Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q2 2013 Earnings Presentation

48 slides from Bakkafrost P/f's earnings presentation, Aug 27, 2013

  1. Slide 1: Q2 2013 Second Quarter Bakkafrost Group

    Q2 |2013 SECOND QUARTER BAKKAFROST GROUP Glyvrar 27 August 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 Q2 2013

     SUMMARY OF Q2 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK Klaksvík is the second largest town of the Faroe Islands. The town is located on Borðoy, which is one of the northernmost islands. The first settlement at Klaksv

  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  ~67% of harvest volumes in Q2 2013  50% of farming licenses  Harvested 10,540 tgw in Q2 2013 (10,219 tgw in Q2 2012)  Feed sale of 18,196 tonnes in Q2 2013* (20,762 tonnes in

  5. Slide 5: Summary of Q2 2013

    SUMMARY OF Q2 2013 Margin  Strong results – Group Operational EBIT DKK 169m  Farming EBIT/kg NOK 19.34  Fishmeal, Oil and Feed 12.30% EBITDA margin  VAP negative EBIT/kg of NOK 8.80 Market  Strong salmon prices and reduced supply in Europe  High demand on large salmon Operation  Harvested sam

  6. Slide 6: Markets and Sales

     SUMMARY OF Q2 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK Klaksvík is the second largest town of the Faroe Islands. The town is located on Borðoy, which is one of the northernmost islands. The first settlement at Klaksv

  7. Slide 7: Global Markets

    GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG]  The NASDAQ prices for salmon increased in Q2 50,00 2013 by 45,00 ~54% compared with Q2 2012 40,00 - from 27.51 to 41.82 NOK/kg 35,00  The increase was 19% from Q1 2013 to Q2 2013, 30,00 from 36.24 to 41.82 NOK/kg – 5.88 NOK up per kg 25,

  8. Slide 8: Markets & Sales

    MARKETS & SALES Overseas High-End markets also dominated Q2 2013 Sales Q2 Q2 H1 H1 by markets 2013 2012 2013 2012  The demand in the US and Asian market continued to dominate the sale EU 49% 54% 49% 52% USA 20% 14% 19% 13%  Eastern European market reduced from 14% in Q2 2012 to 3% in Q2 2013 of to

  9. Slide 9: Diversification and Positioning

    DIVERSIFICATION AND POSITIONING Unique natural conditions for salmon Pristine waters, strong currents, cool and steady sea temperature World´s most stringent vetrinarian legislation All in all out, mandatory fallowing of fjords, no antibiotics, no GMO, industry´s highest smolt yield Salmon from the

  10. Slide 10: Financial Highlights

    FINANCIAL HIGHLIGHTS Q2 Q2 H1 H1 Strong results at the given price level (DKK million) 2013 2012 2013 2012 Operating revenues 610.0 416.3 1,083.3 816.3  Strong salmon prices and improved FOF Operational EBITDA 190.7 97.4 316.6 177.1 (Fishmeal Oil & Feed) operation resulted in Operational EBIT 169.3

  11. Slide 11: Key Financials, Group

    KEY FINANCIALS, GROUP Q2 Q2 H1 1H  Improved cash flow from operations – mainly (DKK million) 2013 2012 2013 2012 due to improved earnings Cash flow from 173.1 154.6 199.8 235.1  Total assets increased mainly due to increase operations in inventory as intake of raw material has Total assets* 2,796.

  12. Slide 12: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Q2 Q2 H1 H1 [tgw]* Harvested volume 2013 2012 2013 2012 West 794 2,300 4,733 12,319  Harvested volumes increased by 3% from 10,219 tgw in Q2 2012 to 10,540 tgw in Q2 North 9,746 7,919 14,103 9,248 2013 Total 10,540 10,219 18,836 21,567  North 92% compared with 77% in Q2 20

  13. Slide 13: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE (DKK million) Q2 2013 Q2 2012 H1 2013 H1 2012 Revenues and margin Operating revenues 520 297 945 609  Revenues increased in Q2 2013 compared with Q2 2012 from DKK 297 million to DKK 520 million Operational EBIT 200 68 324 117  Margin increased from 23% in Q2 2012

