Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2018 Earnings Presentation

44 slides from Bakkafrost P/f's earnings presentation, Nov 6, 2018

  1. Slide 1: Q3 2018 Bakkafrost Group

    Q3 2018 BAKKAFROST GROUP Oslo 6 November 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 Q3 2018

     SUMMARY OF Q3 2018  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvested 7,217 tgw in Q3 2018 (11,585 tgw in Q3 2017) Operation  Feed sales of 23,468 tonnes in Q3 2018* (22,320 tonnes in Q3 2017*)  Raw material purchase of 7,496 tonnes in Q3 2018 (21,937 tonnes in Q3 2017)  Revenues of DKK 622 million in Q3 2018 (DKK 804 million in Q3 2017) Reve

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER Operational EBIT for the Farming segment Q3 Q3 M9 M9 decreased due to lower volumes. Positive (DKK million) 2018 2017 2018 2017 operational EBIT for the VAP segment, but Operating revenue 622 804 2,427 2,864 lower EBITDA margin for the FOF segment. Operational EBITDA 221 302 9

  6. Slide 6: Markets and Sales

     SUMMARY OF Q3 2018  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  INVESTMENT PLAN 2018 - 2022  APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES Sales distribution in Q3 2018 had similar trends as in the Total sales of salmon Q3 Q3 M9 M9 first half of 2018. Sales to Eastern Europe increased and by markets 2018 2017 2018 2017 sales to EU decreased in Q3 2018, compared to Q3 2017. EU 27% 45% 29% 46% Small changes in sales to US

  8. Slide 8: Global Markets

    GLOBAL MARKETS Lower prices in Q3 2018 Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Q1 Q2 Q3 Q4  Prices dropped 3% compared with Q3-2017 80.00 70.00  y/y by 1.39 NOK/kg ~2% - from NOK 56.70 to NOK 55.31 60.00 50.00  q/q by 14.86 NOK/kg ~21% - from NOK 70.17 to NOK 55.31 40.00 30.00 Increased

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

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN 5.4% global supply growth in Q3 2018 SUPPLY DEVELOPMENT Q3 Q3 Change (HOG ‐ 1,000 tonnes) 2018 2017 %  Supply increase exceeded change in harvest Norway 292.2 280.7 4.1 % due to inventory movements in Chile UK 33.8 42.0 -19.5 % Ireland 3.2 4.1 -2

  10. Slide 10: Salmon Markets, Sold Quantity (HOG)

    SALMON MARKETS, SOLD QUANTITY (HOG) Strong momentum in most markets Salmon markets, sold quantity (head on gutted - HOG) Estimated volumes Q3 comparison Estimated volumes YTD comparison Marginal growth in the EU Markets Q3 2018 Q3 2017 Volume % M9 2018 M9 2017 Volume %  Reflecting 1% harvest declin

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK  Modest supply growth expected coming quarters SUPPLY - TOTAL  Growth rate impacted by inventory movements 620 6%  Growth in harvest likely to be instrumental for pricing 600 5%  Frozen products are materially sold through alternative channels 580 4% 560  Europe – Incr

  12. Slide 12: Segment Information

     SUMMARY OF Q3 2018  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  INVESTMENT PLAN 2018 - 2022  APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q3 Q3 M9 M9 tonnes [HOG] 2018 2017 2018 2017  Harvested volumes decreased by 38% in Q3 2018, compared with Q3 2017 North Region 6,254 1,659 21,892 24,364  The harvest in the North Region was 87% West Region 963 9,926 10,464 18,781 and harv

  14. Slide 14: A-81 Kolbanagjógv – Algae Wiped Out Half of the Site

    A-81 KOLBANAGJÓGV – ALGAE WIPED OUT HALF OF THE SITE Critical incident at A-81 Kolbanagjógv September Algae killed 700,000 smolts at A-81 within hours 2018 Wednesday 19th of September  Farmers reported lower appetite  Sea lice disappeared from lumpfish  Samples taken to check for algae Thursday 2

  15. Slide 15: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Lower volumes and incident at Q3 Q3 M9 M9 Kolbanagjógv had a negative impact on (DKK million) 2018 2017 2018 2017 costs Operating revenue 445 619 1,887 2,409  The operational EBIT decreased from DKK Operational EBIT 140 217 761 1,079 217 million in Q3 2017 to DKK 1

  16. Slide 16: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Operation Margin - EBIT per kg total harvested quantity [NOK/kg]  Farming operational EBIT increased by NOK 1.34 per kg from NOK 23.51 in Q3 2017 to 35.00 NOK 24.85 in Q3 2018 30.00 30.28 31.05  Operational EBIT per kg in the North Region 25.00 was NOK 23.95 and i

