* Share up 3.9 pct
* Proposes NOK 5 dividend vs NOK 1.2 in Q4
* Says market will absorb new salmon volumes (Adds detail, dividend, analyst, shares)
OSLO, April 14 (Reuters) - Marine Harvest, the world’s biggest fish farmer, on Monday proposed a big dividend increase and said it planned to boost output as strong demand is expected to absorb increased supply easily.
Marine Harvest, part of shipping tycoon John Fredriksen’s business empire, also said costs could fall over the rest of the year as the company reported a record first quarter profit due to high prices and harvest volumes well above its guidance.
“The solid demand is expected to absorb the measurable supply coming to the market over the next quarters,” it said in a statement. “The increase in volume is partly a function of good growth conditions in Norway and is also likely to lead to an increase in the guided annual volume.”
Salmon prices have hovered near record highs over the past several months due a surge in global demand while supply growth is limited, due in part to disease affecting production in Chile.
“This is a very positive market update,” Nordea Markets analyst Koldbjørn Giskeødegaard said. “They expect costs in Norway to decline and that the market will absorb new volumes. Both issues have been a concern for investors.”
Shares in Marine Harvest rose 3.9 percent at 0730 GMT, outperforming a 0.3 percent rise in the Oslo benchmark index.
The firm said that given its strong outlook and the sale of UK farming assets, it is proposing a first-quarter dividend of 5 crowns per share, up from 1.2 crowns in the previous quarter.
Its operational earnings before interest and taxes (EBIT) in the first quarter more than doubled to 1.075 billion crowns ($181 million), beating expectations for 1.02 billion, according to a poll of analysts.
It harvested 92,000 tonnes of fish, well above its own 80,000 guidance, due to favourable growth conditions in Norway, according to preliminary figures. (Reporting by Balazs Koranyi and Henrik Stolen. Editing by Jane Merriman)