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Welcome to the presentation of the fourth quarter 2017 for Marine Harvest. To present today, I have with me the CFO of Marine Harvest, Ivan Vindheim. And then I think we just jump into it.The operational EBIT for this quarter was EUR 181 million, down from the fourth quarter of 2016, but still decent result. Stable costs in Norway compared to Q3, but still we have initiated a restructuring project in Norway and I will come more back to the details on that later on. At the same time, we -- I guess, some will say overdue, but it's about time we have used the fourth quarter to go through the business and take a good hard look at our costs. And obviously having had many good years, this is an exercise, I think, well worth doing. And I will revert to the actions on this later on.A strong performance in our Markets, Trading Operation and Consumer Products in this quarter. And we entered into a conditional agreement to purchase Northern Harvest. And if approved by the competition authorities, we will start to build up business in the east side of Canada.Quarterly dividend this quarter, the board has decided to be NOK 2.60 per share to be paid in Q1 2018.Slight overview of the numbers. Operational revenue, just north of EUR 1 billion, approximately the same as we had in Q4 2016.Operational EBIT is down 30% from EUR 259.4 million to EUR 180.8 million. And the harvest volume in this quarter is up 13% from 99,000 tonne to 112,000 tonne.If you then look at development in prices during the quarter, I guess we underestimated a supply side here a little bit. Last time we were here. Especially, Chile came in strong here with a growth of 36% and overall growth in this quarter of 16% on the supply side. That's on the high-end. And that has, obviously, resulted in drop in prices in Q4 2017 compared to 2017 (sic)[ 2016 ]. We know the euro price is down 30% in the quarter and the price on North American and Chilean fish is down around 15%.We saw a trend of prices increasing towards the end of the quarter as expected, but maybe not to the levels what we thought and that refers back to the supply exercise. At the same time, we see January starting out positive. We also saw prices on fresh fish coming down in Europe, we saw a 20% increase in consumption in France on fresh fish, a 20% increase in Germany at least on the same conditions. And this is encouraging because it shows the supply-demand is working quite well. And so far in January, prices has been decent, I have to say, on a very strong volume. So all in all, we are positive in the reaction of the increased supply.In terms of price achievement and contracts and quality of our fish, we had a good contract portfolio, especially in Norway. That helps us to achieve a higher price than the spot price equivalent and the same in Scotland with a good contract portfolio and 56% on contract. Canada is a spot market for us and the same in reality in Chile. And you can see the quality distribution down below.If you bridge the operational EBIT from Q4 2016 to Q4 2017, you will see Feed having a disappointing quarter in Q4 '17 and then it's really prices driving down the result of Farming so in this quarter compared to the quarter in '16. And then we have Markets, as already said, and Consumer Products are performing better than the year before.Inter-Norwegian business EUR 117 million in operating EBIT compared to a result of EUR 171.8 million a year before. We think this is okay earnings. The result is a little bit different than you will see it when we get into the different regions on who performs the better. At the same time, okay earnings on a lower spot price scenario.Improved biology 2017 generation compared to 2016 generation. You have to remember that in this quarter, we harvest only 2016 generation. So they are still on a high-cost level. We decided to reorganize Norway in accordance with the new regions from the Department of Fisheries. And I will come back to why and how later on in the presentation.Restructuring from 4 to 3 regions, as you can see on the map here, shows that Region South will be in the directories Region 1, 2 and 3; Region Mid will be in 3, 4 and 5; and Region North will be in 7, 8, 9 and 11. That's where we have operations. The reason for doing it this way is that we have flexibility in MAB because of our value-added operation, the means that we can flex between within these 3 regions. So in Region South, for example, from Region 1, 2 and 3, we can flex MAB, same in Region Mid and same in Region North with exceptions of Area 11 all the way up north.So this is one reason. Because it's -- when you do planning both in terms of processing, smolt and harvesting their whole line, you have to think of this and you can actually utilize your MAB better by having a disadvantage of doing