Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q4 2021 Earnings Presentation

47 slides from Bakkafrost P/f's earnings presentation, Feb 22, 2022

  1. Slide 1: Q4 2021 Bakkafrost Group

    Q4 2021 BAKKAFROST GROUP Glyvrar 22 February 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 Q4 2021

    SUMMARY OF Q4 2021 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS  Record high harvest in the Faroe Islands: 20,694 tgw in Q4 2021 (15,957 tgw in Q4 2020)  Harvest in Scotland: 5,122 tgw in Q4 2021 (9,305 tgw in Q4 2020) Operation  Feed sales of 32,527 tonnes in Q4 2021* (30,885 tonnes in Q4 2020*)  Market balance strong markets and tight supply out

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER HIGHER OPERATIONAL EBIT DRIVEN MAINLY BY FARMING FAROE ISLANDS YTD YTD Q4 2020 Q4 2021 (DKK million) Q4 21 Q4 20 2021 2020 Operating revenue 1,488 1,139 5,554 4,652 OPERATIONAL EBIT/Kg (NOK) Operational EBITDA 270 215 1,352 1,068 Farming Faroe Islands Operational EBIT 120 89 8

  6. Slide 6: Sales

    SUMMARY OF Q4 2021 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Kunoyarnes, A12 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 but Q1 Q2 Q3 Q4 100,00 decreased q/q in Q4 2021 90,00 (NOK/KG) 80,00 70,00 y/y: 44.23 37.2% 60.71 60,00 (Q4 2020) 16.48 (Q4 2021) 50,00 40,00 q/q: 55.41 9.6% 60.71 (Q3 2021) 5

  8. Slide 8: Segment Information

    SUMMARY OF Q4 2021 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 – INCREASED AVG. SMOLT SIZE Q4 2020 Q4 2021 Harvest Volumes tonnes [HOG] Q4 21 Q4 20 YTD 21 YTD 20 Harvested volumes (tonnes HOG) FO - North Region 9,268 6,486 26,082 31,029 North: 45% 15,957 30% 20,694 FO - West Region 8,904 6,96

  10. Slide 10: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE HIGHER OPERATIONAL EBIT AND OPERATING REVENUE IN FO LOWER OPERATIONAL EBIT AND OPERATING REVENUE IN SCT Q4 2020 Q4 2021 Farming FO (DKK million) Q4 21 Q4 20 YTD 21 YTD 20 Operational EBIT (mDKK) Operating revenue 1,111 603 3,477 2,340 63 351% 282 Operational EBIT 28

  11. Slide 11: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Q4 2020 Q4 2021 Margin - EBIT per kg total harvested quantity [NOK/kg] 60,00 Operational EBIT per kg (NOK) 40,00 FO: 5.66 12.62 18.29 20,00 0,00 SCT: -8.41 -47.55 -55.95 Q4 FO Q4 SCT YTD FO YTD SCT -20,00 -40,00 -60,00 2021 2020 FO: Strong growth and good FCR. Freig

  12. Slide 12: Farming Faroe Islands in Q4 2021

    FARMING FAROE ISLANDS IN Q4 2021  45 mDKK in exceptional mortality Affected areas  Main cause:  High sea lice levels requiring more treatments of weak fish with underlying reduced gill health, resulting in higher post treatment mortality  3 sites affected  Impact on operational EBIT/kg for Farm

  13. Slide 13: Farming Scotland in Q4 2021

    FARMING SCOTLAND IN Q4 2021  179 mDKK in exceptional mortality Affected areas  Main cause:  Hydrozoan bloom as secondary complication to underlying reduced gill health  12 sites affected across entire farming area  Significant impact on operational EBIT/kg: as reported Without exceptional morta

  14. Slide 14: Farming Scotland – Upscaling Freshwater Treatment Capacity in 2022

    FARMING SCOTLAND – UPSCALING FRESHWATER TREATMENT CAPACITY IN 2022 • Significant increase of freshwater treatment capacity in 2022 • Enables a preventive treatment strategy to ensure strong gill health ahead of the challenging autumn Ronja Star In service July 2022 • 4,000m3, live haul • Reverse Osm

