Bakkafrost P/f · OSL:BAKKA
Bakkafrost P/f — Bakkafrost — Q1 2014 Earnings Presentation
40 slides from Bakkafrost P/f's earnings presentation, May 20, 2014
Slide 1: Q1 2014 Bakkafrost Group
Q1 2014 Q BAKKAFROST GROUP Glyvrar 20 May 2014
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
Slide 3: Summary of Q1 2014
SUMMARY OF Q1 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS OUTLOOK
Slide 4: Bakkafrost – the largest fish farming company in the Faroe Islands
BAKKAFROST – THE LARGEST FISH FARMING COMPANY IN THE FAROE ISLANDS Largest L t salmon l farming f i company in i the th Faroe F Islands I l d ~63% of harvest volumes in Q1 2014 50% of farming licenses Harvested 9,269 tgw in Q1 2014 (8,296 tgw in Q1 2013) Feed sale of 13,956 tonnes in Q1 20
Slide 5: Summary of the quarter
SUMMARY OF THE QUARTER Q1 Q1 Highest margin ever ((DKK million)) 2014 2013 2013 2012 Operating re evenues 631.3 473.3 2,491.1 1,855.5 Farming division increased margin from Operationall EBITDA 208.1 125.9 673.7 403.3 14.95 to 22.51 NOK/kg Operationa al EBIT 185.5 105.0 587.0 323.0 Strong salmon
Slide 6: Summary of the quarter
SUMMARY OF THE QUARTER Market M k t Tight market and high prices St Strong demand d dddespite it hi high h prices i Operation Harvested volumes higher in Q1 2014 compared to Q1 2013 Transferred 3.0 million smolts in Q1 2014 No further ISA virus detected and no suspicion of ISA Biolog
Slide 7: Markets and Sales
SUMMARY OF Q1 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS OUTLOOK
Slide 8: Global markets
GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG] 55,00 0 The global supply of salmon increased 50,00 0 4% in Q1 2014 compared with Q1 2013 45,00 0 The salmon prices have increased to the highest level 40,00 0 for the past 10 years - due to high demand and low 35,00 0 supply growth 30,
Slide 9: Markets & Sales
MARKETS & SALES Overseas High-End markets also dominated Q1 2014 Sales S l Q1 Q1 by markets 2014 2013 2013 2012 Strong demand from the US market EU 47% 42% 47% 50% The Eastern European market is suffering during USA 26% 22% 19% 16% periods with high salmon prices Asia 21% 34% 27% 19% Eastern Eur
Slide 10: A market in balance in 2014, and no growth expected in 2015
A MARKET IN BALANCE IN 2014 2014, AND NO GROWTH EXPECTED IN 2015 We expect a back back-end end loaded total global G Global supply of Atlantic Salmon (head on gutted - HOG) supply growth of 8% in 2014 and 0% in 2015 2011 2012 2013E 2014E 2015E Norway is expected to increase volumes Norrway 904 1
Slide 11: Demand development split by markets
DEMAND DEVELOPMENT SPLIT BY MARKETS Salmon markets, sold quantity (head on gutted - HOG) Estimated volumes Q1 comparison Growth in supply of 4% in Q1 2014 Markets Q1 2014 E Q1 2013 Volume % EU 185.000 182.300 2.700 1% Strong demand from : USA 88.100 83.500 4.600 6% Russia 29.100 33.400 -4.300 -1
Slide 12: Segment Information
SUMMARY OF Q1 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS OUTLOOK
Slide 13: Farming – Harvest volume
FARMING – HARVEST VOLUME Harvest Volume Q1 Q1 Harvested volumes tonnes [HOG] 2014 2013 2013 2012 Harvested volumes increased by 12% West 8,948 3,939 12,065 20,847 Harvest primarily from the West region in the North 321 4,357 29,203 23,494 quarter Total 9,269 8,296 41,268 44,341 Smolt transfer Fa
Slide 14: Farming – Operational performance
FARMING – OPERATIONAL PERFORMANCE E Q1 Q1 Revenues and margin (D DKK million) 2014 2013 2013 2012 Revenues increased 22% and volumes increased Operating revenues 518 425 1,992 1,372 12% Operational EBIT 186 125 642 274 Operational EBIT margin increased from 29% to Operational EBIT 36% 29% 32% 20
Slide 15: Farming – Operational performance
FARMING – OPERATIONAL PERFORMANCE E Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 25 EBIT/kg increase by NOK 7.56 equivalent to 51% 20 in the quarter 22.51 15 Harvested fish from the sites in Sundalagið with good biological and financial performance 16.27 10 14.95 No signs o
