Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2017 Earnings Presentation

38 slides from Bakkafrost P/f's earnings presentation, Nov 14, 2017

  1. Slide 1: Q3 2017 Bakkafrost Group

    Q3 2017 BAKKAFROST GROUP Oslo 14 November 2017

  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: Agenda: Summary of Q3 2017

     SUMMARY OF Q3 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvested 11,585 tgw in Q3 2017 (10,664 tgw in Q3 2016) Operation  Feed sales of 22,320 tonnes in Q3 2017* (28,850 tonnes in Q3 2016*)  Raw material purchase of 21,937 tonnes in Q3 2017 (11,003 tonnes in Q3 2016) Revenues and  Revenues of DKK 804 million in Q3 2017 (DKK 640 million i

  5. Slide 5: Summary of the quarter

    SUMMARY OF THE QUARTER The result of the Farming segment decreased due to lower salmon prices. The Q3 Q3 M9 M9 VAP segment improved, but had a small (DKK million) 2017 2016 2017 2016 loss. The FOF segment had a strong result. Operating revenues 804 640 2,864 2,334  Farming/VAP margin decreased from

  6. Slide 6: Markets and Sales

     SUMMARY OF Q3 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES Sales to EU in Q3 2017 on similar level as in Q3 2016, Total sales of salmon Q3 Q3 M9 M9 VAP on contract increased to 45% by markets 2017 2016 2017 2016 EU 45% 46% 46% 41%  EU market had a slight decrease of 1% from 46% in USA 20% 24% 17% 23% Q3 2016 to 45% in Q3 2017 Asia 21% 13% 1

  8. Slide 8: Global Markets

    GLOBAL MARKETS Lower salmon prices in Q3 2017 Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Q1 Q2 Q3 Q4  Prices decreased  y/y by 4.40 NOK/kg ~7.8% - from 61.10 to 56.70  q/q by 12.33 NOK/kg ~21.7% - from 69.03 to 56.70 Increased global supply in Q3 2017  5.6% increased global supply in Q3 2

  9. Slide 9: Development in harvested and sold quantity by origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN 5.6% increase in supply to the markets Q3 2017 vs. SUPPLY DEVELOPMENT Q3 Q3 Change (head on gutted - HOG) 2017 2016 % Q3 2016 10% increase in harvest Norway 284.7 271.8 4.7 % UK 40.0 36.3 10.2 %  Inventory build-up in Chile and Norway during Q3 I

  10. Slide 10: Salmon markets, sold quantity (HOG)

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) EU Salmon markets, sold quantity (head on gutted - HOG)  Flat consumption vs. 5.6% increase in European supply Estimated volumes Q3 comparison Estimated volumes YTD comparison  High contract prices and lead times in Markets Q3 2017E Q3 2016 Volu

  11. Slide 11: Short term supply outlook

    SHORT TERM SUPPLY OUTLOOK SUPPLY - TOTAL Increased supply expected in the coming quarters 700 12% 650 10%  Europe expected to grow at relatively high levels, 600 8% compared to recent quarters 550 6%  Expected drop in Q1 2018 due to Easter effect 500 4%  Very strong prevailing growth in Americas

  12. Slide 12: Segment Information

     SUMMARY OF Q3 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q3 Q3 M9 M9  In Q3 2017, 86% of harvested volume came tonnes [HOG] 2017 2016 2017 2016 from the West and 14% from the North region North Region 1,659 10,372 24,364 20,785  Harvested volumes increased by 9% in Q3 2017, compared with Q3 2016

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Reduced margin at lower prices Q3 Q3 M9 M9 (DKK million) 2017 2016 2017 2016  The operational EBIT decreased by 26% from DKK 294 million in Q3 2016 to DKK 217 million Operating revenues 619 610 2,409 2,064 in Q3 2017 Operational EBIT 217 294 1,079 913 Lower growth

  15. Slide 15: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Operation Margin - EBIT per kg total harvested quantity [NOK/kg]  Farming EBIT down by 10.93 NOK per kg to 40.00 23.51 in Q3 2017, compared to 34.44 in Q3 2016 35.00 34.44 33.22 30.00  Harvest in the West region was late in the quarter 31.05 realizing lower sales

