restricted cash
The company has no restricted cash.
67 aker seafoOdS Annual report 2005 Auditor’s Report for 2005
68 aker seafoOdS Annual report 2005 Auditor’s Report for 2005
69 aker seafoOdS Annual report 2005 Corporate Governance
The Norwegian Code of Practice for Corpo- Equity Seafoods does not have a corporate assem- rate Governance was initially published in The booked equity of Aker Seafoods as of bly and that this has been approved by the 2004. The purpose of the Code is to inspire 31 December 2005 was NOK 905 million, Corporate Democracy Board (Bedrifts- confidence in listed companies and thereby equalling an equity ratio of 32.9 per cent. demokratinemda). contribute to generating the greatest possible The Board of Directors of Aker Seafoods value over time for the benefit of sharehold- regard the Group’s current capital structure 9. The work of the board ers, employees and other interested parties. to be expedient and adjusted to the Group’s of directors aims, strategy and risk profile. The recommendation is essentially complied Compliance with the Code of Practice with. The Board of Directors for Aker Sea- should occur according to a ‘comply with’ or Dividend foods has executive responsibility for the ‘explain’ principle. In other words, if a com- In accordance with the dividend policy of management of the company and for super- pany decides not to comply with a specific Aker Seafoods ASA, the company’s objec- vising the day-to-day management and recommendation, the company must explain tive is to give all shareholders the best the company’s business. The Board must why the company has chosen a different possible return on their investment and, over ensure that the company has good internal course of action. time, to distribute a reasonable share of the control in accordance with current regula- company’s net profit as dividends. tions and internal guidelines that apply to its The Code of Practice consists of 14 pri- activities. Instructions for the Board’s work mary points and Aker Seafoods basically Mandates have been prepared to regulate spheres of conducts its business in accordance with The mandates in force are described under responsibility, tasks and the allocation of them. The Code of Practice is available in the chapter Shareholder Matters on page 72 responsibility and duties of the Board, the its entirety at the website of the Oslo Stock of the company’s annual report. Board’s chairman and the chief executive Exchange (www.ose.no). The company’s officer. The Board’s instructions include compliance with the Code of Practice is 4. Equal treatment of share- provisions for rules of procedure, rules for accounted for point by point below. holders and transactions with summoning and leading board meetings, the close associates decision-making process, the CEO’s duty A revised version of the Code of Practice The recommendation is complied with. Aker and right to inform the board, professional was published on 8 December 2005. Aker Seafoods has only one class of shares and secrecy, legal capacity, etc. The Board of Seafoods will start using the revised version all shareholders are treated equally. Aker Directors must on a yearly basis evaluate in the 2006 financial year. Seafoods prioritises the equal treatment of the CEO and communicate the results of the all shareholders. evaluation to the CEO. 1. Implementation and reporting on corporate governance 5. Freely negotiable shares 10. Remuneration of the The recommendation is complied with by The recommendation is complied with. The board of directors means of regular board meetings, regular shares of Aker Seafoods are freely negoti- The recommendation is complied with. operational follow-up, statements presented able and the company’s articles of associa- Remuneration of the Board of Directors in the annual reports and other information. tion do not restrict trading in the company’s is stipulated in a statement in the annual The Board of Directors has laid down the shares. report. Group’s basic values and ethical guidelines. The basic values of Aker Seafoods are dis- 6. General meeting 11. Remuneration of the cussed in the company’s annual report. The recommendation is complied with, executive management specifying that the meeting’s chairperson is The recommendation is complied with. The 2. Business usually designated before the meeting and company has no other option schemes. The recommendation is complied with by announced in the notice of the meeting. means of the company’s articles of associa- 12. Information and tion and the annual report. 7. Nomination committee communications The recommendation is complied with. The recommendation is complied with. See The company’s objects clause is as follows: also the chapter Shareholder Facts, page “The objects of the company are to trade in, The company’s nomination committee is 72, of the company’s annual report where produce and market fish and fish products, made up of the following members: the company’s guidelines regarding contact to invest in and own fishing vessels and • Kjell Inge Røkke (chairman), chairman with shareholders is discussed. machinery and to engage in consultancy and of the Board of Directors for Aker ASA; other activities within this field of business. • Gerhard Heiberg, self-employed 13. Take-overs In addition, the company shall participate businessman; The recommendation is complied with, in other financial activities, including the • Rune Bjerke, Group Chief Executive, specifying that this has not been relevant for ownership and management of real property, Hafslund ASA. the company. securities and other assets, as well as the The nomination committee’s term of office is ownership of subsidiaries with a similar or two years. 14. Auditor other object.” The description of the business The recommendation is complied with, is also available at the company’s website. 8. Corporate assembly and except for the fact that specific guidelines for board of directors: compo- the executive management’s access to use 3. Equity and dividends sition and independence the auditor for services other than auditing The recommendation is complied with. The recommendation is complied with for all have not been stipulated. intents and purposes, specifying that Aker
70 aker seafoOdS Annual report 2005 Management
Yngve Myhre President & CEO Yngve Myhre, born 1969, President & CEO of Aker Seafoods ASA, was appointed as President & CEO in Norway Seafoods (the fisheries group in Aker) in 2001. Mr. Myhre holds a Master of Science in Business. Mr. Myhre has held senior management positions in Seafarm Invest and Hydro Seafood for 8 years prior to joining Norway Seafoods. Mr. Myhre has several directorships including the Norwegian Fishing Vessel Owners Association. As of February 8, Mr. Myhre holds 4 200 shares in Aker Seafoods, and no stock-options. Mr. Myhre is a Norwegian citizen.
