2017
ANNUAL REPORT
Content Directors’ report .....................Page 3-6 Profit and loss statement .Page 7 Balance sheet .........................Page 8-9 Cashflow statement ............Page 10 Notes ..........................................Page 11-30
3 9 10 12 13 32
DIRECTORS’ REPORT 2017 GRIEG MATURITAS
2017 was a good year for the Grieg Group overall, mainly due to a strong market in the salmon industry and the positive results from Grieg Seafood. Grieg Star is still facing tough markets, while several of the other companies within the Grieg Group delivered good results. Group turnover was NOK 9 bill., the operating profit NOK 815 mill. and the profit before tax was NOK 671 mill. The Group is well positioned for the future. The Grieg Group continues to develop within all our business areas. Last year was influenced by large investments now becoming operational through G2 Ocean, Grieg Strategic Services, new brokerage offices, expanded hatcheries and the completion of our headquarter Grieg-Gaarden in Bergen. In addition, Grieg Investor continued to deliver good results.
Highlights
Grieg Seafood celebrated its 25th anniversary with solid results. Salmon prices were down compared to 2016, but the demand for salmon continued to increase. Production in Norway fell due to low sea temperatures, but was still at a satisfactory level. Actions taken in British Columbia impacted positively on production in 2017, but Shetland had another year with biological challenges. The company has focus on increasing the number of smolt in the sea, and met its goals set for 2017 with 26 million smolt. The extension of the hatchery in Rogaland was completed and the work of extending the hatchery in Finnmark has started. The production of salmon in 2017 stood at 62 600 tons, and the company now has considerable unused growth capacity after sustainable investment in new farming capacity both on land and at sea.
Grieg Group KEY FIGURES (NOK mill.)
Turnover EBIT Profit before tax Profit after tax
2017
2016
9 058 815 671 464
10 985 1280 870 654
Grieg Group
For Grieg Star a new chapter was started with the establishment of G2 Ocean together with Gearbulk. All of Grieg Star’s ships are now part of the G2 Ocean Pool, which is the world’s largest within the Open Hatch segment. This joint venture positions us for future cost benefits and streamlined ship operations. With a large part of the revenues related to long-term contracts, the recovery in freight rates in 2017 is not immediately reflected in the results for G2 Ocean and Grieg Star. This will first become apparent as the contracts are renewed in the coming years. Grieg Star recorded another deficit in 2017 due to depressed market and substantial reorganisation costs. As a result of establishing G2 Ocean, Grieg Star is now reporting net operating revenues, effectively down NOK 2 bill. Grieg Logistics increased its earnings in 2017, and most of the subsidiaries delivered positive results. Grieg Strategic Services was established in order to enter into a strategic cooperation agreement with the Norwegian Armed Forces for the delivery of logistics services to military operations. The company is implementing new technology for seamless operations between harbours, terminals, ships and shipowners. Grieg Shipbrokers had a positive year with good results in most of its business segments, while at the same time carrying out major investments. The company expanded with the establishment of offices in Singapore and Shanghai focusing on chartering of Capesize and Kamsarmax, in addition to a new department in Norway to handle the purchase and sale of offshore and service vessels for the fish farming industry.
The Grieg Group is a global group of companies. Through our flexibility and international culture, we gather experience and know-how globally, which we share within the Group, and in the societies in which we operate. The business is based on long-term partnerships, creating value in our various activities – shipping, shipbroking, maritime services & port operations, seafood, investments and financial advisory services. The headquarter is located at Grieg-Gaarden, Bergen, Norway, and the Group is represented in 15 countries all over the world. Grieg Maturitas AS owns 75% of the shares and Grieg Foundation the remaining 25%.
Grieg Maturitas AS Grieg Maturitas is the parent company of the Grieg Group and is owned by the Grieg family. The company is responsible for organizing and facilitating a good corporate structure and branding, as well as challenging the companies within the Group to develop strategically and profitably in a sustainable manner, and in accordance with our principles.
Grieg Investor made another year of profit and growth, and is well positioned for further expansions. The investment companies Grieg Holdings and Grieg International delivered a good result mainly due to high return on the investment portfolio.
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Rensefiskgruppen, producing cleanerfish for the salmon farming industry, had its 5th year of consecutive growth, and is now the largest company in this segment. The Group’s headquarter, Grieg-Gaarden in Bergen, has undergone expansion and upgrading in recent years. This has now been completed, and the building is the location of modern and functional office premises in the heart of Bergen. We are in the process of establishing the UN’s sustainability goals as an active part of and a framework for the Group and the companies’ strategy, innovation and entrepreneurship. For more information on financial results per segment, see note 2.
Balance sheet, financial situation and cash flow
The Grieg Group has a strong financial position. Total current assets amount to NOK 5 424 mill., of which NOK 1 865 mill. is made up of bank deposits, market based financial investments and other current assets. Current liabilities total NOK 2 382 mill., which gives positive working capital of NOK 3 042 mill. The Group’s fixed assets total NOK 10 445 mill., of which NOK 6 027 mill. is financed through loans in financial institutions. Total long-term interest-bearing debt is NOK 600 mill. less than in 2016. Cash flow In total, the Group had a positive cash flow of NOK 742 mill. from operations. Due to investments in fixed assets, mainly Grieg Seafood’s expansion of fish hatcheries in Finnmark and Rogaland, the net cash flow from investing activities is negative at NOK 72 mill. The net cash flow from financing activities is negative at NOK 927 mill., mainly due to loan repayment and dividends paid. In total, the Group had a negative cash flow of NOK 257 mill. in 2017.
Grieg Group KEY FIGURES (NOK mill.)
Equity Total assets Equity ratio
2017
2016
6 980 15 869 44%
7 640 16 926 45%
Financial risk and risk management
When operating in a global market and across different business areas, the companies of the Grieg Group are exposed to different types and degrees of risk, ranging from market operations and financial risk to compliance and the regulatory framework. Risk management is a continuous process and an integrated part of the Group’s governing model. Thus, we are constantly focusing on how to identify and monitor the risk areas in the Group companies as well as developing strategies to mitigate such risks. For further information concerning financial risk, see note 17 to the Group accounts.
Organization and working environment
15
The companies of the Grieg Group are to a large extent based on expert-knowledge, and the employees’ qualifications constitute a substantial part of the business capital. Our aim is to be an attractive employer where people can develop and enjoy working. The Board is of the opinion that job satisfaction is generally high and that the working environment is good. Throughout the organization there are ongoing training and learning activities.
COUNTRIES REPRESENTED IN Equal opportunities The Grieg Group seeks at all times to ensure equal opportunities and rights for all its employees. We do not accept discrimination on the basis of gender, religion, cultural background or race, or in any other form. Health and safety There is continuous focus on training, and the quality of work processes in the Grieg Group companies aims at reducing the risk of serious incidents. The workforce in general is stable, and both the absence and injury rates are low. Besides organizing medical follow-ups, the Group encourages and facilitates participation in physical activities. Corporate Social Responsibility The Grieg Group emphasizes the creation of economic and social values in a longterm perspective, recognizing the environmental and social impacts of our business activities. As well as complying with both national and international environmental
Sick-leave Long-term sick-leave Major injuries
2017
2016
2,5% 1,9% -
2,2% 1,4% -
1881 EMPLOYEES 31.12.2017
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regulations, laws and rules, the Group’s companies strive to play an active role in implementing as well as developing environmental procedures and technology in order to reduce the risk of environmental damage. The Grieg Group is in the process of establishing the UN’s sustainability goals as an active part of and a framework for the Group and the companies’ strategy, innovation and entrepreneurship. This involves all employees and strengthens our focus on sustainability, building it into our established values, while taking account of the environment, society and profitable growth. Shipping operations entail the discharge of harmful emissions. The Grieg Star Group works continuously to be a visible and distinct contributor to environmental awareness and development. In 2017, the organization worked on short and medium-term plans for the execution of the environmental strategy towards end-2020. The Group’s environmental vision: “No harmful emissions to air, sea and land” remains as a basis. The focus going forward is on how to achieve efficient and smart initiatives under extremely challenging market conditions. A plan has been established setting out how to achieve the 2020 emission reduction target of 35% compared to 2007 levels. The new strategy and action plan constitute the Group’s road map for achieving environmental responsibility in the conduct of its business going forward. Grieg Star is committed to the UN Global Compact and transparent reporting on progress. For more information, please visit www.griegstar.com. As demand for seafood continues to grow, intense pressure has been put on the industry in aquaculture to meet this demand in a sustainable manner. The salmon industry is currently favoured as a long-term solution to global animal protein shortages, which gives it a competitive advantage compared to other industries. Grieg Seafood’s main cost drivers, risks and opportunities are increasingly connected to managing the impact on the environment. Systematic efforts to secure balanced sustainability are therefore fundamental in order to facilitate long-term profitable growth and are also increasingly becoming a premise for the public licence of the industry. In 2017 Grieg Seafood continued its work on common sustainability goals through the Global Salmon Initiative (GSI) and has made great progress to improve its impact on society and the local community, ensuring that it produces a healthy and nutritious product in a sustainable way. For further information about Grieg Seafood’s work on sustainability goals, please find the sustainability report published on www.griegseafood.com. The Grieg Group’s head office at Grieg-Gaarden is certified as an eco-lighthouse.