  16. Slide 16: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) VAP margin improved in Q3 2017 Q3 Q3 M9 M9 (DKK million) 2017 2016 2017 2016  Revenues increased by 22% to DKK 246 million in Q3 Operating revenues 246 201 710 568 2017, from DKK 201 million in Q3 2016 Operational EBIT -4 -47 -112 -140  Operating EBIT in Q3 2017 was DKK

  17. Slide 17: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) Strong margin in quarter Fishmeal, Oil and Feed  EBITDA of DKK 79 million in Q3 2017, Q3 Q3 M9 M9 compared with DKK 62 million in Q3 2016 (DKK million) 2017 2016 2017 2016 Operating revenues 342 320 936 828  EBITDA margin of 23.2% in Q3 2017, compared with 19.5% in Q3

  18. Slide 18: Market conditions feed

    MARKET CONDITIONS FEED Feed sales decreased Volumes of raw material purchase and feed sale [tonnes]  Quantity of feed sold was 22,320 tonnes in Q3 2017, 35,000 180,000 compared with 28,850 tonnes in Q3 2016 160,000 Raw material (tonnes) 30,000 Feed sale (tonnes) 140,000 25,000  Growth conditions i

  19. Slide 19: Group Financials

     SUMMARY OF Q3 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Construction of new hatchery at Strond in Klaksvík (photo from Oct. 2017) The operation is expected to start mid-2018. At full operation in 2019/2020 the hatchery is expected to produce 7 million s

  20. Slide 20: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenues increased from DKK 640 million in Q3 Q3 M9 M9 Q3 2016 to DKK 804 million in Q3 2017. (DKK million) 2017 2016 2017 2016 Operating revenues 804 640 2,864 2,334  Operational EBIT in Q3 2017 nearly unchanged at DKK 252 million, compared to Operational EBITDA* 302 287 1,

  21. Slide 21: Operational EBIT and Earnings per Share

    OPERATIONAL EBIT* AND EARNINGS PER SHARE 459 350 335 303 307 257 254 255 252 235 212 209 227 206 Operational EBIT* 186 (DKK million) 2014 2015 2016 YTD 2017 834 1,001 1,165 1,046 11.44 8.19 7.13 6.56 Earnings per share 4.36 4.59 4.39 4.61 3.91 (DKK) 3.44 2.60 2.71 1.78 1.63 1.16 2014 2015 2016 YTD 2

  22. Slide 22: Balance Sheet

    BALANCE SHEET  Intangible assets at the end of Q3 2017 are End M9 End M9 End unchanged from Q4 2016 (DKK million) 2017 2016 2016 Intangible assets 377 377 377  Investments in PPE of DKK 118 million in Q3 Property, plant and equipment 2,448 1,971 2,118 2017 Financial assets 58 49 59  Financial ass

  23. Slide 23: Cash Flow

    CASH FLOW  Cash flow from operations higher in Q3 2017, compared to Q3 2016, due to changes in Q3 Q3 M9 M9 working capital (DKK million) 2017 2016 2017 2016 Cash flow from operations 334 285 1,197 777  Cash flow from investments represents investments in PPE Cash flow from investments -118 -229 -4

  24. Slide 24: Net Interest Bearing Debt (NIBD)

    NET INTEREST BEARING DEBT (NIBD) Development in NIBD in DKK millions Net Interest Bearing Debt  Cash flow from operating activities and 560 118 changes in working capital decreased the -270 NIBD with DKK 334 million  Net investments and other in Q3 2017 -64 356 12 increased the NIBD with DKK 130 m

  25. Slide 25: Outlook

     SUMMARY OF Q3 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  26. Slide 26: Outlook

    OUTLOOK Market VAP  Global supply in 2017 expected to increase around  Contracted around 53% of expected harvest for 2%, compared to 2016 the rest of 2017  Global supply in 2018 expected to increase around  Bakkafrost is presently negotiating contracts for 7-8%, compared to 2017 2018 Farming Fis

