Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2013 Earnings Presentation

42 slides from Bakkafrost P/f's earnings presentation, Nov 5, 2013

  1. Slide 1: Q3 2013 Third Quarter Bakkafrost Group

    Q3 2013 THIRD QUARTER BAKKAFROST GROUP Glyvrar 5 November 2013

  2. Slide 2: Disclaimer

    DISCLAIMER  This presentation includes statements regarding future  No representation or warranty (expressed or implied) is results, which are subject to risks and uncertainties. made as to, and no reliance should be placed on, the Consequently, actual results may differ significantly from fairnes

  3. Slide 3: Summary of Q3 2013

     SUMMARY OF Q3 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  4. Slide 4: Bakkafrost – the largest fish farming company in the Faroe Islands

    BAKKAFROST – THE LARGEST FISH FARMING COMPANY IN THE FAROE ISLANDS  Largest salmon farming company in the Faroe Islands  ~79% of harvest volumes in Q3 2013  50% of farming licenses  Harvested 11,335 tgw in Q3 2013 (9,730 tgw in Q3 2012)  Feed sale of 31,961 tonnes in Q3 2013* (30,290 tonnes in

  5. Slide 5: Summary of Q3 2013

    SUMMARY OF Q3 2013 Margin  Strong results  Farming EBIT/kg NOK 17.59  Fishmeal, Oil and Feed 11.55% EBITDA margin  VAP negative EBIT/kg of NOK 4.96 Market  High demand  Strong salmon prices despite global salmon production is running close to full capacity Operation  Harvested volumes increas

  6. Slide 6: Markets and Sales

     SUMMARY OF Q3 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  7. Slide 7: Global Markets

    GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG] 50,00  The NASDAQ salmon price increased in Q3 2013 by ~52% compared with Q3 2012 45,00 - from 25.51 to 38.90 NOK/kg 40,00 35,00  The decrease was 7% from Q2 2013 to Q3 2013, 30,00 from 41.66 to 38.90 NOK/kg – 2.76 NOK down per kg 25,00 

  8. Slide 8: Markets & Sales

    MARKETS & SALES Overseas High-End markets also dominated Q3 2013 Sales Q3 Q3 M9 M9 by markets 2013 2012 2013 2012 EU 47% 45% 50% 46%  Increasing demand in the US and Asian market USA 24% 20% 21% 20%  Eastern European market reduced from 20% in Q3 Asia 25% 15% 26% 29% 2012 to 4% in Q3 2013 of total

  9. Slide 9: Low Supply Growth Expected in 2014 and 2015

    LOW SUPPLY GROWTH EXPECTED IN 2014 AND 2015  We expect 3% global supply growth of Atlantic Global supply of Atlantic Salmon (head on gutted - HOG) Salmon in 2013 and only 2% in 2014 and 2015 2011 2012 2013E 2014E 2015E Norway 905 1.065 1.040 1.060 1.090  Norway is expected to reduce volumes in UK

  10. Slide 10: Demand Development Split by Markets

    DEMAND DEVELOPMENT SPLIT BY MARKETS  The EU market will also in the next two years Salmon markets, sold quantity (head on gutted - HOG) be the largest market for salmon 2013E 2014E 2015E  The Japanese market has suffered recently, EU 831 1% 864 4% 875 1% and is expected to decline in quantity USA

  11. Slide 11: Bakkafrost Part of the Global Salmon Initiative

    BAKKAFROST PART OF THE GLOBAL SALMON INITIATIVE The mission The GSI is committed to: • Minimizing the environmental impact of our • The Global Salmon Initiative (GSI) is a leadership operations initiative by 70% of global farmed salmon • Sourcing sustainable feed producers, focused on making signifi

  12. Slide 12: Financial Highlights

     SUMMARY OF Q3 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  13. Slide 13: Financial Highlights

    FINANCIAL HIGHLIGHTS Q3 Q3 M9 M9 Strong results compared to last year (DKK million) 2013 2012 2013 2012 Operating revenues 741.1 457.1 1,824.4 1,273.5  Strong salmon spot prices and improved Operational EBITDA 208.4 106.3 525.0 283.5 FOF (Fishmeal Oil & Feed) operation Operational EBIT 186.8 86.2 4

  14. Slide 14: Key Financials, Group

    KEY FINANCIALS, GROUP Q3 Q3 M9 M9  Improved cash flow from operations – mainly (DKK million) 2013 2012 2013 2012 due to improved earnings Cash flow from 130.6 -53.3 330.4 181.8  Total assets increased mainly due to increase operations costs of biomass, increased inventory and Total assets* 3,004.2

