Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q2 2015 Earnings Presentation

42 slides from Bakkafrost P/f's earnings presentation, Aug 25, 2015

  1. Slide 1: Q2 2015 Bakkafrost Group

    Q2 2015 BAKKAFROST GROUP Oslo August 25th 2015

  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 Q2 2015

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Hans á Bakka – Bakkafrost’s new wellboat – Christening ceremony in Glyvrar 30 July 2015

  4. Slide 4: Bakkafrost – the largest fish farming company in the Faroe Islands

    BAKKAFROST – THE LARGEST FISH FARMING COMPANY IN THE FAROE ISLANDS  Largest salmon farming company in the Faroe Islands  50% of farming licenses  Harvested 14,182 tgw in Q2 2015 (11,212 tgw in Q2 2014)  Feed sales of 17,657 tonnes in Q2 2015* (18,827 tonnes in Q2 2014*) ~110km  Revenues of DKK

  5. Slide 5: Summary of the quarter

    SUMMARY OF THE QUARTER Positive results in all segments Q2 Q2 H1 H1  Farming/VAP division increased margin 2015 2014 2015 2014 (DKK million) from 17.66 NOK/kg in Q2 2014 to 22.62 Operating revenues 800 711 1,413 1,342 NOK/kg in Q2 2015 Operational EBITDA 330 236 591 444  VAP segment delivered a ma

  6. Slide 6: Summary of the quarter

    SUMMARY OF THE QUARTER  Market  Good market for high quality salmon  Benefit from market diversification and good market access  Good market diversification  Operation  Good operational performance  Harvested volumes 26% higher, compared with Q2 2014  Transferred 1.4 million smolts in Q2 201

  7. Slide 7: Markets and Sales

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Hans á Bakka – Bakkafrost’s new wellboat – Christening ceremony in Glyvrar 30 July 2015 Eydna Jacobsen, godmother of the ship

  8. Slide 8: Global markets

    GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG] 55,00  The NASDAQ salmon price for size 4-5: 50,00  Decreased y/y Q2 2015 / Q2 2014 by ~5% 45,00 - by 1.88 NOK/kg from 40.61 to 38.73 40,00  Decreased q/q Q2 2015 / Q1 2015 by ~7% 35,00 - by 2.70 NOK/kg from 41.43 to 38.73 30,00 25,00 

  9. Slide 9: Markets & Sales

    MARKETS & SALES Total sales of salmon Q2 Q2 H1 H1 Increased diversification continues by markets 2015 2014 2015 2014 EU 29% 56% 34% 52%  Access to all markets USA 17% 20% 18% 22%  Flexible and efficient market adaptation Asia 15% 19% 13% 20% Eastern Europe 39% 5% 35% 6%  Strong market position in

  10. Slide 10: 4% global growth expected in 2015

    4% GLOBAL GROWTH EXPECTED IN 2015  The supply growth in 2015 is expected to be Global supply of Atlantic Salmon (head on gutted - HOG) 4%, compared with 2014 15E vs 14 2011 2012 2013 2014 2015E HOG %  The expected global supply growth in 2015 has Norway 904 1.066 1.029 1.076 1.111 35 3% UK 139 143

  11. Slide 11: Demand development split by markets

    DEMAND DEVELOPMENT SPLIT BY MARKETS  Only 400 tonnes increase in sold Salmon markets, sold quantity (head on gutted - HOG) volumes in Q2 2015, compared with Estimated volumes Q2 comparison Estimated volumes YTD comparison Q2 2014 Markets Q2 2015 E Q2 2014 Volume % H1 2015 E H1 2014 Volume % EU 229.

  12. Slide 12: Segment Information

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  13. Slide 13: Farming – Harvest volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q2 Q2 H1 H1  Harvested volumes increased by 26% in Q2 tonnes [HOG] 2015 2014 2015 2014 2015, compared with Q2 2014 West 2,501 3,338 5,042 12,286  The North division harvested 82% of the total quantity in the quarter, and the West division

  14. Slide 14: Farming – Operational performance

    FARMING – OPERATIONAL PERFORMANCE Q2 Q2 H1 H1 Revenues and margin (DKK million) 2015 2014 2015 2014 Operating revenues 609 516 1,080 1,034  Revenues increased 18%, and volumes increased 26%, compared to Q2 2014 Operational EBIT 248 160 443 346  All time high Operational EBIT in Q2 2015. Operationa

