Mowi Asa · OSL:MOWI

Mowi Asa — Marine Harvest — Q1 2016 Earnings Presentation

49 slides from Mowi Asa's earnings presentation, May 11, 2016

  1. Slide 1: Marine Harvest Q1 2016 Presentation

    Marine Harvest Q1 2016 Presentation

  2. Slide 2: Forward looking statements

    Forward looking statements 2 This presentation may be deemed to include forward-looking statements, such as statements that relate to Marine Harvest’s contracted volumes, goals and strategies, including strategic focus areas, salmon prices, ability to increase or vary harvest volume, production capa

  3. Slide 3: Highlights

    Highlights 3  Strong operational EBIT of EUR 112 million  Strong demand and low supply growth in the quarter  Record-high prices in Europe and Asia, and improving prices in Americas  High contract share of 55% in Norway  Chile impacted by algal bloom in Region X - Restructuring of MH Chile init

  4. Slide 4: Key financials

    Key financials 4Notes in report Marine Harvest Group - main figures Unaudited EUR million Operational revenue and other income 809.5 10% 735.3 3121.1 Operational EBIT 1) 111.9 17% 95.3 346.8 Cash flow from operations 150.1 61.6 233.3 Net interest-bearing debt (NIBD) 960.1 866.5 999.7 Underlying EPS

  5. Slide 5: Salmon prices

    Salmon prices 5  Prices in Europe and Asia at record high levels  Improving prices in Americas, in particular in March following the Chilean algal bloom 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 8 2012 2013 2014 2015 2016 U S D p e r l b s ( M i a m i a n d S e a t t l e ) E U R p e r k g ( O s l o ) Weekly

  6. Slide 6: Price achievement, contract & superior share

    102% 117% 99% 112% 92% 85% 101% 95% 0% 20% 40% 60% 80% 100% 120% 140% Norwegian Scottish Canadian Chilean Q1 2015 Q1 2016 Price achievement, contract & superior share 6Note: Q1 2016 average price achievement is measured versus reference prices in all markets (Norway/Faroes (NASDAQ), Scotland (NASDAQ

  7. Slide 7: Operational EBIT comparison

    Operational EBIT comparison 7 111.9 - 0.6 15.2 0.3 - 0.4 2.1 95.3 0 20 40 60 80 100 120 140 Op EBIT Q1 2015 Feed Farming Markets Consumer Products Other Op EBIT Q1 2016 E U R m i l l i o n

  8. Slide 8: Norway

    Norway 8  Good results in the quarter driven by improved prices - Contract share of 55% impacted price achievement negatively  High costs - Feed costs higher on higher FCR and increased price of feed - Expect high costs also in the second quarter Note: Details on Nova Sea in appendix SALMON OF NOR

  9. Slide 9: Norway: Sales contract portfolio

    Norway: Sales contract portfolio 9Note: Marine Harvest Norway’s fixed price/fixed volume contracts with third party customers and MH’s processing entities. MH’s processing entities cover a large proportion of their sales exposure through third party end product contracts. 0 5 000 10 000 15 000 20 00

  10. Slide 10: Norway: Operational EBIT/kg per region

    1.43 1.76 1.37 1.46 1.521.54 2.06 1.56 2.08 1.87 0.0 0.5 1.0 1.5 2.0 2.5 South West Mid North Total E UR per kg Q1 2015 Q1 2016 Norway: Operational EBIT/kg per region 10Including contribution from Sales and Marketing

  11. Slide 11: Beck Cage – offshore submersible concept

    11  Application for 6 development licenses  Flexible submersible offshore farming cage  Taking the unit below the roughest weather and below the top layer sea- lice belt  Stronger than other known concepts due to the axial structure “Beck Cage” – offshore submersible concept

  12. Slide 12: Blue Revolution Centre: R&D facility at Frøya

    12 Blue Revolution Centre: R&D facility at Frøya

  13. Slide 13: Marine Donut – closed-end farming concept

    13  Application for 8 development licenses  Robust closed concept protecting fish from sea lice and other pathogens, certified for up to 3 meters wave height  Flow concept exercising fish resulting in top fish quality  Produced of HDPE a 100% reusable material “Marine Donut” – closed-end farming