  14. Slide 14: Segment VAP

    SEGMENT VAP Q2 Q2 H1 H1 Revenues and margin (DKK million) 2013 2012 2013 2012  Revenues increased 30% while volume increased Operating revenues 168 129 316 251 23% Operational EBIT -42 11 -65 22  Margin still negative on back of the increase in the Operational EBIT -25% 9% -21% 9% salmon spot pric

  15. Slide 15: 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

  16. Slide 16: Segment Fishmeal, Oil and Feed (FOF)

    SEGMENT FISHMEAL, OIL AND FEED (FOF)  Raw material intake for fishmeal/oil production was Meal, Oil and Feed 42 thousand tonnes in Q2 2013, compared with 6 thousand tonnes in Q2 2012 Q2 Q2 H1 H1  Revenues increased 31% due to higher sale of (DKK million) 2013 2012 2013 2012 fishmeal Operating reve

  17. Slide 17: Group Financials

     SUMMARY OF Q2 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  18. Slide 18: Group Profit and Loss

    GROUP PROFIT AND LOSS Q2 Q2 H1 H1  Revenue up 47% corresponding to DKK 194 (DKK million) 2013 2012 2013 2012 million) due to: Operating revenues 610 416 1,083 816  Improved market prices for salmon (spot and VAP) Operational EBITDA* 191 97 317 177  Harvest volumes up 3% and VAP volumes up 23% Ope

  19. Slide 19: Balance Sheet

    BALANCE SHEET Q2 End (DKK million) 2013 2012  Investments in PPE of DKK ~40 million in Q2 2013 Intangible assets 294 294 and 62 million YTD 2013 Property, plant and equipment 832 813  Seasonal increase in biological assets 110 91 Financial assets  Higher carrying amount on inventory due to Long t

  20. Slide 20: Cash Flow

    CASH FLOW Q2 Q2 H1 H1 (DKK million) 2013 2012 2013 2012  Improved cash flow from operations in Q2 2013 Cash flow from operations 173 155 200 235 hampered by increase in inventory at Havsbrún Cash flow from investments -41 -20 -69 -37  Cash flow from investments represents investments Cash flow fro

  21. Slide 21: Investments 2013-2017

     SUMMARY OF Q2 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK Klaksvík is the second largest town of the Faroe Islands. The town is located on Borðoy, which is one of the northernmost islands. The first settlement at Klaksv

  22. Slide 22: Bakkafrost – Optimizing the Value Chain

    BAKKAFROST – OPTMIZING THE VALUE CHAIN Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales Main elements in the investment plan:  Centralisation of activities (Packaging, Harvest and VAP) at Glyvrar to take out synergies, reduce costs and meet future market trends  New

  23. Slide 23: Planned Investments 2013 - 2017

    PLANNED INVESTMENTS 2013 - 2017 280 million 280 million 170 million 170 million 170 million BAKKAFROST / Q2 PRESENTATION 2013 Page 23

  24. Slide 24: Bakkafrost – Preparing for the Future

    BAKKAFROST – PREPARING FOR THE FUTURE Present plant at Glyvrar BAKKAFROST / Q2 PRESENTATION 2013 Page 24

  25. Slide 25: Phase 1: Packaging, integration with Harvest

    BAKKAFROST - PREPARING FOR THE FUTURE Phase 1: Packaging, integration with Harvest Draft of new plant 2 factories merged to one BAKKAFROST / Q2 PRESENTATION 2013 Page 25

  26. Slide 26: Phase 2: Harvest integration and a new well boat

    BAKKAFROST - PREPARING FOR THE FUTURE Phase 2: Harvest integration and a new well boat Draft of new plant 3 factories merged to one BAKKAFROST / Q2 PRESENTATION 2013 Page 26

  27. Slide 27: Building a new well boat owned and operated by Bakkafrost

    BAKKAFROST - 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 Main Particulars: Length overall 75.8 meters Width mid 16 meters Fish hold 3,000 CUM 45

  28. Slide 28: Phase 3: New VAP operation

    BAKKAFROST - PREPARING FOR THE FUTURE Phase 3: New VAP operation Draft of new plant 2 factories merged to one BAKKAFROST / Q2 PRESENTATION 2013 Page 28