  15. Slide 15: Farming – Operational performance

    FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 25,00  High EBIT/kg due to good biological performance, low cost prices, good quality and high value from 20,00 21,49 sold products 20,07 18,75  Harvested fish with good biological and financial 15,0

  16. Slide 16: Segment VAP

    SEGMENT VAP Q2 Q2 H1 H1 VAP revenues and margin (DKK million) 2015 2014 2015 2014  Stable market conditions. Operating revenues 191 267 380 499 Operational EBIT 31 20 53 11  Same trend as in Q1 2015, lower revenues from promotions Operational EBIT margin 17% 8% 14% 2% VAP produced volumes  Operat

  17. Slide 17: Segment VAP

    SEGMENT VAP Margin - EBIT per kg total harvested quantity [NOK/kg] Good margins from VAP and Farming 25 20  VAP EBIT was 7.13 NOK and Farming EBIT/kg was 20.07 15 NOK in Q2 2015. 10 5  Combined VAP/Farming EBIT/kg was 22.62 NOK, 0 compared to 17.66 NOK in Q2 2014 -5  Bakkafrost’s strategy is to s

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

    SEGMENT FISHMEAL, OIL AND FEED (FOF) Fishmeal, Oil and Feed Reduced volumes y/y  EBITDA DKK 53 million in Q2 2015, (DKK million) Q2 2015 Q2 2014 H1 2015 H1 2014 compared with DKK 57 million in Q2 2014 Operating revenues 284 280 488 458  EBITDA margin of 18.7% in Q2 2015, compared with 20.3% in Q2

  19. Slide 19: Market conditions feed

    MARKET CONDITIONS FEED Volumes of raw material purchase and feed sale [tonnes] Timing of raw material purchase affects profit 35.000 120.000 Raw material (tonnes)  Raw material intake decreased 20% Q2 2015, 30.000 100.000 Feed sale (tonnes) compared with Q2 2014 25.000 80.000 20.000 60.000  High m

  20. Slide 20: Group Financials

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  21. Slide 21: Group profit and loss

    GROUP PROFIT AND LOSS Q2 Q2 H1 H1  Revenues increased DKK 89 million or 13% (DKK million) 2015 2014 2015 2014 The increase is due to: Operating revenues 800 711 1,413 1,342  Harvest volumes higher in Q2 2015, than Operational EBITDA* 330 235 591 444 corresponding period 2014 Operational EBIT* 303

  22. Slide 22: Balance sheet

    BALANCE SHEET End H1 End H1 End  Investments in PPE of DKK ~ 73 million in Q2 2015 (DKK million) 2015 2014 2014 Intangible assets 295 295 295  Decrease in financial assets because of losses from associates in Q2 2015 Property, plant and equipment 1,168 949 1,041 Financial assets 113 132 125  The

  23. Slide 23: Cash flow

    CASH FLOW  Cash flow from operation improved because of Q2 Q2 H1 H1 higher operational EBIT and working capital is (DKK million) 2015 2014 2015 2014 nearly unchanged in Q2 2015 Cash flow from operations 326 307 407 416 Cash flow from investments -72 -71 -178 -106 Cash flow from financing -373 -217

  24. Slide 24: Outlook

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  25. Slide 25: Outlook

    OUTLOOK Market VAP  Reduced supply growth going forward  Contracted 75% of available capacity for 2015  Forward prices 2H 2015 and in 2016 now average 41 NOK Fishmeal, oil and feed  Global supply growth estimated to 4% in 2015  Forecast for feed sales reduced 10,000 tonnes, and only 2-4% in 201

  26. Slide 26: Appendix

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Hans á Bakka – Bakkafrost’s new wellboat – Christening ceremony in Glyvrar 30 July 2015 Choir and crew

  27. Slide 27: Status on investments

     SUMMARY OF Q2 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX  STATUS ON INVESTMENTS

  28. Slide 28: Investments – Programme 2014-2017

    INVESTMENTS – PROGRAMME 2014 - 2017 Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales The investments will be made step by step in the relevant parts in the value chain to secure:  Efficiency  Biological risk  Organic growth BAKKAFROST / Q2 PRESENTATION 2015 Page 28

  29. Slide 29: Investments – Programme 2015-2017: status on main investments

    INVESTMENTS – PROGRAMME 2015 - 2017 Status on main investments  Harvest/VAP factory  New 8,000m3 Hatchery Viðareiði  Hans á Bakka  Construction of buildings in progress  Construction in progress  Delivered in July 2015 7 months now  To start operation in Q2 2016  Tests and final adjustments