value-added fish in Norway. So that's one. Another reason for doing this is to have a management and a structure in the management that's lean, that is right down to the operations, not too many layers in between is key. We started this already from January 1, 2018. So next time we report, we'll report on these 3 regions. We save directly on overhead, EUR 3 million. And I think the long-term operational savings, I don't only think, I know it's much bigger. If we can move up to around 1,200 tonne per license in each of these regions, we are talking cost savings in the area of EUR 40 million to EUR 45 million just by reduced -- just by the increased volume, especially Region South has high potential here to get this into better operation.One provision done, EUR 2 million on agreements for those employees that has to leave us. In terms of sales contracts and the portfolio there, we had good contract portfolio in Q4 2017. We are around 20,000 tonne both in Q1 and Q2 on good prices going forward.If you look at the different regions and their performance, it's quite a bit of variation.Region South had operational EBIT of EUR 1.3 per kilo. In the lower end, they have issues and have had issues with especially gill disease on the south coast of Norway, especially Hordaland is an area with a lot of gill issues. So -- and also volume is quite low in this region in the fourth quarter. So the performance in Region South, obviously, need to improve.Region West had a decent quarter with EUR 2.15 per kilo.Region Mid is the lowest performing unit in this quarter, 2016 generation. What we see from the 2017 generation in Region Mid is that when we get into that, we'll be -- we'll do real big steps ahead. The fish in Region Mid is performing very well at the moment.Region North, normally our best region. It's the competition between West and North, it's always there. Had okay quarter. They are impacted by ISA, obviously, in this result from before on lower volumes.So all in all, we're satisfied with Norway. It's not a fantastic result. We know that and we know we can do better. But it is still EUR 1.77 per kilo.Scotland, very good price achievement in the quarter due to good contract. So we do a lot of value-added fish in this area. We have harvested somewhat smaller fish to take out fish on some size because of biological challenges. That reduces our result. And at the same time, we have had an experience, quite a bit of, to a certain extent, new issues in Scotland area. There is a bacteria called Pasteurella, we have not seen before. We lost fish to that. We have also had AGD and CMS in this area, and we have had a challenging sea-lice situation in Scotland. But taken steps and being ahead of the game, at least has not -- we have not got into any disaster situation. But we're not happy with the result in Scotland. It's on the low end, especially in terms of the production side of the business.2018 will be a lower-volume year. You will see when Ivan get to the guiding here later on, and then we'll return to higher volumes in 2019. We did 60,000 tonne in 2017 and we'll drop from there in '18 and revert back in '19. That has to do with small stocking and the pattern of small stocking.Canada. Obviously, a quite big price drop on Canadian fish, being only in the spot market. We have also seen there, towards the end of the year and into 2018, quite a recovery in prices of North American fish. Lower sea lice level than ever before. So sea lice is not the issue, but the very warm summer and late fall in Canada gave us low oxygen in the water, almost no growth at some -- at the early part of Q3. And we had some experience with jellyfish and plankton as well, as you can read about in the report. This is not a new situation for Canada. This is the way it is in Canada. But they have the big advantage being very close to the North American market and I think they will do quite well going forward.We've opened a new processing factory just outside of Vancouver to support the markets on the West Coast of U.S. and on the East Coast of Canada. And this is a processing plant doing both portions and skin packed products of fresh fish. And then we, as you know, entered into an agreement to acquire Northern Harvest, and we're just waiting for approval from the competition authorities, as we speak.Chile, quite obviously higher volumes for us, as for the rest of the industry, recovering from the algal bloom in 2016. And all in all, quite satisfied really with operation initially in Chile in this quarter. Okay cost, quite low mortality. But we have issues, especially, in Region 10 with sea lice being there. It's a different sea lice from Norway, but still we have to pay attention. And obviously, we are paying attention to the algal situation that is ongoing. So far, we have not lost a material number of fish, just a