Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q4 2019 Earnings Presentation

41 slides from Bakkafrost P/f's earnings presentation, Feb 25, 2020

  1. Slide 1: Q4 2019 Bakkafrost Group

    Q4 2019 BAKKAFROST GROUP Oslo 25 February 2020

  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 Q4 2019

     SUMMARY OF Q4 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Kunoyarnes, Faroe Islands

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvest in Faroe Islands (FO): 17,930 tgw in Q4 2019 (12,234 tgw in Q4 2018)  Harvest in Scotland (SCO): 7,925 tgw in Q4 2019 Operation  Feed sales of 28,398 tonnes in Q4 2019* (24,711 tonnes in Q4 2018*)  Raw material purchase of 35,180 tonnes in Q4 2019 (46,478 tonnes in Q4 2018) 

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER POSITIVE MARGINS IN ALL SEGMENTS Farming/VAP (FO)* Q4 Q4 (DKK million) 2019 2018 2019 2018 21.91 28.25 Operating revenue 1,605 750 4,511 3,177 (Q4 2018 ) (Q4 2019 ) Operational EBITDA 544 282 1,635 1,274 Farming (FO)* Operational EBIT 415 231 1,325 1,075 Profit for the period

  6. Slide 6: Markets and Sales

     SUMMARY OF Q4 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES SALES TO EASTERN EUROPE INCREASED – ALL OTHER MARKETS DECREASED Numbers outside parenthesis are FO-only Sales & volume (FO only) Numbers in parenthesis include FO & SCO EU Total sales of salmon Q4 Q4 by markets 2019 2018 2019 2018 44% 43% (Q4 2018 ) (Q4 2019 ) EU 43% (59%) 44% 44% (5

  8. Slide 8: Global Markets

    GLOBAL MARKETS HIGHER PRICES AND GROWTH IN GLOBAL HARVEST Significant price increase during Q4 2019 Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Q1 Q2 Q3 Q4  y/y 3.4% up 1.92 NOK/kg - from NOK 56.36 to NOK 58.28  q/q 15.7% up 7.93 NOK/kg - from NOK 50.35 to NOK 58.28 Growth in global harvest

  9. Slide 9: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN MODERATE SUPPLY GROWTH  Global: 3% supply growth in Q4 2019 Harvest & Supply Development Q4 2019 Q4 2018 Change % SUPPLY DEVELOPMENT [Head On Gutted 1,000 tonnes] Q4 2019 Q4 2018 Change % Norway 335 321 4.5 % UK 41 41 1.8 %  Europe: 4% harvest g

  10. Slide 10: Salmon Markets, Sold Quantity (Head On Gutted – HOG)

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) GOOD MOMENTUM IN MOST MARKETS EU - Balance between growth in supply Salmon markets, sold quantity (head on gutted - HOG) and sale Estimated volumes Q4 comparison Estimated volumes FY comparison Markets Q4 2019E Q4 2018 Volume % FY 2019E FY 2018 Vo

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK SUPPLY - TOTAL 800 14%  Global - Expectation of low single digit supply growth 700 12% 600  Europe – Moderate growth 10% 500 8%  Americas – Moderate growth – Some volatility 400 6% 300 4% 200 100 2% 0 0% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 TOTAL Change same q

  12. Slide 12: Segment Information

     SUMMARY OF Q4 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes tonnes Q4 Q4 2019 2018 [HOG] 2019 2018  Harvest (FO) in 2019 was 57,184 tonnes HOG FO - North Region 0 3,996 18,252 25,888  North Region: 31.9% FO - West Region 13,155 5,894 32,210 14,088  West Region: 56.3% FO - South Region 4,775 2,344

  14. Slide 14: Farming – Operational Performance Q4 2019

    FARMING – OPERATIONAL PERFORMANCE Q4 2019 OPERATIONAL EBIT INCREASED 66% IN THE FAROE ISLANDS Q4 Q4 (DKK million) 2019 2018 2019 2018 Faroe Islands (FO) Faroe Islands: Operational EBIT (mDKK) - Operating revenue 945 682 3,152 2,568 204 - Operational EBIT 338 204 1,103 966 66% 338 (Q4 2018 ) (Q4 2019

  15. Slide 15: Farming – Operational Performance Q4 2019

    FARMING – OPERATIONAL PERFORMANCE Q4 2019 Operational EBIT per kg Margin (FO) - EBIT per kg total harvested quantity [NOK/kg] 30.00 21.56 NOK 25.49 NOK FO: (Q4 2018 ) 3.93 NOK (Q4 2019 ) 25.00 20.00 3.09 NOK SCO: (Q4 2019 ) 15.00 10.00 Average weights (HOG) 5.00  FO (West): 5.91 kg - Q4 2019 Q4 201