  14. Slide 14: Norway: The Egg – a new enclosed technology

    Norway: “The Egg” – a new enclosed technology 14  Application for 14 development licenses  New enclosed technology (2016-2018 testing and verification)  Many advantages to conventional farmed salmon production  In total applications for 28 development licenses (Beck Cage, Marine Donut and Egg)

  15. Slide 15: Scotland

    Scotland 15  Results impacted by losses at the Rosyth plant (EUR -6.8 million)  Harvest volumes back to normal  Good prices despite high contract share  Costs higher due to increased FCR and higher feed prices  Costs expected to increase further in the second quarter SALMON OF SCOTTISH ORIGIN E

  16. Slide 16: Canada

    Canada 16  Overall good performance and favorable price development  Good biological situation  Higher costs expected going forward SALMON OF CANADIAN ORIGIN EUR million Q1 2016 Q1 2015 restated Operational EBIT 22.8 6.1 Harvest volume (GWT) 11 551 10 478 Operational EBIT per kg (EUR) 1.97 0.58 -

  17. Slide 17: Chile

    17  Algal bloom in Chile significantly impacted our operations (negative EUR 8.4 million)  Initiated restructuring of Marine Harvest Chile - Write-down of fixed assets of approx USD 16 million in second quarter - Restructuring provision of approx USD 3 million in second quarter - Cost savings of a

  18. Slide 18: Ireland and Faroes

    Ireland and Faroes 18  Challenging weather conditions and biological issues in Ireland  Good contribution from Marine Harvest Faroes in the quarter - Sales to Russia at favorable prices - Revenue based fee of 4.5% reduced profit SALMON OF IRISH ORIGIN EUR million Q1 2016 Q1 2015 restated Operation

  19. Slide 19: Consumer Products

    Consumer Products 19Please note that Consumer Products is the combined operations of the former VAP Europe and Morpol  Continued start up costs in the Rosyth plant of EUR 7.7 million in the quarter - Execution of recovery plan in process - Management changes implemented - Estimated losses of EUR 4

  20. Slide 20: Feed

    Feed 20  Seasonal low volumes in the quarter - Volumes higher year-over-year as third party supply contract discontinued  Volumes sold in the quarter accounted for 86% of internal feed requirement in Norway  Location determined for new plant in Scotland at Kyleakin MH FEED EUR million Q1 2016 Q1

  21. Slide 21: First Quarter 2016 Financials, Harvest Volumes and Markets

    First Quarter 2016 Financials, Harvest Volumes and Markets 21

  22. Slide 22: Profit and Loss

    Profit and Loss 22Notes in report Marine Harvest Group EUR million Operational revenue and other income 809.5 10% 735.3 3121.1 Operational EBIT 1) 111.9 17% 95.3 346.8 Change in unrealized internal margin 3.0 1.2 -2.2 Unrealized salmon derivatives -3.8 -5.5 -12.5 Net fair value adjustment of biomass

  23. Slide 23: Financial Position

    Financial Position 23 Marine Harvest Group EUR million Non-current assets 2 122.7 2 218.7 2 134.9 Current assets 2 129.0 1 917.0 2 059.4 Assets held for sale 1.8 0.9 1.8 Total assets 4 253.5 4 136.6 4 196.1 Equity 1 952.7 2 114.5 1 895.6 Non-current liabilities 1 709.1 1 448.1 1 684.6 Current liabil

  24. Slide 24: Cash Flow and Net Interest Bearing Debt

    Cash Flow and Net Interest Bearing Debt 24 Marine Harvest Group EUR million NIBD beginning of period -999.7 -1 032.6 -1 032.6 . Operational EBITDA 147.7 129.7 486.6 Change in working capital 34.5 -45.6 -146.2 Taxes paid -26.0 -15.2 -68.3 Other adjustments -6.2 -7.3 -38.8 Cash flow from operations 15

  25. Slide 25: 2016 Cash Flow Guidance

    2016 Cash Flow Guidance 25  2016 cash flow estimates - Working capital buildup EUR ~30m • Support further organic growth - Capital expenditures EUR ~190m • Freshwater expansion projects EUR ~50m - Interest expenses EUR ~30m - Tax payables EUR ~75m  Long term NIBD target of EUR 1,050m  Quarterly d

