Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2016 Earnings Presentation

39 slides from Bakkafrost P/f's earnings presentation, Nov 8, 2016

  1. Slide 1: Q3 2016 Bakkafrost Group

    Q3 2016 BAKKAFROST GROUP Oslo 8 November 2016

  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 Q3 2016

     SUMMARY OF Q3 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS Acquisition of Faroe Farming and strong result  Harvested 10,664 tgw in Q3 2016 (12,982 tgw in Q3 2015)  Feed sales of 28,850 tonnes in Q3 2016* (27,011 tonnes in Q3 2015*)  Raw material purchase of 11,003 tonnes in Q3 2016 (10,417 tonnes in Q3 2015)  Revenues of DKK 640 million in Q3

  5. Slide 5: Summary of the quarter

    SUMMARY OF THE QUARTER Strongest quarterly result from combined Q3 Q3 M9 M9 Farming/VAP per kg, although VAP segment (DKK million) 2016 2015 2016 2015 is still struggling. FOF segment has good Operating revenues 640 677 2,334 2,091 result Operational EBITDA 287 232 905 823  Farming/VAP division inc

  6. Slide 6: Markets and Sales

     SUMMARY OF Q3 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES Sales to EU and USA increased and consequently Total sales of salmon Q3 Q3 M9 M9 sales to Asia and Eastern Europe decreased by markets 2016 2015 2016 2015 EU 46% 34% 41% 34%  EU market share increased from 34% in Q3 2015 to USA 24% 19% 23% 18% 46% in Q3 2016 Asia 13% 17% 19% 14% Eas

  8. Slide 8: Market Environment Q3 2016

    MARKET ENVIRONMENT Q3 2016 MARKET CURRENCY Q3 2016 Q3 2015 Change % PRICE NORWAY Nasdaq Norway (EUR) 6.41 4.48 43.2 % UB North East US 12-14lb HOG (USD) 4.06 3.17 28.2 % 8,0 60,0 6,9 7,0 6,1 6,4 50,0 6,0 DKK Q3 2016 Q3 2015 Change % 4,7 4,8 40,0 5,0 4,4 4,5 Nasdaq Norway 47.71 33.40 42.9 % EUR DKK 4

  9. Slide 9: Global Markets

    GLOBAL MARKETS Undersupply leads to high market prices Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG]  The NASDAQ salmon price for size 4-5 Q1 Q2 Q3 Q4  Increased y/y by 19.04 NOK/kg ~55% - from 42.08 to 61.10  Reduced q/q by 4.29 NOK/kg ~7% - from 65.41 to 61.10 Reduced global supply in Q3 20

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

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) Supply decreased in Q3 2016 Reduced supply in Q3 2016 and YTD of Atlantic Salmon (head on gutted - HOG)  35,600 tonnes lower supply Estimated volumes Q3 comparison Estimated volumes YTD Q3 comparison Markets Q3 2016E Q3 2015 Volume % YTD 2016E YT

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK Low supply to continue SUPPLY - TOTAL 540.000 0%  8-9% drop in global supply expected for the next two quarters, compared to the same quarters last year 520.000 -2%  Temporary reduction in Norway 500.000 -4%  Biological challenges in Chile 480.000 -6%  Europe expected t

  12. Slide 12: Segment Information

     SUMMARY OF Q3 2016  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  Nearly all harvest, 97%, was from the North tonnes [HOG] 2016 2015 2016 2015 region. Average weight of harvested fish was 5.3 kg gw North Region 10,372 3,846 20,785 22,712  Harvested volumes decreased by 18% in Q3 West Region

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE High prices and good margin Q3 Q3 M9 M9 (DKK million) 2016 2015 2016 2015  The operational EBIT increased 61% from DKK 183 million in Q3 2015 to DKK 294 million Operating revenues 610 558 2,064 1,639 in Q3 2016 Operational EBIT 294 183 913 626  Good biological per