few thousand. But they are -- that's on one side in Region 11. But this is algal bloom that we've seen. It's been losses in Region 12, it's been losses in Region 11 and it's been losses in the south of Region 10. So obviously, it's not significant number so far, a few million fish, but this is something we pay close attention to.We have put in defense mechanism almost on all our farms, 15 of them in the same as we have in Canada. Obviously, that's not a guarantee, but that will help us being protected against algae. We have learned a lot from our Canadian operation on algal blooms and have put that in place in our operation in Chile.Then on to Ireland and Faroe Islands. Both had great quarters. Ireland, margin of EUR 2.86, up from EUR 1.13 in Q4 2018 (sic)[ 2016 ]. And Faroe Islands at EUR 3.13, up from -- down from EUR 3.59 in Q4 2016. All in all, Irish -- Ireland is an organic operation for the most part and Faroe Island had a good price achievement in the quarter.Consumer products also did very well in the quarter, especially as this go for Morpol, our biggest factory. But also Pieters in Brugge had a very good quarter and a record year. The same for the operation in Bolougne. Rosyth is our both smoked and fresh processing unit in Scotland in Edinburgh, had never done better. And the same goes for a Sterk, which is a whitefish operation in Holland.All in all, as already mentioned, positive demand response, especially on the fresh segments there, fresh portions in France and Germany, but also in many other markets. And Ivan will revert to that later on.Feed. Quite a disappointing quarter for Feed for Marine Harvest in Q4 2014 (sic) [ 2017 ]. Obviously, we see declining prices. This is -- we benchmark towards the others, but that's not the main reason. The main reason is that we did not use as much Feed as we planned for in 2017. We bought, based on our production plan, raw materials early in the year where we had high raw material prices. So you get an effect where the timing of purchasing raw material actually was wrong. Then in addition, we -- there is -- we are building a plant -- between 2017 and 2018, we build a new plant in Scotland. I think that will be a key for future operation and really reduce the cost of Feed production in Scotland significantly. And this is going on as planned. You can see the picture down below the Norwegian plant. And that put in EUR 2 million that we could not put on to the acquisition that was direct expensed in this quarter. So overall, not the best quarter for Feed. We believe, 2018 will be a better year. But full recovery for Feed will be in '19 when we are in operation with both our plants and can really move on the way we want it to go.Then back to cost savings. We have done a bottom-up approach. Started in Q4, going through all the lines in all our operations, trying to figure out is there any way we can save money in our operations. And surprise, surprise, Marine Harvest has been through, now, many good years that has effects on organizations. And certainly, we see areas where we can save cost.In all units, we can save cost. And then we have taken the concrete actions with the responsible person [indiscernible] and added up all the different projects. This is not like being best on sea lice or being best on Feed conversion ratio. This is -- that's, obviously, something we have to do in addition. This is the line-by-line item where we know we can perform better. That has to do with purchasing, that has to do with traveling in better ways, that has to do with using consultants and loads. If you have all the lines, it's a lot of lines. Then we group it back in, challenge the units again and really start to take a real hard look at our structure. You saw what we did in the Norwegian unit going from 4 to 3 regions, the structure of how we operate a business can even give bigger savings going forward.So all of these initiatives will be taken in 2019 on the list. Then we will have an effect, 50% of it in 2018 and a full year effect for everything in 2019. So that's what you should put into your models.And this goes throughout the organization. I'm sure we can produce as much as we do today and better with less people, with more automation, with more use of robots as well going forward. So a lot of good initiatives both in terms of direct savings, but also in terms of how to renew the business going forward. And it's overdue because the cost development in this sector has not been good, at least over the last couple of years. And then you can say I can always blame sea lice, but this is not only sea lice. There's a lot more to do in this business going forward. And I will urge all the people trying to sell us stuff, that if it doesn't cut cost, they don't need to come.So with that comment, I would rather invite Ivan up to go through the numbers.
