Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q1 2016 Earnings Presentation

42 slides from Bakkafrost P/f's earnings presentation, May 10, 2016

  1. Slide 1: Q1 2016 Bakkafrost Group

    Q1 2016 BAKKAFROST GROUP Oslo 10 May 2016

  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 Q1 2016

     SUMMARY OF Q1 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS High spot prices – positive for Farming, negative for VAP  Harvested 10,934 tgw in Q1 2016 (9,726 tgw in Q1 2015)  Feed sales of 14,454 tonnes in Q1 2016* (14,400 tonnes in Q1 2015*)  Revenues of DKK 905 million in Q1 2016 (DKK 613 million in Q1 2015)  Operational EBIT** of DKK 254 mi

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER Positive results in Farming and FOF seg- ments, but negative result in VAP segment Q1 Q1 (DKK million) 2016 2015 2015 2014  Farming/VAP division increased margin Operating revenues 905 613 2,850 2,683 from 26.12 NOK/kg in Q1 2015 to 27.55 NOK/kg in Q1 2016 Operational EBITDA

  6. Slide 6: Markets and Sales

     SUMMARY OF Q1 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  7. Slide 7: Global Markets

    GLOBAL MARKETS Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Very high market price for salmon  The NASDAQ salmon price for size 4-5  Increased y/y Q1 2016 / Q1 2015 by ~43% - by 17.95 NOK/kg from 41.43 to 59.38  Increased q/q Q1 2016 / Q4 2015 by ~27% - by 12.68 NOK/kg from 46.70 to 59.38 Su

  8. Slide 8: Markets & Sales

    MARKETS & SALES Total sales of salmon Q1 Q1 Good market diversification by markets 2016 2015 2015 2014 EU 38% 39% 36% 45%  EU similar market share in Q1 2016, compared with USA 22% 18% 19% 19% Q1 2015 Asia 22% 8% 15% 16%  USA increased from 18% to 22% Eastern Europe 18% 35% 30% 20%  Asia increase

  9. Slide 9: 6% Global Volume Reduction Expected in 2016

    6% GLOBAL VOLUME REDUCTION EXPECTED IN 2016 Increased supply in Q1-2016 of Atlantic Salmon (head on gutted - HOG) 3.8% supply increase in Q1 2016 Estimated volumes Q1 comparison Estimated volumes YTD comparison Markets Q1 2016E Q1 2015 Volume % 2015 2014 Volume % EU 221.300 221.800 -500 0% 978.400 9

  10. Slide 10: Market Development

    MARKET DEVELOPMENT 3.8% increased sales in global markets Demand - split by markets, sold quantity (head on gutted - HOG)  Total quantity increased 18,500 tonnes Markets Estimated volumes Q1 2016E Q1 2015 Q1 comparison Volume % Estimated volumes 2015 2014 YTD comparison Volume % in the quarter, com

  11. Slide 11: Segment Information

     SUMMARY OF Q1 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  12. Slide 12: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q1 Q1  Harvested volumes increased by 12% in Q1 tonnes [HOG] 2016 2015 2015 2014 2016, compared with Q1 2015 West 9,425 2,541 22,946 18,342  The West region harvested 86% of the total quantity in the quarter. Split in West was North 1,509

  13. Slide 13: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Q1 Q1 High prices and good margin (DKK million) 2016 2015 2015 2014  The operational EBIT increased 34% from Operating revenues 702 471 2,274 2,099 DKK 195 million in Q1 2015 to DKK 261 million Operational EBIT 261 195 841 694 in Q1 2016 Operational EBIT margin 37%

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 35,00  Farming EBIT of NOK 30.45 per kg in Q1 2016, compared to 23.49 in Q1 2015 30,00 30,45 25,00  High prices and satisfying biological performance 23,49 20,00  Farming West harvested throughout t

  15. Slide 15: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) Q1 Q1 VAP revenues and margin (DKK million) 2016 2015 2015 2014  Revenues reduced by 5% to DKK 180 million in Q1 Operating revenues 180 190 737 913 2016 from DKK 190 million in Q1 2015 Operational EBIT -25 22 86 70  Lower inventory of goods for sale by end Q1 2016 Operat

