Bakkafrost P/f · OSL:BAKKA
Bakkafrost P/f — Bakkafrost — Q4 2014 Earnings Presentation
41 slides from Bakkafrost P/f's earnings presentation, Feb 24, 2015
Slide 1: Q4 2014 Bakkafrost Group
Q4 2014 BAKKAFROST GROUP Oslo February 24th 2015
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
Slide 3: Summary of Q4 2014
SUMMARY OF Q4 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX
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 ~57% of harvest volumes in Q4 2014 50% of farming licenses Harvested 12,651 tgw in Q4 2014 (11,097 tgw in Q4 2013) Feed sale of 23,133 tonnes in Q4 2014* (20,270 tonnes in
Slide 5: Summary of the quarter
SUMMARY OF THE QUARTER Q4 Q4 Positive contribution from all segments (DKK million) 2014 2013 2014 2013 Operating revenues 757.3 666.6 2,683.3 2,491.1 Combination of contracts and spot sale Operational EBITDA 254.5 148.7 930.9 673.7 boosted earnings Operational EBIT 227.5 125.9 833.8 587.0 Farmin
Slide 6: Summary of the quarter
SUMMARY OF THE QUARTER Market Characterized by tight market and Russian import ban High increase in salmon price during the quarter, but high supply from mid December led to big price drop Achieved a combination of high contract prices and high spot prices Operation Harvested volumes 14%
Slide 7: Markets and Sales
SUMMARY OF Q4 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX
Slide 8: Global markets
GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG] The NASDAQ salmon price for size 4-5: Decreased y/y Q4 2014 / Q4 2013 by ~6% - by 2.53 NOK/kg from 41.41 to 38.88 Increased q/q Q4 2014 / Q3 2014 by ~12% - by 4.24 NOK/kg from 34.64 to 38.88 The global supply growth was ~16,500 tonn
Slide 9: Markets & Sales
MARKETS & SALES Total sales of salmon Q4 Q4 Bakkafrost benefits of the global salmon market by markets 2014 2013 2014 2013 EU 40% 50% 45% 47% Access to all markets USA 13% 17% 19% 19% Flexible and efficient market adaptation Asia 10% 22% 16% 27% Eastern Europe 37% 11% 20% 6% Market position im
Slide 10: A market in balance in 2014, limited growth expected in 2015
A MARKET IN BALANCE IN 2014, LIMITED GROWTH EXPECTED IN 2015 The largest producer of Atlantic Salmon – Global supply of Atlantic Salmon (head on gutted - HOG) Norway – is expected to increase supply in 2011 2012 2013 2014E 2015E 2015 by 4% compared with 2014 Norway 904 1.066 1.029 1.076 1.124 UK 1
Slide 11: Demand development split by markets
DEMAND DEVELOPMENT SPLIT BY MARKETS Salmon markets, sold quantity (head on gutted - HOG) The supply growth in Q4 2014 was Estimated volumes Q3 comparison Estimated volumes YTD comparison Markets Q4 2014 Q4 2013 Volume % FY 2014 E FY 2013 Volume % 4% compared with Q4 2013 EU 253.600 235.000 18.600
Slide 12: Segment Information
SUMMARY OF Q4 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX
Slide 13: Farming – harvest volume
FARMING – HARVEST VOLUME Harvest Volumes Q4 Q4 Harvested volumes tonnes [HOG] 2014 2013 2014 2013 Harvested volumes increased by 14% in the quarter but are up 7% YTD West 5,023 2,992 18,342 12,065 The distribution between the regions fairly North 7,628 8,105 25,671 29,203 even, with 42% of the v
Slide 14: Farming – operational performance
FARMING – OPERATIONAL PERFORMANCE Revenues and margin (DKK million) Q4 2014 Q4 2013 2014 2013 Operational EBIT margin increased from Operating revenues 630 526 2,099 1,992 25% to 29% Operational EBIT 181 131 694 642 Good biology and fish health Operational EBIT margin 29% 25% 33% 32% Satisfyin
Slide 15: Farming – operational performance
FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 20.00 Higher EBIT/kg due to higher sales prices 15.00 Front end loaded harvest in West at lower market 17.65 16.27 prices 16.53 10.00 13.02 5.00 0.00 Q4 2014 Q4 2013 2014 2013 (NOK/kg) Q4 2014 Farm
Slide 16: Farming – drivers behind margins
FARMING – DRIVERS BEHIND MARGINS Distribution of sizes in producing countries, Q4 2014 in percent (est.) The average weight of salmon from Bakkafrost was Country Faroe Island 1-2 0% 2-3 1% 3-4 8% 4-5 20% 5-6 29% 6-7 23% 7+ 18% Share 6+ 41% 5.1 kg gw in Q4 2014 Norway 0% 5% 18% 29% 25% 15% 8% 23% N
Slide 17: Segment VAP
SEGMENT VAP Q4 Q4 Revenues and margin (DKK million) 2014 2013 2014 2013 Strong result in in VAP due to high contracts prices Operating revenues 259 203 913 666 Operational EBIT 32 -6 70 -90 Utilised low salmon prices in Q3 to produce on stock, which positively affected result for Q4 Operational
Slide 18: Segment VAP
SEGMENT VAP Margin - EBIT per kg total harvested quantity [NOK/kg] Record high combined earnings from VAP and 25 Farming 20 15 VAP EBIT was 7.36 NOK/kg in Q4-2014 10 Farming EBIT was 16.53 NOK/kg 5 Contract period is normally between 6 and 12 months. 0 Q4-2013 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11
Slide 19: Segment Fishmeal, Oil and Feed (FOF)
SEGMENT FISHMEAL, OIL AND FEED (FOF) Fishmeal, Oil and Feed Sale of fishmeal normalised in second half of 2014 Q4 Q4 (DKK million) 2014 2013 2014 2013 EBITDA margin increased due to favourable Operating revenues 225 253 971 1,083 market development EBITDA 41 21 182 126 Sale in 2014 in line wit
Slide 20: Raw material prices and feed sale
RAW MATERIAL PRICES AND FEED SALE Volumes of raw material purchase and feed sale [tonnes] Timing of raw material purchase affects profit 35,000 120,000 Feed sale Raw material (tonnes) Purchased high volumes of raw material for fishmeal 30,000 100,000 Feed sale (tonnes) production in Q2 at low pric
Slide 21: Group Financials
SUMMARY OF Q4 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX
Slide 22: Group profit and loss
GROUP PROFIT AND LOSS Q4 Q4 (DKK million) 2014 2013 2014 2013 Operating revenues 757 667 2,683 2,491 Revenues increased due to improved Operational EBITDA* 255 149 931 674 salmon prices both in the spot and contract Operational EBIT* 227 126 834 587 market. Fair value adjustment on biological asse
Slide 23: Balance sheet
BALANCE SHEET Investments in PPE of DKK ~ 103 million in Q4 2014 and YTD of DKK ~ 230 million (DKK million) 2014 2013 Intangible assets 295 295 Increase in financial assets primarily due to Property, plant and equipment 1,041 917 investment in pelagic processing plant (Bakkafrost owns 30%) Finan
Slide 24: Cash flow
CASH FLOW Cash flow from operation is on the same level: Q4 Q4 (DKK million) 2014 2013 2014 2013 Higher operational earnings Cash flow from operations 173 187 870 518 Taxes paid in Q4 Cash flow from investments -79 -97 -232 -205 Cash flow from financing -57 -72 -414 -156 Net change in cash 37
Slide 25: Status on Investment
SUMMARY OF Q4 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX Building ground for Bakkafrost’s new Harvest- & VAP plant in Glyvrar. To be in operation in Q1-2016 Picture from early January-2015
Slide 26: Investments – programme 2014-2017
INVESTMENTS – PROGRAMME 2014 - 2017 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 / Q4 PRESENTATION 2014 Page 26
Slide 27: Investments – programme 2015-2017