Grieg Foundation
Grieg Foundation owns 25% of the Grieg Group. The Foundation supports global projects for the education of children and youth, medical research and environmental projects, as well as art and cultural projects. In 2017 Grieg Foundation’s contributions amounted to NOK 32 mill. Since its establishment in 2002 the Foundation’s total distributions amount to approx. NOK 546 mill.
Corporate Governance
In order to ensure that the division of responsibility for tasks and roles between the administration, the Board of Directors and the General Meeting is based on sound practice, the Norwegian Recommendation on Corporate Governance is applied. Deviations may arise given the fact that the Group is privately owned.
Grieg Foundation - distributions (Amounts in NOK mill.)
2017
2002-2017
Education of children & youth
10,8
207,5
Musical art
6,5
78,8
Cultural projects
3,6
103,2
Medical research and projects
4,1
68,3
Other projects
6,8
88,7
31,8
546,5
Total
Most of Grieg Group’s companies are doing business globally. The companies within the Group operate independently, but close cooperation across company borders is encouraged. This contributes to a higher knowledge level and a shared culture. In order to ensure an ethical foundation for our business as well as a solid company culture, we have four common core values; Solid, Proud, Open and Committed. These values define the compass by which we navigate when doing business across the world.
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Going concern
The Board of Directors confirms that the annual accounts have been prepared on a going concern basis and that this assumption is valid, based on the Group’s solid financial position and expectations of future profits. The Board believes that the submitted annual accounts give a correct picture of the result, cash flow and economic situation. No events have taken place after the balance sheet date that could materially affect the accounts.
Outlook
Although many of our business areas are still being tested by challenging markets, tough competition and economic difficulties, we are continuously developing in an innovative way, making us better prepared for the future. Globalized and exponential technology trends represents opportunities for growth and profitability. Within the seafood segment we believe in increased demand for salmon and relative good market prices in the future. Grieg Seafood works hard to bring the cost level down to the industry average and lower, and to shorten the production time. Other initiatives within the aquaculture segments also further strengthens the Group’s presence in this industry. After strong investment in new capacity the recent years, the salmon farming group expects a substantial lift in production and turnover during the next 2-3 years both on land and in sea. Through Grieg Star’s joint venture with G2 Ocean, we are steadily moving towards our vision of «pioneering sustainable shipping». In the shipping segment, a gradual normalization of rates and values is expected to materialize over the next few years. This, combined with further synergies from G2 Ocean corporation, and further improvement and innovation from the operation in Grieg Star is expected to increase earnings. Going forward, we will focus on adapting to changing markets and pursue opportunities as they arise. Supporting new business ideas and facilitating innovation initiatives within the Group are highly focused. In 2018 we are also establishing a new investment entity to coordinate investing activities and further strengthen the Group’s asset management activities. The Board of Directors would like to express our thanks to the employees of the Grieg Group for their hard work and efforts throughout the year.
Bergen, 5th of April 2018 The Board of Directors of Grieg Maturitas AS
Elna-Kathrine Grieg Board Member
Elisabeth Grieg Chair
Per Grieg jr. Board Member
Camilla Grieg Board Member
Stig Grimsgaard Andersen Board Member
Wenche Kjølås Managing Director
2017
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PROFIT AND LOSS STATEMENT GRIEG MATURITAS AS
GRIEG GROUP
(Amounts in NOK 1000)
(Amounts in NOK 1000)
2016
2017 Note
3 421
3 431
2
Operating Revenue
2017
2016
9 058 834
10 984 508
-872 703
-952 516
Operating Costs -3 340
-3 858
-
-
Profit (loss) sale of tangible assets
-
-
6,7
Depreciation
-
-
6
Reversal (write-down) fixed assets
-
-
3
-
-
-916
- 1 306
-4 256
- 5 164
-835
- 1 733
2
74 525
416 014
8
Income from investments in subsidiaries
1 216
932
Other Financial income
-
-
10 14
-
-
-1
4
Payroll and social security costs
-
-4 470
-596 761
-560 550
-2 974
6 033
Operating costs - shipping
-864 608
-2 974 948
3
Cost of sales - fish farming
- 3 754 704
-3 327 298
3,23
Other operating expenses
-2 151 641
-1 890 355
Total operating expenses
- 8 243 391
-9 704 105
Operating profit - EBIT
815 444
1 280 403
-
-
156 217
89 940
Change in value of market based assets
34 309
22 441
9
Results of investments in associated companies
-55 013
12 637
-2
10
Other Financial expenses
-279 951
-535 845
75 741
416 944
2
Net financial items
-144 439
-410 827
74 906
415 211
2
Profit before tax
671 005
869 576
-107
- 177
19
Tax
-207 362
-215 705
74 799
415 387
20
Profit for the year
463 643
653 871
To minority interests
394 415
484 871
Majority proportion
69 228
169 000
Financial items
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BALANCE SHEET GRIEG MATURITAS AS
GRIEG GROUP
(Amounts in NOK 1000)
(Amounts in NOK 1000)
2016
2017 Note
2017
2016
28 480
22 163
Assets Fixed assets Intangible assets -
-
Research and development
-
149
-
-
-
-
Contracts
39 867
41 018
-
-
Goodwill
19 283
23 993
-
-
Licenses
1 087 834
1 078 272
-
149
Total intangible assets
1 175 464
1 165 446
1 091 720
1 018 142
-
90 684
19
7
Deferred tax assets
Tangible assets -
-
Land and real estate
-
-
Loading and discharge equipment
-
-
Vessels
6 463 659
7 099 523
-
-
Vehicles, machinery and equipment
1 535 086
1 222 741
-
-
9 090 465
9 431 090
-
-
6
Total tangible assets
Long-term financial assets 4 021 796
4 021 796
8
Investments in subsidiaries
-
-
9
Investments in associated companies
78 834
4 407
-
-
13
Loans to associated companies
28 033
20 524
-
-
Shareholding and other investments
51 774
27 976
-
-
11 13
Other receivables
20 230
281 196
4 021 796
4 021 796
Total long-term financial assets
178 872
334 103
4 021 796
4 021 995
Total fixed assets
10 444 801
10 930 639
2 150 716
1 869 267
862 455
984 131
-
-
545 847
523 815
1 408 302
1 507 946
Current assets -
-
12
-
Stocks Accounts receivable
74 525
292 500
Receivables from subsidiaries
12
93
74 537
292 593
-
-
11
Shareholding and other investments
148 330
132 887
-
-
14
Market based financial investments
802 891
1 313 997
144 515
43 660
16
Cash and bank deposits
914 140
1 171 006
219 052
336 253
5 424 379
5 995 103
4 240 848
4 358 198
15 869 180
16 925 742
Other receivables Total receivables
Total current assets
Total assets
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BALANCE SHEET
GRIEG MATURITAS AS (Amounts in NOK 1 000)
2016
2017 Note
GRIEG GROUP (Amounts in NOK 1000)
2017
2016
1 124
1 124
Equity and liabilities Equity Paid-up equity 1 124
1 124
21
Share capital (1 123 530 shares of NOK 1 )
702 263
409 763
Share premium
409 763
702 263
703 387
410 887
Total
410 887
703 387
3 461 825
3 653 699
Other equity/group reserves
3 833 459
4 111 162
-
-
Minority interests
2 735 613
2 824 977
3 461 825
3 653 699
Total retained earnings
6 569 070
6 936 139
4 165 212
4 064 585
Total equity
6 979 957
7 639 526
60 191
74 610
408 960
360 019
Retained earnings
20
Liabilities Provisions -
-
5
Pension liabilities
28
-
19
Deferred tax
-
-
Other provisions
10 276
12 424
28
-
Total provisions
479 427
447 053
5 959 416
6 623 751
67 952
3 329
6 027 368
6 627 080
Bank overdrafts
541 848
512 535
Accounts payable
673 691
612 075
-
-
165 587
177 956
58 118
91 239
Dividend
398 233
102 117
Other current liabilities
544 952
715 262
2 382 428
2 212 084
Other long-term liabilities -
- 15,16 Liabilities to financial institutions
-
-
-
-
-
-
15
Other long-term liabilities Total long-term liabilities
Current liabilities 16
25
138
22
14
115
-
271
289
74 525
292 500
650
672
75 608
293 613
Total current liabilities
75 636
293 613
Total liabilities
8 889 224
9 286 216
4 240 848
4 358 198
Total equity and liabilities
15 869 180
16 925 742
Accounts payable group companies
19
Taxes payable Public duties payable
20
Bergen, 5th of April 2018 The Board of Directors of Grieg Maturitas AS
Elna-Kathrine Grieg Board Member
Elisabeth Grieg Chair
Per Grieg jr. Board Member
Camilla Grieg Board Member
Stig Grimsgaard Andersen Board Member
Wenche Kjølüs Managing Director
2017
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CASHFLOW STATEMENT GRIEG MATURITAS AS
GRIEG GROUP
(Amounts in NOK 1 000)
2016
(Amounts in NOK 1000)
2017
2017
2016
671 005
869 576
-177 956
-23 289
-
4 470
Cashflow from operations 74 906 -212 -74 525
415 211 Profit before tax -115 Taxes paid - Gain/loss from sale of fixed assets -416 014 Dividends receivable taken to income