  16. Slide 16: Value Added Products (VAP) Q4 2019

    VALUE ADDED PRODUCTS (VAP) Q4 2019 STRONG QUARTER FROM VAP (DKK million) Q4 2019 Q4 2018 2019 2018 Volumes (tonnes) Operating revenue 249 109 964 365 2,845 t 4,219 t Operational EBIT 37 3 64 -22 (Q4 2018 ) (Q4 2019 ) Operational EBIT margin 15% 3% 7% -6% VAP produced volumes (tgw) 4,219 2,845 16,690

  17. Slide 17: Fishmeal, Oil and Feed (FOF) Q4 2019

    FISHMEAL, OIL AND FEED (FOF) Q4 2019 HIGH RAW MATERIAL SOURCING IN 2019, BUT LESS ACTIVITY IN Q4 Q4 Q4 (DKK million) 2019 2018 2019 2018 EBITDA (mDKK) 338 288 1,388 1,269 Operating revenue 60 58 (Q4 2018 ) (Q4 2019 ) 58 60 276 254 EBITDA 17.1% 21.0% 19.9% 20.0% EBITDA margin EBITDA margin (%) 28,398

  18. Slide 18: Market Conditions Feed Q4 2019

    MARKET CONDITIONS FEED Q4 2019 SIGNIFICANT INCREASE IN FEED SALES Volumes of raw material purchase and feed sale [tonnes] 15% Increased feed sales 180,000 40,000  Quantity of feed sold was 28,398 tonnes in Q4 2019, 160,000 35,000 compared to 24,711 tonnes in Q4 2018 140,000 30,000 Raw material (ton

  19. Slide 19: Group Financials

     SUMMARY OF Q4 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  20. Slide 20: Group Profit and Loss

    GROUP PROFIT AND LOSS STRONG QUARTER WITH SIGNIFICANTLY HIGHER REVENUE & OPERATIONAL EBIT Q4 Q4 Revenue (mDKK) (DKK million) 2019 2018 2019 2018 750 1,605 * Operating revenue 1,605 750 4,511 3,177 (Q4 2018 ) (Q4 2019 ) Operational EBITDA* 544 282 1,635 1,274 * FO: 1,168 Operational EBIT* 415 231 1,3

  21. Slide 21: Operational EBIT and Earnings per Share

    OPERATIONAL EBIT* AND EARNINGS PER SHARE 459 408 415 350 335 339 331 303 307 303 257 254 255 252 268 268 235 231 206 Operational EBIT* 168 (mDKK) 2015 2016 2017 2018 2019 1,001 1,165 1,378 1,075 1,325 11.44 8.19 7.13 7.32 6.96 6.56 5.60 Earnings per share 4.39 4.61 4.37 4.25 3.91 3.88 3.67 (DKK) 3.4

  22. Slide 22: Balance Sheet

    BALANCE SHEET  Intangible assets amount to DKK 4,396 million at the end (DKK million) Q4 2019 End 2018 of Q4 2019 Intangible assets 4,396 390 Property, plant and equipment 3,780 2,884  Investments in PPE of DKK 214.2 million in Q4 2019 and PPE amount to DKK 3.8 billion Right of use assets 333 0 Fi

  23. Slide 23: Fair Value

    FAIR VALUE 1. SSC changes fair value estimates to Bakkafrost and branch* estimates • Change of discount factor from 4.7% per year to 6% per month (equalling to 101% per year) 2. Group fair value adjustment Q3-2019  Q4-2019 (DKK million) 30-09-2019 31-12-2019 Change Bakkafrost 265,306 404,622 139,31

  24. Slide 24: Cash Flow

    CASH FLOW Q4 Q4 (DKK million) 2019 2018 2019 2018 Cash flow, operations (mDKK) Cash flow from operations -150 -59 1,033 913 -59 -150 (Q4 2018 ) (Q4 2019 ) Cash flow from investments -3,791 -147 -4,598 -531 Cash flow, investments* (mDKK) Cash flow from financing 2,639 216 4,557 -375 -147 -3,791 Net c

  25. Slide 25: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) NIBD INCREASED DURING Q4 2019, PRIMARY LINKED TO THE ACQUISITION OF SSC NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 3,791)  Taxes paid (mDKK 152)  Working capital change (mDKK 517) NIBD was decreased by:  Cash flow, operating

  26. Slide 26: Outlook

     SUMMARY OF Q4 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  27. Slide 27: Outlook

    OUTLOOK Market  Global supply in Q4 2019 increased around 3%, compared to Q4 2018  Global harvest in Q1 2020 is expected to increase around 1%, compared to Q1 2019  Global harvest growth 2020 is expected to be around 4%, compared to 2019 Farming  Bakkafrost harvested 57,184 tonnes HOG in 2019 

