Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q2 2014 Earnings Presentation

41 slides from Bakkafrost P/f's earnings presentation, Aug 26, 2014

  1. Slide 1: Q2 2014 Bakkafrost Group

    Q2 2014 BAKKAFROST GROUP Glyvrar 26 August 2014

  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 2014

     SUMMARY OF Q2 2014  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK

  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  ~66% of harvest volumes in Q2 2014  50% of farming licenses  Harvested 11,212 tgw in Q2 2014 (10,540 tgw in Q2 2013)  Feed sale of 18,827 tonnes in Q2 2014* (18,196 tonnes in

  5. Slide 5: Summary of the quarter

    SUMMARY OF THE QUARTER Q2 Q2 H1 H1 Strong result from VAP and fishmeal and oil (DKK million) 2014 2013 2014 2013 Operating revenues 710.6 610.0 1,341.9 1,083.3 Operational EBITDA 235.5 190.7 443.5 316.6  Combination of contracts and spot sale Operational EBIT 212.1 169.3 397.6 274.4 busted earnings

  6. Slide 6: Summary of the quarter

    SUMMARY OF THE QUARTER  Market  Increased supply during the quarter and hence decreased spot prices  Strong contract prices during the quarter for VAP products  No slow down in demand due to high contract prices  Operation  Harvested volumes higher in Q2 2014 compared to Q2 2013 Bakkafrost’s n

  7. Slide 7: Markets and Sales

     SUMMARY OF Q2 2014  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK

  8. Slide 8: Global markets

    GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG] 55,00  The NASDAQ salmon price decreased 50,00 ~3% compared with Q2 2013 45,00 - from NOK 41.82 to 40.61 in Q2 2014 40,00  The price decreased 6.56 NOK per kg from Q1 2014 35,00 to Q2 2014 30,00 - from 47.18 to 40.62 NOK/kg 25,00 20,00 

  9. Slide 9: Markets & Sales

    MARKETS & SALES Total sales of salmon Q2 Q2 H1 H1 EU market increased in Q2 2014 by markets 2014 2013 2014 2013 EU 56% 51% 52% 52%  VAP share increased in value compared with last USA 20% 22% 22% 20% year Asia 19% 23% 20% 25%  For fresh products overseas high-end markets Eastern Europe 5% 4% 6% 3%

  10. Slide 10: A market in balance in 2014, and no growth expected in 2015

    A MARKET IN BALANCE IN 2014, AND NO GROWTH EXPECTED IN 2015  We expect a high global growth in Q3 2014, but Global supply of Atlantic Salmon (head on gutted - HOG) lower growth for some time after Q3 2014 2011 2012 2013 2014E 2015E  Norway is expected to increase volumes Norway 904 1.066 1.029 1.0

  11. Slide 11: Demand development split by markets

    DEMAND DEVELOPMENT SPLIT BY MARKETS Salmon markets, sold quantity (head on gutted - HOG)  The supply growth in Q2 2014 was Estimated volumes Q2 comparison Estimated volumes YTD comparison Markets Q2 2014 E Q2 2013 Volume % YTD 2014 E YTD 2013 Volume % 14% compared with Q2 2013 EU 215.400 192.200 23

  12. Slide 12: Segment Information

     SUMMARY OF Q2 2014  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK

  13. Slide 13: Farming – harvest volume

    FARMING – HARVEST VOLUME Harvest Volume Q2 Q2 H1 H1 Harvested volumes tonnes [HOG] 2014 2013 2014 2013  Harvested volumes increased by 6% West 3,338 794 12,286 4,733  73% of the volumes from the North region, with large farming sites, and hence lower North 7,874 9,746 8,195 14,103 costs Total 11,2

  14. Slide 14: Farming – operational performance

    FARMING – OPERATIONAL PERFORMANCE Q2 Q2 H1 H1 Revenues and margin (DKK million) 2014 2013 2014 2013  Revenues decreased 1%, and volumes increased Operating revenues 516 520 1,034 945 6% Operational EBIT 160 200 346 324  Operational EBIT margin decreased from 38% to Operational EBIT 31% 38% 33% 34%