Thank you, Alf-Helge, and good morning, everyone. As usual, we start with the P&L. For the second time in our history, we posted a turnover in the quarter above EUR 1 billion, EUR 1,010 million. As you can see, quite stable compared to the same quarter last year. Full year turnover, record high EUR 3.65 billion. So a good year turnover-wise, mainly explained by the prices.As you can see from the bottom of this table, our volumes, they are somewhat down in the year or full year.Operational EBIT, EUR 181 million, so down in the P&L. Net fair value adjustment on biomass, negative EUR 94 million, driven by the drop in prices through the quarter. We also have recognized impairment losses on our Chilean licenses, EUR 97 million plus some related to the fixed assets, so it's in total, EUR 102 million. So all in all, our financial EBIT just below 0.Net financial items this time, positive EUR 8 million, mainly impacted by a positive fair value adjustment of the last outstanding convertible bond we have. This is just accounting techniques. There is no cash flow, at least for now, involved.And underlying EPS for the quarter, EUR 0.27, which is equal to the dividend sold by the board.Harvest volume in the quarter 113,000 tonnes, a little bit more than what we guided for the quarter. Full year numbers 370,000 tonnes. So much about the P&L.Down over to the balance sheet. So what we call the financial position these days. Total balance sheet amounts to EUR 4.3 billion at the end of the year. It's down EUR 0.5 billion compared to year-end -- last year EUR 400 million related to fair value adjustment of biomass. And, yes, the last EUR 100 million comes from the write-down of the licenses in Chile. So underlying balance sheet is more or less unchanged.Net interest-bearing debt at the end of the quarter EUR 832 million, adjusted equity ratio at healthy 52%.Then over to our cash flow. The fourth quarter is always a quarter where we tie up a substantial amount of working capital, mainly in our downstream division, what we call the Consumer Products. EUR 100 million this time. The full year number here is EUR 115 million and if we add on other adjustments, we are at around EUR 120 million, which was the forecast.And net CapEx is EUR 70 million in the quarter, also in line with the forecast EUR 250 million for full year.Net interest expenses, normal. The dividend of NOK 3.40 from the third quarter was distributed or paid in the fourth quarter. Please note that the dividend, which is resolved now by the board, is to be paid as ordinary dividend. So we are not paying back paid-in capital. So that has a tax implication for some of our shareholders.So again, please note that. All in all, EUR 132 million in net interest-bearing debt at the end of the quarter. We started at EUR 664 million.Then over to the 2018 cash flow guidance. We expect EUR 120 million working capital tie up also in '18 related to further organic growth across all business units, but hopefully the main driver here will be Farming and increase in biomass so that we can get back to previous volumes and maybe also grow a little bit from there.CapEx, EUR 290 million. We are building our Feed Plant in Scotland. Kyleakin has -- of algae just coming along. EUR 60 million is related to that greenfield project. We are also continuing our investments in freshwater sites, i.e., smolt sites.Sandøra in Region North; Norheim, Region Mid; and completing of the small facility in Scotland and Inchmore. EUR 35 million in total.We also want to grow organically. So we are investing in seawater capacity. Scotland, Canada, Chile, in total EUR 30 million. We also bought our share of the 2% growth in MAB now in January. Approximately EUR 20 million is also in -- built in the CapEx guidance forecast.We also grow our downstream business. We are leasing a new factory in Miami, almost tripling our capacity there. We also are to open a second facility at the Ducktrap, our smokehouse in Maine, in addition to a lot of our other organic growth projects. So all in all, EUR 290 million in CapEx, of which EUR 250 million -- sorry, EUR 150 million is maintenance and the remainder is growth projects.Interest paid, EUR 35 million, taxes paid EUR 150 million. And again, the quarterly dividend NOK 2.60 this quarter and is to be distributed as ordinary dividend this time and going forward.Then over to our financing. No changes since last time. I -- you know the audience here is -- know this. So I will not bother you with going through the breakdown. But just mentioning that in line with our growth -- with our increased debt service capacity, the board has increased our debt target from EUR 1.05 billion to EUR 1.2 billion.We are also increasing the Farming parts, although we are not increasing the volumes. So we have adjusted the net interest-bearing debts per kilo target from EUR 1.8 to EUR 2. This number has been unchanged since 2011. And we think that the long-term earnings in this industry has improved over the 7, 8 last years. I guess, it's hard to disagree on that. We have a quite different regulation these days than what we had back then when we set the initial target.So much about the financial figures. Then over to the fundamentals. First supply and the supply development in the fourth quarter. As much as 16% as Alf-Helge duly commented on at the beginning of this presentation and more than what we expected, explained by Chile. Good growth in Chile in the quarter. Good harvest rates, low mortality. They all -- the