  30. Slide 30: Building new Harvest & VAP factory

    BUILDING NEW HARVEST & VAP FACTORY New Harvest & VAP factory in Glyvrar Merging 7 factories into one facility  Improve efficiency and create synergies  Double capacity  Significant reduction of internal transportation between own factories  New products  Reduce risk in farming  Start-up in Q2

  31. Slide 31: Building new hatcheries

    BUILDING NEW HATCHERIES New Hatchery in Viðareiði (S-21)  Significant capacity expansion in progress  Recycling of 99% of water - saving water and heating  The goal is to increase average size of smolts from 100g to 300g in 2018  Reduce risk in farming  Reduce total time of production cycle at

  32. Slide 32: Larger smolt – reduced risk and organic growth

    LARGER SMOLT – REDUCED RISK AND ORGANIC GROWTH Results with large smolt in Faroe Islands Actual growth period with larger smolt Months for growth Growth potential • Reduced risk until Harvest vs 100g smolt • Up to 6 months reduced growth period will reduce risk significantly • Reduced mortality • Fe

  33. Slide 33: Bakkafrost - preparing for the future

    BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2015-2017  Use free cash flow from operations  Unused financing of approximately DKK 721 million  Partly new financing if advantageous  Flexibility to postpone investment in case of adverse events Profiles from the National Footb

  34. Slide 34: Financing

    FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding  Total funding to DKK ~ 1,023 million 1.400  Bonds NOK 500 million due Feb 2018 (swapped into 1.200 DKK) 1.000  Instalment loan of DKK 175 million was fully repaid in Q2 2015. Originally repayable DKK 25 million e

  35. Slide 35: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  48,788 inhabitants (April 2015)  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 : ~1

  36. Slide 36: Faroe Islands – excellent conditions for cost effective farming

    FAROE ISLANDS – EXCELLENT CONDITIONS FOR COST EFFECTIVE FARMING Average Seawater Temperatures  Natural growth area for wild salmon ºC Faroe Islands Norway (Trøndelag) GEOGRAPHY  Faroese fjords provide separation between locations 16  Improves biological control and area management 14 12  Stable

  37. Slide 37: New Harvest and VAP operation

    BAKKAFROST - PREPARING FOR THE FUTURE New Harvest and VAP operation The new plant and HQ 7 factories merged into one BAKKAFROST / Q2 PRESENTATION 2015 Page 37

  38. Slide 38: Development per quarter Q1 2012 – Q2 2015

    DEVELOPMENT PER QUARTER Q1 2012 – Q2 2015 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2015 2015 2014 2014 2014 2014 2013 2013 2013 2013 2012 2012 2012 2012 Revenue 800 613 757 584 711 631 667 741 610 473 582 457 416 400 Op. EBIT 303 235 227 209 212 186 124 187 169 105 99 86 78 60 Profit/Loss 19

  39. Slide 39: The value of a strict sanitary regime

    THE VALUE OF A STRICT SANITARY REGIME Margin EBIT/kg last 15 years (NOK/kg) Margin EBIT/kg last 5 years (NOK/kg) Margin EBIT/kg 2014E (NOK/kg) During the last 15 years, 2000 - 2014 The last five years - 2010-2014 In 2014, BAKKA had a farming Norway had the highest margin of the BAKKA had a strong av

  40. Slide 40: Dividend

    DIVIDEND Dividend DPS in % of adj. EPS *  Dividend of DKK 6.00 (NOK 6.78) per share paid in April 2015 100% 99% 90% 80% Dividend policy 70%  Competitive return through: 60% 49%** 49% 49%**  Dividends 50% 40%  Increase in the value of the equity 40% 30%  Generally, the company shall pay dividend

  41. Slide 41: Largest shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development Last 12 months Traded daily No of shares Account name type Citizenship M NOK NOK/share 4.594.437 9,4% Jacobsen Oddvør FRO 4.492.783 9,2% Jacobsen Johan Regin FRO 2.202.538 4,5% Skandinaviska Enskil A/C CLIENTS ACCO NOM SWE 1.883.553 3,9%

  42. Slide 42: Hans á Bakka – baptizing ceremony in Glyvrar

    Hans á Bakka – Bakkafrost’s new wellboat – Babtizing ceremony in Glyvrar 30. July 2015

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