INVESTMENTS – PROGRAMME 2015 - 2017 Status on main investments Harvest/VAP factory New Hatchery Viðareiði Hans á Bakka Building process started Contracted Feb-2015 Wellboat under construction in Yalova in Turkey Contracts for machinery partly Total investment DKK 125 mill signed Co
Slide 28: Outlook
SUMMARY OF Q3 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX
Slide 29: Outlook
OUTLOOK Market Fishmeal, oil and feed Tight market in 2015, especially first half of the year Forecast for feed sales 83,000 - 87,000 tonnes in 2015 Forward prices 1H-2015 are around 45 NOK per kg and NOK 38-44 per kg in 2H-2015 Business development Optimize the Value Chain according to the
Slide 30: Appendix
SUMMARY OF Q4 2014 MARKETS AND SALES SEGMENT INFORMATION GROUP FINANCIALS STATUS ON INVESTMENT OUTLOOK APPENDIX Bakkafrost’s Farming Site in Gøtu A-25
Slide 31: Bakkafrost - preparing for the future
BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2015-2017 Use free cash flow from operations Unused financing of approximately DKK 958 million Partly new financing if advantageous Flexibility to postpone investment in case of adverse events Profiles from the National Footb
Slide 32: Financing
FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding Total funding to DKK ~ 1,191 million 1600 Bonds NOK 500 million due Feb 2018 (swapped into 1400 DKK) 1200 Instalment loan of DKK 200 million, repayable with DKK 1000 25 million each quarter 800 Revolving cred
Slide 33: Faroe Islands
FAROE ISLANDS 18 islands – 1,387 km2 48,618 inhabitants (November 1st 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% Fishi
Slide 34: 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
Slide 35: New Harvest and VAP operation
BAKKAFROST - PREPARING FOR THE FUTURE New Harvest and VAP operation The new plant and HQ 7 factories merged into one BAKKAFROST / Q4 PRESENTATION 2014 Page 35
Slide 36: Development per quarter Q1 2012 – Q4 2014
DEVELOPMENT PER QUARTER Q1 2012 – Q4 2014 (mDKK) Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Revenue 757 584 711 631 667 741 610 473 582 457 416 400 Op. EBIT 227 209 212 186 124 187 169 105 99 86 78 60 Profit/Loss 222 211 126 87 138 200 184 67 148
Slide 37: Industry structure has influence on the competitiveness
INDUSTRY STRUCTURE HAS INFLUENCE ON THE COMPETITIVENESS Margin EBIT/kg last 15 years (NOK/kg) Margin EBIT/kg last 5 years (NOK/kg) Margin EBIT/kg 2013E (NOK/kg) 7 12 18 6 16 10 14 5 8 12 4 10 6 3 8 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 BAK
Slide 38: Dividend
DIVIDEND Dividend DPS in % of adj. EPS * Proposed dividend of DKK 6.00 (NOK ~6.90) per share paid out in Q2 2015 100% 99% 90% 80% Dividend policy 70% Competitive return through: 60% 49%** 49% 49%** Dividends 50% 40% Increase in the value of the equity 40% 30% Generally the company shall pa
Slide 39: Largest shareholders
LARGEST SHAREHOLDERS 20 largest shareholders Share price development since listing in NOK 20 largest shareholders Last 12 No of shares % Name Origin months 4.594.437 9,4 Jacobsen Oddvør FRO 4.491.217 9,19 Jacobsen Johan Regin FRO 2.405.166 4,92 SPAR NORD BANK A/S S/A C LIENT AC C OU NOM DNK 1.872.81
Slide 40: Tax increases approved by parliament
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 (2,5% in 2013) • 0.5% on farming revenues (new from 2014) Effect on 2014 compared to 20
Slide 41: National Football Team sponsorship
Profiles from the National Football Team enjoying top quality Bakkafrost salmon. Bakkafrost is the main sponsor of the Faroe Islands National Football Team.