  15. Slide 15: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Operation Margin - EBIT per kg total harvested quantity [NOK/kg]  Farming EBIT of NOK 34.44 per kg in Q3 2016, 40,00 compared to 17.25 in Q3 2015 35,00 34,44  High prices and good biological performance 30,00 33,22 25,00  Performance similar in North and West Reg

  16. Slide 16: Faroe Farming Part of Bakkafrost from 1 July 2016

    FAROE FARMING PART OF BAKKAFROST FROM 1 JULY 2016 Part of Bakkafrost Group 1 July 2016 Faroe Farming – located at the South Island in the Faroe Islands  Faroe Farming’s operation integrated into Bakkafrost’s West Region  No harvest in Q3 2016  Three farming sites, whereof one is relinquished in o

  17. Slide 17: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) VAP revenues and margin Q3 Q3 M9 M9 (DKK million) 2016 2015 2016 2015  Revenues increased by 20% to DKK 201 million in Q3 2016, from DKK 167 million in Q3 2015 Operating revenues 201 167 568 547 Operational EBIT -47 9 -140 62  Operating EBIT in Q3 2016 DKK -47 million, c

  18. Slide 18: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) High margin Fishmeal, Oil and Feed  EBITDA DKK 62 million in Q3 2016, Q3 Q3 M9 M9 compared with DKK 42 million in Q3 2015 (DKK million) 2016 2015 2016 2015 Operating revenues 320 320 828 809  EBITDA margin of 19.5% in Q3 2016, compared with 13.0% in Q3 2015 EBITDA 62 4

  19. Slide 19: Market Conditions Feed

    MARKET CONDITIONS FEED Feed sales higher Volumes of raw material purchase and feed sale [tonnes]  Quantity of feed sold was 28,850 tonnes in Q3 2016, 35.000 120.000 compared with 27,011 tonnes in Q3 2015 Raw material (tonnes) 30.000 100.000 Feed sale (tonnes) 25.000 80.000 20.000 60.000 15.000 40.0

  20. Slide 20: Group Financials

     SUMMARY OF Q3 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  21. Slide 21: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenues decreased from DKK 677 million in Q3 Q3 M9 M9 Q3 2015 to DKK 640 million in Q3 2016, as (DKK million) 2016 2015 2016 2015 harvested volumes were lower, but decrease Operating revenues 640 677 2,334 2,091 limited because of higher spot prices Operational EBITDA* 287 2

  22. Slide 22: Balance Sheet

    BALANCE SHEET  Increase of DKK 82 million in intangible assets relates End M9 End M9 End to acquisition of Faroe Farming (acquired farming (DKK million) 2016 2015 2015 licenses) Intangible assets 377 295 295 Property, plant and equipment 1,971 1,346 1,531  Investments in PPE of DKK ~ 154 million i

  23. Slide 23: Cash Flow

    CASH FLOW Q3 Q3 M9 M9  Cash flow from operations lower in Q3 2016 than (DKK million) 2016 2015 2016 2015 in Q3 2015, due to increase in total inventory. Cash flow from operations 285 367 777 773 Changes in receivables and current debts had positive effect Cash flow from investments -230 -204 -546 -

  24. Slide 24: Outlook

     SUMMARY OF Q3 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  25. Slide 25: Outlook

    OUTLOOK Market VAP  Tight market balance in 2016, global supply  Contracted 100% of the goal for the VAP production reduction of 4% in 2016, compared to 2015 for the rest of 2016, corresponding to around 43% of expected harvest for the rest of 2016  Global supply in 2017 expected to increase only

  26. Slide 26: Appendix

     SUMMARY OF Q3 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  27. Slide 27: Development per Quarter Q1 2013 – Q3 2016

    DEVELOPMENT PER QUARTER Q1 2013 – Q3 2016 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 2013 2013 2013 2013 Revenue 640 790 905 760 677 800 613 757 584 711 631 667 741 610 473 Operational EBIT 255 307 254 257 206 303 235 227 209 212 186 12

