Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2019 Earnings Presentation

39 slides from Bakkafrost P/f's earnings presentation, Nov 5, 2019

  1. Slide 1: Q3 2019 Bakkafrost Group

    Q3 2019 BAKKAFROST GROUP Oslo 5 November 2019

  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 2019

     SUMMARY OF Q3 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Lambavík, East of Eysturoy, Faroe Islands

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvested 12,938 tgw in Q3 2019 (7,217 tgw in Q3 2018) Operation  Feed sales of 33,874 tonnes in Q3 2019* (23,468 tonnes in Q3 2018*)  Raw material purchase of 17,845 tonnes in Q3 2019 (7,496 tonnes in Q3 2018)  Revenues of DKK 996 million in Q3 2019 (DKK 622 million in Q3 2018) Reve

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER Positive margin in all segments (DKK million) Q3 2019 Q3 2018 YTD YTD 2019 2018  Farming/VAP margin increased: Operating revenue 996 622 2,906 2,427 26.25 NOK/kg in Q3 2019 Operational EBITDA 373 221 1,091 992 vs. 25.34 NOK/kg in Q3 2018 Operational EBIT 303 168 910 844 Profi

  6. Slide 6: Markets and Sales

     SUMMARY OF Q3 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES Sales to Eastern Europe decreased significantly while all Total sales of salmon Q3 Q3 M9 M9 other markets increased by markets 2019 2018 2019 2018 EU 45% 27% 46% 29%  EU market increased from 27% in Q3 2018 to 45% in Q3 USA 23% 18% 24% 16% 2019 Asia 24% 23% 25% 23% Eastern Europe 8%

  8. Slide 8: Global Markets

    GLOBAL MARKETS Significantly lower prices in Q3 2019 Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Q1 Q2 Q3 Q4  y/y 10% down 4.96 NOK/kg - from NOK 55.31 to NOK 50.35  q/q 27% down 13.67 NOK/kg - from NOK 64.02 to NOK 50.35 Growth in global supply in Q3 2019  13% increased global supply in Q3

  9. Slide 9: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Supply Development Q3 2019 Q3 2018 Change % SUPPLY DEVELOPMENT [Head On Gutted 1,000 tonnes] Q3 2019 Q3 2018 Change % Strong supply growth in Q3 2019 vs Q3 2018 Norway 322 290 11.2 % UK 45 36 27.0 %  13% global supply growth in Q3 2019 Ireland 4

  10. Slide 10: Salmon Markets, Sold Quantity (HOG)

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) Salmon markets, sold quantity (head on gutted - HOG) Good momentum in most markets Estimated volumes Q3 comparison Estimated volumes H1 comparison Markets Q3 2019 E Q3 2018 Volume % H1 2019 H1 2018 Volume %  Strong demand in EU and the US EU 275,

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK Diminishing growth in global supply SUPPLY - TOTAL TOTAL 800 14%  Low growth expected in Europe 700 12% 600  Impact from early harvest in 2019 10% 500 8%  Continued high lice pressure expected in Norway 400 6% 300  Americas 200 4% 2%  Low increase in smolt release 100

  12. Slide 12: Segment Information

     SUMMARY OF Q3 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes tonnes [HOG] Q3 2019 Q3 2018 M9 2019 M9 2018  The expected harvest for 2019 is 54,500 tonnes North Region 3,651 6,254 18,252 21,892 gutted weight West Region 9,287 963 21,002 10,464  Harvested volumes increased by 79% in Q3 Total 12,938 7,

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Operational EBIT 65% up (DKK million) Q3 2019 Q3 2018 M9 2019 M9 2018  Operational EBIT increased 65% from DKK 140 Operating revenue 693 445 2,207 1,887 million in Q3 2018 to DKK 231 million in Q3 Operational EBIT 231 140 765 761 2019 Operational EBIT margin 33% 31

  15. Slide 15: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Operation Margin - EBIT per kg total harvested quantity [NOK/kg]  Farming operational EBIT decreased by NOK 1.24 per kg from NOK 24.85 in Q3 2018 to NOK 35.00 23.61 in Q3 2019 30.00  Average weight West 5.79 kg and North 4.90 kg 25.00 HOG 20.00  Operational EBIT

  16. Slide 16: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) Strong quarter from VAP (DKK million) Q3 2019 Q3 2018 M9 2019 M9 2018 Operating revenue 217 69 716 256  Higher volumes in Q3 2019, compared to Q3 2018 Operational EBIT 26 3 27 -26  Revenue increased to DKK 217 million in Q3 2019, Operational EBIT margin 12% 4% 4% -10% fr

  17. Slide 17: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) Strong quarter in FOF segment (DKK million) Q3 2019 Q3 2018 M9 2019 M9 2018 484 354 1,050 981  EBITDA more than doubled to DKK 94 Operating revenue million in Q3 2019, compared with DKK 41 94 41 218 194 EBITDA million in Q3 2018 19.5% 11.7% 20.8% 19.8% EBITDA margin  E

  18. Slide 18: Market Conditions Feed

    MARKET CONDITIONS FEED Volumes of raw material purchase and feed sale [tonnes] 44% Increased feed sales  Quantity of feed sold was 33,874 tonnes in Q3 2019, compared to 23,468 tonnes in Q3 2018 Raw material (tonnes) Feed sale (tonnes)  External feed sales 187% higher in Q3 2019, compared to Q3 201

  19. Slide 19: Group Financials

     SUMMARY OF Q3 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  20. Slide 20: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenue in Q3 2019 amounted to DKK 996 (DKK million) Q3 2019 Q3 2018 M9 2019 M9 2018 million, compared to DKK 622 million in Q3 Operating revenue 996 622 2,906 2,427 2018 Operational EBITDA* 373 221 1,091 992  Operational EBIT in Q3 2019 was higher, Operational EBIT* 303 168