  15. Slide 15: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) SAME VOLUMES AND HIGHER COST OF RAW MATERIAL Q4 2020 Q4 2021 (DKK million) Q4 21 Q4 20 YTD 21 YTD 20 Volumes (tonnes) Operating revenue 359 287 1,195 1,116 Operational EBIT 28 80 120 140 6,688 -1% 6,603 Operational EBIT margin 8% 28% 10% 13% Farming FO transferred to VAP (

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

    FISHMEAL, OIL AND FEED (FOF) LOWER RAW MATERIAL SOURCING AND HIGHER SALES OF FEED AND FISHMEAL Q4 2020 Q4 2021 (DKK million) Q4 21 Q4 20 YTD 21 YTD 20 Operating revenue 433 359 1,659 1,419 EBITDA (mDKK) EBITDA 89 48 306 208 48 86% 89 EBITDA margin 21% 13% 18% 15% Feed sold (tonnes)* 32,527 30,885 12

  17. Slide 17: Market Conditions Feed

    MARKET CONDITIONS FEED SIGNIFICANT INCREASE IN INTERNAL FEED SALES Q4 2020 Q4 2021 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) 30,885 5% 32,527 35.000 Feed sale (tonnes) 120.000 30.000

  18. Slide 18: Financials & ESG

    SUMMARY OF Q4 2021 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS &OUTLOOK APPENDIX

  19. Slide 19: Group Profit and Loss

    GROUP PROFIT AND LOSS HIGHER REVENUE, OPERATIONAL EBIT AND PROFIT Q4 2020 Q4 2021 (DKK million) Q4 21 Q4 20 YTD 21 YTD 20 Operating revenue 1,488 1,139 5,554 4,652 Revenue (mDKK) Operational EBITDA 270 215 1,352 1,068 1,139 31% 1,488 Operational EBIT 120 89 821 621 Fair value adjustment of biologica

  20. Slide 20: Operational EBIT and Adjusted Earnings per Share

    OPERATIONAL EBIT* AND ADJUSTED EARNINGS PER SHARE** 459 408 415 407 335 331 339 303 252 268 268 231 248 224 Operational EBIT* 182 (mDKK) 168 103 89 120 71 2017 2018 2019 2020 2021 1,378 1,075 1,325 622 821 6,84 6,48 5,60 5,89 5,08 4,98 4,83 4,80 3,79 4,07 3,57 3,61 3,19 2,95 Adjusted EPS** 2,55 2,06

  21. Slide 21: Balance Sheet

    BALANCE SHEET End End Headlines (mDKK) (DKK million) 2021 2020 End 2020 End 2021 Intangible assets 4,496 4,493 Property, plant and equipment 4,889 4,221 PPE: 4,221 668 4,889 302 353 Right of use assets Financial assets 149 122 Biological assets: 2,117* 331 2,448* Long-term receivables 8 8 *(whereof

  22. Slide 22: Cash Flow

    CASH FLOW Q4 2020 Q4 2021 (DKK million) Q4 21 Q4 20 YTD 21 YTD 20 Cash flow, operations (mDKK) Cash flow from operations 189 -107 1,125 474 -107 296 189 Cash flow from investments -289 -343 -1,112 -816 Cash flow from financing 237 471 30 -500 Cash flow, investments (mDKK) Net change in cash 136 21 4

  23. Slide 23: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) NIBD INCREASED DURING Q4 2021 NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 290)  Taxes paid (mDKK 54) NIBD was decreased by:  Cash flow, operating activities (mDKK -198)  Change in working capital (mDKK -6) NIBD and available

  24. Slide 24: Q4 ESG Update

    Q4 ESG UPDATE Commits to reduce scope 3 emissions by 52% per tonne of product sold by 2030 from a 2020 base year. As with our scope 1 and 2 targets of 50% GHG emission reduction by 2030, the target will be submitted for approval by the Science Based Targets initiative (SBTi). Entered into term sheet

  25. Slide 25: Markets & Outlook

    SUMMARY OF Q4 2021 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Borðoyavík, A13 Faroe Islands

