Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2022 Earnings Presentation

58 slides from Bakkafrost P/f's earnings presentation, Nov 8, 2022

  1. Slide 1: Q3 2022 Bakkafrost Group

    Q3 2022 BAKKAFROST GROUP Oslo 8 November 2022

  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 2022

    SUMMARY OF Q3 2022 MARKETS & SALES FINANCIALS SEGMENT INFORMATION OUTLOOK APPENDIX Ardyne, Scotland

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvest in the Faroe Islands: 16,850 tgw in Q3 2022 (14,937 tgw in Q3 2021)  Harvest in Scotland: 8,100 tgw in Q3 2022 (6,914 tgw in Q3 2021) Operation  Feed sales of 37,805 tonnes in Q3 2022* (44,973 tonnes in Q3 2021*)  Raw material purchase of 76,182 tonnes in Q3 2022 (17,224 tonn

  5. Slide 5: Markets & Sales

    SUMMARY OF Q3 2022 MARKETS & SALES FINANCIALS SEGMENT INFORMATION OUTLOOK APPENDIX Viðoy, Faroe Islands

  6. Slide 6: Global Markets

    GLOBAL MARKETS HIGHER PRICES Y/Y, BUT LOWER Q/Q Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Average spot prices increased y/y and q/q Q1 Q2 Q3 Q4 130,00 in Q3 2022 110,00 (NOK/KG) 90,00 y/y: 55.41 26.8% 70.25 14.85 70,00 (Q3 2021) (Q3 2022) 50,00 q/q: 107.46 -34.8% 70.25 (Q2 2022) -37.21 (Q3 2

  7. Slide 7: Harvested and Sold Quantity by Origin

    HARVESTED AND SOLD QUANTITY BY ORIGIN Global quarterly harvest volumes increase 6% SUPPLY DEVELOPMENT Q3 2022 Q3 2021 Change %  4% increase when including inventory movements Norway 378 371 1,7 % UK 46 47 -2,1 % Faroes 23 21 8,9 % European harvest increase 1.5% in volume Iceland 7 8 -10,1 % Ireland

  8. Slide 8: Salmon Markets, Sold Quantity

    SALMON MARKETS, SOLD QUANTITY Salmon markets, sold quantity (head on gutted - HOG) Good demand in EU/UK  5% increase Estimated volumes Q3 comparison Estimated volumes FY comparison Markets Q3 2022 E Q3 2021 Volume % H1 2022 H1 2021 Volume % EU 327.700 311.000 16.700 5% 495.200 521.000 -25.800 -5% U

  9. Slide 9: Financials

    SUMMARY OF Q3 2022 MARKETS & SALES FINANCIALS SEGMENT INFORMATION OUTLOOK APPENDIX From Múlatindur watching over Funningsfjørður, Faroe Islands

  10. Slide 10: Group Profit and Loss

    GROUP PROFIT AND LOSS HIGHER REVENUE AND OPERATIONAL EBIT YTD YTD Q3 2021 Q3 2022 (DKK million) Q3 22 Q3 21 22 21 Operating revenue 1,867 1,272 5,190 4,066 Revenue (mDKK) Operational EBITDA 461 194 1,739 1,081 1,272 47% 1,867 Operational EBIT 325 71 1,329 702 Fair value adjustment of biological asse

  11. Slide 11: Margins

    MARGINS HIGHER OPERATIONAL EBIT MARGIN DRIVEN MAINLY BY FARMING FAROE ISLANDS Q3 2021 Q3 2022 Q3 22 Q3 21 YTD 22 YTD 21 Operational EBITDA margin 24.7% 15.2% 33.5% 26.6% OPERATIONAL EBIT/Kg (NOK) Operational EBIT margin 17.4% 5.5% 25.6% 17.3% Farming Faroe Islands 12.56 35.60 Operational EBIT/Kg (Fa

  12. Slide 12: Operational EBIT and Adjusted Earnings per Share

    OPERATIONAL EBIT* AND ADJUSTED EARNINGS PER SHARE** 587 408 415 407 418 Operational EBIT* 339 325 303 (mDKK) 268 268 231 248 224 168 182 103 89 120 71 2018 2019 2020 2021 2022 1,075 1,325 622 821 1,329 6,77 6,48 5,89 4,98 4,83 4,80 4,82 4,07 4,00 3,79 3,61 Adjusted EPS** 3,19 2,95 (DKK) 2,55 2,06 1,