Bent Skisaker Executive Vice President & CFO Bent M. Skisaker, born 1969, was appointed Executive Vice President & CFO in 2004. Mr. Skisaker holds a Master of Science in Business and is a State Authorized Public Accountant. Mr. Skisaker has 6 years experience from the auditing firms Arthur Andersen and Ernst & Young and 3 years experience from positions as CFO and Financial Manager including publicly listed company. As of February 8, Mr. Skisaker holds 1 600 shares in Aker Seafoods, and no stock-options. Mr. Skisaker is a Norwegian citizen.
Trond Executive Vice President Williksen business Development & Strategy Trond Williksen, born 1963, was appointed Executive Vice President Business Development & Strategy in 2004. Mr. Williksen holds an MBA in Operational management, Finance and Strategy. Mr Williksen has 15 years of experience from managerial positions in fisheries and aquaculture companies. He has held senior management positions as leader of KPMG Center for Aquaculture and Fisheries and Managing Director of Norwegian Fish Farmers Association prior to joining Aker Seafoods. As of February 8, Mr. Williksen holds 1 600 shares in Aker Seafoods, and no stock- options. Mr. Williksen is a Norwegian citizen.
BjørnAR Executive vice president Kleiven processing Bjørnar Kleiven, born 1965, was appointed Executive Vice President Processing in 2005. Mr. Kleiven holds a Master of Science in business. Mr. Kleiven has 15 years of experience from managerial positions in fisheries and aquaculture companies. He was formerly President & CEO of West Fish Aarsæther AS prior to joining Aker Seafoods. As of February 8, Mr. Kleiven holds 3 200 shares in Aker Seafoods, and no stock-options. Mr. Kleiven is a Norwegian citizen.
Morten HYldborg Executive Vice president Jensen sales & marketing Morten Hyldborg Jensen, born 1965, was appointed Executive Vice President Sales and Marketing in 2002. Mr. Jensen holds an Academy Economist in International Marketing. Mr. Jensen has 15 years of industry experience as sales manager in Denmark, Germany, UK and Norway. As of February 8, Mr. Jensen holds 1 600 shares in Aker Seafoods, and no stock-options. Mr. Jensen is a Danish citizen.
71 aker seafoOdS Annual report 2005 Shareholder Matters
Aker Seafoods has issued 48,646,016 ordinary shares with par value of NOK 5.00 (see note 22 of the financial statement). The company had 521 shareholders as of 8 February 2006. Aker Seafoods has one class of shares and each share entitles the holder to one vote.
