Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q4 2017 Earnings Presentation

38 slides from Bakkafrost P/f's earnings presentation, Feb 20, 2018

  1. Slide 1: Q4 2017 Bakkafrost Group

    Q4 2017 BAKKAFROST GROUP Oslo 20 February 2018

  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 2017

     SUMMARY OF Q4 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvested 11,470 tgw in Q4 2017 (12,940 tgw in Q4 2016) Operation  Feed sales of 18,955 tonnes in Q4 2017* (24,988 tonnes in Q4 2016*)  Raw material purchase of 50,852 tonnes in Q4 2017 (34,680 tonnes in Q4 2016) Revenues and  Revenues of DKK 906 million in Q4 2017 (DKK 868 million i

  5. Slide 5: Summary of the quarter

    SUMMARY OF THE QUARTER The result of the Farming segment decreased due to lower salmon prices, but Q4 Q4 the VAP result increased significantly. The (DKK million) 2017 2016 2017 2016 FOF segment had a strong result. Operating revenues 906 868 3,770 3,203 Operational EBITDA 378 393 1,561 1,298  Farm

  6. Slide 6: Markets and Sales

     SUMMARY OF Q4 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Farming site A-71 Funningsfjørður Picture taken 13.02.2018 from Tyril, Gjógv By curtesy of Pól Sundskarð www.hiking.fo

  7. Slide 7: Markets & Sales

    MARKETS & SALES Sales to Eastern Europe increased, and sales to EU Total sales of salmon Q4 Q4 decreased in Q4 2017, compared to Q4 2016. VAP on by markets 2017 2016 2017 2016 contract decreased to 43% EU 45% 48% 45% 43% USA 17% 23% 18% 23%  EU market had a decrease of 3% from 48% in Q4 Asia 15% 14

  8. Slide 8: Global Markets

    GLOBAL MARKETS Lower salmon prices in Q4 2017 Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Q1 Q2 Q3 Q4  Prices decreased  y/y by 18.14 NOK/kg ~26.6% - from 68.30 to 50.16  q/q by 6.53 NOK/kg ~11.5% - from 56.70 to 50.16 Increased global supply in Q4 2017  11.8% increased global supply in Q4

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

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN 12% increase in supply to the markets (Q/Q) SUPPLY DEVELOPMENT Q4 Q4 Change % (head on gutted - HOG) 2017 2016  16% increase in global harvest  Large inventory build up in the quarter Norway 321.8 289.5 11.2 % UK 40.3 36.6 10.1 %  Market player

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

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) EU underperformed other markets Salmon markets, sold quantity (head on gutted - HOG)  High contract prices and lead times in transferring reduced spot prices to end consumers Estimated volumes Q4 comparison Estimated volumes FY comparison Markets

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK SUPPLY - TOTAL Lower supply growth 700 18% 600 16% 14%  Supply to the market likely to be impacted by inventory 500 12% reductions 400 10% 300 8%  Supply from Europe expected to be volatile in the coming 6% 200 quarters 4% 100 2%  Supply growth from Americas expected to

  12. Slide 12: Segment Information

     SUMMARY OF Q4 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q4 Q4  All volumes harvested in Q4 2017 came from tonnes [HOG] 2017 2016 2017 2016 the West Region, 66% came from A-57 Fuglafjørð at average 6.6 kg wfe North Region 0 3,983 30,251 24,768  Harvested volumes decreased by 11% in Q4 West Regio

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Reduced margin at lower prices Q4 Q4 (DKK million) 2017 2016 2017 2016  The operational EBIT decreased by 43% from DKK 402 million in Q4 2016 to DKK 229 million Operating revenues 577 777 2,987 2,841 in Q4 2017 Operational EBIT 229 402 1,308 1,315 Operational EBIT

  15. Slide 15: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Operation Margin - EBIT per kg total harvested quantity [NOK/kg]  Farming EBIT down by 11.94 NOK per kg to 40.00 25.76 in Q4 2017, compared to 37.70 in Q4 2016 35.00 37.70 34.50  Farming EBIT has decreased approximately 10 30.00 30.02 NOK in second half 2017, comp

  16. Slide 16: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) VAP margin positive for first time since Q4 2015 Q4 Q4 (DKK million) 2017 2016 2017 2016  Revenues decreased by 8% to DKK 288 million in Q4 Operating revenues 288 313 999 881 2017, from DKK 313 million in Q4 2016 Operational EBIT 37 -61 -75 -201  Operating EBIT in Q4 201

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

    FISHMEAL, OIL AND FEED (FOF) Very strong margin in the quarter Fishmeal, Oil and Feed  EBITDA of DKK 94 million in Q4 2017, Q4 Q4 compared with DKK 71 million in Q4 2016 (DKK million) 2017 2016 2017 2016 Operating revenues 367 330 1,303 1,158  EBITDA margin of 25.5% in Q4 2017, compared with 21.5%

  18. Slide 18: Market Conditions Feed

    MARKET CONDITIONS FEED Feed sales decreased Volumes of raw material purchase and feed sale [tonnes]  Quantity of feed sold was 18,955 tonnes in Q4 2017, 35,000 180,000 compared with 24,988 tonnes in Q4 2016 160,000 Raw material (tonnes) 30,000 Feed sale (tonnes) 140,000 25,000  Negative growth con

  19. Slide 19: Group Financials

     SUMMARY OF Q4 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Construction of the new hatchery at Strond in Klaksvík (photo from Jan 11th 2018) The operation is expected to start mid-2018. At full operation in 2019/2020 the hatchery is expected to produce 7 m

  20. Slide 20: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenues increased from DKK 868 million in Q4 Q4 Q4 2016 to DKK 906 million in Q4 2017. (DKK million) 2017 2016 2017 2016 Operating revenues 906 868 3,770 3,203  Operational EBIT in Q4 2017 decreased to DKK 331, compared to DKK 350 million in Q4 Operational EBITDA* 378 393 1