  13. Slide 13: Balance Sheet

    BALANCE SHEET Headlines (mDKK) (DKK million) Q3 22 End 2021 End 2021 Q3 2022 Intangible assets 4,508 4,496 Property, plant and equipment 5,213 4,889 PPE: 4,889 325 5,213 468 302 Right of use assets Financial assets 149 149 Biological assets: 2,448* 820 3,269* Long-term receivables 0 8 *(whereof mDKK

  14. Slide 14: Cash Flow

    CASH FLOW Q3 2021 Q3 2022 (DKK million) Q3 22 Q3 21 YTD 22 YTD 21 Cash flow, operations (mDKK) Cash flow from operations 127 267 820 936 Cash flow from investments -237 -310 -685 -823 267 -140 127 Cash flow from financing 171 -136 -76 -207 Net change in cash 60 -180 59 -94 Cash flow, investments (mD

  15. Slide 15: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) NIBD INCREASED DURING Q3 2022 NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 237)  Change in working capital (mDKK 241) NIBD was decreased by:  Cash flow, operating activities (mDKK -318) Financing end Q3 2022  NIBD: DKK 2,427 m

  16. Slide 16: Government Proposal Changes to the Faroese Revenue Tax

    GOVERNMENT PROPOSAL CHANGES TO THE FAROESE REVENUE TAX Main changes Revenue tax proposed step change from 2023 • Reduced tax with low salmon prices • Increased tax with higher 12,0% salmon prices with 2 new tax levels (7.5% and 10.0%) 10,0% • The thresholds (price per kg) for Proposed tax each tax l

  17. Slide 17: Q3 2022 ESG Update

    Q3 2022 ESG UPDATE New 4,000m3 FSV in operation and delivering efficient dual-treatments for gill health and sea lice – all in one gentle operation Bakkafrost’s first fully-electric catamaran. The electric catamaran is the result of an energy project facilitated by the Nordic Council of Ministers, w

  18. Slide 18: Segment Information

    SUMMARY OF Q3 2022 MARKETS & SALES FINANCIALS SEGMENT INFORMATION OUTLOOK APPENDIX A-15 Froðba, South Island, Faroe Islands

  19. Slide 19: Farming – Harvest Volume

    FARMING – HARVEST VOLUME INCREASED HARVEST – HIGHER AVG Q3 2021 Q3 2022 Harvest Volumes tonnes [HOG] Q3 22 Q3 21 YTD 22 YTD 21 Harvested volumes (tonnes HOG) North: 51% FO - North Region 8,695 2,862 23,542 16,814 FO: 14,937 13% 16,850 West: 33% FO - West Region 5,664 7,756 14,079 23,349 SCT: 6,914 1

  20. Slide 20: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE STRONG PERFORMANCE IN THE FAROES – WEAKENED IN SCOTLAND Q3 2021 Q3 2022 Farming FO (DKK million) Q3 22 Q3 21 YTD 22 YTD 21 Operational EBIT (mDKK) Operating revenue 1,155 759 3,493 2,366 Operational EBIT 444 135 1,532 622 FO: 135 229% 444 Operational EBIT margin 38%

  21. Slide 21: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Q3 2021 Q3 2022 Margin - EBIT per kg total harvested quantity [NOK/kg] Operational EBIT per kg (NOK) Q3 FO Q3 SCT H1 FO H1 SCT FO: 70,00 12.56 23.05 35.60 50,00 43,43 SCT: -16.32 -6.58 -22.90 35,60 30,00 18,37 12,56 10,00 -2,00 FO: Good biological development -10,00

  22. Slide 22: Hatcheries in Scotland – The Past

    HATCHERIES IN SCOTLAND – THE PAST BAKKAFROST / Q3 2022 PRESENTATION Page 22

  23. Slide 23: Hatcheries in Scotland – The Past

    HATCHERIES IN SCOTLAND – THE PAST GEOCRAB BAKKAFROST / Q3 2022 PRESENTATION Page 23

  24. Slide 24: Hatcheries in Scotland – At Acquisition

    HATCHERIES IN SCOTLAND - THE PAST HATCHERIES IN SCOTLAND – AT ACQUISITION APPLECROSS THE GEOCRAB HATCHERY BAKKAFROST / Q3 2022 PRESENTATION Page 24