  21. Slide 21: Operational EBIT and Earnings per Share

    OPERATIONAL EBIT* AND EARNINGS PER SHARE 459 408 350 335 339 331 303 307 303 257 254 255 252 268 268 235 231 206 Operational EBIT* 168 (DKK million) 2015 2016 2017 2018 YTD 2019 1,001 1,165 1,378 1,075 910 (YTD) 11.44 8.19 7.13 7.32 6.96 6.56 5.60 Earnings per share 3.91 4.39 4.61 4.37 3.88 3.67 (DK

  22. Slide 22: Balance Sheet

    BALANCE SHEET  Intangible assets amounts to DKK 390 million at the end (DKK million) Q3 2019 End 2018 of Q3 2019 Intangible assets 390 390 Property, plant and equipment 3,216 2,884  Investments in PPE of DKK 173 million in Q3 2019 and PPE amounts to DKK 3.2 billion Financial assets 494 113 Long-te

  23. Slide 23: Cash Flow

    CASH FLOW  Cash flow from operations amounted to (DKK million) Q3 2019 Q3 2018 M9 2019 M9 2018 DKK 779 million in Q3 2019, compared to DKK 324 million in Q3 2018 Cash flow from operations 779 324 1,182 972  Cash flow from investments amounted to Cash flow from investments -544 -164 -806 -384 DKK -

  24. Slide 24: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) Net interest-bearing debt Development in NIBD in DKK millions  Cash flow from operating activities decreased the NIBD with DKK 422 million in Q3 2019  Net investments increased the NIBD with DKK 544 million in Q3 2019, whereof DKK 375 million was due to acquisition

  25. Slide 25: Outlook

     SUMMARY OF Q3 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Funningsfjørður, North of Eysturoy, Faroe Islands

  26. Slide 26: Outlook

    OUTLOOK Market VAP  Global supply in Q3 2019 increased around 13%, compared  Contracted around 40% of expected harvest volume to Q3 2018 for Q4 2019 and 26% of 2020 harvest volume  Global harvest in Q4 2019 is expected to increase 3%,  Bakkafrost’s long-term strategy is to sell 40-50% of compare

  27. Slide 27: Appendix

     SUMMARY OF Q3 2019  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  28. Slide 28: Entering Scotland

    ENTERING SCOTLAND Strategic rationale 1. Provides access to the attractive Scotland 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 Faroe Isl

  29. Slide 29: Entering Scotland

    ENTERING SCOTLAND Strategic rationale 3. Potential for significant improvement  Scottish Salmon profitability to improve over a five-year period through transfer of best practices  Synergies and  Targeted investment programs 4. Financially attractive acquiring the business at a reasonable value m

  30. Slide 30: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 43 farming sites / 67,023T consent South  20 sites / 29,205T consent  Mull and Gigha, 6 sites  Loch Striven and Arran, 4 sites  Loch Fyne, 10 sites North  23 sites / 37,818T consent  Uist, 5 sites  Sky & mainland, 7 sites  Loch Roag, 6 sites  East Lewis & Harris, 5 si

  31. Slide 31: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN  7% global supply growth in 2019 Global Supply of Atlantic Salmon (head on gutted - HOG)  8% growth in European harvest in 2019 2016 2017 2018 2019E 2020E Norway 1,055 1,078 1,130 1,193 1,248  Americas harvest increased by 4% in 2019 UK 142 159

  32. Slide 32: Q3 Market Environment

    Q3 MARKET ENVIRONMENT PRICE NORWAY  Reduced market prices compared to Q3 2018 8.0 7.2 60.0 7.0 6.2 6.3 6.4 6.0 50.0  Nasdaq Norway price EUR 5.0 in Q3 2019 6.0 5.1 5.7 5.8 5.0 40.0 5.0  13% down vs. Q3 2018 EUR DKK 4.0 30.0 3.0  Driven by exceptional supply increase 2.0 20.0 10.0 1.0  Urner Bar

  33. Slide 33: Superior Biology Combined with State of the Art Infrastructure

    SUPERIOR BIOLOGY COMBINED WITH STATE OF THE ART INFRASTRUCTURE FISHMEAL, OIL AND FEED BROODSTOCK SMOLT SEA WATER PROCESSING SALES/MARKETING Equivalent to 100k (tgw) None 12 million @ 200 grams 21 farming sites/17 fjords 130k primary (tgw) Central sales Faroes annual harvest @ 55k (tgw) @100g smolt/

  34. Slide 34: Development per Quarter

    DEVELOPMENT PER QUARTER Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (mDKK) 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 677 760 905 790 640 868 854 1206 804 906 851 954 622 750 964 947 996 Revenue 206 257 254 307 255 350 335 459 252 331 268 408 168 231

  35. Slide 35: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • Dividend for 2018 of DKK 8.25 (NOK 10.65) per share was 99% paid out on 26 April 2019. Totalling 403.1 DKK million (NOK 520.3 million) 49%** 49% 50% 50% 50% 49% 46% 40% Dividend policy 19%  Competitive return through:  Dividends  Increase i

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    BAKKAFROST / Q3 2019 PRESENTATION Page 36

  37. Slide 37: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 41.8% (2016)  52,122 inhabitants (1 August 2019)  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 ma

  38. Slide 38: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development 12 months development Traded daily Rank Holding Share Name Citisenship Account type NOK/share 1 5.094.627 8,74% FOLKETRYGDFONDET NOR Ordinary 2 4.615.896 7,92% JACOBSEN, JOHAN REGIN FRO Ordinary 3 4.594.437 7,88% JACOBSEN, ODDVØR MARITA

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    BAKKAFROST / Q3 2019 PRESENTATION Page 39

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