Slide 1: Q2 2017 Bakkafrost Group
Q2 2017 BAKKAFROST GROUP Oslo 22 August 2017
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: Agenda
▪ SUMMARY OF Q2 2017 ▪ MARKETS AND SALES ▪ SEGMENT INFORMATION ▪ GROUP FINANCIALS ▪ OUTLOOK ▪ APPENDIX ~110km
Slide 4: Highlights
HIGHLIGHTS ▪ Harvested 18,402 tgw in Q2 2017 (13,004 tgw in Q2 2016) Operation ▪ Feed sales of 17,032 tonnes in Q2 2017* (16,295 tonnes in Q2 2016*) ▪ Raw material purchase of 163,100 tonnes in Q2 2017 (83,970 tonnes in Q2 2016) Revenues and ▪ Revenues of DKK 1,206 million in Q2 2017 (DKK 790 millio
Slide 5: Summary of the Quarter
SUMMARY OF THE QUARTER Record high results Q2 Q2 H1 H1 ▪ Sold volumes from Farming highest ever (DKK million) 2017 2016 2017 2016 Operating revenues ▪ Sourced raw material intake for FOF highest 1,206 790 2,060 1,694 ever Operational EBITDA 505 336 882 618 Operational EBIT 459 307 795 561 ▪ Highest
Slide 6: Markets and Sales
▪ SUMMARY OF Q2 2017 ▪ MARKETS AND SALES ▪ SEGMENT INFORMATION ▪ GROUP FINANCIALS ▪ OUTLOOK ▪ APPENDIX
Slide 7: Markets & Sales
MARKETS & SALES Same trend as in Q1 2017, sales to Europe and Total sales of salmon Q2 Q2 H1 H1 Eastern Europe increased, as sales to USA and Asia by markets 2017 2016 2017 2016 decreased EU 46% 39% 46% 39% USA 16% 23% 17% 23% ▪ EU market share increased from 39% in Q2 2016 to Asia 16% 21% 15% 21% 4
Slide 8: Global Markets
GLOBAL MARKETS High salmon prices continued in Q2 2017 Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Q1 Q2 Q3 Q4 ▪ Prices increased 5.3% vs Q2 2016 ▪ Increased y/y by 3.61 NOK/kg ~5.5% - from 65.41 to 69.03 ▪ Increased q/q by 1.96 NOK/kg ~2.9% - from 67.07 to 69.03 Reduced global supply in Q2 20
Slide 9: Development in Harvested and Sold Quantity by Origin
DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Decreased market supply in Q2 2017 vs. Q2 2016 SUPPLY Q2 Q2 Change DEVELOPMENT 2017 2016 % Global supply down 2.8% despite 3.9% increase in SUPPLY DEVELOPMENT Q2 2017 Q2 2016 Change % harvest Norway 235 249 -5.5 % ▪ Large Chilean inventory build-u
Slide 10: Salmon Markets, Sold Quantity (Head on Gutted – HOG)
SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) EU Salmon markets, sold quantity (head on gutted - HOG) ▪ Q2 consumption decrease materially exceeded Estimated volumes Q2 comparison Estimated volumes YTD comparison European supply decrease (1.4%) Markets Q2 2017E Q2 2016 Volume % H2 2017 H2 201
Slide 11: Short Term Supply Outlook
SHORT TERM SUPPLY OUTLOOK SUPPLY - TOTAL Increased supply expected in the coming quarters ▪ Both Europe and Americas contributing in H2 2017 ▪ Increasing supply from Chile ▪ 2016 impacted by mass mortality due to Algae bloom SUPPLY - EUROPE SUPPLY - AMERICAS Source: Kontali BAKKAFROST / Q2 2017 PRES
Slide 12: Segment Information
▪ SUMMARY OF Q2 2017 ▪ MARKETS AND SALES ▪ SEGMENT INFORMATION ▪ GROUP FINANCIALS ▪ OUTLOOK ▪ APPENDIX
Slide 13: Farming – Harvest Volume
FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q2 Q2 H1 H1 ▪ In Q2 2017, 74% of harvested volume came tonnes [HOG] 2017 2016 2017 2016 from the North and 26% from the West region North Region 13,581 8,904 22,705 10,413 ▪ Harvested volumes increased by 42% in Q2 2017, compared with Q2 201