The 20 largest shareholders as of 8 February 2006 were as follows: Number Share Name Account Citizenship 32 474 910 66.76 % Aker Seafoods Holding AS Nom Nor 3 604 400 7.41 % Bank Of New York, Br Bny Gcm Client Accou Nom Cym 1 924 000 3.96 % Credit Suisse Securi (Europe) Prime Broke Gbr 1 532 850 3.15 % Odin Norge Nor 1 520 010 3.12 % Odin Norden Nom Nor 871 235 1.79 % Deutsche Bank Ag Lon Prime Brokerage Full Gbr 703 625 1.45 % Bank Of New York, Br S/a Equity Tri-party Gbr 558 775 1.15 % Gåsø Næringsutviklin Nom Nor 548 799 1.13 % State Street Bank & Client Omnibus D Usa 529 887 1.09 % Kentra As Nom Nor 439 438 0.90 % Morgan Stanley And C Client Equity Accoun Gbr 385 000 0.79 % Jpmorgan Chase Bank S/a The Trust.of Bt Gbr 309 300 0.64 % Holberg Norge Verdipapirfondet V/holberg Fondsforva Nor 300 000 0.62 % Pactum As Nor 263 303 0.54 % Frøy Sjøtransport As V/helge Gåsø Nor 236 400 0.49 % Forum Funds-polaris Fund Nom Usa 221 300 0.45 % Union Bank Of Califo Uboc Global Custody Usa 213 000 0.44 % Mp Pensjon Nom Nor 210 000 0.43 % Goldman Sachs Intern Equity Nontreaty Cus Gbr 200 165 0.41 % Deutsche Bank Ag Lon Prime Brokerage - Pr Nom Deu 47 046 397 96.71 % Sum 20 Største Aksjonærer
The company’s principal shareholder, Aker Investor relations as the company’s interim and annual reports ASA, owns 66.76 per cent of the voting The aim of Aker Seafoods’ information and presentations of corporate results. shares of Aker Seafoods ASA and thus efforts is to strengthen the interest of inves- Updated articles of association, a financial controls the company. Aker ASA has stated tors and analysts in the company to ensure calendar and the company’s guidelines for that it wishes to retain a controlling interest the correct pricing of the company’s shares investor relations and corporate governance in Aker Seafoods of at least 50.1 per cent of and, at the same time, to ensure long-term will also be published on the company’s the shares. access to competitively priced equity. This website, in addition to other information. must be achieved by offering the various Stock market listing parties of the finance market sufficient, pre- Dividend Aker Seafoods’s shares were listed on the cise and consistent information at the right Aker Seafoods ASA’s objective is to give Oslo Stock Exchange on 13 May 2005. At time. The company operates its business all shareholders the best possible return on the time of introduction, the listed price was according to the rules and recommenda- their investment and, over time, to distribute NOK 29. tions that are in force for the Oslo Stock a reasonable share of the company’s net Exchange and of good business practice. profit as dividends. Since the listing on the stock market, the company’s shares have risen to NOK 39 Aker Seafoods holds regular corporate Based on the company’s objective, Aker as of 8 February 2006, a 34.5 per cent presentations for analysts and investors, Seafoods’ Board of Directors will assess increase. During this same period, the primarily in Norway, but also at international and recommend the dividends each year shares have been traded at NOK 43.50 and finance centres. based on the corporate earnings in the pre- NOK 29.00 – the highest and lowest price ceding financial year and on the company’s respectively. Since 13 May, the Oslo Stock Shareholders and other interested parties financial position. Exchange All-Share Index has risen by 40.9 seeking information from the company will per cent. find up-to-date information at the company’s The Board of Directors’ recommendation for website: www.akersea.com. The website the distribution of dividend is presented for includes the company’s stock market approval at the company’s general meeting. announcements and press releases, as well
72 aker seafoOdS Annual report 2005 Mandates in force shareholding after the acquisition exceeds At the extraordinary general meeting of Aker 10 per cent of the share capital. The man- Seafoods on 12 May 2005, the Board of date may only be exercised by the company Directors was given a mandate to increase to the extent the acquisition does not give the company’s share capital by up to NOK rise to a concession obligation pursuant to 122 million. The mandate is in force up to the Norwegian Act on Participation in Fisher- the holding of the ordinary general meeting ies (lov om deltakelse i fisket) or similar in 2006. The mandate entitles the Board rules of law or result in a situation where to depart from the shareholders’ pre-emp- more than 40 per cent of the shares in the tion right. The mandate also encompasses company are owned by foreigners. The capital increases by means of contributed minimum price for the purchase of shares capital in assets other than capital. In in the company is NOK 15 per share and addition, the mandate includes a decision the maximum price is NOK 50 per share. to merge pursuant to Section 10-5 of the The mandate is in force up to the holding Norwegian Public Companies Act (allmenn- of the ordinary general meeting in 2006. aksjeselskapsloven). The mandate may only The mandate has not been utilised as of 14 be exercised by the company to the extent February 2006. that the capital increase does not give rise to a concession obligation pursuant to the RISK adjustment Norwegian Act on Participation in Fisheries Current Norwegian taxation regulations (lov om deltakelse i fisket) or similar rules of require shareholders who are liable to pay law or result in a situation where more than tax in Norway to adjust the original cost 40 per cent of the shares are owned by for- of the shares upwards or downwards by eigners. The mandate has not been utilised the RISK (adjustment of the initial value of as of 14 February 2006. taxable capital) amount when calculating a possible profit of sale. At the same time, the Board of Directors was given a mandate to acquire own shares As of 1 January 2006, the RISK amount is with a total nominal value of up to NOK 24 preliminarily calculated as NOK -0.59 per million, yet in such a way that the company share. may not acquire own shares if the total
Financial calendar General assembly: 29 March 1st quarter 2006: 28 April 2nd quarter 2006: 10 August 3rd quarter 2006: 30 October
73 aker seafoOdS Annual report 2005 Part of the Aker group