  15. Slide 15: Farming – operational performance

    FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 20,00  Lower EBIT/kg due increased supply of salmon during the quarter and hence lower spot prices 15,00 19.34 17.27 18.75  Harvested fish with good biological and financial 15.65 performance 10,00 

  16. Slide 16: Segment VAP

    SEGMENT VAP Q2 Q2 H1 H1 Revenues and margin (DKK million) 2014 2013 2014 2013  Revenues increased 59%, while volume increased Operating revenues 267 168 499 316 22% Operational EBIT 20 -42 11 -65  Positive result in VAP due to high contracts prices Operational EBIT margin 8% -25% 2% -21% and spot

  17. Slide 17: Segment VAP

    SEGMENT VAP Margin - EBIT per kg total harvested quantity [NOK/kg] Strategy 25 20  Bakkafrost’s strategy is to sell 40-50% of our products as VAP products directly to end markets in Europe and 15 US 10 5  Contract period is normally between 6 and 12 months 0 -5  Losses during periods with high in

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

    SEGMENT FISHMEAL, OIL AND FEED (FOF)  EBITDA margin increased from 12.3% to 20.3% Fishmeal, Oil and Feed due to higher production of fishmeal and fish oil in a market with favourable development Q2 Q2 H1 H1 (DKK million) 2014 2013 2014 2013 Operating revenues 280 251 458 408  Sale in 2014 in line

  19. Slide 19: Segment Fishmeal, Oil and Feed (FOF)

    SEGMENT FISHMEAL, OIL AND FEED (FOF) Faroese pelagic quotas in the North Atlantic  Increased pelagic quotas since the acquisition of 500.000 Havsbrún in 2011 Bakkafrost acquires Havsbrún 400.000  Increased quotas => improved access to raw material for the production of fishmeal and oil 300.000  H

  20. Slide 20: Group Financials

     SUMMARY OF Q2 2014  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK

  21. Slide 21: Group profit and loss

    GROUP PROFIT AND LOSS Q2 Q2 H1 H1  Revenue up 17% corresponding to DKK 101 (DKK million) 2014 2013 2014 2013 million) due to: Operating revenues 711 610 1,342 1,083  Improved contract prices for Value Added Operational EBITDA* 235 191 444 317 Products and improved result in Havsbrún Operational EB

  22. Slide 22: Balance sheet

    BALANCE SHEET End H1 (DKK million) 2014 2013  Investments in PPE of DKK ~61 million in Q2 2014 Intangible assets 295 295  Increase in financial assets primarily due to Property, plant and equipment 949 917 investment in pelagic processing plant (Bakkafrost Financial assets 132 116 owns 30%) Long t

  23. Slide 23: Cash flow

    CASH FLOW Q2 Q2 H1 H1 (DKK million) 2014 2013 2014 2013  Cash flow from operation improved due to higher Cash flow from operations 308 173 416 200 operational EBIT and lower working capital Cash flow from investments -71 -41 -105 -69 Cash flow from financing -217 -169 -230 -69  Cash flow from inve

  24. Slide 24: Proposed tax increases approved by parliament

    PROPOSED TAX INCREASES APPROVED BY PARLIAMENT Licence tax on farming companies in the Faroes*  Approved by the parliament in May 2014  From a provisional tax to a permanent tax  Licence tax of: • 4.5% on taxable income • 0.5% on farming revenues Effect on H1 2014 compared to 2013 tax rates estima

  25. Slide 25: Outlook

     SUMMARY OF Q2 2014  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2014-2017  OUTLOOK

  26. Slide 26: Bakkafrost – preparing for the future

    BAKKAFROST - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales One of the most vertical integrated salmon farming companies in the world • Full traceability to the benefit of our customers • 45 years of experience • Focus on cost centres • Vert

  27. Slide 27: Time to boost organic growth

    TIME TO BOOST ORGANIC GROWTH 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 2014 Page 27