Slide 14: Farming – Operational Performance
FARMING – OPERATIONAL PERFORMANCE High harvested volumes and strong Q2 Q2 H1 H1 performance with some challenges (DKK million) 2017 2016 2017 2016 ▪ The operational EBIT increased 37% from Operating revenues 1,039 752 1,790 1,453 DKK 358 million in Q2 2016 to DKK 489 million Operational EBIT 489 358
Slide 15: Farming – Operational Performance
FARMING – OPERATIONAL PERFORMANCE Operation Margin - EBIT per kg total harvested quantity [NOK/kg] ▪ Farming EBIT of NOK 33.50 per kg in Q2 2017, 40.00 compared to 34.47 in Q2 2016 35.00 34.47 ▪ High prices and good biological performance 30.00 33.50 33.71 32.68 25.00 ▪ Performance in the North Regi
Slide 16: Value Added Products (VAP)
VALUE ADDED PRODUCTS (VAP) VAP revenues and margin Q2 Q2 H1 H1 (DKK million) 2017 2016 2017 2016 ▪ Revenues increased by 45% to DKK 273 million in Q2 Operating revenues 273 187 464 367 2017, from DKK 187 million in Q2 2016 Operational EBIT -54 -68 -108 -93 ▪ Operating EBIT in Q2 2017 was DKK -54 mil
Slide 17: Fishmeal, Oil and Feed (FOF)
FISHMEAL, OIL AND FEED (FOF) Record high activity and satisfactory Fishmeal, Oil and Feed performance Q2 Q2 H1 H1 ▪ EBITDA of DKK 48 million in Q2 2017, (DKK million) 2017 2016 2017 2016 compared with DKK 45 million in Q2 2016 Operating revenues 317 220 594 508 ▪ EBITDA margin of 15.1% in Q2 2017, E
Slide 18: Market Conditions Feed
MARKET CONDITIONS FEED Feed sales increasing Volumes of raw material purchase and feed sale [tonnes] ▪ Quantity of feed sold was 17,032 tonnes in Q2 2017, 35,000 180,000 compared with 16,295 tonnes in Q2 2016 Raw material (tonnes) 160,000 30,000 Feed sale (tonnes) 140,000 25,000 ▪ Since Q3 2016, whe
Slide 19: Group Financials
▪ SUMMARY OF Q2 2017 ▪ MARKETS AND SALES ▪ SEGMENT INFORMATION ▪ GROUP FINANCIALS ▪ OUTLOOK ▪ APPENDIX
Slide 20: Group Profit and Loss
GROUP PROFIT AND LOSS ▪ Revenues increased from DKK 790 million in Q2 Q2 H1 H1 Q2 2016 to DKK 1,206 million in Q2 2017. (DKK million) 2017 2016 2017 2016 Higher activity and volumes in all segments Operating revenues 1,206 790 2,060 1,694 ▪ Operational EBIT increased from DKK 307 Operational EBITDA*
Slide 21: Operational EBIT and Earnings per Share
OPERATIONAL EBIT* AND EARNINGS PER SHARE 459 350 335 303 307 257 254 255 235 212 209 227 206 Operational EBIT 186 (DKK million) 2014 2015 2016 YTD 2017 834 1,001 1,165 795 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 2014 2015 2016 YTD 2017 13.33 16
Slide 22: Balance Sheet
BALANCE SHEET ▪ Intangible assets at the end of Q2 2017 are End H1 End H1 End unchanged from Q4 2016 (DKK million) 2017 2016 2016 Intangible assets 377 295 377 ▪ Investments in PPE of DKK 170 million in Q2 Property, plant and equipment 2,380 1,793 2,118 2017 Financial assets 59 136 59 ▪ Financial as
Slide 23: Cash Flow
CASH FLOW ▪ Cash flow from operations higher in Q2 2017, compared to Q2 2016, due to improved Q2 Q2 H1 H1 operations, changes in working capital (DKK million) 2017 2016 2017 2016 Cash flow from operations 498 248 863 493 ▪ Cash flow from investments represents investments in PPE Cash flow from inves