  21. Slide 21: Operational EBIT and Earnings per Share

    OPERATIONAL EBIT* AND EARNINGS PER SHARE 459 350 335 331 303 307 257 254 255 252 235 212 209 227 206 Operational EBIT* 186 (DKK million) 2014 2015 2016 2017 834 1,001 1,165 1,378 11.44 8.19 7.13 6.56 Earnings per share 4.36 4.59 4.39 4.61 3.91 (DKK) 3.44 2.60 2.71 1.78 1.63 1.16 -0.45 2014 2015 2016

  22. Slide 22: Balance Sheet

    BALANCE SHEET  Intangible assets at the end of Q4 2017 are unchanged from Q4 2016 (DKK million) 2017 2016 Intangible assets 377 377  Investments in PPE of DKK 169 million in Q4 2017 Property, plant and equipment 2,570 2,118  Financial assets amount to DKK 77 million. Financial assets 77 59 Long t

  23. Slide 23: Cash Flow

    CASH FLOW  Cash flow from operations higher in Q4 2017, compared to Q4 2016, due to changes in Q4 Q4 working capital (DKK million) 2017 2016 2017 2016 Cash flow from operations 261 72 1,458 850  Cash flow from investments represents investments in PPE Cash flow from investments -169 -193 -636 -740

  24. Slide 24: Net Interest Bearing Debt (NIBD)

    NET INTEREST BEARING DEBT (NIBD) Development in NIBD in DKK millions Net Interest Bearing Debt  Cash flow from operating activities and changes in working capital decreased the 169 NIBD with DKK 402 million in Q4 2017 356 -367  Net investments and other in Q4 2017 increased the NIBD with DKK NIBD1

  25. Slide 25: Outlook

     SUMMARY OF Q4 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  26. Slide 26: Outlook

    OUTLOOK Market VAP  Global supply in Q4 2017 estimated to increase  Contracted around 14% of expected harvest for around 12%, compared to Q4 2016 the rest of 2018  Global harvest increase in 2018 expected to be  Bakkafrost long-term strategy is to sell 40-50% of around 6% the harvested volumes a

  27. Slide 27: Appendix

     SUMMARY OF Q4 2017  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  28. Slide 28: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Global Supply of Atlantic Salmon (head on gutted - HOG) 2014 2015 2016 2017E 2018E 9% supply increase in 2018 Norway 1,076 1,112 1,055 1,078 1,180 UK 153 150 142 157 143  Total supply growth of 2% in 2017 Ireland 11 14 14 15 16  Total supply gro

  29. Slide 29: Q4 Market Environment

    Q4 MARKET ENVIRONMENT PRICE NORWAY Reduced spot prices in Europe driven by supply growth 8.0 60.0 7.4 7.3 7.2 6.9  Nasdaq Norway price EUR 5.1 in Q4 2017 7.0 6.1 6.4 50.0 6.0 6.0  31% decrease vs. Q4 2016 5.1 40.0 5.0  15% decrease compared to Q3 2017 EUR DKK 4.0 30.0  Fixed contracts realised a

  30. Slide 30: Share of Large Salmon Market

    SHARE OF LARGE SALMON MARKET Share of large fish Share of large fish (>6kg)  Share of large fish 25% in Q4 2017, 30% compared with average of 14%  Large fish share generally indicator on good 25% performance and better market diversification 20% 15% 10% 5% 0% Faroe Islands Norway Chile North Ameri

  31. Slide 31: 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:  Biological risk  Efficiency  Organic growth BAKKAFROST / Q4 2017 PRESENTATION Page 31

  32. Slide 32: 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

  33. Slide 33: Increased Smolt Production Leads to Increased Production

    INCREASED SMOLT PRODUCTION LEADS TO INCREASED PRODUCTION Farming volume – growth potential with PS (1,000 tonnes) Larger smolt (PS) will reduce time of cycle in farming 80  Harvest cycle every second year from the same fjords until 70.0 70 effect from larger smolt evolvs 60 54.5 50.6 51,0 47.5 50 

  34. Slide 34: Development per Quarter Q1 2014 – Q4 2017

    DEVELOPMENT PER QUARTER Q1 2014 – Q4 2017 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2017 2017 2017 2017 2016 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 Revenue 906 804 1,206 854 868 640 790 905 760 677 800 613 757 584 711 631 Operational EBIT 331 252 459 335 350 255 307 254

  35. Slide 35: Dividend

    DIVIDEND Dividend per share in % of adj. EPS * Dividend 100% 99% • Dividend for 2017 of DKK 10.50 (NOK 13.65****) 90% per share will be paid out in Q2 2018 80% 70% 60% 49%** 49% 50% 50% 49% 50% 46% 40% Dividend policy 40% 30% 19%  Competitive return through: 20% 10%  Dividends 0%  Increase in the

  36. Slide 36: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  50,498 inhabitants (Jan 2018)  Home rule – within the Kingdom of Denmark  Part of the Danish monetary union, Danish krone (DKK) Key sectors (% of wage earners, 2016)  Service/public admin.: ~34%  Private service: ~31%  Construction: ~13%  Fishing : ~21%

  37. Slide 37: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development 12 months development Traded daily NOK/share 5 years development Traded Monthly NOK/share Subscribe Oslo Stock Exchange Releases from BAKKA by e-mail on: http://www.bakkafrost.com/en/frontpage/ BAKKAFROST / Q4 2017 PRESENTATION Page 37

  38. Slide 38: Page 38

    BAKKAFROST / Q4 2017 PRESENTATION Page 38

Bakkafrost — Q4 2017 Earnings Presentation on 6ix