Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q1 2022 Earnings Presentation

45 slides from Bakkafrost P/f's earnings presentation, May 10, 2022

  1. Slide 1: Q1 2022 Bakkafrost Group

    Q1 2022 BAKKAFROST GROUP Oslo 10 May 2022

  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 Q1 2022

    SUMMARY OF Q1 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX View from the Headquarter and processing facilities on Glyvrar, Faroe Islands

  4. Slide 4: Highlights

    HIGHLIGHTS  Highest harvested volumes ever in a Q1 in the Faroe Islands: 17,459 tgw in Q1 2022 (14,025 tgw in Q1 2021)  Low harvested volumes in Scotland: 3,973 tgw in Q1 2022 (7,002 tgw in Q1 2021) Operation  Feed sales of 26,192 tonnes in Q1 2022* (23,717 tonnes in Q1 2021*)  Market balance: S

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER HIGHER OPERATIONAL EBIT DRIVEN MAINLY BY FARMING FAROE ISLANDS Q1 2021 Q1 2022 (DKK million) Q1 22 Q1 21 Operating revenue 1,639 1,176 OPERATIONAL EBIT/Kg (NOK) Operational EBITDA 554 354 Farming Faroe Islands Operational EBIT 418 224 14.10 36.03 Profit for the period 405 408

  6. Slide 6: Sales

    SUMMARY OF Q1 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Gøtuvík, A25 Faroe Islands

  7. Slide 7: Global Markets

    GLOBAL MARKETS HIGHER PRICES Y/Y AND Q/Q Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Average spot prices increased y/y and q/q Q1 Q2 Q3 Q4 in Q1 2022 120,00 100,00 (NOK/KG) 80,00 y/y: 54.48 47.1% 80.17 (Q1 2021) 25.69 (Q1 2022) 60,00 40,00 q/q: 60.71 32.1% 80.17 (Q4 2021) 19.46 (Q1 2022) 20,00

  8. Slide 8: Segment Information

    SUMMARY OF Q1 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX

  9. Slide 9: Farming – Harvest Volume

    FARMING – HARVEST VOLUME INCREASED HARVEST IN FO AND DECREASED IN SCT – LOWER AVG. HARVEST WEIGHTS Q1 2021 Q1 2022 Harvest Volumes tonnes [HOG] Q1 22 Q1 21 Harvested volumes (tonnes HOG) FO - North Region 10,046 11,422 North: 57% FO: 14,025 24% 17,459 FO - West Region 5,333 2,458 West: 31% South: 12

  10. Slide 10: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE STRONG PERFORMANCE IN FAROES – WEAKENED IN SCOTLAND Q1 2021 Q1 2022 Farming FO (DKK million) Q1 22 Q1 21 Operational EBIT (mDKK) Operating revenue 1,199 645 FO: 143 229% 471 Operational EBIT 471 143 Operational EBIT margin 39% 22% SCT: -7 -620% -53 Farming SCT (DKK

  11. Slide 11: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Q1 2021 Q1 2022 Margin - EBIT per kg total harvested quantity [NOK/kg] Q1 FO Q1 SCT Operational EBIT per kg (NOK) 40,00 36,03 FO: 14.10 21.93 36.03 30,00 SCT: -1.44 -16.23 -17.67 20,00 14,10 10,00 0,00 FO: Good biological development -1,44 Low sea lice levels -10,00

  12. Slide 12: Farming Scotland

    FARMING SCOTLAND FRESHWATER TREATMENT CAPACITY HAS BEEN UPSCALED IN Q1 (…MORE TO COME) • Freshwater treatment capacity has been more than doubled in Q1 2022 • Enables a preventive treatment strategy to ensure strong gill health ahead of the challenging autumn Ronja Star In service July 2022 - (to re