  15. Slide 15: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvest Volume Q3 Q3 M9 M9 Harvested volume [HOG]* 2013 2012 2013 2012 West 4,340 2,938 9,073 15,257  Harvested volumes increased by 16% from 9,730 tgw in Q3 2012 to 11,335 tgw in Q3 2013 North 6,995 6,792 21,098 16,040  North 62% compared with 70% in Q2 2012 Total 11,335

  16. Slide 16: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE (DKK million) Q3 2013 Q3 2012 M9 2013 M9 2012 Revenues and margin Operating revenues 520 327 1,466 937  Revenues increased in Q3 2013 due to higher salmon prices and increased volumes Operational EBIT 188 75 512 190  Margin increased from 23% in Q3 2012 to 37% in

  17. Slide 17: Segment VAP

    SEGMENT VAP Q3 Q3 M9 M9 Revenues and margin (DKK million) 2013 2012 2013 2012  Revenues increased 22% while volume increased Operating revenues 148 121 464 372 15% Operational EBIT -20 3 -85 26  Margin negative in Q3 in total but margins were Operational EBIT -13% 3% -18% 7% positive in September

  18. Slide 18: Segment VAP

    SEGMENT VAP Margin - EBIT per kg total harvested quantity [NOK/kg] Strategy 25  VAP production is a long term strategy, optimizing 20 markets and stabilises cash flow 15 10  Losses during periods with high increase in spot 5 prices and gains during periods with drop in spot prices 0 -5  Contract

  19. Slide 19: Segment Fishmeal, Oil and Feed (FOF)

    SEGMENT FISHMEAL, OIL AND FEED (FOF)  Raw material intake for fishmeal/oil production was Meal, Oil and Feed 68 thousand tonnes in Q3 2013, compared with 8 thousand tonnes in Q3 2012 Q3 Q3 M9 M9  Revenues increased 41% mostly due to higher sale (DKK million) 2013 2012 2013 2012 of fishmeal Operati

  20. Slide 20: Group Financials

     SUMMARY OF Q3 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  21. Slide 21: Group Profit and Loss

    GROUP PROFIT AND LOSS Q3 Q3 M9 M9  Revenue up 62% corresponding to DKK 284 (DKK million) 2013 2012 2013 2012 million) due to: Operating revenues 741 457 1,824 1,273  Improved market prices for salmon (spot and VAP) Operational EBITDA* 208 106 525 283  Harvest volumes up 16% and VAP volumes up 15%

  22. Slide 22: Balance Sheet

    BALANCE SHEET Q3 End (DKK million) 2013 2012  Investments in PPE of DKK ~39 million in Q3 2013 Intangible assets 295 294 and 101 million YTD 2013 Property, plant and equipment 850 813  Seasonal increase in biological assets 110 91 Financial assets  Higher carrying amount on inventory due to Long

  23. Slide 23: Cash Flow

    CASH FLOW Q3 Q3 M9 M9 (DKK million) 2013 2012 2013 2012  Improved cash flow from operations in Q3 2013 Cash flow from operations 131 -54 330 182 hampered by increase in working capital Cash flow from investments -38 15 -108 -22 Cash flow from financing -15 0 -84 -167  Cash flow from investments re

  24. Slide 24: Investments

     SUMMARY OF Q3 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS  OUTLOOK

  25. Slide 25: Investments - Preparing for the Future

    INVESTMENTS - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales Investment plan 2013-2017:  Seven plants into one integrated plant (Packaging, Harvest and VAP) at Glyvrar to take out synergies, reduce costs and meet future market trends  New

  26. Slide 26: Investments 2013-2017

    INVESTMENTS - PREPARING FOR THE FUTURE INVESTMENTS 2013 - 2017 DKK 280 million DKK 280 million DKK 170 million DKK 170 million DKK 170 million BAKKAFROST / Q3 PRESENTATION 2013 Page 26

  27. Slide 27: Hatchery in Norðtoftir

    INVESTMENTS - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales Hatchery in Norðtoftir  Finalised Q1 2014  Investment of DKK 53 million  Recirculation of 99% of water - saving water and heating  Capacity of 2 million 100g smolts per year 

  28. Slide 28: Building a New Well Boat

    INVESTMENTS - PREPARING FOR THE FUTURE Building a new well boat  Owned and operated by Bakkafrost  Rolls Royce design  Contract signed with the shipyard Tersan in Yalova, Turkey  Planned to be delivered mid 2015  Estimated total costs DKK 230 million Specifications  Length overall 75.8 meters