industry also harvested more fish than what we expected when we started the quarter.So again, 2 digits' growth, which we haven't seen for a long time, 16%. And on overall basis, the line share is related to recovery in Chile after algal bloom we had in '16. But we also have seen a substantial improvement in biology in Norway. So combined that gave a very impressive supply number for the quarter.When we grow our supplies by 16%, it also has an impact on prices. The prices dropped by 30% in Europe in the quarter and 50% -- 15% in Americas. If we include contracts in Europe, the blended price drop is quite similar for those 2 markets.Then over to demand. And Alf-Helge said, we see positive response in the fresh France segment. We also see positive response in the important fresh German market on dropping prices. We also think this will happen on frozen and smoked goods as the contract expires. So normally when prices go down, the demand increases. We think we'll see the same this time around.Volume-wise, a lot of impressive numbers here. Apart from EU, I would say. But again, back to France and German -- Germany, the 2 biggest markets in Europe, we see that they have started to respond positively on dropping prices and we think that, that will continue as we go along. For the other markets, I think the fourth quarter was really impressive. U.S. up by 17%, China as much as 36%. So apart from Japan, which is a mature market and EU, which is lagging a little bit, I would say, the positive response in all our markets are very good. So our view is that the underlying demand is still good for the salmon. What we saw in the fourth quarter was driven by a very high increase in supply by 16%. And we also came from an unprecedented price level. So going forward, we think this will be absorbed by the market.Then over to the supply outlook for the industry going forward. Kontali expects a year-over-year growth for '18 of 6%. We agree to that number. For '19, they have 5%, which is in line with our internal expectations. We also see that the biggest growth takes place in the beginning of this year. Percentage-wise, it will smoothen out as we go along during the year, although we will see the same seasonal pattern as we normally do. So in the long-term perspective, it's very hard to see that the supply will be very significant for the industry.So as we go along, we expect the market to absorb the recovery from Chile and improve biology in Norway.Then over to our internal volume guidance. No changes since the last time. We released those numbers in connection with the third quarter release. 410,000 tonnes in total for '18, close to 250,000 tonnes in Norway, which is more than a partial recovery. For our part, we had 210,000 tonnes last year. Scotland 47,000 tonnes, down from 60,000 tonnes last year. Canada 46,000 tonnes, up from 39,000 tonnes last year. Chile 53,000 tonnes versus 45,000 tonnes last year. So some growth in Chile. Other units, which is the Faroes and Ireland for our parts, stable at 16,000 tonnes. So no changes in our full year guidance. For the first quarter, we expect 83,000 tonnes, of which 52,000 tonnes are in Norway.So with that, I would like to say thank you and pass it over to Alf-Helge so we can wrap it all up. Thank you.
Thank you, Ivan. Yes, I think it's clear that -- and important for a company to have a strong financial position. And I guess, you see that from what Ivan not longer call the balance sheet, but the financial position.In terms of growth initiatives, Ivan has been through quite a few of them. They go within the smolt area as he mentioned, they go to the farming area. He didn't mention we go to new site in Scotland. In Scotland, it's different from other operations. If you get a site, you get maybe and for us, this is on an island called Rum, a very attractive farming area for us. So very good. And at the same time, we invest a little bit in a slight growth in Chile. Chile is still for us an option, to be honest with you. So we see it as a place to be and we hope that regulation at some point in time will make this a good place to farm fish.Cost saving, I've been through. We go for EUR 50 millions, as detailed out. A lot of hard work, a lot of tough decisions to come. But also, it's about making our business more automated, more effective throughout the areas we operate. And we have plenty of areas to change and to change for the better and we have identified that. Then we hope that we get the Northern Harvest acquisition approved maybe during this quarter. It's hard to tell with the competition authorities in the world, but maybe this quarter or the next quarter. We don't have -- we don't get the deadline from them. So that's just how it works.Strong underlying demand, I think, Ivan has proven that and especially in certain fresh segments in Europe. But also Asia and encouraging to see that export to China is basically doubling as we speak week for week. So I guess, there, it's now a matter of having the right fish and getting the airfreight going.Quarterly dividend, again, as Ivan said, NOK 2.60 and to be paid out in Q1 2018. And just to reiterate, ordinary dividend not repaid in capital for -- that doesn't -- that's not important for all shareholders, but for some.So with that, I would like to thank you and then open up for questions. And [indiscernible] has his microphone ready and then if you straighten up your arm, state your name and employer for those who're listening in and just speak loudly.