  13. Slide 13: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) HIGHER VOLUMES AND HIGHER COST OF RAW MATERIAL Q1 2021 Q1 2022 (DKK million) Q1 22 Q1 21 Volumes (tonnes) Operating revenue 418 305 5,576 24% 6,936 Operational EBIT -29 75 Operational EBIT margin -7% 25% Farming FO transferred to VAP (tgw) 6,677 5,265 Revenue (mDKK) VAP pr

  14. Slide 14: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) HIGHER EBITDA AND HIGHER SALES OF FEED AND FISHMEAL Q1 2021 Q1 2022 (DKK million) Q1 22 Q1 21 Operating revenue 442 322 EBITDA (mDKK) EBITDA 86 48 48 79% 86 EBITDA margin 20% 15% Feed sold (tonnes)* 26,192 23,717 EBITDA margin (%) Fishmeal sold external (tonnes) 9,797 7,

  15. Slide 15: Market Conditions Feed

    MARKET CONDITIONS FEED INCREASE IN INTERNAL AND EXTERNAL FEED SALES Q1 2021 Q1 2022 Volumes of raw material purchase and feed sale [tonnes] 180.000 50.000 Total feed sales increased (tonnes) 160.000 45.000 140.000 40.000 Raw material (tonnes) 23,717 10% 26,192 Feed sale (tonnes) 35.000 120.000 30.00

  16. Slide 16: Financials & ESG

    SUMMARY OF Q1 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS &OUTLOOK APPENDIX Árnafjørður, A63 Faroe Islands

  17. Slide 17: Group Profit and Loss

    GROUP PROFIT AND LOSS HIGHER REVENUE AND OPERATIONAL EBIT Q1 2021 Q1 2022 (DKK million) Q1 22 Q1 21 Operating revenue 1,639 1,176 Revenue (mDKK) Operational EBITDA 554 354 1,176 39% 1,639 Operational EBIT 418 224 Fair value adjustment of biological assets 177 285 Operational EBIT (mDKK) Onerous cont

  18. Slide 18: Operational EBIT and Adjusted Earnings per Share

    OPERATIONAL EBIT* AND ADJUSTED EARNINGS PER SHARE** 408 415 407 418 339 303 268 268 248 Operational EBIT* 231 224 (mDKK) 168 182 120 103 89 71 2018 2019 2020 2021 2022 1,075 1,325 622 821 418 6,48 5,89 4,98 4,83 4,80 4,82 4,07 3,79 3,61 3,19 Adjusted EPS** 2,95 2,55 (DKK) 2,06 1,89 1,27 0,64 -0,33 2

  19. Slide 19: Balance Sheet

    BALANCE SHEET Headlines (mDKK) (DKK million) Q1 22 End 2021 End 2021 Q1 2022 Intangible assets 4,507 4,496 Property, plant and equipment 4,943 4,889 PPE: 4,889 54 4,943 279 302 Right of use assets Financial assets 154 149 Biological assets: 2,448* 188 2,637* Long-term receivables 0 8 *(whereof mDKK

  20. Slide 20: Cash Flow

    CASH FLOW Q1 2021 Q1 2022 (DKK million) Q1 22 Q1 21 Cash flow, operations (mDKK) Cash flow from operations 151 137 137 14 151 Cash flow from investments -175 -268 Cash flow from financing -40 37 Cash flow, investments (mDKK) Net change in cash -64 -93 -268 93 -175 Cash at the end of the period 445 3

  21. Slide 21: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) NIBD INCREASED DURING Q1 2022 NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 175)  Change in working capital (mDKK 336) NIBD was decreased by:  Cash flow, operating activities (mDKK -446) Financing end Q1 2022  NIBD: DKK 2,191 m

  22. Slide 22: Q1 2022 ESG Update

    Q1 2022 ESG UPDATE 2021 Sustainability Report has been released This is our 5th annual sustainability report Selected headlines from the report: • 38% decrease in carbon intensity per tonne of salmon produced in the Faroes • An overall 16% decrease in GHG emissions in Scotland • Sourced locally arou