  29. Slide 29: New Packaging Plant at Glyvrar

    INVESTMENTS – PREPARING FOR THE FUTURE Present Packaging plant at Glyvrar New Packaging plant at Glyvrar Phase 1: Integration with Harvest  Work started  Estimated costs DKK 26 million  Gradually start up during summer 2014  3,500m2 including existing 1.300 m2 storage BAKKAFROST / Q3 PRESENTATI

  30. Slide 30: Financing of the Investments 2013-2017

    BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2013-2017  Use free cash flow from operation  Unused financing of approximately DKK 600 million  Partly new financing if advantageous Unchanged dividend policy BAKKAFROST / Q3 PRESENTATION 2013 Page 30

  31. Slide 31: Outlook

     SUMMARY OF Q3 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS  OUTLOOK

  32. Slide 32: Outlook

    OUTLOOK  Market  VAP  Strong market in Q4 All capacity in Q4 contracted  Spot prices now around NOK 39-40 per kg Below 10% of 2014 capacity contracted  Forward prices for 2014 stabilised at NOK 38 per kg Contract prices increase in Q4 and further in 2014  Global supply growth estimated to 2% i

  33. Slide 33: Thank You!

    \W/ BAKKAFROST THANK YOU!

  34. Slide 34: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  48,282 inhabitants (June 1st 2013)  Home rule – within the Kingdom of Denmark  Part of the Danish monetary union, Danish krone (DKK)  Key sectors (% of wage earners, 2012)  Service/public admin.: ~36%  Private service: ~33%  Construction: ~12%  Fishing

  35. Slide 35: Bakkafrost's Value Chain

    BAKKAFROST’S VALUE CHAIN Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales • One of the most vertical integrated salmon farming companies in the world • Full traceability to the benefit of our customers • 45 years of experience • Focus on cost centres • Vertical integr

  36. Slide 36: Monthly Exchange Rates

    MONTHLY EXCHANGE RATES NOK/DKK USD/DKK GBP/DKK 620 960 104 600 940 102 920 100 580 900 98 560 880 96 540 860 94 520 840 92 500 820 90 480 800 460 780 88 2011M07 2011M09 2011M11 2012M01 2012M03 2012M05 2012M07 2012M09 2012M11 2013M01 2013M03 2013M05 2013M07 2013M09 2011M07 2011M09 2011M11 2012M01 201

  37. Slide 37: Faroe Islands – Excellent Conditions for Cost Effective Farming

    FAROE ISLANDS – EXCELLENT CONDITIONS FOR COST EFFECTIVE FARMING  Natural growth area for wild salmon GEOGRAPHY  Faroese fjords provide separation between locations  Improves biological control and area management Average Seawater Temperatures ºC Faroe Islands Norway (Trøndelag)  Stable seawater

  38. Slide 38: Dividend

    DIVIDEND Dividend  Dividend of DKK 2.00 (NOK 2.04) per share paid out DPS in % of adj. EPS * in Q2 2013 100% 99% Dividend policy 90% 80%  Competitive return through: 70%  Dividends 60% 49%  Increase in the value of the equity 50% 40% 40% 30% 19%  Generally the company shall pay dividends to its

  39. Slide 39: Financing

    FINANCING Financing of the Group NIBD and available funding  Total funding to DKK ~ 1,378 million 1600  Bonds NOK 500 million due Feb 2018 (swapped into 1400 DKK) 1200  Instalment loan of DKK 325 million, repayable with DKK 25 million each quarter 1000 800  Revolving credit facility of DKK 553 m

  40. Slide 40: Phase 3: New VAP Operation

    BAKKAFROST - PREPARING FOR THE FUTURE Phase 3: New VAP operation Draft of new plant 2 factories merged into one BAKKAFROST / Q3 PRESENTATION 2013 Page 40

  41. Slide 41: Bakkafrost - Preparing for the Future

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales The investments will be made step by step in the relevant parts in the value chain to secure:  Effiency  Biological risk  Organic growth BAKKAFROST / Q3 PRESENTATION 2013 Page 41

  42. Slide 42: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share price development since listing in NOK 7.269.400 14,88% SALMAR ASA NOR 2013 4.594.437 9,40% Jacobsen Oddvør FRO 4.491.217 9,19% Jacobsen Johan Regin FRO 2.454.264 5,02% TF Íløgur FRO 1.145.935 2,35% J.P. Morgan Chase Ba NORDEA TREATY ACCOUN NOM GBR

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