  25. Slide 25: Hatcheries in Scotland – Present

    HATCHERIES IN SCOTLAND – PRESENT APPLECROSS BAKKAFROST / Q3 2022 PRESENTATION Page 25

  26. Slide 26: Hatchery Comparison Example

    HATCHERY COMPARISON EXAMPLE THE PAST VS. TO-BE Scotland Faroe Islands Hatchery: Barvas Hatchery: Strond Capacity: 730 m3 Capacity: 29,000 m3 (40x larger) Technology: Flow-through Technology: RAS (99.7% recycling) BAKKAFROST / Q3 2022 PRESENTATION Page 26

  27. Slide 27: Large High Quality Smolt = Game Changer

    LARGE HIGH QUALITY SMOLT = GAME CHANGER Large Smolt Strategy Allowing for - Reduced biological risk ”ONE SUMMER” - Increased production efficiency - Enables growth cycles FRESHWATER MARINE Summer/Autumn Risk BAKKAFROST / Q3 2022 PRESENTATION Page 27

  28. Slide 28: Our Roadmap to Larger Smolt in Scotland

    OUR ROADMAP TO LARGER SMOLT IN SCOTLAND RAPIDLY REDUCING THE GAP BETWEEN FAROE ISLANDS AND SCOTLAND Smolt avg. weight (g) GAP between Faroe Islands and Scotland to close within next 5 - 6 yrs Freshwater Strategy • Simplify operations 500 500 • Safe, energy effective and cost-efficient production 2y

  29. Slide 29: Our Roadmap to Larger Smolt in Scotland

    OUR ROADMAP TO LARGER SMOLT IN SCOTLAND INCREASING HATCHERY CAPACITY Ónavík new Hatchery 3 new Glyvradal expansion Norðtoftir expansion Viðareiði expansion 500 500 Large hatchery 2 new 400 400 350 350 Strond 332 Applecross 5 & 6 expansion 250 205 205 180 175 170 150 Applecross 4 expansion 125 125 10

  30. Slide 30: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) HIGHER VOLUMES AND HIGHER COST OF RAW MATERIAL Q3 2021 Q3 2022 (DKK million) Q3 22 Q3 21 YTD 22 YTD 21 Volumes (tonnes) Operating revenue 386 267 1,221 825 5,334 24% 6,636 Operational EBIT 0 11 -137 91 Operational EBIT margin 0% 4% -11% 11% Revenue (mDKK) Farming FO transf

  31. Slide 31: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) HIGHER EBITDA AND HIGHER SALES OF FISHMEAL AND FISH OIL Q3 2021 Q3 2022 (DKK million) Q3 22 Q3 21 YTD 22 YTD 21 Operating revenue 677 557 1,642 1,226 EBITDA (mDKK) EBITDA 120 111 326 217 111 8% 120 EBITDA margin 18% 20% 20% 18% Feed sold (tonnes)* 37,805 44,973 95,240 95

  32. Slide 32: Market Conditions Feed

    MARKET CONDITIONS FEED DECREASE IN INTERNAL AND EXTERNAL FEED SALES Q3 2021 Q3 2022 Volumes of raw material purchase and feed sale [tonnes] 180.000 50.000 Total feed sales decreased (tonnes) 160.000 45.000 140.000 40.000 Raw material (tonnes) 44,973 -16% 37,805 35.000 Feed sale (tonnes) 120.000 30.0

  33. Slide 33: Outlook

    SUMMARY OF Q3 2022 MARKETS & SALES FINANCIALS SEGMENT INFORMATION OUTLOOK APPENDIX A-18 Hov, Faroe Islands

  34. Slide 34: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK Expectation of limited global supply growth SUPPLY - TOTAL  1% increase expected inQ4 2022 1.600 20% 1.400 15%  Low single digit growth expected in 2023 1.200 10% 1.000 800 5% European drivers 600 0%  Tax driven Q4 2022 harvest likely in Norway 400 -5% 200 0 -10% Negativ