  26. Slide 26: Harvested and Sold Quantity by Origin

    HARVESTED AND SOLD QUANTITY BY ORIGIN  5% increase in total quarterly harvest SUPPLY DEVELOPMENT Q4 2021 Q4 2020 Change %  3% increase in supply to the markets, Norway 401 365 9.9 % taking inventory movements into account UK 36 41 -10.8 % Faroes 30 21 48.2 % Iceland 10 10 6.6 % Ireland 3 3 3.0 % 

  27. Slide 27: Salmon Markets, Sold Quantity

    SALMON MARKETS, SOLD QUANTITY  4% increase in the EU Salmon markets, sold quantity (head on gutted - HOG)  Low compared to 10% harvest growth in Estimated volumes Q4 comparison Estimated volumes FY comparison Europe Markets Q4 2021E Q4 2020 Volume % FY 2021E FY 2020 Volume % EU+UK 323 800 311 700

  28. Slide 28: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK  Moderate growth expected coming periods SUPPLY - TOTAL 1.600 25%  7% global supply setback during 1H 2022 1.400 20% 1.200 15% - Drop in both Europe and Americas 1.000 10% 5% 800 0%  6% growth in 2H 2022 600 -5% 400 -10% 200 -15%  Likely to see market based acceleration

  29. Slide 29: Outlook

    OUTLOOK Market Contracts  Global harvest increased 4.6% in Q4 2021 vs Q4 2020  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 grow moderately: and Scotland - decrease 7% in H1 - increase 1% fo

  30. Slide 30: Appendix

    SUMMARY OF Q4 2021 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Weststrome, Scotland

  31. Slide 31: 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 =>

  32. Slide 32: 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 / Q4 2021 PRESENTATION

  33. Slide 33: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 7,742 TONNES 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  Loch

  34. Slide 34: 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, Faroe Islands a

  35. Slide 35: Scotland – Strategic Rationale

    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, multipl

  36. Slide 36: 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)

  37. Slide 37: 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 syncronised at 180kt capacity in 2026 Development in capacity constraints 2018 2022 2026 • Extra capacity as “insurance” & flexibility and for growth: planned later

  38. Slide 38: 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

  39. Slide 39: Markets & Sales

    MARKETS & SALES TOTAL SALES TO NORTH AMERICA, ASIA AND EASTERN EUROPE INCREASED – WESTERN EUROPE DECREASED Sales & volume Total sales of Q4 2021 Q4 2020 YTD 2021 YTD 2020 salmon by markets FO SCT Total FO SCT Total FO SCT Total FO SCT Total Q4 2020 Q4 2021 Western Europe 56% 97% 63% 59% 96% 74% 53%

  40. Slide 40: 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 2018 2019 2020 2021E 2022E Norway 1.129 1.198 1.223 1.378 1.389  1% growth in Global supply UK 137 171 160 180 179 Ireland 13 14 14 14 14  European supply unchan

  41. Slide 41: Q4 2021 Market Environment

    Q4 2021 MARKET ENVIRONMENT PRICE NORWAY  Strong increase in market prices compared to Q4 2020 9,0 60 8,0 50 7,0  Nasdaq Norway price EUR 6.1 in Q4 2021 6,0 40 5,0 EUR DKK - Strong price increase given 10% growth in European supply 30 4,0 3,0 20 - Demand stimulated by reduced Covid-19 measures 2,0

  42. Slide 42: Development per Quarter

    DEVELOPMENT PER QUARTER Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (mDKK) 2019 2020 2020 2020 2020 2021 2021 2021 2021 Revenue 1,605 1,255 1,134 1,123 1,139 1,176 1,618 1,272 1,488 Operational EBIT 415 248 182 103 89 224 407 71 120 Profit/Loss 220 -148 472 177 -38 408 428 131 -3 Harvest FO (tgw) 17,930 10,667 12,94

  43. Slide 43: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • The Board proposes dividend for 2021 of DKK 5.14 per 99% share to be paid 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%  In

  44. Slide 44: Page 46

    BAKKAFROST / Q4 2021 PRESENTATION Page 46

  45. Slide 45: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 43.3% (2019)  53,664 inhabitants (Jan 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

  46. Slide 46: Facilities and locations

    Facilities and locations BAKKAFROST / Q4 2021 PRESENTATION Page 48

  47. Slide 47: Page 49

    BAKKAFROST / Q4 2021 PRESENTATION Page 49

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