Scottish Salmon Company saw its trading profit slump last year to £500,000, from £14.4 million in 2011, with an "unprecedented" biological issue prompting a legal dispute and adding to a severe impact from stock disease.

The company, which employs 400 around Scotland, has reported a fall in revenues from £90m to £79.5m after what it calls "a challenging year".

Harvest volumes for 2012 were almost 24,000 tonnes (up from 23,000) helped by new sites at Loch Roag, on the west coast of Lewis, in the later part of the year.

Higher-than-anticipated costs on harvested fish, especially in the last quarter, impacted on results. "This is primarily as a result of a biological issue caused by sub-standard feed that impacted growth, survival and stock's ability to resist expected environmental challenges," the company said. "The situation was unprecedented and this stock, lower in weight and quality and consequentially more difficult and costly to process, increased costs both at farm level and also through the harvesting and processing value chain. This situation is now the subject of legal negotiations."

Market prices were low for most of 2012, SSC said. "This was in part due to harvesting dynamics across Europe along with high incidences of Amoebic Gill Disease across the Scottish industry which has resulted in earlier harvesting."

SSC fulfilled customer obligations and 2012 saw the company secure contracts with leading UK retailers and expand its exports to more than 20 countries. It is seeking new sites particularly in the Western Isles.

Stewart McLelland, chief executive, said: "The company continues to see growing market demand for high quality sustainably-farmed Scottish salmon and is on course to develop the volume of premium salmon to 29,000 tonnes in 2014."