  23. Slide 23: Markets & Outlook

    SUMMARY OF Q1 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Faroe Islands

  24. Slide 24: Harvested and Sold Quantity by Origin

    HARVESTED AND SOLD QUANTITY BY ORIGIN  7% drop in global quarterly supply SUPPLY DEVELOPMENT Q1 2022 Q1 2021 Change % Norway 305 319 -4.3 % UK 33 43 -22.3 % Faroes 21 20 2.7 %  6% drop in European harvest Iceland 11 11 -6.3 % Ireland 3 3 -13.2 %  High downgrading and licence constraints in Norway

  25. Slide 25: Salmon Markets, Sold Quantity

    SALMON MARKETS, SOLD QUANTITY  9% decrease in the EU/UK Salmon markets, sold quantity (head on gutted - HOG) Estimated volumes Q1 comparison Estimated volumes FY comparison  Artificially high level in 2021 due to Markets Q1 2022E Q1 2021E Volume % FY 2021E FY 2020 Volume % Covid-19 EU+UK 247,500 2

  26. Slide 26: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK  Expectation of limited global supply growth SUPPLY - TOTAL 1.600 10%  Drop in global harvest expected through 1H 2022 8% 1.400 6%  Limited growth expected 2H 2022 and 2023 1.200 4% 1.000 2%  2H 2022 European growth driven 800 0% -2%  Licence auction in Norway 600 -4%

  27. Slide 27: Outlook

    OUTLOOK Market Contracts  Global harvest decreased 6.7% in Q1 2022 vs Q1 2021  For 2022, Bakkafrost has signed contracts for around 32% of the total expected harvest volumes in the Faroe Islands  Global supply for 2022 expected to decrease moderately: and Scotland - decrease 7% in H1 - decrease 1

  28. Slide 28: Appendix

    SUMMARY OF Q1 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Applecross 4 expansion, Scotland

  29. Slide 29: Hatchery Expansions - Faroe Islands

    HATCHERY EXPANSIONS - FAROE ISLANDS INCREASING HATCHERY CAPACITY FROM 15 TO 23 MILLION AT 500G  The Strond hatchery has significantly increased smolt capacity Ónavík (2025) 2.4m smolt @500g  Large smolts grow strongly after release Glyvradal expansion (2024)  Very low feed conversion rate 0,3 =>

  30. Slide 30: Hatchery Expansion - Scotland

    HATCHERY EXPANSION - SCOTLAND INCREASING HATCHERY CAPACITY TO +18 MILLION AT 500G  Significant increase in smolt capacity in Scotland 2026: Large Hatchery no. 3 2025: Large Hatchery no. 2 2023: Applecross 5 10m smolt @500g 2022: Applecross 4 8m smolt @250g TBD TBD BAKKAFROST / Q1 2022 PRESENTATION

  31. Slide 31: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 7,742 TONNES OF CONSENT INCREASE SINCE THE ACQUISITION Total consent has increased by 11.6% (7,742 tonnes) since the acquisition in Q4 2019 Total consent is 74,765 tonnes in 44 farming sites: North: 24 sites / 44,415 tonnes consent  Uist, 5 sites  Sky & mainland, 6 sites  L

  32. Slide 32: Scotland – Strategic Rationale

    SCOTLAND – STRATEGIC RATIONALE 1. Provides access to the attractive Scottish 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, the Faroe Islan

  33. Slide 33: Scotland – Strategic Rationale

    SCOTLAND – STRATEGIC RATIONALE 3. Potential for significant improvement  Scottish Salmon profitability to improve over five years through transfer of best practices  Synergies  Targeted investment programmes 4. Financially attractive  Acquiring the business at a reasonable value, multiple to the

  34. Slide 34: Planned Investments 2022-2026

    ~ 6.2BN PLANNED INVESTMENTS 2022-2026 FRONTLOADED TO ACCELERATE BUSINESS TRANSFORMATION IN SCOTLAND Faroe Islands: Planned investment profile 2022-2026 (DKK 1,000) • Hatchery capacity (2026 capacity: +23m smolt at 500g) 1.000 Planned investments • Increase feed capacity to cater 200,000 tonnes (HOG)