Slide 16: Segment VAP
SEGMENT VAP Q1 Q1 Revenues and margin (DKK million) 2014 2013 2013 2012 Revenues increased 56%, while volume increased Operating revenues 232 148 666 526 37% Operational EBIT -9 -23 -90 37 Loss in VAP due to high raw material prices in the Operational EBIT -4% -16% -14% 7% spot market margin VAP
Slide 17: Segment VAP
SEGMENT VAP Margin - EBIT per kg total harvested quantity [NOK/kg] Strategy 25 20 Bakkafrost’s strategy is to sell around 50% of our products as VAP products directly to end markets in 15 Europe and US 10 5 Contracts are normally between 6 and 12 months 0 Losses during periods with high increa
Slide 18: Segment Fishmeal, Fishmeal Oil and Feed (FOF)
SEGMENT FISHMEAL, FISHMEAL OIL AND FEED (FOF) Improved raw material situation. situation Intake of 44 Fishmeal, Oil and Feed thousand tonnes in Q1 2014, compared with 31 thousand tonnes in Q1 2013 Q1 Q1 (DKK million) 2014 2013 2013 2012 EBITDA margin decreased from 15.75% 15 75% to 12.45% 12 45%
Slide 19: Ownership in FF Skagen
OWNERSHIP IN FF SKAGEN Two step transaction Purchased majority of Hanstholm Fiskemelsfabrik Sold Hanstholm Fiskemelsfabrik to FF Skagen Ownership now 17% in FF Skagen Why sell Hanstholm to FF Skagen Hanstholm Fiskemelsfabrik unprofitable p Necessary for consolidation in the region Access
Slide 20: Ownership in Pelagos
OWNERSHIP IN PELAGOS Pelagos a new processing plant next to Havsbrún 30% ownership together with two pelagic fishing com mpanies Access to off cuts and downgraded fish Reduced transportation costs of raw material Pelagos Commence p production in July y 2014 Capacity to process 650 tonnes p
Slide 21: Group Financials
SUMMARY OF Q1 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS OUTLOOK
Slide 22: Group profit and loss
GROUP PROFIT AND LOSS Q1 Q1 Revenue up 33% corresponding to DKK 158 ((DKK millio on)) 2014 2013 2013 2012 million) due to: Operating revenues 631 473 2,491 1,855 Improved market prices for salmon (spot and Operational EBITDA* 208 126 674 403 VAP) Operational EBIT* E 185 105 587 323 Harvest vol
Slide 23: Balance sheet
BALANCE SHEET End Q1 (DKK million)) (D 2014 2012 Investments in PPE of DKK ~18 million in Q1 2014 In ntangible assets 295 295 Financial assets increased due to investment in P Property, plant and equipment 912 917 pelagic p g p processinggpplant ((Bakkafrost owns 30%)) F Financial assets 125 115
Slide 24: Cash flow
CASH FLOW Q1 Q Q1 Q (D DKK million) 2014 2013 2013 2012 Positively affected cash flow from operations due to C Cash flow from operations 108 34 518 285 higher salmon prices C h fl Cash flow ffrom iinvestments t t -34 34 -29 29 -205 205 -67 67 C Cash flow from financing -13 94 -156 -211 Cash flow
Slide 25: Dividend
DIVIDEND Dividend DPS in % of adj. EPS * Dividend of DKK 4.50 (NOK ~4.98) per share paid out in April 2014 100% 99% Bakkafrost purchased treasury shares in 2013, 2013 90% equivalent to DKK 0.59 (NOK 0.66) per share. 80% Dividend incl. the acquisition of treasury shares is 70% DKK 5.09 ((NOK ~5
Slide 26: Proposed tax increases approved by parliament
PROPOSED TAX INCREASES APPROVED B BY PARLIAMENT Licence tax on farming companies in the Faroes* Faroes Approved by the parliament in May 2014 From a provisional tax to a permanent tax Licence tax of: • 4.5% on taxable income • 0 5% on farming revenues 0.5% Effect on Q1 2014 compared to 2013 ta
Slide 27: Outlook
SUMMARY OF Q1 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS INVESTMENTS 2014-2017 OUTLOOK
Slide 28: Outlook
OUTLOOK Market VAP More salmon expected in the market during Around 75-80% of the VAP capacity for 2014 contracted the summer • Contracted unsold volumes corresponds to 30% of g estimated harvested volumes in 2014 remaining Forward prices for the rest of 2014 are around • Contract prices on a si
Slide 29: Thank you!