  35. Slide 35: Outlook

    OUTLOOK Market Contracts  Global harvest:  For 2023, Bakkafrost has signed contracts for around 23% of the total expected harvest volumes in the Faroe Islands  increased 6.4% in Q3 2022 vs Q3 2021 and Scotland  expected to increase 1% in Q4 2022  expected to be flat in H1 2023 Fishmeal, Oil and

  36. Slide 36: Appendix

    SUMMARY OF Q3 2022 MARKETS & SALES FINANCIALS SEGMENT INFORMATION OUTLOOK APPENDIX Cairndow, Scotland

  37. Slide 37: Hatchery Expansions - Faroe Islands

    HATCHERY EXPANSIONS - FAROE ISLANDS INCREASING HATCHERY CAPACITY FROM 15 TO 23 MILLION AT 500G  The Strond hatchery has significantly increased smolt capacity Ónavík (2025) 2.4m smolt @500g  Large smolts grow strongly after release  Very low feed conversion rate Glyvradal expansion (2024) 0,3 =>

  38. Slide 38: Hatchery Expansion - Scotland

    HATCHERY EXPANSION - SCOTLAND INCREASING HATCHERY CAPACITY TO +18 MILLION AT 500G  Significant increase in smolt capacity in Scotland 2026: Large Hatchery no. 3 2025: Large Hatchery no. 2 2024: Applecross 5 10m smolt @500g 2023: Applecross 4 8m smolt @250g TBD TBD BAKKAFROST / Q3 2022 PRESENTATION

  39. Slide 39: Our Roadmap to Larger Smolt in Scotland

    OUR ROADMAP TO LARGER SMOLT IN SCOTLAND RAPIDLY REDUCING THE GAP BETWEEN FAROE ISLANDS AND SCOTLAND Ónavík new Hatchery 3 new Glyvradal expansion Norðtoftir expansion Viðareiði expansion 500 500 Large hatchery 2 new 2y GAP 400 400 350 350 Strond 332 Applecross 5 & 6 expansion 250 205 205 5y GAP 180

  40. Slide 40: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 7,742 TONNES OF CONSENT INCREASE SINCE THE ACQUISITION Total consent has increased by 11.6% (7,742 tonnes) since the acquisition in Q4 2019 Total consent is 74,765 tonnes in 44 farming sites: North: 24 sites / 44,415 tonnes consent  Uist, 5 sites  Sky & mainland, 6 sites  L

  41. Slide 41: Exceptional Mortality in Scotland

    EXCEPTIONAL MORTALITY IN SCOTLAND BAKKAFROST VS INDUSTRY PEERS Exceptional Mortality biomass in Q3 2022 Bakkafrost Scotland’s historic share of total exceptional mortality reported in Scotland Significant mortality across Industry Peer 1 Scotland  Widely spread of plankton and jelly fish blooms cau

  42. Slide 42: Bakkafrost Scotland Exceptional Mortality

    BAKKAFROST SCOTLAND EXEPTIONAL MORTALITY SIGNIFICANTLY UPSCALED FRESHWATER TREATMENT CAPACITY • New capabilities for efficient and gentle dual-treatment for gill health and sea lice • Now permanently two Farming Service Vessels in service all year around to clear gills and sea-lice Weekly exceptiona

  43. Slide 43: 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, the Faroe Islan

  44. Slide 44: Scotland – Strategic Rationale

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

  45. Slide 45: Planned Investments 2022-2026

    ~ 6.2BN PLANNED INVESTMENTS 2022-2026 FRONTLOADED TO ACCELERATE BUSINESS TRANSFORMATION IN SCOTLAND Faroe Islands: Planned investment profile 2022-2026 (DKK 1,000) • Hatchery capacity (2026 capacity: +23m smolt at 500g) 1.000 Planned investments • Increase feed capacity to cater 200,000 tonnes (HOG)

  46. Slide 46: Planned Investments Ensure Significant Uplift in Capacity

    PLANNED INVESTMENTS ENSURE SIGNIFICANT UPLIFT IN CAPACITY VALUE CHAIN SYNCHRONISED AT 180KT HOG HARVEST CAPACITY IN 2026 • Value chain synchronised at 180kt capacity in 2026 Development in capacity constraints 2018 2022 2026 • Extra capacity as “insurance” & flexibility and for growth: planned later