-
- Ordinary depreciation
-
- Write-down (reversal) of fixed assets
-
- Unrealised gain/loss market based investments
-
- Unrealised gain/loss investments in shares
-
- Change in inventory
-
-81 Change in accounts receivable
635 506
560 551
-273
-6 033
-34 309
-22 441
-
129 676
-281 449
-22 819
121 676
-162 730
-21
105 Change in accounts payable
61 616
-177 776
35
40 Change in accruals
- 2 148
-129 730
-
- Difference in expenses pensions and payment in/out
-2 862
-2 073
-
- Effect of change in exchange rate
8 468
99 160
-
- Share of profit from associated companies and joint ventures
55 013
-12 637
-
- Gain/loss on sales of shares without cash effect
-134 827
-35 674
-
- Change in other provisions
-176 987
-
-855 Net cashflow from operations
742 473
1 068 230
10 908
382 668
-777 512
-615 560
-31 467
-18 908
-
-
183
Cashflow from investing activities -
- Sale of fixed assets
-
- Purchase of fixed assets/newbuilding contracts
67 500
- Purchase of intangible assets 198 039 Payments from other group companies
-
- Payments from other claims (short/long term)
-
17 911
-
- Sale of shares
963 700
496 056
-
- Purchase of shares and securities
-237 618
-671 893
-71 989
-409 727
67 500
198 039 Net cashflow from investing activities
Cashflow from financing activities -
- Net change in bank overdraft
27 465
174 304
-
- Loan repayment (short/long-term)
-705 058
-3 526 560
-
- Loan proceeds
400 759
2 853 697
-67 500
-298 039 Dividends paid
-650 515
-198 026
-67 500
-298 039 Net cashflow from financing activities
-927 349
-696 585
- 256 866
-38 082
1 171 006
1 209 088
914 140
1 171 006
183
-100 855 Net cashflow for the period
144 332
144 515 Opening balance of cash and cash equivalents
144 515
43 660 Cash and equivalents 31.12
2017
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NOTES NOTE 1 Accounting principles 12 NOTE 2 Segment information 14 NOTE 3 Other operating expenses 14 NOTE 4 Payroll costs, number of employees, remuneration etc. 15 NOTE 5 Pensions and pension commitments 16 NOTE 6 Fixed assets 17 NOTE 7 Intangible assets 18 NOTE 8 Investments in subsidiaries 18 NOTE 9 Investments in associated companies and joint ventures 21 NOTE 10 Financial items 21 NOTE 11 Shareholdings and other investments 22 NOTE 12 Stock and bunkers 23 NOTE 13 Receivables due in more than one year 23 NOTE 14 Marketbased financial investments 23 NOTE 15 Debt payable in more than 5 year 23 NOTE 16 Mortgages/guarantee liability/restricted funds 24 NOTE 17 Financial risk 25 NOTE 18 Contingencies and subsequent events 26 NOTE 19 Taxes 26 NOTE 20 Equity 28 NOTE 21 Share capital and share information 28 NOTE 22 Related parties 29 NOTE 23 Remuneration to auditor 29 NOTE 24 Discontinued operations 30
Note 1 Accounting principles
Foreign exchange rates (NOK)
01.01.2017
31.12.2017
Average 2017
The Annual Accounts for Grieg Maturitas AS have been prepared in accordance with Norwegian Accounting Act and generally accepted accounting principles.
CAD
6,4042
6,5432
6,3696
GBP
10,6130
11,0910
10,6386
Group Accounts
EUR
9,0863
9,8403
9,3271
USD
8,6200
8,2050
8,2630
The consolidated accounts include the subsidiaries specified in note 8 and shows the accounts of the parent company and the subsidiaries as a single economic unit. Shareholdings and investments in sub-sidiaries are eliminated on the basis of the acquisition method. The cost of shareholdings and investments in subsidiaries is eliminated against the book equity of the shares/investments at the date of acquisition. Any difference arising is posted to the identifiable assets. Any surplus value that cannot be attributed to specific assets, or the company’s own intangible assets, is described as goodwill and is depreciated over its estimated lifetime. Intra-group transactions and internal balances are eliminated. Companies that are bought or sold during the year, is included in the group accounts from the time of control arises or ceases. Changed owner share in subsidiaries, where the company after the transaction still is a subsidiary, is an equity transaction for the Group.The income statements and balance sheets of the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities are converted at the closing rate on the date of the balance sheet, (ii) income and expense items in the income statement are converted at average exchange rates for the period (unless this average is not a reasonable estimate of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated on the dates of the transactions). (iii) translation differences are recorded against equity and specified separately.
Operating Revenue
Operating revenues are entered as income at the time of delivery. The time of delivery is understood as the time of transfer of risk and control related to the delivery. Freight revenues from voyages are recognised on the basis of the number of days the voyage lasts. Revenue is shown, net of value added tax, returns and discounts.
Classification of assets and liabilities – main rule
Assets intended for long-term ownership or use are classified as fixed assets. Other assets are classified as current assets. Receivables due within one year are classified as current assets. The corresponding criteria are applied to classify liabilities. Certain items are stated on the basis of special valuation rules, in accordance with accounting legislation, as detailed below. Other assets and liabilities are classified as fixed assets and long-term liabilities, respectively.
Inventories
Inventories are recognised at the lower of cost and fair value. Goods in progress, and finished goods are recognised at the lower of full cost and net sales value. The net sales value of finished goods is calculated as sales value less sales costs. The stock of bunkers consists of fuel and diesel and are recognised at cost on the basis of the FIFO method.
Foreign currency
Assets and liabilities denominated in foreign currencies are stated at the year-end exchange rate. Agio, or disagio, on settlements or conversion of monetary items in foreign currency on the day of balance is allocated. Transactions in foreign currencies is recalculated to transaction rate. Foreign exchange hedging derivatives purchased in order to reduce the currency risk for the sub-group Grieg Star Group are recognised as hedging transactions. Gains/losses of foreign exchange contracts are therefore recorded in the same period as the hedged transactions. Please refer to note 17. Unrealized gain/loss on the hedging contracts is not posted on the balance sheet.
Interest rate hedging
Interest rate hedging contracts are recognised and classified in the same way as the related mortgage loan. The interest received/paid under the contract is therefore recognised in the interest period in question, and is included in interest cost/income for the period. Unrealized gain/loss on the hedging contracts is not posted on the balance sheet.
Accounts receivable
Accounts receivable are stated at nominal value less provisions for expected losses. The loss provision is based on an individual assessment of each accounts receivable.
Investments in subsidiaries
A company is defined as a subsidiary if the Group has a decisive influence on its operations. This is normally the case where the Group holds more than 50% of the voting share capital. Subsidiaries are posted in the company accounts applying the cost method. The investment is stated at historical cost of the shares unless a write-down has been necessary. The investment is written down to fair value when the reduced value is due to causes which are not deemed to be temporary. Write-downs are reversed when the grounds for the write-down no longer exist. Dividends and other distributions are recognised in the year in which they are provided for in the accounts of the subsidiary. If the dividend exceeds the profit after the acquisition, the surplus amount represents repayment of the capital investment and the distributions are deducted from the amount of the investment in the balance sheet.
Investments in limited partnerships
Investments in limited partnerships are recorded on the basis of the cost method whereby the investment is stated at cost in the balance sheet. The distribution of profits/contribution to cover losses from investments in limited partnerships is taken to income/charged against profits under financial items. Profits from investments in limited partnerships are taxable in the hands of the respective participants.
Investements in portfolio and private equity companies
A portfolio of investments are recorded as a current asset, and is valued at the lower of cost price and estimated fair value for the portfolio as a whole when the intention behind the portfolio is to diversify the risk through a balanced portfolio with respect to time, branches and geography. For unlisted investments, with no observable price, the fair value are determined by recently third-party-trades, or with a reference to the fair value of similar investments.