  28. Slide 28: Outlook

    OUTLOOK VAP  Contracted around 40% of expected Q1 2020 harvest volume and 30% of the harvest volume in the Faroe Islands for 2020  Long-term strategy is to sell 40-50% of the harvested volumes in the Faroe Islands at fixed price contracts Fishmeal, Oil and Feed  Feed sales are expected to be arou

  29. Slide 29: Appendix

     SUMMARY OF Q4 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  30. Slide 30: Entering Scotland

    ENTERING SCOTLAND Strategic rationale 1. Provides access to the attractive Scotland farming region  Niche and differentiated region  High quality salmon from Scottish Provenance priced at a premium 2. Creating a differentiated global leader in premium salmon  Exposure to two geographies, Faroe Is

  31. Slide 31: Entering Scotland

    ENTERING SCOTLAND Strategic rationale 3. Potential for significant improvement  Scottish Salmon profitability to improve over a five-year period through transfer of best practices  Synergies  Targeted investment programmes 4. Financially attractive acquiring the business at a reasonable value, mu

  32. Slide 32: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 43 farming sites / 67,023T consent South  20 sites / 29,205T consent  Mull and Gigha, 6 sites  Loch Striven and Arran, 4 sites  Loch Fyne, 10 sites North  23 sites / 37,818T consent  Uist, 5 sites  Sky & mainland, 7 sites  Loch Roag, 6 sites  East Lewis & Harris, 5 si

  33. Slide 33: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Supply growth in 2019 Global Supply of Atlantic Salmon (head on gutted - HOG)  6% growth in global supply 2016 2017 2018 2019E 2020E Norway 1.055 1.078 1.129 1.198 1.236  8% growth in European supply UK 142 159 138 165 167 Ireland 14 15 13 15 15

  34. Slide 34: Q4 Market Environment

    Q4 MARKET ENVIRONMENT REDUCED MARKET PRICES, COMPARED TO Q4 2018 PRICE NORWAY Nasdaq Norway price EUR 5.6 per kg in Q4 2019 8.0 7.2 60.0 7.0 6.2 6.3 6.4 50.0 5.8  Increasing prices during the quarter 6.0 5.1 5.7 5.6 5.0 40.0 5.0  3% down vs. Q4 2018 EUR DKK 4.0 30.0  12% up vs. Q3 2019 3.0 20.0 2

  35. Slide 35: Superior Biology Combined with State of the Art Infrastructure

    SUPERIOR BIOLOGY COMBINED WITH STATE OF THE ART INFRASTRUCTURE FISHMEAL, OIL AND FEED BROODSTOCK SMOLT SEA WATER PROCESSING SALES/MARKETING Equivalent to 100k (tgw) None 12 million @ 200 grams 21 farming sites/17 fjords 130k primary (tgw) Central sales Faroes CAPACITY annual harvest @ 55k (tgw) @100

  36. Slide 36: Development per Quarter

    DEVELOPMENT PER QUARTER 2017 2018 2019 (mDKK) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FO Q4 SCO Revenue 854 1,206 804 906 851 954 622 750 964 947 996 1,168 437 Operational EBIT 335 459 252 331 268 408 168 231 268 339 303 397 18 Profit/Loss 79 398 56 -22 272 339 356 -7 213 189 181 220 Harvest (tgw) 13,15

  37. Slide 37: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • Dividend for 2019 of DKK 8.31 (NOK 11.23 ***) per 99% share will be paid out in Q2 2020 49%** 49% 50% 50% 50% 50% 47% 46% Dividend policy 40%  Competitive return through: 19%  Dividends  Increase in the value of the equity  Generally, Bakk

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    BAKKAFROST / Q4 2019 PRESENTATION Page 38

  39. Slide 39: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 41.8% (2016)  52,122 inhabitants (1 August 2019)  Corporate tax: 18%  Farming revenue tax: 5.0% of revenues after 1 January 2019  Home rule – within the Kingdom of Denmark  The tax is applied as follows (IMP ~ International ma

  40. Slide 40: Largest Shareholders and Share Development

    LARGEST SHAREHOLDERS AND SHARE DEVELOPMENT 20 largest shareholders Share development 12 months development Rank Holding Stake Name Citizenship Type of account NOK/share 1 5.153.004 8,71% FOLKETRYGDFONDET Norway Ordinary 2 4.611.217 7,80% JACOBSEN, JOHAN REGIN Faroe Islands Ordinary 3 4.594.437 7,77%

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    BAKKAFROST / Q4 2019 PRESENTATION Page 41

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