  17. Slide 17: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) VAP operational EBIT margin positive again Q3 Q3 M9 M9 (DKK million) 2018 2017 2018 2017  Substantial decrease in revenue by 72% to DKK 69 Operating revenue 69 246 256 710 million in Q3 2018, from DKK 246 million in Q3 2017 Operational EBIT 3 -4 -26 -112  Operating EBIT

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

    FISHMEAL, OIL AND FEED (FOF) Reduced EBITDA margin in the quarter Fishmeal, Oil and Feed  EBITDA of DKK 41 million in Q3 2018, Q3 Q3 M9 M9 compared with DKK 79 million in Q3 2017 (DKK million) 2018 2017 2018 2017 Operating revenue 354 342 981 936  EBITDA margin of 11.7% in Q3 2018, compared with 2

  19. Slide 19: Market Conditions Feed

    MARKET CONDITIONS FEED Increase in feed sales Volumes of raw material purchase and feed sale [tonnes]  Quantity of feed sold was 23,468 tonnes in Q3 2018, 35,000 175,000 Raw material (tonnes) compared to 22,320 tonnes in Q3 2017 30,000 150,000 Feed sale (tonnes) 25,000 125,000  External feed sales

  20. Slide 20: Group Financials

     SUMMARY OF Q3 2018  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  INVESTMENT PLAN 2018 - 2022  APPENDIX

  21. Slide 21: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenue on lower level in Q3 2018, due to Q3 Q3 M9 M9 lower harvest. Revenue in Q3 2018 (DKK million) 2018 2017 2018 2017 amounted to DKK 622 million, compared to Operating revenue 622 804 2,427 2,864 DKK 804 million in Q3 2017. Operational EBITDA* 221 302 992 1,184  Operati

  22. Slide 22: Operational EBIT and Earnings per Share

    OPERATIONAL EBIT* AND EARNINGS PER SHARE 459 408 350 335 331 303 307 257 254 255 252 268 235 206 Operational EBIT* 168 (DKK million) 2015 2016 2017 YTD 2018 1,001 1,165 1,378 844 11.44 8.19 6.56 7.13 6.96 7.32 5.60 Earnings per share 4.39 4.61 3.91 (DKK) 3.44 2.71 1.63 1.16 -0.45 2015 2016 2017 YTD

  23. Slide 23: Balance Sheet

    BALANCE SHEET  Intangible assets increased by DKK 12 million in the End M9 End M9 End quarter and amounts to DKK 389 million at the end (DKK million) 2018 2017 2017 of Q3 2018 Intangible assets 389 377 377 Property, plant and equipment 2,789 2,448 2,570  Investments in PPE of DKK 127 million in Q3

  24. Slide 24: Cash Flow

    CASH FLOW  Cash flow from operations amounted to DKK Q3 Q3 M9 M9 324 million in Q3 2018, compared to DKK 334 (DKK million) 2018 2017 2018 2017 million in Q3 2017 Cash flow from operations 324 334 972 1,197  Cash flow from investments amounted to Cash flow from investments -164 -118 -384 -467 DKK -

  25. Slide 25: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) Net Interest-Bearing Debt Development in NIBD in DKK millions  Cash flow from operating activities decreased the NIBD with DKK 207 million in Q3 2018 -115 164  Net investments increased the NIBD with DKK 164 million in Q3 2018 -207  Change in working capital in Q3

  26. Slide 26: Outlook

     SUMMARY OF Q3 2018  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  INVESTMENT PLAN 2018 - 2022  APPENDIX

  27. Slide 27: Outlook

    OUTLOOK Market VAP  Global supply in Q3 2018 increased around 5%, compared  Contracted around 12% of expected harvest for the to Q3 2017 rest of 2018  Global harvest in Q4 2018 is expected to increase 1%  Bakkafrost is presently negotiating new contracts for 2019  Global supply increase in 2018

  28. Slide 28: Appendix

     SUMMARY OF Q3 2018  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  INVESTMENT PLAN 2018 - 2022  APPENDIX

  29. Slide 29: Investment Programme 2018 - 2022

    INVESTMENT PROGRAMME 2018 - 2022 Same aim as in previous investment programs:  Biological risk  Efficiency  Sustainable growth And investments will be made step by step in the relevant parts of the value chain BAKKAFROST / Q3 2018 PRESENTATION Page 29

  30. Slide 30: ~55% Sustainable Growth in Harvest Expected by 2023

    ~55% SUSTAINABLE GROWTH IN HARVEST EXPECTED BY 2023 (CAGR 9.2%) Sustainable Growth part of Investment Program  New portfolio of sites in Suðuroy  10,000 tonnes expected by 2023  Full infrastructure to be upgraded  Roll-out of large smolt strategy  15,000 tonnes expected by 2022 (1)  R&D projec

