Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q2 2020 Earnings Presentation

41 slides from Bakkafrost P/f's earnings presentation, Aug 25, 2020

  1. Slide 1: Q2 2020 Bakkafrost Group

    Q2 2020 BAKKAFROST GROUP Glyvrar 25 August 2020

  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 2020

    SUMMARY OF Q2 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX Faroe Islands, Gøtuvík

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvest in the Faroe Islands (FO): 12,941 tgw in Q2 2020 (12,609 tgw in Q2 2019)  Harvest in Scotland (SCT): 7,937 tgw in Q2 2020 Operation  Feed sales of 22,121 tonnes in Q2 2020* (18,872 tonnes in Q2 2019*)  Raw material purchase of 122,512 tonnes in Q2 2020 (110,109 tonnes in Q2 2

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER (DKK million) Q2 2020 Q2 2019 H1 2020 H1 2019 Farming/VAP (FO)* Operating revenue 1,134 947 2,389 1,910 31.31 15.34 (Q2 2019) (Q2 2020) Operational EBITDA 298 397 665 718 Operational EBIT 182 339 430 606 Farming (FO)* Profit for the period 472 189 324 401 31.31 9.79 (Q2 2019)

  6. Slide 6: Markets and Sales

    SUMMARY OF Q2 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES SALES TO WESTERN EUROPE INCREASED – OTHER MARKETS DECREASED Sales & volume (FO only) Total sales of salmon Q2 2020 Q2 2019 H1 2020 H1 2019 Western Europe by markets FO SCT Total FO SCT Total FO SCT Total FO SCT Total Western Europe 64% 82% 73% 43% N/A 43% 56% 87% 70% 46% N/A 46% 43%

  8. Slide 8: Global Markets

    GLOBAL MARKETS LOWER PRICES AND MODERATE GROWTH IN GLOBAL HARVEST Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Average spot prices increased in Q2 2020 Q1 Q2 Q3 Q4 (NOK/KG) 80.00 70.00 y/y: 64.02 -7.3% 59.36 (Q2 2019) -4.67 (Q2 2020) 60.00 50.00 q/q: 69.92 -15.1% 59.36 40.00 (Q1 2020) -10.56 (Q

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

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN MODERATE INCREASE IN SUPPLY Global growth of 1.4% Harvest & Supply Development Q2 2020 Q2 2019 Change % [Head On Gutted 1,000 tonnes] Norway 271 277 -2.5 % Europe flat development – down 0.3% UK 41 41 0.7 %  Norway down 6kt Faroes 21 17 23.2 % 

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

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) MODERATE GROWTH Global growth of 1.3% Salmon markets, sold quantity (head on gutted - HOG) EU & USA growth of 3%  Increased supply through retail chain Russia down 18%  Reduced frozen supply from Chile Latin America down 18%  High proportion no

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK Moderate global supply growth SUPPLY - TOTAL  Moderate European supply in 2020, drop in 2021  Reduced output expected in Norway and Scotland  Significant drop in Americas driven by Chile  Outlook for tighter supply from medio 2021 SUPPLY - EUROPE SUPPLY - AMERICAS Sourc

  12. Slide 12: Segment Information

    SUMMARY OF Q2 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME INCREASED HARVEST IN THE FAROE ISLANDS – INCREASED AVG. SMOLT SIZE Q2 2019 Q2 2020 Harvest Volumes tonnes [HOG] Q2 Q2 H1 H1 2020 2019 2020 2019 Harvested volumes (tonnes HOG) North: 100% FO - North Region 12,941 7,858 19,206 14,601 FO: 12,609 3% 12,941 FO - West Region 0 4,7

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE REVENUE AND OPERATIONAL EBIT DECREASED IN THE FAROE ISLANDS Faroe Islands (FO) Operational EBIT (mDKK) 303 86 (Q2 2019) (Q2 2020) Operational EBIT margin (%) Skálafjørður, Faroe Islands - (view from Bakkafrost’s Headquarters) 40 15 (Q2 2019) (Q2 2020) Farming FO (DK