Yes. Tore Tønseth, Sparebank 1 Markets. Two questions related to the 2017 generation. What kind of cost reduction should we expect when the 2017 generation is being harvested? And the second question is, when do you expect this generation to come out? When is it going to be a larger generation in 2016? What kind of -- which ones are we talking?
Yes, on -- we don't guide on cost, specifically. So we'll come back to cost when the fish are coming onto harvest table. In terms of what time these fish reach processing plant, that starts really already March. But the major part will come during June, July when you change over to 2017 generation as once the spring smolt. But we start early because we have some bigger smolt. And then the [indiscernible] which are -- some are also bigger, they start in October as we come. So from what we see now, we see a good performance, especially in Region Mid and Region North. And Region South, a little bit more problematic because of gill issues there. But overall, for Marine Harvest that is good.
Christian Nordby, Kepler Cheuvreux. The volume guidance in Scotland is restated, but you harvested 3,000 tonnes more in Q4 than original guidance. What's the biological situation in Scotland and how is that not changed?
Improved. So we went in and took out some sites a little bit earlier, as you correctly noted. But lower mortality during January is what we see and so that's why we believe that we can keep the guiding up, based on what we see as we speak.
Alexander Aukner, DNB. Could you tell us about the potential in the East Canadian operations? It's obviously a quite sizable area. Also in terms of the net interest-bearing debt target, you're see higher long-term earnings and Ivan alluded to the regulations supporting that. Could you just try and elaborate a little bit more on why that has increased?
Maybe I can do Canada and you can do long-term earnings. Ivan, is that okay? On East Canada, we will rather wait to come with this kind of the -- our production plans until this acquisition is approved. For us, that is the safer bet. But certainly, being on the east coast, close to the North American market, both the east coast of Canada and into the middle of Canada is an advantage. And the same goes being close to the east coast of U.S. So freight-wise, this has good potential. So -- but I will not guide on volumes there before the acquisition is finally approved. Ivan, if you can do the...
Yes. Regulations and net interest-bearing debt targets, particularly at Farming. An increase of the multiple there we use. When we set the targets historically, we didn't have the regulation in Chile, we didn't have the regulation in Norway as we have today. Those 2 regulations puts an effective cap on the supply growth. So we see a protection on the supply side, which we didn't have before. We have considered to increase this for long time. But we decided to do it now. Why? I don't know if there is a good question, but if you are looking back on historical earnings for the industry, you will see that disregarded algal bloom in Chile, they are up over those years. And as far as we can see, this parasite is at least based upon current technology, put a cap on -- in the foreseeable future. So until further notice, we will stick to this calculation of breakdown of the debt targets going forward. So as we increase our business, we will also increase the debt target. So they must be a combined. And it's also connected to the dividend. Our board is very focused on combining growth -- organic growth but also acquisitively growth in combination with dividend as we go along -- and the only way to do that is to secure it by a sound, but also a sensible financial structure.
So higher and more stable underlying earnings, basically?
The way we see it, yes.
And I see also that, obviously, the Northern Harvest volumes are not included in the volume guidance. You've purchased growth in Norway, which does not seem to be included. So when that is included, the interest-bearing debt target will increase even further, I suspect.
For Northern Harvest, I think that's a good assumption. But for the 2% growth, it's quite small. So debt will not rock any boat. So...
Kolbjørn Giskeødegård, Nordea Markets. One more long-term question. You are coming up from a very low level production-wise 2017 up to the guided -- sorry, 2018 level of 410,000 tonnes. Just looking away from the issues around Eastern Canada and the potential there, what would be a normal production level we should assume after 2019, without you being forced to go into guiding further? But what should be a normal production level on the group for Marine Harvest? The current level is 410,000 tonnes.
Normally we don't comment on this. But obviously, without putting any numbers on it, to be blunt, I think Marine Harvest has growth -- organic growth potentially in Farming, Canada West, Scotland, I mentioned a little bit about that. Even in Ireland. Faroe Islands are rather limited for us, in terms of their regulation. So -- but we actually will grow in the Faroe Islands by -- we just finalized hatchery in the Faroe Islands, producing 1 kilo smolt. That will have -- give us some more volume in the Faroe Islands, but smolt. And then in Norway, we are, as you say, I think lagging. So rather than -- we want to be best in class also on production. So rather than stating any number, take a look at what the best are doing in terms of tonne per license and we should beat them. And then obviously, this has to be a regional [indiscernible] . So you can produce slightly more in Northern Norway than in Southern Norway.