  31. Slide 31: Suðuroy – Sole Operator in Reorganized Production Cluster

    SUÐUROY – SOLE OPERATOR IN REORGANIZED PRODUCTION CLUSTER  To be operated with separate Suðuroy - Reorganized production cluster infrastructure  Harvest capacity of 15,000 tonnes annually  Of which 5,000 tonnes from large smolt  Separate hatchery for large smolt  Four farming sites 112 km  Onl

  32. Slide 32: Preparing for the Future – Updated Investment Plan

    PREPARING FOR THE FUTURE – UPDATED INVESTMENT PLAN (DKK 3 BILLION) Fishmeal, oil and feed (DKK ~ 425 million) Investment program 2018 - 2022  Increased fish oil capacity to support marine index 765 715  Increased feed capacity and advanced feed line capabilities 590 540 Development of unique Faroe

  33. Slide 33: In-House Broodstock Operation

    IN-HOUSE BROODSTOCK OPERATION  Breeding program based on gene Sandoy east side – remote and good location for broodstock site pool of local wild salmon strain  Adaptability to local biology  Product differentiation  Support branding strategy  Independence of external suppliers  Veterinary cont

  34. Slide 34: Sustainability Update – Biogas Plant Investment

    SUSTAINABILITY UPDATE – BIOGAS PLANT INVESTMENT Faroe Islands Biogas Plant Investment (2019-)  Sustainability commitment  Part of Bakkafrost’s 2020 Healthy Living Plan  Waste management  40-50,000 tonnes from salmon and dairy farms to be processed annually  Heat and electricity production  Eno

  35. Slide 35: Updated Investment Program to Support Sustainable Growth

    UPDATED INVESTMENT PROGRAM TO SUPPORT SUSTAINABLE GROWTH Total investments of DKK 3 billion (2018-2022)  Front loaded average investment level of DKK 10/kg  Incremental investments of DKK 120/kg growth (25k tgw) Completes upgrading of entire infrastructure in value chain  Total investments of DKK

  36. Slide 36: 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) 2012 2013 2014 2015 2016 2017 2018E 2019E  7% supply growth expected in 2018 Norway 1,066 1,029 1,076 1,113 1,054 1,087 1,136 1,187 United Kingdom 143 142 154 150 142 159 136 159  1% in Eur

  37. Slide 37: Q3 2018 Market Environment

    Q3 2018 MARKET ENVIRONMENT  Reduced market prices in third quarter PRICE NORWAY 8.0 7.4 7.3 60.0 7.2  Nasdaq Norway price EUR 5.7 in Q3 2018 7.0 7.2 6.4 6.2 6.0 50.0 5.7  5% decrease vs. Q3 2017 6.0 5.1 40.0 5.0  20% decrease vs. Q2 2018 EUR DKK 4.0 30.0 3.0  1% increase in Urner Barry East Coa

  38. Slide 38: Superior Biology Combined with State of the Art Infrastructure

    SUPERIOR BIOLOGY COMBINED WITH STATE OF THE ART INFRASTRUCTURE FISHMEAL, OIL AND FEED BROODSTOCK SMOLT SEA WATER PROCESSING SALES/MARKETING Equivalent to 100k (tgw) None 12 million @ 200 grams 21 farming sites/17 fjords 130k primary (tgw) Central sales Faroes annual harvest @ 55k (tgw) @100g smolt/

  39. Slide 39: Development per Quarter Q1 2015 – Q2 2018

    DEVELOPMENT PER QUARTER Q1 2015 – Q2 2018 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2018 2018 2018 2017 2017 2017 2017 2016 2016 2016 2016 2015 2015 2015 2015 Revenue 622 954 851 906 804 1,206 854 868 640 790 905 760 677 800 613 Operational EBIT 168 408 268 331 252 459 335 350 255 307 254

  40. Slide 40: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • Dividend for 2017 of DKK 10.50 (NOK 13.52) per 100% 99% share was paid in Q2 2018 90% 80% 70% 60% 50% 50% 49%** 49% 46% 49% Dividend policy 50% 40% 40% 30%  Competitive return through: 19% 20% 10%  Dividends 0%  Increase in the value of the

  41. Slide 41: Page 41

    BAKKAFROST / Q3 2018 PRESENTATION Page 41

  42. Slide 42: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  51,060 inhabitants (Sept 2018)  Home rule – within the Kingdom of Denmark  Part of the Danish monetary union, Danish krone (DKK) Key sectors (% of wage earners, 2017)  Service/public admin.: ~36%  Private service: ~33%  Construction: ~16%  Fish & aquacu

  43. Slide 43: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development Traded daily No of shares % Name Type Nationality 12 months development NOK/share Traded Monthly 5 years development NOK/share Subscribe Oslo Stock Exchange Releases from BAKKA by e-mail on: http://www.bakkafrost.com/en/bakkafrost_invest

  44. Slide 44: Page 44

    BAKKAFROST / Q3 2018 PRESENTATION Page 44

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