  15. Slide 15: Farming – Operational Performance: EBIT per kg

    FARMING – OPERATIONAL PERFORMANCE Margin (FO) - EBIT per kg total harvested quantity [NOK/kg] Operational EBIT per kg 35 30 25 FO: 31.31 NOK -21.52 NOK 9.79 NOK 20 (Q2 2019) (Q2 2020) 15 10 SCT: 5.36 NOK 5 (Q2 2020) 0 Q2 2020 Q2 2020 Q2 2019 H1 2020 H1 2019 FO SCT Average weights (HOG): (NOK/kg) Q2

  16. Slide 16: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) HIGHER VOLUMES AND HIGHER OPERATIONAL EBIT Q2 Q2 H1 H1 (DKK million) 2020 2019 2020 2019 Volumes (tonnes) Operating revenue 308 238 582 498 4,088 6,420 (Q2 2019) (Q2 2020) Operational EBIT 49 0 38 1 Operational EBIT margin 15.8% 0.0% 6.5% 0.3% Revenue (mDKK) VAP produced v

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

    FISHMEAL, OIL AND FEED (FOF) HIGHER RAW MATERIAL SOURCING, BUT LOWER EXTERNAL SALES OF FISHMEAL (DKK million) Q2 2020 Q2 2019 H1 2020 H1 2019 EBITDA (mDKK) Operating revenue 269 283 579 567 58 50 (Q2 2019) (Q2 2020) EBITDA 50 58 90 124 EBITDA margin 18.6% 20.6% 15.6% 21.8% EBITDA margin (%) Feed sol

  18. Slide 18: Market Conditions Feed

    MARKET CONDITIONS FEED SIGNIFICANT INCREASE IN FEED SALES Volumes of raw material purchase and feed sale [tonnes] Total feed sales increased (tonnes) 180,000 40,000 160,000 35,000 18,872 17% 22,121 140,000 30,000 Raw material (tonnes) (Q2 2019) (Q2 2020) 120,000 Feed sale (tonnes) 25,000 100,000 20,

  19. Slide 19: Financials & ESG

    SUMMARY OF Q2 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX Scotland, Loch Torridon

  20. Slide 20: Group Profit and Loss

    GROUP PROFIT AND LOSS HIGHER REVENUE, BUT REDUCED OPERATIONAL EBIT Revenue (mDKK) (DKK million) Q2 2020 Q2 2019 H1 2020 H1 2019 947 1,134* Operating revenue 1,134 947 2,389 1,910 (Q2 2019) (Q2 2020) Operational EBITDA 298 397 665 718 * FO: 757 Operational EBIT 182 339 430 606 Operational EBIT (mDKK)

  21. Slide 21: Operational EBIT and Adjusted Earnings per Share

    OPERATIONAL EBIT* AND ADJUSTED EARNINGS PER SHARE 459 408 415 350 335 339 331 307 303 254 255 252 268 268 231 248 168 182 Operational EBIT* (mDKK) 2016 2017 2018 2019 2020 1,165 1,378 1,075 1,325 430 6.84 6.48 5.64 5.60 5.89 5.08 4.98 4.83 4.72 3.79 4.07 3.59 3.62 3.57 3.61 3.19 Adjusted EPS 2.55 2.

  22. Slide 22: Balance Sheet

    BALANCE SHEET Headlines (mDKK) (DKK million) Q2 2020 End 2019 Intangible assets: 4,378 Intangible assets 4,378 4,396 (Q2 2020) Property, plant and equipment 3,894 3,780 432 333 PPE: 3,894 Right of use assets (Q2 2020) Financial assets 117 119 Long-term receivables 4 4 Biological assets: 1,902 2 1,90

  23. Slide 23: Cash Flow

    CASH FLOW (DKK million) Q2 2020 Q2 2019 H1 2020 H1 2019 Cash flow, operations (mDKK) 327 111 Cash flow from operations 111 327 477 403 (Q2 2019) (Q2 2020) Cash flow from investments -196 -157 -297 -263 Cash flow from financing -262 -189 -1,034 -135 Cash flow, investments (mDKK) Net change in cash -3

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

    NET INTEREST-BEARING DEBT (NIBD) NIBD IN Q2 2020 SLIGHTLY HIGHER THAN IN Q1 2020 NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 196)  Change in working capital (mDKK 187) NIBD was decreased by:  Cash flow, operating activities (mDKK -255) Financing end Q2 2020 N