Investments in associated companies and joint ventures
An associated company is a company where the Group has significant influence, but not control. Significant influence is deemed to exist for investments where the Group has between 20% to 50% of voting capital. Investments in associated companies and joint ventures are recorded on the basis of the equity method in the consolidated accounts, unless the investment value is immaterial. The share of the results in associated companies is posted separately under financial items. The investments in associated companies are posted as a financial asset. The Group’s share of a loss is not posted in the income statements if this means that value of the investment in the balance sheet becomes negative. Provisions will be made if the Group has undertaken an obligation on behalf of the associate.
Fixed assets
Fixed assets are valued at acquisition cost, but are written down to fair market value where the decline in value is not expected to be temporary. Fixed assets with a limited economic lifetime are depreciated on a straight-line basis over the expected lifetime of the asset. Long-term liabilities are stated in the balance sheet at the nominal amount on the establishment date. Current assets are valued at the lower of acquisition cost and fair market value. Current liabilities are stated in the balance sheet at the nominal amount on the establishment date. Periodic classification and maintenance costs are posted in the balance sheet and depreciated on a straight-line basis until
2017
ANNUAL REPORT
12
the next planned docking. The docking costs are included in the balance sheet along with the value of the ship. The depreciation of docking costs is included in operating costs.
Intangible assets
Goodwill is depreciated over its economic lifetime. The surplus value attached to the fleet’s contracts of employment and the company’s right to renominate Grieg Star tonnage is defined as ”contracts” in the balance sheet and is depreciated over 20 years. Licenses with unlimited economic lifespan is subject to an annual impairment test. Licenses with limited economic lifespan is depreciated annually. Expenses related to the company’s own development are recorded in the balance sheet from the point when it is likely that the development work will result in an identifiable intangible asset.
Asset impairments
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cashflows (cash-generating units). The Group’s open hatch vessels have been sailing in a pool which has been marketed and operated by Grieg Star Shipping AS until 1st of May 2017. 2nd of May 2017 Grieg Star Shipping AS established a joint venture with Gearbulk AS called G2 Ocean Holding AS, which now markets and operates the Group’s vessels in a pool. Having the vessels sail in a pool means that the operational use of the vessels, including optimization of routes, is combined for the fleet. Earnings of each individual vessel is therefore affected by the earnings of other vessels in the pool. The open hatch fleet and the bulk fleet are therefore considered to be the respective cash-earnings of other vessels in the pool. The open hatch fleet and the bulk fleet are therefore considered to be the respective cash-generating units. Newbuilding contracts are included in the fleet impairment and unpaid installments are deducted.
Estimates
When preparing the annual accounts in accordance with good accounting practice, the management make estimates and assumptions which affect the profit and loss account and the valuation of assets and liabilities as well as information about contingent assets and liabilities at year-end. Contingent losses which are likely and quantifiable are charged against income on an ongoing basis.
Leasing
The companies differentiates between financial leasing and operational leasing based on an evaluation of the lease contract at the time of inception. A lease contract is classified as a financial lease when the terms of the lease transfer substantially all the risk and reward of ownership to the lessee. All other leases are classified as operational leases. When a lease contract is classified as a financial lease where the company is the lessee, the rights and obligations relating to the leasing contracts are recognised in the balance sheet as assets and liabilities. The interest element in the lease payment included in the interest costs and the capital amount of the lease payment is recorded as repayment of debt. The lease liability is the remaining part of the principal. For operational leases, the rental amount is recorded as an operating cost.
Taxation
The tax charge in the profit and loss account consists of the tax payable and the change in net deferred tax. Taxes are charged when they arise. Deferred tax in the balance sheet is calculated on the basis of timing differences between values for taxation and accounting purposes. Taxable and tax-deductible timing differences which are reversed or can be reversed within the same period are netted against each other and entered net. Some of the companies of the Group are subject to shipping taxation under the Norwegian tonnage tax system pursuant to chapter 8 of the Taxation Act.
Cash flow statement
The statement of cashflows is prepared on the basis of the indirect method. Accordingly, the cashflows from investment and financing activities are reported gross, while the accounting result is reconciled against the net cashflow from operations. Cash and cash equivalents include cash, bank deposits and other short-term liquid investments that can immediately and with no major exchange rate risk be converted into a known amount and maturing less than three months from the transaction date.
Non-financial assets other than goodwill which have been impaired are reviewed for possible reversal of the impairment at each date.
Pension commitments Defined contribution plans
The Group’s main pension scheme is a defined contribution plan, for which the companies pay contributions to an insurance company. The companies have no further payment obligations once the contributions have been paid. Contributions are recorded as payroll expenses.
Defined benefit plan
Some companies have defined benefit plans, including AFP. A defined benefit plan is a pension scheme that defines the pension payment an employee will receive on reaching retirement age. The pension payment normally depends on one or more factors, such as age, period of service with the company and salary level. The pension commitment under defined benefit schemes posted in the balance sheet is the present value of the defined benefit schemes at year-end less the fair value of the pension fund assets, adjusted for unposted deviations from estimate. The pension commitment is calculated annually by an independent actuary based on a linear accrual of pension entitlements. Changes in benefits under the pension plan are posted in the profit and loss account on an ongoing basis. The pension schemes are funded through payments to insurance companies or financed through operations. Post-employment benefit obligations associated with the early retirement pension (AFP), under the LO/NHO arrangement, are a multi-employer defined benefit plan, but the plan is recorded as defined contribution, as it is not measurable.
Market based financial assets
Short-term investments in shares and mutual funds are regarded as part of the trading portfolio and are stated at fair value at year-end. Dividends received and other distributions are entered as income under other financial income.
2017
ANNUAL REPORT
13
Note 2 Segment information GROUP (Amounts in NOK mill.)
Operating revenue 2017 2016
Operating profit 2017 2016
Net financial Items 2017 2016
Profit before tax 2017 2016
Grieg Seafood (NGAAP)
7 038
6 598
904
1 160
-15
-122
889
1 038
Grieg Star 1
1 335
3 850
-121
104
-132
-167
-253
-64
Grieg Logistics
397
330
-6
-14
-44
13
-50
-2
Grieg Investor
75
69
12
15
0
0
12
16
Grieg Shipbrokers
115
105
9
6
1
-5
10
1
Ryfylke Rensefisk
101
54
23
9
-2
-2
21
7
39
36
16
14
-7
-2
9
12
3
3
-24
-19
392
30
368
11
-43
-59
3
5
-337
-156
-334
-150
9 059
10 985
815
1 280
-144
-411
671
870
Grieg Property Finance/Investment companies Other 2 Sum Grieg Group ‘ 1
On May 2nd, 2017, Grieg Star and Gearbulk established their new joint venture G2 Ocean. Although the establishment of G2 Ocean took place well into the financial year 2017, Grieg Star’s annual accounts have been restated for the entire 2017, in order to reflect the actual situation going forward, where Grieg Star’s freight income is made up of an equivalent to net time charter hire received on its open hatch and dry bulk fleet. The 2017 figures are concequently not comparable to previous years accounts. 2
Other includes the Groups’s holding company, management service company and eliminations.
Note 3 Other operating expenses GROUP (Amounts in NOK 1000)
2017
2016
77 633
2 067 761
240 847
335 217
Operating costs - shipping Voyage costs - shipping Timecharter costs - shipping Ship operating costs Operating costs - shipping
546 128
571 970
864 608
2 974 948
2017
2016
Cost of sales - fish farming Cost of sales - fish farming
3 756 423
3 671 731
-1 719
-344 433
3 574 704
3 327 298
2017
2016
Change in inventories Cost of sales - fish farming
Other operating expenses Freight and cost of services
285 997
240 739
Other operating expenses
1 865 644
1 649 615
Other operating expenses
2 151 641
1 890 355
The Group has the following long term operating lease agreements related to chartering of vessels, offices, plant and machinery. 2017
Duration
Number of vessels
Operating lease expense
Long-term time charter
0-4 years
5
185 918
Bare-boat hire
1-14 years
4
106 593
Other lease amount charged in the year
2-10 years
177 775 470 285
Total lease amount charged
2017
ANNUAL REPORT
14
2016
Duration
Number of vessels
Operating lease expense
Long-term time charter
0 - 5 years
6
220 949
Bare-boat hire
2-12 years
4
105 854
Other lease amount charged in the year
3-10 years
62 036
Total lease amount charged
388 839
Note 4 Payroll costs, number of employees, remuneration etc. PARENT COMPANY (Amounts in NOK 1000)
Total payments for salary, pension premium and other remuneration to Managing Director: Payroll and social security costs
2017
2016
Salaries and other benefits
3 093
2 706
Social security costs
463
399
Pension costs
163
96
Other benefits
139
139
3 858
3 340
Total
The Managing Director is the only employee in the company. There has been no renumeration to the Board of Directors in Grieg Maturitas. Total remuneration to Managing Director is specified under renumeration to executives below.