Vidar Strat, ABG. There has been a lot of talk about sea lice, historically. There has been a little talk about this time. It would be interesting to get a brief update on the sea lice situation in Norway if it's significantly improved or if you still see quite some challenges there. And then I know you elaborated some on the algal bloom in Chile. It would also be interesting to hear some more details if you feel that the mortality levels now, on an industry basis, are lower than what we usually see during an algae season. Any more flavor on that will be most helpful, if possible.
Sea lice in Norway, it is -- in general terms, in those 4 regions we are in, sea lice level at the end of 2017 was lower in all region compared to the end of 2016. So an improvement. That improvement has come with a cost on the 2016 generation. There's no doubt about that. And we're looking into -- this is about we clean nets quite a bit to make the RAS more efficient. Now I'll go a little bit in detail. But to clean the nets so often in terms of the gills on the fish and how -- is not necessarily the best thing to do. So we're looking at new ways of dealing with that. The same goes for the mechanical treatment that, in big part, has taken over all chemical treatments. If you look at hydrogen peroxide, hardly not used in this industry anymore in Norway, good thing. If you look at other [ bath ] treatments, strong reduction. 75% reduction on many of these things or medicine we used before. All replaced by a mechanical treatment, one way or the other. It is a tough thing for the fish. Obviously, you can optimize these treatments and you can get lower mortality by doing it right and doing it better. But then again, maybe not the final solution. Costly as well. So sea lice situation, to come back to your answer, the state is good, better than before, that's a good thing for Marine Harvest. Then we know we might have to treat less going forward. And then it's early days, it's colder this winter than last winter. That's good, water temperature is down. And then it depends on the summer as we come into. So still a challenge and still the biggest challenge for the industry. But the situation is better. On the algae bloom in Chile, it is -- I think you read the papers as much as I do. But on our sites, no significant impact. But then again, it's early days, so we are very careful about monitoring the situation. I think other companies has to comment for themselves.
Thomas Lorck, Arctic. There is a question for you, Ivan. You mentioned, it's fair to assume that you could raise your net debt targets further, if the acquisition in Canada is approved. But how should we think about financing of this versus dividend potential going forward, as it's not included in the CapEx guiding?
No. Well, we have a dividend policy. So we will stick to that. So we distribute in practice all the surplus cash over time. So obviously, there is a limit there. But we will revert to this in due course. So let's cross that bridge when we get it. But as I said to Alexander on his question, that acquisition will increase our debt service capacity. So consequently, it also will have a positive impact on the debt target level, i.e., it will be raised. But still, there is plenty of room for doing all this. So in terms of our total financing, we are very comfortable and we have a healthy balance sheet. And so we are ready to meet both dividend distribution as we go along acquisition in Northern Harvest and also realizing the organic growth we are planning [indiscernible] the CapEx budget or guidance for '18.
Any more questions? One more there.
Bruce Diesen, Fearnleys. You had a 2% increase in your biomass, but you're guiding for production increase of 11%. But when you have such low biomass growth, shouldn't you be harvesting more than other companies in the first half of the year? Because that would mean your biomass in order to meet your production targets, you must have a higher share of 16G in your biomass than your competitors. But you're guiding for low production in start of the year.
Harvest you mean and not production?
Yes.
Yes. But we had a very skewed harvest profile also last year. And bear in mind that we lost 40,000 tonnes. So this is about getting or improving our mortality rates substantially. So the biomass is fine. The biomass was fine also last year. Remember that we took down the guidance significantly as we went along because of this mortality. So improved biology, i.e., less mortality and better growth in sea will make this for us. So the keyword is actually mortality and the losses we had last year. So that's the key assumption. This is not the skewness of the profile because year-over-year, it's the same.
Any more questions? If not, I would like to thank you all for coming. And have a nice day, going forward. Thank you.
Thank you.