\W/ BAKKAFROST ESTABLISHED ipée - ¥ 2 THANK YOU! “j ~ a es g ( yee
Slide 30: Faroe Islands
FAROE ISLANDS 18 islands – 1,387 km2 48,288 inhabitants (February 28 2014) 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: C t ti ~12% 1
Slide 31: Bakkafrost's value chain
BAKKAFROST’S VALUE CHAIN Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales One of the most vertical integrated salm mon farming companies in the world • Full traceability to the benefit of our cusstomers • 45 years of experience • Focus on cost centres • Vertical integ
Slide 32: Monthly exchange rates
Page 32 2 2014M03 2 2014M03 2 2014M01 2 2014M01 2 2013M11 2 2013M11 2 2013M09 2 2013M09 2 2013M07 2 2013M07 RUB/DKK 2 2013M05 GBP/DKK 2 2013M05 2 2013M03 2 2013M03 2 2013M01 2 2013M01 2 2012M11 2 2012M11 2 2012M09 2 2012M09 2 2012M07 2 2012M07 2 2012M05 2 2012M05 2 2012M03 2 2012M03 2 2012M01 2 2012
Slide 33: Faroe Islands – excellent conditions for cost effective farming
FAROE ISLANDS – EXCELLENT CONDITIONS FOR COST EFFECTIVE FARMING Natural growth area for wild salmon GEOGRAPHY Faroese fjords provide separation between locations Improves biological control and area manag gement Average Seawater Temperatures ºC Faroe Islands Norway (Trøndelag) Stable seawate
Slide 34: Bakkafrost - preparing for the future
BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales The investments will be made step by sttep in the relevant parts in the value chain to secure: Efficiency Biological Bi l i l risk i k Organic growth BAKKAFROST / Q1 PRESENTAT
Slide 35: Investments 2014-2017
INVESTMENTS - PREPARING FOR THE FUTURE INVESTMENTS 2014 - 2017 DKK 280 million DKK 280 million DKK 170 million DKK 170 million BAKKAFROST / Q1 PRESENTATION 2014 Page 35
Slide 36: Phase 3: New VAP operation
BAKKAFROST - PREPARING FOR THE FUTURE Phase 3: New VAP operation Draft of new plant 2 factories merged into one BAKKAFROST / Q1 PRESENTATION 2014 Page 36
Slide 37: Financing of the investments 2014-2017
BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2014-2017 Use free cash flow from operation Unused financing of DKK 804 million Partly new financing if advantageous U h Unchanged d di dividend id d policy li BAKKAFROST / Q1 PRESENTATION 2014 Page 37
Slide 38: Financing
FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding Total funding to DKK ~ 1,328 million 1600 Bonds NOK 500 million due Feb 2018 (swapped into 1400 DKK) 1200 Instalment loan of DKK 300 million, repayable with DKK 1000 25 million each quarter 800 Revolving cred
Slide 39: Development per quarter Q1 2012 – Q1 2014
DEVELOPMENT PER QUARTER Q1 2012 – Q1 2014 (mDKK) Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 2 Q3 2012 Q2 2012 Q1 2012 Revenue 631 667 741 610 473 582 457 416 400 Op. EBIT 186 124 187 169 105 99 86 78 60 Profit/Losss 87 138 200 184 67 148 26 91 16 Harvest (tgw) 9,269 11,097 11,335 10,540 8,296 1
Slide 40: Largest shareholders
LARGEST SHAREHOLDERS 20 largest shareholders Share price development since listing in NOK N off shares No h share h N Name Oi i Origin Last 12 4.594.437 9,5% JACOBSEN Oddvør Faroe Isl months 4.491.217 9,3% JACOBSEN Regin Faroe Isl 2.454.264 5,1% TF ÍLØGUR P/F Faroe Isl 2.094.793 3,0% SKANDINAVISKA E