OREANDA-NEWS. OJSC “Russian Sea Group” (the “Company” or the “Group”) announces its financial results for the six months ended 30 of June 2013 based on unaudited interim condensed consolidated financial statements.

On 28th of February 2013 the Group finalized a sale of its 100% subsidiary, CJSC “Russian Sea”, to a strategic investor. Therefore in interim condensed consolidated financial statements for the six months ended 30 of June 2013 CJSC “Russian Sea” (ready-to-eat segment) operations are classified as discontinued and the segment's results are presented separately. Chilled and frozen and aquaculture segments operations are classified as continuing.

The Group consolidated revenue from continuing operations increased by 14.3% in the first half of 2013 as compared to the same period of the previous year and amounted to 7,686.1 million rubles. The consolidated EBITDA from continuing operations amounted to 208.8 million rubles as compared to the loss in amount of 29.9 million rubles for the 1H of 2012.

Chilled and Frozen segment

The segment's sales to external customers increased by 15.2% in the 1H of 2013 as compared with the 1H of 2012 and amounted to 7,683.6 million rubles. One of the main segment's revenue growth drivers are increased sales of Russian pelagic fish both in value and volume terms. Russian pelagic substitutes imported pelagic fish, sales of which reduced as a result of its purchase price increase.

During the first half of 2013 the purchase price for imported Norwegian salmon and trout was increasing that contributed to its operational results improvement. In the first six months of 2013 sales of salmon and trout grew both in modern retail trade channel and in the regions.

The segment's gross margin improved in the first half of 2013 as compared to the same period of the previous year and amounted to 9.5%. The gross margin growth resulted from increased profitability of sales of Far Eastern and Russian pelagic fish during the first half of 2013.

Aquaculture segment

The segment's sales to external customers amounted to 2.5 million rubles by the end of the 1H of 2013 as compared to 54.9 million rubles for the same period of the previous year. In the beginning of the 2013 the Company wasn't selling fish as all trout of the last season was sold till the end of 2012 in accordance with a normal for aquaculture segment farming and sales cycle. In June 2013 the Company sold the sample lot of trout farmed at the trout farm Segozerskoye. The segment's gross margin was 27%.

In June 2013 the second Atlantic salmon farm was successfully launched - Shalim in Ura-guba of Barents sea basin, Murmansk region. 12 cages and fish feeding barge were installed at the site. Currently all smolt is stocked at Shalim. The Company prepares to start operations at Titovka site in 2014.

At the trout farm in Karelia two more sites for trout farming were launched. The commercial fish farming on them has already started. The fish harvest started in September 2013 and will continue until the planned volume is sold. It is planned to harvest more than 1 000 tons of trout till the end of the year.

Key costs and expenses

In the 1H of 2013 the Group's selling and distribution costs from continuing operations decreased by 9.6% as compared to the same period of 2012. Due to inventory turnover improvement in chilled and frozen segment the cost of transportation between branch offices decreased as well as cargo handling charges.

General and administrative expenses increased by 8.9% in the 1H of 2013 as compared to the 1H of 2012. As a percentage of revenue G&A expenses decreased from 2.13% to 2.03%. Expenses grew mainly due to fish farming capacity increase of aquaculture segment.

Interest expense grew from RUR 83.5 million in the 1H of 2012 to RUR 157.3 million in the 1H of 2013 as a result of increased amount of credits taken in order to finance the investment stage of aquaculture project.

The exchange loss for the period in amount of 27.7 million rubles resulted from high US dollar volatility.

In the first half of 2013 the Group net profit from continuing operations amounted to 18.1 million rubles as compared to the net loss in amount of 80.9 million rubles for the first half of 2012.

Commenting on the Group results and priorities Dmitry Dangauer, the Company CEO, said:

“Today we announce the financial results for the first half of 2013 that improved significantly as compared to the same period of the previous year. The Group earned net profit in amount of 18.1 million rubles as compared to the net loss in amount of 80.9 million rubles for the first six months of 2012.

These results were achieved as a result of an implementation of a complex of measures when “Russian Sea” business (ready-to-eat segment) was sold. The debt of the Group, its expenses and personnel were reduced. The business processes were optimized. The Group became more transparent and manageable. It allowed to concentrate on further progressive development of distribution segment and implementation of an ambitious aquaculture project.

In chilled and frozen segment we see a significant sales growth both in volume and value terms. The Company continues to develop the delicacy red fish category. Despite the price growth and further consumer demand decrease on salmon and trout Russian Fish Company's sales volumes of this category decreased slightly and the revenue increased as compared to the same period of the previous year. At the beginning of the second half of the year the purchase price for Norwegian salmon and trout decreased significantly that resulted in further consumer demand growth for red fish. We expect that this trend will remain till the end of the year and will allow us to considerably increase sales volumes and exceed the last year result.

In the second half of the year we will continue to increase sales of Russian pelagic fish, Asian assortment, packaged fish products and increase sales through the Company's regional network.

At the beginning of 2013 the new project was launched in chilled and frozen segment - delivery of Russian fish to catering organizations. Implementation of this project will allow the Company to considerably increase sales volumes in future.

We continue to progressively develop our strategically important and promising business division - aquaculture - that will play a defining role for the whole Group in future. In June 2013 we successfully launched the second salmon farm in Barents sea basin, Murmansk region. Thus currently the commercial salmon farming is held already at two sites. The first fish harvest is planned for 2014.

We continue to farm trout at Segozero lake in Karelia. In 1H 2013 two more sites were launched. The fish harvest started in September 2013”.