  47. Slide 47: Investing in Sustainable Growth

    INVESTING IN SUSTAINABLE GROWTH 150,000 TONNES HARVEST IN 2026, FAROE ISLANDS AND SCOTLAND COMBINED 2022-2026 Capex of DKK 6.2 bn builds 180,000t capacity by Volumes Faroe Islands Scotland 2026 1.800 16,00 2021 67,217t 29,672t 1.600 14,00 1.400 Investments per kg (DKK) 12,00 1.200 10,00 DKK million

  48. Slide 48: Markets & Sales

    MARKETS & SALES TOTAL SALES TO NORTH AMERICA AND ASIA INCREASED – WESTERN- AND EASTERN EUROPE DECREASED Sales & volume Total sales of Q3 2022 Q3 2021 YTD 2022 YTD 2021 salmon by markets FO SCT Total FO SCT Total FO SCT Total FO SCT Total Q3 2021 Q3 2022 Western Europe 56% 92% 67% 65% 88% 71% 58% 91%

  49. Slide 49: Development in Supply and Sold Quantity by Origin

    DEVELOPMENT IN SUPPLY AND SOLD QUANTITY BY ORIGIN Global Supply of Atlantic Salmon (head on gutted - HOG) Expected supply growth in 2022  No change in Global supply 2018 2019 2020 2021 2022E 2023E Norway 1,129 1,198 1,223 1,378 1,381 1,412 UK 137 171 160 179 164 177  1% decrease in supply from Eur

  50. Slide 50: Q3 2022 Market Environment

    Q3 2022 MARKET ENVIRONMENT PRICE NORWAY  Prices up compared to Q3 2021 12,0 10,5 90,0 80,0 10,0  Spot price drop compared to 1H 2022 8,4 70,0 8,0 60,0 6,7 6,2 6,1  Nasdaq Norway price up 27% 50,0 EUR DKK 6,0 5,2 5,3 4,5 40,0 4,0  Limited European supply growth in the quarter 4,0 30,0 20,0  Low

  51. Slide 51: Normalised Relationship Between Nasdaq and SSB

    Q3 2022 – NORMALISED RELATIONSHIP BETWEEN NASDAQ AND SSB PRICE IN NORWAY PRICE NORWAY (NOK) 120 10  Nasdaq spot price reflecting marginal pricing per week 100 5  Statistics Norway (SSB) publish average price for all whole 80 0 fish sold per week 60 -5  Incorporates bilateral contracts of variable

  52. Slide 52: Price Movement Largely in Line with Protein Peers

    PRICE MOVEMENT LARGELY IN LINE WITH PROTEIN PEERS European wholesale prices (indexed) Factors impacting ability to pass through cost inflation 160 150  Relative end consumer price elasticity 140 130  Ability and lead time for implementation of required supply 120 contraction to adapt to price elas

  53. Slide 53: Development per Quarter

    DEVELOPMENT PER QUARTER Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (mDKK) 2020 2020 2021 2021 2021 2021 2022 2022 2022 Revenue 1,123 1,139 1,176 1,618 1,272 1,488 1,639 1,684 1,867 Operational EBIT 103 89 224 407 71 120 418 587 325 Profit/Loss 177 -38 408 428 131 -3 405 845 249 Harvest FO (tgw) 11,135 15,957 14,025

  54. Slide 54: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • A dividend for 2021 of DKK 5.14 per share was paid 99% out in Q2 2022 • Dividend payment equals 50% of adjusted EPS 59% 49%* 49% 50% 50% 50% 50% 46% 40% Dividend policy  Competitive return through: 19%  Dividends 0%  Increase in the value o

  55. Slide 55: Page 55

    BAKKAFROST / Q3 2022 PRESENTATION Page 55

  56. Slide 56: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 43.8% (2020)  54,081 inhabitants (September 2022)  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 mar

  57. Slide 57: Facilities and locations

    Facilities and locations BAKKAFROST / Q3 2022 PRESENTATION Page 57

  58. Slide 58: Page 58

    BAKKAFROST / Q3 2022 PRESENTATION Page 58

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