  26. Slide 26: Overview of financing

    Overview of financing 26  EUR 805m Facility Agreement - Maturity – Q4 2019 - Covenants: • 35% equity ratio - Accordion option EUR 45m - Lenders: DNB, Nordea, Rabobank and ABN Amro  EUR 340m issued in November 2015 - Tenor 5 years, annual coupon 0.125%(1), conversion price EUR 15.9083  EUR 375m is

  27. Slide 27: Supply development

    Estimated volumes Compared to Q1 2015 Est. volumes Suppliers Q1 2016 Q1 2015 Volume % Q4 2015 Norway 243 700 259 600 -15 900 -6.1% 309 900 Scotland 31 000 28 400 2 600 9.2% 40 800 Faroe Islands 15 900 12 600 3 300 26.2% 22 500 Ireland 2 300 1 700 600 35.3% 4 100 Total Europe 292 900 302 300 -9 400 -

  28. Slide 28: Development in reference prices

    Development in reference prices 28Source: Marine Harvest and Kontali Reference prices Q1 2016 Change vs Q1 2016 Change vs Market Q1 2015 NOK Q1 2015 Norway (1) EUR 6.15 31.9% NOK 58.58 43.9% Chile (2) USD 4.30 6.7% NOK 37.04 18.5% Chile, GWE (3) USD 4.36 9.8% NOK 37.58 22.0% North America (4) USD 2.

  29. Slide 29: Estimated volumes by market

    Estimated volumes Compared to Q1 2015 Est. volumes 12 month comparison Markets Q1 2016 Q1 2015 Volume % Q4 2015 LTM PTM % EU 221 300 221 700 -400 -0.2% 273 300 978 100 942 800 3.7% Russia 20 500 18 400 2 100 11.4% 25 400 100 900 121 600 -17.0% Other Europe 17 300 20 200 -2 900 -14.4% 23 300 80 900 8

  30. Slide 30: Industry supply outlook

    Industry supply outlook: Guidance of declining growth of -9% to -5% for 2016 30Actual harvest volumes will be affected by e.g. water temperatures, development in biological growth, biological challenges such as diseases, algae blooms etc. and market developments. 2013 2014 2015 2016 GWE tonnes (thou

  31. Slide 31: MHG 2016 volume guidance

    MHG 2016 volume guidance 31Actual harvest volumes will be affected by e.g. water temperatures, development in biological growth, biological challenges such as diseases, algae blooms etc. and market developments.  2016 reduced guidance from 436,000 tons GWE to 414,000 tons GWE - Chile decreased by 1

  32. Slide 32: Outlook

    Outlook 32  Market balance expected to be tight in 2016 - Future prices (NASDAQ) for 2016 have increased to EUR 5.9 per kg (NOK 56 per kg)  Strong consumer demand in Europe and Asia  Algal bloom in Chile to impact American supply fundamentals going forward - Restructuring of Marine Harvest Chile

  33. Slide 33: Appendix

    Appendix 33

  34. Slide 34: Dividend policy

    Dividend policy 34  The quarterly dividend level shall reflect the present and expected future cash flow generation of the Company  To this end, a target level for net interest bearing debt is determined, reviewed and updated on a regular basis  When the target is met, at least 75% of the annual

  35. Slide 35: Contract coverage and sales contract policy

    Contract coverage and sales contract policy 35  Q2 2016 contract shares (% of guided volume): - Norway 49% - Scotland 63% - Canada 0% - Chile 22%  Contracts typically have a duration of 3-12 months - Contracts are entered into on a regular basis - Policy opens for contracts of up to 48 month durat

  36. Slide 36: Quarterly segment overview

    Quarterly segment overview 36 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) MH Group OPERATIONAL EBIT MH FARMING 85.1 11.5 19.6 -27.1 -2.6 3.8 90.4 MH SALES AND MARKETING MH Markets 8.5 3.7 3.1 3.2 0.0 0.1 0.0 18.6 MH Consumer Products 5.7 -6.7 0.0 0.0 0.0 0.0 0.3 -0.6 SUBTOTAL 99

  37. Slide 37: Quarterly segment overview MH Operating Units

    Quarterly segment overview 37 MH Operating Units EUR million Norway Scotland Canada Chile Ireland Faroes Markets Consumer Products MH Feed Other Elim Group* Revenues and other income 280.0 68.6 61.6 77.9 11.3 10.3 610.0 327.3 64.5 7.2 -709.2 809.5 Operating EBITDA 97.3 15.7 22.2 -21.3 -1.8 4.3 19.6