GROUP (Amounts in NOK 1000)
Payroll and social security costs Salaries Social security costs
2017
2016
656 585
736 401
69 451
66 562
Pension costs
47 662
49 443
Other benefits
99 005
100 109
Total
872 703
952 516
1 138
1 155
Number of employees Number of sailing personnel
1
Total 1
743
755
1 881
1 910
Salary costs are recognised in the P&L as operating costs - shipping.
Remuneration to executives In 2017 total payments to salary, pension premium and other remuneration to Managing Director was NOK 3,7 mill. and to Board members NOK 13,3 mill. (14,6 mill. last year). Remuneration to the Board members and Group Managing Director is paid from the companies where the Director is employed or a member of the Board.
2017
ANNUAL REPORT
15
Note 5 Pensions and pension commitments PARENT COMPANY Defined contribution based pension scheme The defined contribution based pension scheme covers all full-time and part-time employees and amounts to between 7% and 20% of salary. At year-end 2017 one person was covered by the scheme. The contribution charged in the accounts for 2017 amounted to TNOK 163 (excluding National Insurance Contributions).
GROUP (Amounts in NOK 1000)
The Group companies in Norway have pension schemes which meet the requirements of the Act relating to compulsory occupational pension schemes. Most of existing employees in Group companies in Norway are now transferred from having a defined benefit based pension scheme to having a defined contribution based pension scheme. All new employees are offered a contribution based pension scheme. Most of the Group companies abroad have a defined contribution based pension scheme.
2017
2016
35 238
38 299
Defined benefit pension, incl. AFP
6 083
11 144
Pension costs - discontinued operations
6 361
-
47 662
49 443
Total pension costs distributes as follows Defined contribution pension
Total
Defined contribution based pension scheme The defined contribution based pension scheme covers full-time and part-time employees and amounts to between 7% and 20% of salary. The contribution charged in the accounts in 2017 amounted to NOK 35,3 mill. (excluding National Insurance Contributions).
Defined benefit based pension scheme Some companies in the Group have defined benefit pension scheme. The Group pension scheme is funded through the accumulation of pension fund assets in an insurance company or through operations. The scheme gives an entitlement to defined future benefits. In 2017 a total of 132 persons (including pensioners and persons on early retirement) were covered by the benefits based scheme.
Net pension costs, including National Insurance Contribution
2017
2016
Present value of pension entitlements
3 410
8 184
Interest expenses on pension entitlements
2 006
4 030
Return on pension fund assets
-2 137
-3 583
Accounting effect of estimate divergences and plan changes
1 858
891
-
635
This years change, provision for undercoverage CPA Administration expenses
926
987
Pension costs for the year
6 083
11 144
Pension fund assets/liabilities
2017
2016
Calculated pension commitments
- 153 492
-182 401
93 127
99 324
Pension fund assets (at market value) Unposted effect of estimate divergences Net pension fund assets/(liabilities) of which unfunded obligations
2017 Financial assumptions:
175
8 470
-60 190
-74 610
- 28 685
-44 493
2016
Norway
Norway
Canada
Discount rate
2,40%
2,10%
3,60%
Anticipated rise in salaries
2,50%
2,25%
2,40%
Anticipated return on pension fund assets
4,10%
3,00%
Anticipated increase of pensions
2,25%
2,00%
Anticipated rise in pensions, regulation of National Insurance Base rate
2,25%
2,00%
2017
ANNUAL REPORT
16
Note 6 Fixed assets GROUP (Amounts in NOK 1000)
Purchase cost at 01.01. Currency translations differences
Land and real estate
Vehicles, machinery and equipment
Loading and discharging equipment
Vessels
Total
1 506 071
2 770 306
300 985
11 406 332
15 983 694
-16 532
13 981
-14 491
-549 192
-566 233
Additions
156 628
547 941
-
72 942
777 512
Disposals
-121 154
-85 422
-286 494
-
-493 069
Purchase cost at 31.12.
1 525 013
3 246 808
-
10 930 082
15 701 903
Accumulated depreciation
-432 895
- 1 669 750
-
-4 231 163
-6 333 808
-399
-41 972
-
-235 259
-277 630
1 091 720
1 535 086
-
6 463 659
9 090 465
64 975
189 756
-
317 253
571 983
-
273
-
-
273
Economic lifetime
20-50 years
3-20 years
10 years
25-30 years
Depreciation plan
Linear
Linear
Linear
Linear
Accumulated write-down Balance sheet value at 31.12. Depreciation Write-down (reversal)
Land & Realestate: Investments is mainly related to Grieg Seafood ASA and expansion of fish hatcheries in Finnmark and Rogaland, Ryfylke Rensefisk Group investing in production facilities at Talgje and Grieg Property refurnishing the Grieg Group head quarters in Bergen. Vehicles, machinery and equipment: Additions is mainly related to equipment for Grieg Seafood ASA`s expansion of fish hatcheries in Finnmark and Rogaland and Ryfylke Rensefisk Group`s facilities at Talgje. Loading and discharghing equipment: All loading and discharghing equipment is demerged to G2Ocean AS when Grieg Star enteried into the joint venture. Vessels/Newbuildings: The newbuilding contract for Star Iris was cancelled in april 2017 and for Star Nike in September 2017. Paid in instalments have been refunded including interests. In addition, there is a realized loss of NOK 1.3 mill. regarding the two vessels in 2017. Financial lease agreements: Grieg Seafood ASA has financial lease agreements on real estate, vehicles, machinery and other equipment. with book value of NOK 306 mill. per 31.12. Total depreciation on financial lease agreements in Grieg Seafood ASA in 2017 is NOK 37 mill. Estimated total lease amount on financial lease agreements for Grieg Seafood ASA is NOK 312 mill, with NPV of NOK 260 mill.
2017
ANNUAL REPORT
17
Note 7 Intangible assets GROUP (Amounts in NOK 1000)
Purchase cost at 01.01
Goodwill
Contracts
Research and development
Licenses
Total
174 730
151 097
27 065
1 123 697
1 476 589
-2 786
-7 254
-
9 290
-750
1 977
9 010
15 244
5 236
31 467
Currency translations differences Additions Disposals
-
-
-
-36
-36
173 921
152 852
42 309
1 138 187
1 507 270
Accumulated depreciation
-65 036
-112 984
-11 129
-50 353
-239 503
Accumulated write-down
-89 603
-
-2 700
-
-92 303
19 283
39 867
28 480
1 087 834
1 175 464
5 379
8 243
6 227
4 929
24 778
-
-
2 700
-
2 700
Economic lifetime
3-20 years
10 years
Depreciation plan
Linear
Linear
Purchase cost at 31.12
Balance sheet value at 31.12. Depreciation Write-down (reversal)
3-10 years 5-25 years/unlimited Linear
Linear/none
Contracts: represent excess values related to the vessels’ contracts of affreightment through the participation in the G2 Ocean pool and purchased dividend rights in the Grieg Shipbrokers Group. Research and development: relates to logistic systems in Grieg Logistics Group and new digital software solutions in Grieg Investor AS. Licenses relates to fish-farming licenses in Grieg Seafood ASA and Ryfylke Rensefisk Group. Most licenses have an unlimited economic lifetime, but is subject to a yearly valueassessment to determine if write-downs are required.
Note 8 Investments in subsidiaries COMPANY (Amounts in NOK 1000)
Subsidiary Grieg Maturitas II AS
Registered office
Ownership
Proportion of voting shares, %
Bergen
75%
100%
Book equity 100%
Book value
Dividend
5 109 851
4 021 796
416 014
Grieg Maturitas II AS, which is owned 75% by Grieg Maturitas AS and 25% by Grieg Foundation, is the common holding company of the Group.
GROUP The consolidated financial statements comprise the company Grieg Maturitas AS and Grieg Maturitas II AS with the following subsidiaries: Directly ownership %
Directly and indirectly ownership %
45,5%
100%
Grieg Maturitas II AS owns the following companies:
Registered office
Grieg Star Group AS
Bergen
Grieg Logistics AS
Bergen
100%
100%
Grieg Holdings AS
Bergen
83,7%
100%
Grieg Property AS
Bergen
58,99%
100%
Grieg International AS
Oslo
100%
100%
Grieg Ltd AS
Bergen
100%
100%
Grieg Group Resources AS
Bergen
100%
100%
2017
ANNUAL REPORT
18
Ownership %
Proportion of voting shares, %
49,97%
49,97%
Grieg Holdings AS owns the following companies:
Registered office
Grieg Seafood ASA
Bergen
AS Joachim Grieg & Co
Bergen
100%
100%
Grieg Shipbrokers KS
Bergen
55,45%
55,45%
Bergen
59,91%
59,91%
Joachim Grieg Star KS Grieg Shipbrokers Ltd.