  35. Slide 35: Planned Investments Ensure Significant Uplift in Capacity

    PLANNED INVESTMENTS ENSURE SIGNIFICANT UPLIFT IN CAPACITY VALUE CHAIN SYNCHRONISED AT 180KT HOG HARVEST CAPACITY IN 2026 • Value chain synchronised at 180kt capacity in 2026 Development in capacity constraints 2018 2022 2026 • Extra capacity as “insurance” & flexibility and for growth: planned later

  36. Slide 36: Investing in Sustainable Growth

    INVESTING IN SUSTAINABLE GROWTH 150,000 TONNES HARVEST IN 2026, FAROE ISLANDS AND SCOTLAND COMBINED 2022-2026 Capex of DKK 6.2 bn builds 180,000t capacity by Volumes Faroe Islands Scotland 2026 1.800 16,00 2021 67,217t 29,672t 1.600 14,00 1.400 Investments per kg (DKK) 12,00 1.200 10,00 DKK million

  37. Slide 37: Markets & Sales

    MARKETS & SALES TOTAL SALES TO NORTH AMERICA AND ASIA EUROPE INCREASED – WESTERN AND EASTERN EUROPE DECREASED Sales & volume Total sales of Q1 2022 Q1 2021 2021 2020 salmon by markets FO SCT Total FO SCT Total FO SCT Total FO SCT Total Q1 2021 Q1 2022 Western Europe 55% 96% 61% 59% 88% 68% 53% 81% 6

  38. Slide 38: Development in Supply and Sold Quantity by Origin

    DEVELOPMENT IN SUPPLY AND SOLD QUANTITY BY ORIGIN Global Supply of Atlantic Salmon (head on gutted - HOG) Expected supply growth in 2022 2017 2018 2019 2020 2021E 2022E Norway 1.078 1.129 1.198 1.223 1.378 1.374  1% decrease in Global supply UK 159 137 171 160 179 172 Ireland 15 13 14 14 14 14  1%

  39. Slide 39: Q1 2022 Market Environment

    Q1 2022 MARKET ENVIRONMENT PRICE NORWAY  Material increase in market prices compared to Q1 2021 9,0 70 8,0 60  Significant drop in supply 7,0 50 6,0  Demand stimulated by reduced Covid-19 measures 5,0 40 EUR DKK 4,0 30  Nasdaq Norway price up 61% to EUR 8.4 in Q1 2022 3,0 20 2,0  Lower than nor

  40. Slide 40: Development per Quarter

    DEVELOPMENT PER QUARTER Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 (mDKK) 2020 2020 2020 2020 2021 2021 2021 2021 2022 Revenue 1,255 1,134 1,123 1,139 1,176 1,618 1,272 1,488 1,639 Operational EBIT 248 182 103 89 224 407 71 120 418 Profit/Loss -148 472 177 -38 408 428 131 -3 405 Harvest FO (tgw) 10,667 12,941 11,13

  41. Slide 41: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • A dividend for 2021 of DKK 5.14 per share to be paid 99% out in Q2 2022 • Dividend payment equals 50% of adjusted EPS 59% 49%* 49% 50% 50% 50% 50% 46% 40% Dividend policy  Competitive return through: 19%  Dividends 0%  Increase in the value

  42. Slide 42: Page 42

    BAKKAFROST / Q1 2022 PRESENTATION Page 42

  43. Slide 43: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 43.8% (2020)  53,792 inhabitants (Apr 2022)  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 market pr

  44. Slide 44: Facilities and locations

    Facilities and locations BAKKAFROST / Q1 2022 PRESENTATION Page 44

  45. Slide 45: Page 45

    BAKKAFROST / Q1 2022 PRESENTATION Page 45

Bakkafrost — Q1 2022 Earnings Presentation on 6ix