  16. Slide 16: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) Fishmeal, Oil and Feed Good margin (DKK million) Q1 2016 Q1 2015 2015 2014  EBITDA DKK 69 million in Q1 2016, Operating revenues 288 205 1,048 971 compared with DKK 63 million in Q1 2015 EBITDA 69 63 202 182  EBITDA margin of 24.0% in Q1 2016, compared with 30.5% in Q1

  17. Slide 17: Market Conditions Feed

    MARKET CONDITIONS FEED Volumes of raw material purchase and feed sale [tonnes] Feed sales unchanged and fishmeal increased 35.000 120.000  Quantity of feed sold was 14,454 tonnes in Q1 2016, Raw material (tonnes) 30.000 100.000 Feed sale (tonnes) compared with 14,400 tonnes in Q1 2015 25.000 80.000

  18. Slide 18: Group Financials

     SUMMARY OF Q1 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  19. Slide 19: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenues of DKK 905 million. Higher Q1 Q1 harvested volumes, higher spot prices and (DKK million) 2016 2015 2015 2014 higher sales in FOF, but lower VAP volumes Operating revenues 905 613 2,850 2,683  Operational EBIT increased from DKK 235 Operational EBITDA* 282 261 1,109

  20. Slide 20: Balance Sheet

    BALANCE SHEET Q1 End  Investments in PPE of DKK ~ 119 million in Q1 (DKK million) 2016 2015 2016 Intangible assets 295 295  Financial assets unchanged Property, plant and equipment 1,622 1,531 Financial assets 131 131  The carrying amount of biological assets has Biological assets 1,130 1,060 inc

  21. Slide 21: Cash Flow

    CASH FLOW  Cash flow from operations higher in Q1 2016 than Q1 Q1 Q1 2015: (DKK million) 2016 2015 2015 2014 Cash flow from operations 244 81 768 877  High operational earnings Cash flow from investments -119 -106 -602 -240  Working capital nearly unchanged in Q1 2016 Cash flow from financing 94

  22. Slide 22: Outlook

     SUMMARY OF Q1 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  23. Slide 23: Outlook

    OUTLOOK Market Fishmeal, -oil and feed  Tight market balance in 2016, global supply reduction of 6%  Forecast for feed sales, 80,000 tonnes in 2016 Farming Business development  2016 estimated harvest volumes at 48,000 tonnes  Optimizing of the value chain according to the  Expected smolt relea

  24. Slide 24: Appendix

     SUMMARY OF Q1 2016  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  25. Slide 25: Investment Programme 2014 - 2017

    INVESTMENT PROGRAMME 2014 - 2017 Investments will be made step by step in the relevant parts in the value chain to secure:  Efficiency  Biological risk  Organic growth BAKKAFROST / Q1 PRESENTATION 2016 Page 25

  26. Slide 26: Investment Programme 2016 - 2018: Status on main investments

    INVESTMENT PROGRAMME 2016 - 2018 Status on main investments  Harvest/VAP factory  New 8,000 m3 hatchery at Viðareiði  New 29,000 m3 hatchery á Strond  Installation of machinery in progress  Construction in progress  Investment announced in March 2016  Harvest operation to start up in Q2  Hat

  27. Slide 27: Building New Harvest & VAP Factory

    BUILDING NEW HARVEST & VAP FACTORY New Harvest & VAP factory at Glyvrar Merging 7 factories into one facility  Improve efficiency and create synergies  Double capacity  Significant reduction of internal transportation between own factories  New products  Reduce risk in farming  Start up in Q2

  28. Slide 28: Building New Hatcheries - Viðareiði

    BUILDING NEW HATCHERIES - VIÐAREIÐI New hatchery at Viðareiði (S-21)  Capacity expansion in finalising stages  Reduce risk in farming  Reduce total time of production cycle at sea  Recycling of 99% of water - saving water and heating November 2015 April 2016  Viðareiði facility to start up oper

  29. Slide 29: Building New Hatcheries – Á Strond

    BUILDING NEW HATCHERIES – Á STROND New hatchery á Strond  Further significant capacity expansion commences  Reduce risk in farming  Reduce total time of production cycle at sea  Recycling of 99% of water - saving water and heating  Sludge treatment of discharge water and recycling of nutrients

  30. Slide 30: Investments in Hatchery Capacity

    INVESTMENTS IN HATCHERY CAPACITY Significant increase of capacity Capacity (m3)  Startup of Viðareiði (S-21) in 2016 will increase Bakkafrost’s total capacity by 70% 50.000  Strond - Klaksvík will increase the capacity further with 29.000 m3 to a total of 50.000 m3 45.000 40.000  Total capacity f