London, UK
55%
55%
Grieg Shipbrokers Asia AS
Bergen
100%
100%
Grieg Shipbrokers Asia Ltd
Shanghai
100%
100%
Grieg Shipbrokers Asia Pte. Ltd
Singapore
100%
100%
Bergen
100%
100%
Finnøy
60%
60%
Portugal
90%
90%
Ownership %
Proportion of voting shares, %
Grieg Holdings II AS Rensefisk Holding AS Silves Odissey Inv. and Techn. Lda.
Grieg Property AS owns the following companies
Registered office
Grieg Gaarden AS
Bergen
100%
100%
AS Nestun Uldvarefabrik
Bergen
100%
100%
CSG15 AS
Bergen
100%
100%
Grieghallen Parkering II AS
Bergen
36,25%
36,25%
Bergen
36,25%
36,25%
Grieghallen Parkering AS
Grieg Star Group AS owns the following companies:
Registered office
Ownership %
Proportion of voting shares, %
Grieg Shipowning AS
Bergen
100%
100%
Grieg Shipping II AS
Bergen
100%
100%
Grieg International II AS
Oslo
100%
100%
Grieg Star 2017 AS
Bergen
100%
100%
Grieg Star AS
Bergen
100%
100%
Grieg Star Bulk AS
Bergen
100%
100%
Grieg Green AS
Oslo
100%
100%
Shanghai, China
100%
100%
Bergen
100%
100%
Vancouver B.C., Canada
100%
100%
Squamish BC, Canada
100%
100%
Grieg Consulting and Advisory Company Ltd. Grieg Star Shipping AS Grieg Star Shipping (Canada) Ltd. Squamish Terminals Ltd.
Grieg Ltd AS owns the following companies:
Registered office
Ownership %
Proportion of voting shares, %
Grieg Star Group AS
Bergen
30,09%
39,80%
Grieg Property AS
Bergen
41,01%
55,70%
Grieg Holdings AS
Bergen
16,13%
21,50%
Grieghallen Parkering II AS
Bergen
11,27%
11,27%
Bergen
11,27%
11,27%
Grieghallen Parkering AS Grieg Investor Holding AS
Oslo
15,00%
26,67%
Grieg Investor AS
Oslo
15,00%
26,67%
0,19%
0,19%
Grieg Seafood ASA
Bergen
2017
ANNUAL REPORT
19
Grieg International AS owns the following companies:
Registered office
Ownership %
Proportion of voting shares, %
Grieg Star Group AS
Bergen
24,38%
32,25%
Grieg Investor Holding AS
Oslo
30,00%
53,33%
Grieg Investor AS
Oslo
30,00%
53,33%
Ownership %
Proportion of voting shares, %
Tønsberg
100%
100%
Mosjøen
100%
100%
Kristiansand
70%
70%
Kristiansund
51%
51%
Bergen
100%
100%
Bergen
100%
100%
Ownership %
Proportion of voting shares, %
Grieg Logistics AS owns the following companies:
Registered office
Scandinavian Harbour Service AS Mosjøen Industriterminal AS Seamless AS Shiplog AS Grieg Strategic Services AS Grieg Port Security AS
Grieg Seafood ASA owns the following companies:
Registered office
Grieg Seafood Rogaland AS
Bergen
100%
100%
Grieg Seafood Finnmark AS
Alta
100%
100%
Grieg Seafood Canada AS
Bergen
100%
100%
Grieg Seafood BC Ltd.
Canada
100%
100%
Grieg Seafood Hjaltland UK Ltd.
UK
100%
100%
Grieg Seafood Shetland Ltd.
UK
100%
100%
Ocean Quality AS
Bergen
60%
50%
Ocean Quality UK Ltd.
UK
60%
50%
Ocean Quality North America Inc.
Canada
60%
50%
Rensefisk Holding AS owns the following companies:
Registered office
Ownership %
Proportion of voting shares, %
Ryfylke Rensefisk AS
Finnøy
100%
100%
Finnmark Rensefisk AS
Alta
100%
100%
Marin Innovasjon AS (former Sea Urchin Farm AS)
Finnøy
100%
100%
Lønningdal Rensefisk AS
Os
60%
60%
Austevoll Rensefisk AS
Austevoll
72%
72%
2017
ANNUAL REPORT
20
Note 9 Investments in associated companies and joint ventures GROUP (Amounts in NOK 1000)
Ownership %
Registered office
Book value 01.01
25%
Oslo
2 281
16,67%
Bergen
-
Grieg Newfoundland AS
50%
Bergen
-
Gulen Base AS2
51%
Bergen
-
Fram Marine AS1 Tytlandsvik Aqua AS
G2 Ocean Holding AS
5
Addition
Share of profit/loss for the year
Other changes
Book value 31.12
Excess value incl. in book value 31.12.
-
-
-
2 281
219
10 000
-550
-
9 450
-
-
-
-
-
-
40 204
-40 204
-
-
35%
Bergen
-
81 412
-14 259
-565
66 588
-
Rogaland Havbrukspark Eiendom AS
50%
Finnøy
500
-
-
-
500
-
Rogaland Havbrukspark AS
30%
Finnøy
15
-
-
-
15
-
Grieg Strategic Services AS
100%
Bergen
1 478
-
-
- 1 478
-
-
100%
Bergen
133
-
-
- 133
-
-
4 407
131 616
-55 013
-2 176
78 834
219
3
Grieg Port Security AS4 Sum
Booked according to the cost method. Gulen Base has been consolidated as a subsidiary until 2017. There has not been any acitivty in 2017 and the company is now for sale. Based on this process, it is assessed that Grieg Logistics AS no longer have controlling influence and as a consequence the investment in Gulen Base should be considered as an associated company, and booked according to the equity method. 3 In 2017, Norwind AS changed name to Grieg Strategic Services and is now a 100% owned subsidiary in the Grieg Group 4 In 2017, Norwind Installer AS changed name in to Grieg Port Security AS and is now a 100% owned subsidiary in the Grieg Group 5 In May 2017, Grieg Star and Gearbulk established their new joint venture G2 Ocean Holding AS. � 2
Tytlandsvik Aqua AS Grieg Seafood invested MNOK 10 in Tytlandsvik Aqua AS in 2017, which corresponds to 16.67% of the shares in the company Remaining shares are owned by Bremnes Seashore AS (16.67%) and Vest Havbruk AS (66.67%). Tytlandsvik Aqua AS will contribute to increased access to postmolt During 2018, Grieg Seafood and Bremnes Seashore AS will increase their ownershare by capital increase, so that all the owners have the same amount of shares in Tytlandsvik Aqua AS. The parties have agreed that Grieg Seafood and Bremnes Seashore AS will be guarantueed organizational rights as if they own 1/3 of the shares, already from the first payment of MNOK 10 in 2017, including the right to appoint board members and voting rights at the general meeting. Therefore, the Group has included share of the consolidated financial statements although the owner share is 16,67%. In the agreement, the Group has the right and obligation to purchase the remaining shares in 2018 , in three transactions of respectively MNOK 10, a total of MNOK 30. The share of income included corresponds to ownership interest (16.67%) in the ownership period in 2017.
Note 10 Financial items (Amounts in NOK 1000)
Other Financial Income Interest income Gain on sale of investments Other financial income Total financial income
Other Financial Expenses
Parent company 2017 2016
Group 2017
2016
932
1 216
25 700
24 070
-
-
80 773
34 938
-
-
49 745
30 932
932
1 216
156 217
89 940
Parent company 2017 2016
2017
Group 2016
Interest expenses
-
-
257 857
264 161
Write-down of financial fixed assets
-
-
-
129 676
Other financial expenses
2
1
22 094
142 008
Total financial expenses
2
1
279 951
535 485
2017
ANNUAL REPORT
21
Note 11 Shareholdings and other investments GROUP (Amounts in NOK 1000)
Shareholdings and other investments - classified as current assets
Company
Ownership
Purchase cost
Maris Reinvest AS
93,15%
60 913
KS Brage Supplier
12,50%
29 625
Argentum Investment Partners I
7,62%
27 674
Holmen Industri Invest I AS
26,66%
23 378
Utleiebolig AS
17,49%
9 418
1,32%
6 764
DNB private equity III IS)
1,41%
5 704
Union Real Estate Fund
1,53%
5 678
Voxtra East Africa Agribusiness Fund
5,44%
5 326
F14 Invest AS
1,73%
2 500
Karihaugveien 22 Holding AS
6,70%
1 456
Blomster Norge AS
4,86%
1 301
Sahara Forest Project AS
1,34%
750
0,74%
500
25,00%
110
FSN Capital Ltd. P.ship II
Hordaland Maritime Miljøselskap AS EUP AG Total - classified as current assets
Acc. write-down 1.1.
Change in value Book value 31.12. 2017
181 097
-48 417
Ownership
Purchase cost
Acc. write-down 1.1.