  27. Slide 27: Appendix

     SUMMARY OF Q3 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  28. Slide 28: Development in harvested and sold quantity by origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Global Supply of Atlantic Salmon (head on gutted - HOG) 2014 2015 2016 2017E 2018E 8% supply increase in 2018 Norway 1,076 1,112 1,055 1,083 1,171 UK 153 150 142 157 159  Total supply growth of 2% in 2017 Ireland 11 14 14 16 16  Total supply gro

  29. Slide 29: Q3 Market Environment

    Q3 MARKET ENVIRONMENT PRICE NORWAY 8.0 7.4 60.0 Reduced prices in Europe on moderate supply growth 6.9 7.3 7.2 7.0 6.4 6.1 6.0 50.0  Nasdaq Norway price EUR 6.0 in Q3 2017 6.0 4.8 40.0 5.0  6.3% increase vs. Q3 2016 EUR DKK 4.0 30.0  16.8% decrease, compared to Q2 2017 3.0 20.0  Generally high p

  30. Slide 30: Share of large salmon market

    SHARE OF LARGE SALMON MARKET Share of large fish Share of large fish (>6kg)  Share of large fish 26% in Q3 2017, 30% compared with average of 9%  Large fish share generally indicator on good 25% performance and better market diversification 20% 15% 10% 5% 0% Faroe Island Norway Chile North United

  31. Slide 31: Investment Programme 2016 - 2020

    INVESTMENT PROGRAMME 2016 - 2020 Investments will be made step by step in the relevant parts of the value chain to secure:  Biological risk  Efficiency  Organic growth BAKKAFROST / Q3 2017 PRESENTATION Page 31

  32. Slide 32: Investment Programme 2016 - 2020

    INVESTMENT PROGRAMME 2016 - 2020 Investment Programme 2016 – 2020 (mDKK) Investment program of DKK 2.2b from 2016 to 2020 590 570 Fishmeal, Oil & Feed (380 mDKK)  New salmon meal and –oil plant  New feed line to increase capacity 410  Advanced feed line capabilities 360 280 Smolt (1,130 mDKK)  V

  33. Slide 33: Increased smolt production leads to increased production

    INCREASED SMOLT PRODUCTION LEADS TO INCREASED PRODUCTION Farming volume – growth potential with PS (1,000 tonnes) Larger smolt (PS) will reduce time of cycle in farming 80  Harvest cycle every second year from the same fjords until 70.0 70 effect from larger smolt evolvs 60 54.5 50.6 51,0 47.5 50 

  34. Slide 34: Development per quarter Q1 2014 – Q3 2017

    DEVELOPMENT PER QUARTER Q1 2014 – Q3 2017 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2017 2017 2017 2016 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 Revenue 804 1,206 854 868 640 790 905 760 677 800 613 757 584 711 631 Operational EBIT 252 459 335 350 255 307 254 257 206 303 235

  35. Slide 35: Dividend

    DIVIDEND Dividend per share in % of adj. EPS * Dividend 100% 99% • Dividend for 2016 of DKK 8.70 (NOK 10.36) per 90% share is paid out in Q2 2017 80% 70% 60% 49%** 49% 50% 48% 50% 46% 40% Dividend policy 40% 30% 19%  Competitive return through: 20% 10%  Dividends 0%  Increase in the value of the

  36. Slide 36: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  50,250 inhabitants (July 2017)  Home rule – within the Kingdom of Denmark  Part of the Danish monetary union, Danish krone (DKK) Key sectors (% of wage earners, 2016)  Service/public admin.: ~34%  Private service: ~31%  Construction: ~13%  Fishing : ~21

  37. Slide 37: Largest shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development 12 months development Traded daily No of shares Account name type Citizenship NOK/share 4.594.437 9,4% Jacobsen Oddvør FRO 4.494.251 9,2% JACOBSEN JOHAN REGIN FRO 3.759.341 7,7% FOLKETRYGDFONDET NOR 3.513.840 7,2% Nordea Bank AB Denmark

  38. Slide 38: Page 38

    BAKKAFROST / Q3 2017 PRESENTATION Page 38

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