  31. Slide 31: Larger Smolt – Reduced Risk and Organic Growth

    LARGER SMOLT – REDUCED RISK AND ORGANIC GROWTH Results with large smolt in the Faroe Islands Actual growth period with larger smolt Months for growth Growth potential • Reduced risk until harvest vs 100g smolt • Up to 6 months reduced growth period will reduce risk significantly • Reduced mortality

  32. Slide 32: Bakkafrost - Preparing for the Future

    BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2016-2018  Use free cash flow from operations  Unused financing of approximately DKK 1,074 million  Partly new financing if advantageous Unchanged dividend policy BAKKAFROST / Q1 PRESENTATION 2016 Page 32

  33. Slide 33: Faroe Islands – Excellent Conditions for Cost Effective Farming

    FAROE ISLANDS – EXCELLENT CONDITIONS FOR COST EFFECTIVE FARMING Average Seawater Temperatures  Natural growth area for wild salmon ºC Faroe Islands Norway (Trøndelag) GEOGRAPHY  Faroese fjords provide separation between locations 16  Improves biological control and area management 14 12  Stable

  34. Slide 34: Development per Quarter Q1 2013 – Q1 2016

    DEVELOPMENT PER QUARTER Q1 2013 – Q1 2016 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2016 2015 2015 2015 2015 2014 2014 2014 2014 2013 2013 2013 2013 Revenue 905 760 677 800 613 757 584 711 631 667 741 610 473 Op. EBIT 254 257 206 303 235 227 209 212 186 124 187 169 105 Profit/Loss 213 319 168 19

  35. Slide 35: The Value of a Strict Sanitary Regime

    THE VALUE OF A STRICT SANITARY REGIME Margin EBIT/kg last 15 years (NOK/kg) Margin EBIT/kg last 5 years (NOK/kg) Margin EBIT/kg 2014E (NOK/kg) During the last 15 years, 2001–2015 During the last five years: 2011–2015 In 2015, BAKKA had a farming Norway had the highest margin of the BAKKA had a stron

  36. Slide 36: Dividend

    DIVIDEND Dividend DPS in % of adj. EPS *  Dividend of DKK 8.25 (NOK 10.38) per share paid out in Q2 2016 100% 99% 90% 80% Dividend policy 70% 60%  Competitive return through: 49%** 49% 46% 48%** 50% 40%  Dividends 40%  Increase in the value of the equity 30% 19% 20%  Generally, the company shal

  37. Slide 37: Financing

    FINANCING NIBD and available funding Financing of the Group 2.000  Total funding to ~ DKK 1,291 million 1.800 1.600  Bonds NOK 500 million due Feb 2018 (swapped into 1.400 1.200 DKK) 1.000 800  Revolving credit facility of DKK 850 million due in 2020 600 400  NIBD end Q4 2015: DKK 218 million 20

  38. Slide 38: Tax Changes on Farming in the Faroe Islands

    TAX CHANGES ON FARMING IN THE FAROE ISLANDS Changes in license tax on farming in the Faroes Changes in licence tax 2016 2014 and 2015  Approved by the parliament in December 2015 Taxable income 0% 4.5%  Effective from 1 January 2016 Farming revenue 4.5% 0.5%  From 2016, revenue tax is classified

  39. Slide 39: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  49,192 inhabitants (January 2016)  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%  Fishing :

  40. Slide 40: Monthly Exchange Rates

    MONTHLY EXCHANGE RATES USD/DKK NOK/DKK RUB/DKK • USD decreased in value Q1 2016 • NOK reduced value in 2015 against most • RUB has lost value since April 2015, and is currencies, but regained somewhat in Q1 now at its lowest • More than 50% of the revenue of 2016 Bakkafrost is in USD • The consumpti

  41. Slide 41: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development No of shares Account name type Citizenship 12 months development Traded daily 4.594.437 9,4% Jacobsen Oddvør FRO NOK/share 4.493.140 9,2% Jacobsen Johan Regin FRO 3.429.742 7,0% Nordea Bank Danmark S/A NORDEA (DK) CCANOM DNK 1.812.188 3,

  42. Slide 42: Bakkafrost

    \i/ BAKKAFROST

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