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 7 560 changes in working capital decreased the 170 NIBD with DKK 498 million 459 ▪ Net investments and net dividend payment in -466 423 553 Q2 2017 increased the N
Slide 25: Outlook
▪ SUMMARY OF Q2 2017 ▪ MARKETS AND SALES ▪ SEGMENT INFORMATION ▪ GROUP FINANCIALS ▪ OUTLOOK ▪ APPENDIX
Slide 26: Outlook
OUTLOOK Market Fishmeal, Oil and Feed ▪ Global supply in 2017 expected to increase around ▪ Forecast for feed sales in 2017 is 85,000 tonnes 2%, compared to 2016 Business development ▪ Optimizing of the value chain according to the Farming announced investment plan continues ▪ Bakkafrost expects to
Slide 27: Appendix
▪ SUMMARY OF Q2 2017 ▪ MARKETS AND SALES ▪ SEGMENT INFORMATION ▪ GROUP FINANCIALS ▪ OUTLOOK ▪ APPENDIX
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 7% supply increase in 2018 Norway 1.076 1.112 1.055 1.080 1.151 UK 153 150 142 157 159 ▪ Total supply growth of 2% in 2017 Ireland 11 14 14 14 16 ▪ Total supply gro
Slide 29: Q2 Market Environment
Q2 MARKET ENVIRONMENT PRICE NORWAY High prices in Europe as supply contraction continued in the second quarter ▪ Nasdaq Norway price EUR 7.2 in Q2 2017 ▪ 5.3% increase vs. Q2 2016 ▪ 0.8% decrease, compared to Q1 2017 ▪ Generally high price realization on fixed contracts ▪ Chilean supply increase imp
Slide 30: Share of Large Salmon Market
SHARE OF LARGE SALMON MARKET Share of large fish increased Share of large fish (>6kg) ▪ Share of large fish 42% in Q2 2017, compared with 29% in Q2 2016 ▪ Large fish share generally indicator on good performance and better market diversification Average Notes: All figures are in hog-equivalents and
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 / Q2 2017 PRESENTATION Page 31
Slide 32: Investment Programme 2016 - 2020
From CMD June-2016 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 Smo
Slide 33: Development per Quarter Q1 2014 – Q2 2017
DEVELOPMENT PER QUARTER Q1 2014 – Q2 2017 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2017 2017 2016 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 Revenue 1,206 854 868 640 790 905 760 677 800 613 757 584 711 631 Operational EBIT 459 335 350 255 307 254 257 206 303 235 227 209 212 186
Slide 34: Dividend
DIVIDEND Dividend per share in % of adj. EPS * Dividend 100% 99% • Dividend for 2016 of DKK 8.70 (NOK 10.36) per 90% share is paid out in Q2 2017 80% 70% 60% 49%** 49% 50% 48% 50% 46% 40% Dividend policy 40% 30% 19% ▪ Competitive return through: 20% 10% ▪ Dividends 0% ▪ Increase in the value of the
Slide 35: Faroe Islands
FAROE ISLANDS ▪ 18 islands – 1,387 km2 ▪ 50,250 inhabitants (July 2017) ▪ 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
Slide 36: Largest Shareholders
LARGEST SHAREHOLDERS 20 largest shareholders Share development 12 months development Traded daily No of shares Account name type Citizenship NOK/share 4.594.437 9,4% Jacobsen Oddvør FRO 4.494.174 9,2% JACOBSEN JOHAN REGIN FRO 3.681.562 7,5% Nordea Bank AB Denmark Branch, CCA NOM DNK 3.322.931 6,8% F
Slide 37: Page 37
BAKKAFROST / Q2 2017 PRESENTATION Page 37