  29. Slide 29: Preparing for the Future – 7 factories merged to one

    BAKKAFROST - PREPARING FOR THE FUTURE Draft of new plant 7 factories merged to one BAKKAFROST / Q2 PRESENTATION 2013 Page 29

  30. Slide 30: Preparing for the Future – Efficiency, biological risk, organic growth

    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 / Q2 PRESENTATION 2013 Page 3

  31. Slide 31: 2017: Production capacity to ~170,000 tonnes

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales 2017: Yearly production capacity from 100,000 → ~ 170,000 tonnes, by investing in a second production line Increase inventory capacity for raw material and feed BAKKAFROST / Q2 PRES

  32. Slide 32: 2015: Increase smolt production

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales 2015: Increase production in terms of number and size to increase production at sea and reduce biological risk BAKKAFROST / Q2 PRESENTATION 2013 Page 32

  33. Slide 33: 2013–2017: New equipment for exposed areas

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales 2013 – 2017: New equipment to cope with weather conditions in exposed areas to increase fish welfare and capacity BAKKAFROST / Q2 PRESENTATION 2013 Page 33

  34. Slide 34: 2013–2015: New well boat

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales 2013 – 2015: New well boat to improve quality, emergency back-up and increase capacity The boat will be owned and operated by Bakkafrost BAKKAFROST / Q2 PRESENTATION 2013 Page 34

  35. Slide 35: 2014–2015: New harvesting plant at Glyvrar

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales 2014 – 2015: New harvesting plant at Glyvrar Improve quality, emergency back-up and effeciency BAKKAFROST / Q2 PRESENTATION 2013 Page 35

  36. Slide 36: 2016–2017: New VAP plant in Glyvrar

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales 2016 – 2017: Build new VAP plant in Glyvrar integrated with Harvest plant Improve quality and efficiency, increase capacity and meet future consumer trends Strategy to produce 40-50

  37. Slide 37: 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 / Q2 PRESENTATION 2013 Page 37

  38. Slide 38: Outlook

     SUMMARY OF Q2 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS  OUTLOOK

  39. Slide 39: Outlook

    OUTLOOK  Seasonal higher supply  Strong market especially for fresh large salmon  31% of expected volumes for the rest of 2013 contracted per end Q2 as VAP products  Estimated harvest of 45,000 tonnes tgw in 2013  Faroe Farming is estimated to harvest 4,500 tonnes tgw in 2013  Smolt release in

  40. Slide 40: Thank you!

    \/ BAKKAFROST ESTABLISHED 1968

  41. Slide 41: 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

  42. Slide 42: 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

  43. Slide 43: 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

  44. Slide 44: Low supply growth expected in 2013 - 2015

    LOW SUPPLY GROWTH EXPECTED IN 2013 - 2015  We expect the global supply growth of Atlantic Global supply of Atlantic Salmon (head on gutted - HOG) Salmon in 2013 to be only 2%: 2011 2012 2013E 2014E 2015E  Negative growth of 4% in Europe and Norway 905 1.065 1.022 1.067 1.073 UK 141 140 132 133 148

  45. Slide 45: Supply development split by markets

    SUPPLY 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

  46. Slide 46: 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

  47. Slide 47: Financing

    FINANCING Financing of the Group NIBD and available funding  Total funding to DKK ~ 1,403 million 1600  Bonds NOK 500 million due Feb 2018 (swapped into 1400 DKK) 1200  Instalment loan of DKK 350 million, repayable with DKK 25 million each quarter 1000 800  Revolving credit facility of DKK 553 m

  48. Slide 48: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share price development since listing in NOK 1 7.269.400 14,9% SALMAR ASA NOR 2013 2 4.594.437 9,4% Jacobsen Oddvør FRO 3 4.491.217 9,2% Jacobsen Johan Regin FRO 4 2.454.264 5,0% TF Íløgur p/f FRO 5 1.820.766 3,7% UBS AG A/C OMNIBUS-DISCLOSE NOM CHE 6 1.1

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