15,34%
18 958
-
-
18 958
1
15 651
148 330
Shareholdings and other investments - classified as fixed assets
Company Mercell Holding AS F 14 Invest AS Stochasto Holding AS
Change in value Book value 31.12. 2017
2,10%
2 761
-
-
2 761
17,60%
5 222
-5 222
-
-
Grieg Star Phillippines Inc.
100%
1 641
-
-
1 641
Nye Bolshoy AS
7,30%
21 742
-
-
21 742
10,0%
2 500
-
-
2500
15%
55 743
-45 618
-10 125
-
3 850
-23
346
4 172
112 416
-50 862
-9 779
51 774
Proximar Seafood AS Stril Offshore DIS
3
Other investments Total - classified as fixed assets 2
Portfolio investments: the portfolio of investments on the list is valued at the lower of cost price and estimated fair value (market value). The investments are treated as a portfolio where gains and losses are off-set, and the cost price are measured against the estimated fair value on the total portfolio. 2 Direct share investments: the shares are valued on the basis of the cost method at an individual basis,and written down if fair value is lower than the cost price. Writedowns are reversed when the grounds for the write-down no longer exist. 1
3
Investment in Stril Offshore DIS is in 2017 classified as fixed assets and written down to 0 in book value.
2017
ANNUAL REPORT
22
Note 12 Stock and bunkers GROUP (Amounts in NOK 1000)
Stocks raw materials - fish farming Stocks goods in progress - fish farming Stocks of finished goods Stocks of bunkers and lub oil Total stocks and bunkers
2017
2016
94 619
91 448
2 025 593
1 635 138
50
7 821
30 454
134 860
2 150 717
1 869 267
Note 13 Receivables due in more than one year GROUP (Amounts in NOK 1000)
Loan to associated companies Spoolbase project (Gulen Base AS)
2017
2016
28 033
20 524
-
219 629
Other receivables
20 230
61 567
Total
48 263
301 720
Purchase cost
Market value
Note 14 Market based financial investments GROUP (Amounts in NOK 1000)
Individual shareholdings Mutual funds Bonds Money market funds Total
11 884
8 728
247 354
367 949
231 233
236 353
188 950
189 861
679 421
802 891
Unrealised gain this year of market based financial investments
34 309
Note 15 Debt payable after 5 years GROUP (Amounts in NOK 1000)
Long-term debt - maturity more than 5 years
2017
2016
736 761
843 147
2017
ANNUAL REPORT
23
Note 16 Mortgages/guarantee liability/restricted funds PARENT COMPANY (Amounts in NOK 1000)
Restricted deposits related to employees’ tax deduction
2017
2016
188
173
2017
2016
GROUP (Amounts in NOK 1000)
Restricted deposits related to employees’ tax deduction Short term fixed interest restricted deposits Total Debt secured by mortgage (including overdraft facilities) Mortgaged debt - long term Other long term liabilities Factoring and short term debt Total mortgaged debt
32 188
26 732
-
160 000
32 188
186 732
2017
2016
5 922 420
6 623 751
-
3 328
509 849
502 535
6 432 269
7 129 614
Group assets have been given as mortgage security Balance sheet value of mortgaged assets Receivables Vessels and newbuildings
2017
2016
783 146
945 373
6 388 909
7 099 523
Other assets
2 134 746
2 292 432
Licences
1 068 552
1 060 622
Stocks
2 117 908
1 734 228
Total
12 493 260
13 132 179
2017
2016
Total guarantee liability
489 553
543 060
Undrawn borrowing facilities
609 650
826 200
Pledges include shares in subsidiaries. The book value of these shares is 0 in the consolidated accounts.
Loan covenants Grieg Star Group (GSG) is per year end 2017 required to have minimum liquid funds of USD 35 mill. A common covenant for all mortgage loans is that GSG must continue to be controlled by the Grieg familiy. GSG has met its loan covenant commitments throughout the year. The covenants of Grieg Seafood’s credit facility is an equity ratio in excess of 35%, without consolidation of Ocean Quality Group, and a revolving NIBD/ EBITDA ratio of 5.0 if the equity ratio is higher than 40% and 4.5 if the equity ratio is between 35% and 40%. As at 31 December 2017, the equity share exclusive of Ocean Quality was 52% and NIBD/EBITDA 1.2 Grieg Seafood has met its loan covenant commitments throughout the year. In 2018, Grieg Seafood has signed a term sheet regarding refinancing the credit facilities. See note Note 18 for further information.
2017
ANNUAL REPORT
24
Note 17 Financial risk Group is exposed to a range of financial risks; market risk (including currency risk, cashflow interest rate risk, fair value interest rate risk and price The risk), credit risk and liquidity risk. The Group uses various financial derivatives to manage its financial risk.
Market risk Several of the Group’s companies have considerable financial investment portfolios, and changes in the value of international securities and interest rates directly affect their results. The portfolios are managed in accordance with long-term strategies and within defined mandates, also reflecting the Group’s business principles.
Foreign exchange risk A large proportion of the Group’s revenues, assets and liabilities are in foreign currencies, mainly USD and EUR. Changes in foreign exchange rates therefore affect the accounts, which are prepared in NOK. The Group companies have strategies and procedures to reduce both the exchange rate and interest rate Grieg Star Group hedges expenditures in currencies other than USD through forward contracts. At 31.12.17 the company had entered into hedging through the use of currency swaps for USD 1.9m. Total unrealised MTM value, not recognised in the balance sheet, at 31.12.17 was USD 0.009m. Grieg Shipbrokers had 31.12.17 forward contracts to hedge a total of USD 17,4 m, of which USD 9,3 m applies to hedging of reasonably secure transactions, ref NRS 18. As of 31.12.17, the contracts had an unrealized, not recognised gain of TNOK 899.
Credit and counterparty risk The Group’s credit risk that counterparties do not have financial ability to meet their obligations is considered to be relatively low, due to solid customers, a diversified portfolio, and historically there has been small losses on receivables. The Group works hard to mitigate the counterparty risk by building good procedures and systems. In some parts of the Group with a large customer portfolio, the risk is reduced by maintaining good procedures for assessing counterparty risk and credit rating.
Liquidity risk The Group constantly monitors liquidity reserves and needs. The Group’s liquidity risk has increased, but strong liquidity and a focus on cash management ensure that there is sufficient liquidity to meet the Group’s obligations when they mature.
Interest rate risk Interest rate risk arises in the short and long term as most parts of the Group’s debt are at a floating rate of interest. A change in interest rates will result in either an increase or a reduction of the financing cost. If certain interest rate derivatives are applied then the predictability of the financing cost will increase due to a limitation of the net effect of a change in interest rates. In addition a change in interest rates will affect the returns on the investment portfolio and the rates on cash deposits. The Group’s strategy is to employ a certain level of hedging using interest rate swap agreements to establish greater stability for the Group’s loan interest expenses. Gains and losses rising from interest rate swaps in the Grieg Star Group are recognised in the same period as the related interest expense. At 31.12.17 the Grieg Star Group held interest rate swap agreements of USD 224m. Total unrealised MTM value, not recognised in the balance sheet, was USD -5.1m. Gains and losses rising from interest rate swaps in Grieg Seafood are not subject to hedge accounting and are recognised as the gains or losses arise. Grieg Seafood had interest swap agreement totalling NOK 660 mill. at 31.12.17. Unrealized loss attached to this agreement, recognised in the balance sheet, amounts to NOK -4,1 mill. Interest rate swap agreements have a horizon of 4 years and whether these periods are to be rolled over is a matter of constant evaluation.
Freight rate risk The Group’s ship earnings are to a large extent related to cargo transportation contracts as a considerable share of the shipping activities are of an industrial character. The open hatch fleet’s earnings are to a large extent related to long term cargo contracts. This implies that revenues are less volatile than in the spot market, and that changing market conditions generally have a delayed effect on the results. The group’s dry bulk activity is on the other hand more exposed to general spot market movements.
Salmon prices The Group is also exposed to fluctuations in the spot prices for salmon, which is mainly determined by global supply. Although the effect of changing prices is somewhat reduced through Grieg Seafood’s geographical diversification, the long production cycles makes it challenging to respond rapidly to changing market prices. Salmon is primarily traded at spot prices. The price risk is partly hedged through financial purchase contracts. At year end 2017 unrealized gains of TNOK 42.914 related to these contracts is not recognized in the balance sheet, the Group had no financial price contracts or physical delivery contracts that would give a loss at year end.