  28. Slide 28: Investments – preparing for the future

    INVESTMENTS - PREPARING FOR THE FUTURE Time to boost organic growth adjusting investment plan  Increasing hatchery capacity to produce 200-300g smolt  Reduce biological risk  Gradually increase Farming production by 10-15%  Investment in Hatcheries increased from DKK 50 to 420 million 550  More

  29. Slide 29: Financing of the investments 2014-2017

    BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2014-2017  Use free cash flow from operations  Unused financing of approximately DKK 730 million  Partly new financing if advantageous  Flexibility to postpone investment in case of adverse events Unchanged dividend policy BAKKAF

  30. Slide 30: Financing

    FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding  Total funding to DKK ~ 1,303 million 1600  Bonds NOK 500 million due Feb 2018 (swapped into 1400 DKK) 1200  Instalment loan of DKK 250 million, repayable with DKK 1000 25 million each quarter 800  Revolving cred

  31. Slide 31: Outlook

     SUMMARY OF Q2 2014  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2014-2017  OUTLOOK

  32. Slide 32: Outlook

    OUTLOOK Market  Still high supply of salmon in Q3, but expected Biology tight market from Q4  Good biology and fish health  Marked interrupted in the short term by the import ban  Good biological performance and results put into effect by the Russian authorities VAP  Faroe Islands not covered b

  33. Slide 33: Thank you!

    THANK YOU! Manager Hatchery employee Foremen Farming Captain Harvest employee Foreman VAP employee Senior Quality Manager Technician Logistics Business Controller Marketing Manager Feed Division

  34. Slide 34: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  48,288 inhabitants (February 28 2014)  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%  Fishin

  35. Slide 35: Faroe Islands – excellent conditions for cost effective farming

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

  36. Slide 36: Phase 3: New VAP operation

    BAKKAFROST - PREPARING FOR THE FUTURE Phase 3: New VAP operation Draft of new plant 2 factories merged into one BAKKAFROST / Q2 PRESENTATION 2014 Page 36

  37. Slide 37: Development per quarter Q1 2012 – Q2 2014

    DEVELOPMENT PER QUARTER Q1 2012 – Q2 2014 (mDKK) Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Revenue 711 631 667 741 610 473 582 457 416 400 Op. EBIT 212 186 124 187 169 105 99 86 78 60 Profit/Losss 126 87 138 200 184 67 148 26 91 16 Harvest (tgw) 11,212 9,269 11,

  38. Slide 38: Industry structure has influence on the competitiveness

    INDUSTRY STRUCTURE HAS INFLUENCE ON THE COMPETITIVENESS Margin EBIT/kg last 15yrs (NOK/kg) Margin EBIT/kg last 5yrs (NOK/kg) Margin EBIT/kg 2013E (NOK/kg) 7 12 16 6 10 14 5 12 8 4 10 6 8 3 4 6 2 4 1 2 2 0 0 0 -2 -4 During the last 15 years, Norway The last five years BAKKA had a In 2013 BAKKA had a

  39. Slide 39: Dividend

    DIVIDEND Dividend DPS in % of adj. EPS *  Dividend of DKK 4.50 (NOK ~4.98) per share paid out in April 2014 100% 99%  Bakkafrost purchased treasury shares in 2013, 90% equivalent to DKK 0.59 (NOK 0.66) per share. 80%  Dividend incl. the acquisition of treasury shares is 70% DKK 5.09 (NOK ~5.64) 6

  40. Slide 40: Largest shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share price development since listing in NOK No of shares % Name Origin Last 12 4.594.437 9,4 Jacobsen Oddvør FRO months 4.491.217 9,2 Jacobsen Regin FRO 3.044.312 6,2 SPAR NORD BANK A/S S/A CLIENT ACCOUNT NOM FRO 2.204.940 4,5 DANSKE BANK 3993 NORDIC SET

  41. Slide 41: Manager Feed Division Hatchery employee

    Manager Hatchery employee Foremen Farming Captain Harvest employee Foreman VAP employee Senior Quality Manager Technician Logistics Business Controller Marketing Manager Feed Division

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