  28. Slide 28: Record Prices, Yet Challenging to Retain Windfall Profits

    RECORD PRICES, YET CHALLENGING TO RETAIN WINDFALL PROFITS  Global output has generally exceeded practical capacity given 25,0 DKK EBIT/kg (Largest public players) current tools (technology, regulations, industry cooperation/ practice and pharmacy) 20,0 Operational EBIT (DKK)  Pending progress in t

  29. Slide 29: Size and Survival Matters!

    SIZE AND SURVIVAL MATTERS! Yield per smolt (HOG) 2010-2012G vs 2013G Average harvest weight (HOG) 5,50 6,50 2010-2012G vs 2013G 5,00 6,00 5,50 4,50 5,00 4,00 2012 - 2014 4,50 2012 - 2014 2015 3,50 2015 2012 - 2014 4,00 2012 - 2014 2012 - 2014 2015 2012 - 2014 2015 2012 - 2014 3,00 2015 3,50 2015 201

  30. Slide 30: 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:  Efficiency  Biological risk  Organic growth BAKKAFROST / Q3 2016 PRESENTATION Page 30

  31. Slide 31: 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

  32. Slide 32: Investments - Future vs. Past

    INVESTMENTS - FUTURE VS. PAST Past 3 years Investments since 2013 700  Investments 2013 – 2015  DKK 1.0 billion (incl. maintenance) 600 500 Future 5 years 400 DKK million  Investments 2016 – 2020 300  DKK 2.2 billion (incl. maintenance) 200 Maintenance level 100  Maintenance level has increased

  33. Slide 33: Fresh Water Division Capacity Increase

    FRESH WATER DIVISION CAPACITY INCREASE Capacity increase in order to produce larger smolt Capacity development  The capacity increases in 2016 with the new Hatchery at Viðareiði 8,000m3 Capacity  New Hatchery at Strond 29,000m3 in operation in 2018 50.000 45.000  Total capacity 4 folded from 2015

  34. Slide 34: De-bottlenecking: Shortening the Sea-Water Production Cycle

    DE-BOTTLENECKING: SHORTENING THE SEA-WATER PRODUCTION CYCLE TRANSFER TO SEAWATER TRANFER TO PROCESSING FRESHWATER STAGE (MONTHS) SEAWATER STAGE (MONTHS) FALLOWING 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1 2 100 g 6 kg GW 30% REDUCTION TRANSFER TO SEAWATER TRANFER TO P

  35. Slide 35: Increased Smolt Size Leads to Increased Total Volume

    INCREASED SMOLT SIZE LEADS TO INCREASED TOTAL VOLUME* Farming volume – growth potential with PS (1,000 tonnes) Larger smolt (PS) will reduce time of cycle in farming 70 65,0 60  Smolt size will gradually increase to 500 gram by 50 44,3 44,0 50,6 48,0 41,3 2020 40 36,3 30  Smolt release will gradua

  36. Slide 36: Dividend

    DIVIDEND Dividend per share in % of adj. EPS * Dividend policy 100% 99%  Competitive return through: 90% 80%  Dividends 70%  Increase in the value of the equity 60% 49%** 49% 46% 48%** 50% 40%  Generally, Bakkafrost shall pay dividend to its 40% 30% shareholders 19% 20%  A long-term goal is tha

  37. Slide 37: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  49,192 inhabitants (January 2016)  Home rule – within the Kingdom of Denmark  Part of the Danish monetary union, Danish krone (DKK) Key sectors (% of wage earners, 2014)  Service/public admin.: ~40%  Private service: ~31%  Construction: ~12%  Fishing :

  38. Slide 38: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development No of shares Account name type Citizens 12 months development Traded daily 4.594.437 9,4% Jacobsen Oddvør FRO NOK/share 4.493.465 9,2% Jacobsen Johan Regin FRO 3.392.623 6,9% Nordea Bank Danmark S/A NORDEA (DK) NOM DNK 2.343.633 4,8% FOL

  39. Slide 39: Page 39

    BAKKAFROST / Q3 2016 PRESENTATION Page 39

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