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    BAKKAFROST / Q2 2020 PRESENTATION Page 25

  26. Slide 26: Outlook

    SUMMARY OF Q2 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  27. Slide 27: Outlook

    OUTLOOK Market Contracts  4% increase expected in global harvest in H2-2020  Contracted around 33% of expected H2 2020 harvest volume  2% increase in global harvest expected in 2021  Long-term strategy is to sell around 40% of the harvested volumes at fixed price contracts Farming Fishmeal, Oil

  28. Slide 28: Appendix

    SUMMARY OF Q2 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  29. Slide 29: Scotland – Strategic Rationale

    SCOTLAND – STRATEGIC RATIONALE 1. Provides access to the attractive Scottish farming region  Niche and differentiated region  High quality salmon from Scottish Provenance priced at a premium 2. Creating a differentiated global leader in premium salmon  Exposure to two geographies, Faroe Islands a

  30. Slide 30: Scotland – Strategic Rationale

    SCOTLAND – STRATEGIC RATIONALE 3. Potential for significant improvement  Scottish Salmon profitability to improve over a five-year period through transfer of best practices  Synergies  Targeted investment programmes 4. Financially attractive, acquiring the business at a reasonable value, multiple

  31. Slide 31: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 43 farming sites / 67,023T consent South  20 sites / 29,205T consent  Mull and Gigha, 6 sites  Loch Striven and Arran, 4 sites  Loch Fyne, 10 sites North  23 sites / 37,818T consent  Uist, 5 sites  Sky & mainland, 7 sites  Loch Roag, 6 sites  East Lewis & Harris, 5 si

  32. Slide 32: Faroe Islands - Growing to 100kt

    FAROE ISLANDS - GROWING TO 100KT 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 CAPACIT

  33. Slide 33: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Expected supply growth in 2021 Global Supply of Atlantic Salmon (head on gutted - HOG)  2% growth in Global supply 2017 2018 2019 2020E 2021E Norway 1,078 1,129 1,198 1,228 1,274  4% growth in European supply UK 159 138 165 166 169 Ireland 15 13

  34. Slide 34: Q2 2020 Market Environment

    Q2 2020 MARKET ENVIRONMENT DECREASING MARKET PRICES PRICE NORWAY NORWAY  Decreasing market prices during the quarter 8.0 7.2 60.0 7.0 6.3 6.4 6.6 50.0  Significant demand disruption (Covid-19) 6.0 5.7 5.8 5.6 5.2 5.0 40.0 5.0  Limited supply growth EUR DKK 4.0 30.0 3.0  Nasdaq Norway price EUR 5

  35. Slide 35: Q2 2020 Market Environment – Covid-19 Effects

    Q2 2020 MARKET ENVIRONMENT – COVID-19 EFFECTS BAKKAFROST / Q2 2020 PRESENTATION Page 35

  36. Slide 36: Development per Quarter

    DEVELOPMENT PER QUARTER Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (mDKK) 2018 2018 2018 2019 2019 2019 2019 2020 2020 Revenue 954 622 750 964 947 996 1,605 1,255 1,134 Operational EBIT 408 168 231 268 339 303 415 248 182 Profit/Loss 339 356 -7 213 189 181 220 -148 472 Harvest FO (tgw) 12,902 7,217 12,234 13,707 12

  37. Slide 37: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • No dividend for 2019 because of the disruption and 99% uncertainty caused by Covid-19 Dividend policy 49%** 49% 46% 50% 50% 50% 40%  Competitive return through:  Dividends 19%  Increase in the value of the equity  Generally, Bakkafrost sha

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    BAKKAFROST / Q2 2020 PRESENTATION Page 38

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    BAKKAFROST / Q2 2020 PRESENTATION Page 39

  40. Slide 40: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 41.8% (2016)  52,656 inhabitants (July 2020)  Corporate tax: 18%  Farming revenue tax: 5.0% of revenues after 1 January 2019  Home rule – within the Kingdom of Denmark The tax is applied as follows (IMP ~ International market p

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    BAKKAFROST / Q2 2020 PRESENTATION Page 41

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