2017
ANNUAL REPORT
25
Note 18 Contingencies and subsequent events The Grieg Group is neither a party to any court case nor the subject of any other litigation beyond what is normally associated with ordinary operations. Grieg Seafood’s growth targets comprise increased smolt capacity and new sites. The planned investments are higher than what is considered to be a normal maintenance investment which requires increased working capital. Grieg Seafood has renegotiated the Group’s credit facilities before agreed maturity in 2019. Total credit facilities are increased from MNOK 1 910 to MNOK 1 700 in addition to MEUR 60. The revolving loan facility is extended from MNOK 700 to MNOK 1000. In addition, a bank overdraft of MNOK 100 is granted. Term loans of MNOK 600 and MEUR 60 will be repaid in semiannually installments of respectively MNOK 50 and MEUR 5. The financing has a maturity of 5 years, with due date 28 February 2023. 31 January 2018 Ocean Quality AS received a decision from the Norwegian Food Safety Authority (the “NFSA”) to suspend all export of Norwegian salmon from the company to China. Quality AS is suspended from exporting Norwegian Salmon to China on the basis that NFSA has received incorrect documentation regarding shipments of salmon exported to China. From what Ocean Quality knows, individuals in the company has, in violation of the internal guidelines, deliberately re-used earlier declarations. Neither, any individual employee nor the Company have had any gain from these alleged actions. After the NFSA’s control, Ocean Quality has conducted a complete review of its internal routines and export systems to find out how this could occur. New controls and improved routines have been implemented. Furthermore, two employees have been suspended with immediate effect. Grieg Seafood has a zero tolerance for the above-mentioned violation. In February 2018 it was discovered a hole in a net on Shetland. The fish in the relevant cage has been counted. There was a deviation of 21 700 fish. Write-down related to this incident is assessed to GBP 200 101, equivalent to approx. MNOK 2,2.
Note 19 Taxes PARENT COMPANY (Amounts in NOK 1000)
Tax expense consists of: Ordinary result before tax Permanent differences Change in temporary differences Basis of tax payable in profit and loss account
2017
2016
415 211
74 905
-415 974
-74 472
73
29
-690
462
Tax losses carried forward
-
-
Basis for payable taxes in the income statement
0
462
Components of the income tax expense Payable tax on this years result
0
116
Change in deferred tax
-177
-8
Tax expense (-income)
-177
108
2017
2016
93
116
Tax-deductible differences
-50
-
Tax credit carried forward
-690
-
Basis for deferred tax
-647
116
Deferred tax in the balance sheet
-149
28
Deferred tax Taxable differences
2017
ANNUAL REPORT
26
GROUP (Amounts in NOK 1000)
Tax expense consists of:
2017
2016
Profit before tax
671 005
869 577
Profit before tax, companies subject to shipping tax
-425 414
-394 173
Profit before tax, companies not subject to shipping tax
1 096 419
1 263 750
Permanent differences
-183 034
-193 307
Change in temporary differences
-225 102
-140 372
31 302
-242 582
-
55 883
Basis of tax payable, companies not subject to shipping tax
719 586
743 372
Tax payable, companies not subject to shipping tax
174 017
184 557
Change in tax loss carried forward Group contribution
Tax charge in profit and loss account
-
37 153
Tax payable
174 017
221 710
Increase / (decrease) in deferred tax
33 344
30 589
-
-36 594
207 362
215 705
Adjustment prior year Tax charge for the year on ordinary result Tax payable in balance sheet Tax payable, companies not subject to shipping tax
2017
2016
164 743
178 592
Tonnage tax
3 757
4 680
Tax prepaid
-4 491
-3 402
Other adjustments (treasure trove) Total tax payable in balance sheet Deferred tax Taxable timing differences Tax-deductible timing differences
1 577
-1 914
165 586
177 956
2017
2016
2 009 784
1 565 981
-13 615
-48 834
Tax loss to be carried forward
-748 643
-448 622
Net timing differences
1 247 526
1 068 525
322 883
268 315
86 077
91 704
408 960
360 019
Deferred tax on net timing differences Unposted deferred tax assets Net deferred tax in balance sheet Loss carried forward Norway, companies not subject to shipping tax UK
2017
2016
-305 870
-128 102
-92 427
-33 027
Companies subject to shipping tax
-350 346
-287 492
Total
-748 643
-448 622
2017
ANNUAL REPORT
27
Note 20 Equity PARENT COMPANY (Amounts in NOK 1000)
Equity - Opening Balance
Share capital
Share premium
Other equity
Total
1 124
702 263
3 461 825
4 165 212
Profit of the year
-
-
415 387
415 387
Dividend paid during the year
-
-
-223 514
-223 514
Provision for dividend
-
-292 500
-
-292 500
1 124
409 763
3 653 699
4 064 585
Share capital
Share premium
Group reserves
Minority interests
Total
Equity - Closing Balance
GROUP (Amounts in NOK 1000)
Equity - Opening Balance
1 124
702 263
4 111 162
2 824 977
7 639 526
Profit for the year
-
-
69 228
394 415
463 643
Provision for dividend at year end
-
-292 500
0
-105 733
-398 233
Dividend paid during the year
-
-
-223 514
-324 884
-548 398
Effect of changed ownership in subsidiaries 1
-
-
-28 633
-9 276
-37 909
Currency translation differences 2
-
-
-120 681
-40 389
-161 071
Equity transactions
-
-
9 432
4 923
14 355
-
-
16 464
-8 420
8 044
1 124
409 763
3 833 459
2 735 613
6 979 957
3
Other changes Equity - Closing Balance 1
Please see note 9 for further information
2
Currency translation differences: this is primarily the effect of converting subsidiaries from local currencies into NOK, and the major effect is from Grieg Star Group.
Equity transactions: the total amount is similar to the OCI (other comprehensive income) from Grieg Seafood ASA in their IFRS financial statements, which is transformed into NGAAP for consolidation purposes in Grieg Maturitas Group. 3
Note 21 Share capital and share information At 31 December 2017 the share capital of Grieg Maturitas AS consisted of 1 123 530 shares of nominal value NOK 1. The share capital consists of the following share classes: Class
Number of shares
Nominal
Book value
A-shares
201 600
1,-
201 600
B-shares
921 930
1,-
Total
921 930
1 123 530
1 123 530
The A class shares carry both voting and dividend rights. The B class shares carry no voting rights, but are entitled to dividends.
2017
ANNUAL REPORT
28
The company’s shareholders are as follows:
A-shares
B-shares
Total
40 420
101 480
141 900
5,89 %
-
66 144
66 144
3,85 %
9 980
33 323
43 303
15,64 %
35 224
140 440
175 664
6,74 %
15 176
60 507
75 683
GMC Invest AS
22,37 %
50 400
200 947
251 347
Suletind AS
22,37 %
50 400
200 947
251 347
Capelka AS
10,52 %
-
118 142
118 142
100 %
201 600
921 930
1 123 530
Kvasshøgdi AS
12,63 %
Nye Ystholmen AS Nina WG. AS Salthavn AS Salthavn Invest AS
Total
Through the companies specified above, the shareholders and their families have control of 100% of the shares in Grieg Maturitas AS.
Note 22 Related parties PARENT (Amounts in NOK 1000)
Transactions
Operating revenue
Operating cost
Financial income*
Financial expenses
Accounts payable
Current receivables*
3 100
183
416 014
-
14
292 500
* Dividend from subsidiaries
GROUP (Amounts in NOK 1000)
Members of the board and managing director of the parent company, including their related parties, are with companies in the Group considered as closely related parties. Transactions and intercompany balances with group companies are eliminated in the Group accounts, and is not mentioned below. Remuneration to directors and managing director, see Note 4.
Transactions
Operating revenue
Operating cost
Financial income
Financial expenses
Long-term receivables
Current receivables
1 227
19 275
171
0
785
1 466
Note 23 Remuneration to auditor Specification of Group auditor’s fee (Amounts in NOK 1000)
Auditor
Parent company 2017 2016
Group 2017
2016
6 424
5 803
Statutory audit
16
30
Taxation advice
-
-
578
1 140
Other assurance services
-
-
1 297
257
Other assistance
-
-
940
2 026
16
30
9 239
9 226
1 364
1 999
Total (exluding VAT) The amount above includes remuneration to other auditors with:
2017
ANNUAL REPORT
29
Note 24 Discontinued operations When establishing the joint venture G2 Ocean, it was agreed that certain assets and liabilities held by Grieg Star Group’s subsidiary Grieg Star Shipping AS should be demerged and sold to G2 Ocean. The demerger was carried out with accounting effect 1 January 2017. Profit/(loss), cash flows, assets and liabilities related to the discontinued operations are included in the consolidated financial statements for 2016 and 2017. Below is a summary of financial information for the discontinued operations:
(Amounts in NOK 1000)
2017
2016
Operating revenue
0
3 168 038
Voyage related expenses
0
-2 005 944
Operating expenses
0
-114 337
Net TC
0
1 047 757
Hire chartered vessels
0
-77 019
Distributed TC hire to participating vessels
0
-960 312
0
10 426
- 1 958
4 726
Tax
12 226
- 2 309
Profit/(loss) for the period
10 267
2 417
Gain disposal discontinued operations
57 263
-
Operating profit Profit/(loss) before tax
G2 Ocean is recorded on the basis of the equity method in the consolidated accounts.
2017
ANNUAL REPORT
30
grieg.no