  38. Slide 38: Development in harvest volumes

    Development in harvest volumes 38 2012 Total Total Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2E H2-16E Total Norway 202.5 217.5 255.3 222.5 55.1 68.7 64.3 69.9 258.0 65.2 64.0 58.9 66.6 254.8 54.0 56.0 152.0 262.0 Chile 10.6 26.0 40.2 28.3 17.7 16.4 16.7 16.6 67.5 16.1 13.2 18.4 14.8 62.5

  39. Slide 39: Net capital expenditure guidance

    0 50 100 150 200 250 300 2008 2009 2010 2011 2012 2013 2014 2015 2016E E U R m i l l i o n Net capital expenditure guidance 39 Maintenance level

  40. Slide 40: Net working capital guidance

    Net working capital guidance 40 -100 -50 0 50 100 150 200 250 2008 2009 2010 2011 2012 2013 2014 2015 2016E W o r k i n g c a p i t a l t i e - u p ( E U R m i l l i o n )

  41. Slide 41: Guidance on financial commitments and cost of debt

    Guidance on financial commitments and cost of debt Interest expenses Contractual repayments 41 0 20 40 60 80 100 120 2011 2012 2013 2014 2015 2016E E U R m i l l i o n

  42. Slide 42: Nova Sea

    Nova Sea 42  Leading integrated salmon producer in Northern Norway - 33.33 wholly owned licenses - 4 partly owned licenses  Marine Harvest has an ownership in Nova Sea of ~48% through direct and indirect shareholdings  Proportion of income after tax reported as income from associated companies in

  43. Slide 43: Debt distribution and interest rate hedging

    Debt distribution and interest rate hedging 43 POLICY:  External interest bearing debt is distributed as follows: EUR 73%, USD 12%, GBP 5%, other currencies 11%.  Marine Harvest ASA shall hedge 70%-100% of the Group’s long-term interest-bearing debt by currency with fixed interest or interest rate

  44. Slide 44: Hedging and long term currency exposure

    Hedging and long term currency exposure 44 POLICY  EUR/NOK - Marine Harvest shall hedge between 0% and 30% of its assumed annual expenses in NOK against the EUR with a horizon of two years. The annual hedging shall be evenly distributed across the months of the year.  USD/CAD - Marine Harvest shal

  45. Slide 45: Strategic currency hedging

    Strategic currency hedging 45 STRATEGIC CURRENCY HEDGING MEUR Rate MUSD Rate 2016 167 9.19 22 1.32 2017 232 9.41 20 1.33 2018 56 9.68 2 1.39 P/L effect of contracts maturing in Q1 -0.9 (MEUR) MEUR Market value 31/12/2015 -18.4 Change (1) 10.0 Market value 31/03/2016 -8.4 DESIGNATED MARKET CURRENCIES

  46. Slide 46: Fair value adjustment of biomass

    Fair value adjustment of biomass 46  Under IFRS (IAS 41) the company is required to value biological assets at a fair market value.  During the second half of 2011, the largest salmon farming companies in Norway, with support from audit firms, formed an industry working group where the objective w

  47. Slide 47: Tax losses carried forward (YE 2015)

    Tax losses carried forward (YE 2015) 47  Most of the deferred tax assets have note been recognised on the statement of financial position  The NOL’s will be used to offset taxable profit in the countries going forward  The utilisation of the deferred tax asset on NOL’s gives rise to a tax expense

  48. Slide 48: The Board's current authorisations

    The Board’s current authorisations 48  The Board was given the following proxies at the AGM - General share capital increase (up to 10% of share capital) • Proxy to set aside shareholders pre-emption right to subscribe - Purchase of own shares (up to 10% of share capital) • Maximum price: NOK 140 p

  49. Slide 49: Sensitivities

    Sensitivities 49 ESTIMATED SENSITIVITIES ON ANNUAL RESULTS OP. EBIT EFFECT CASH FLOW EFFECT DRIVER EUR million Change in global average salmon price of EUR 0.1 (1) (2) 41 38 Annual harvest volume Change in total harvest volume of 10,000 tonnes (2) (3) 10 9 Marginal volume Change in global feed price

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