Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Investor Day (June 2019)

127 slides from Bakkafrost P/f's investor day presentation, Jun 12, 2019

  1. Slide 1: Capital Markets Day

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Faroe Islands 12 June 2019 Page 1

  2. Slide 2: Disclaimer

    DISCLAIMER This presentation includes statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied) is made as to

  3. Slide 3: Outstanding operational and financial performance

    OUTSTANDING OPERATIONAL AND FINANCIAL PERFORMANCE Average price Norway (NOK per kg HOG)  NOK ~20 price increase from 2013 to 2018 2013  EBIT/kg conversion  Norwegian industry 1/3 2018  Bakkafrost 80% 0 10 20 30 40 50 60 70  Performance driven by Group operational EBIT per kg (HOG, NOK)  The un

  4. Slide 4: Performance drivers within the Faroese veterinary model

    PERFORMANCE DRIVERS WITHIN THE FAROESE VETERINARY MODEL Page 4

  5. Slide 5: The secret behind the Faroese business model

    THE SECRET BEHIND THE FAROESE BUSINESS MODEL Structure of production zones  Strong regulatory framework  Few players to agree on coordination of unregulated matters – avoids “tragedy of the commons”  Limited overlap of players within production zones  Autonomy to adjust production cycles/fallowi

  6. Slide 6: Integrated business model undergoing significant investment programme

    INTEGRATED BUSINESS MODEL UNDERGOING SIGNIFICANT INVESTMENT PROGRAMME Investments 2013-2018 (MDKK) Page 6

  7. Slide 7: Marine diet – impact on fish welfare and product nutrition

    MARINE DIET – IMPACT ON FISH WELFARE AND PRODUCT NUTRITION Development of feed recipes - Norway Key performance indicator 2016-18 100% 90% 80% Bakkafrost 70% 60% 50% 40% 30% 20% Norway 10% 0% 2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 Yield per smolt (kg, HOG) Fish oil inclusion Fish meal inclusion

  8. Slide 8: Integrated sustainability approach highlights from Healthy Living Plan

    INTEGRATED SUSTAINABILITY APPROACH HIGHLIGHTS FROM HEALTHY LIVING PLAN Page 8

  9. Slide 9: Biological parameters

    BIOLOGICAL PARAMETERS Mortality rate Economic Feed Conversion Ratio (EFCR) 23 1,6 21 Economic feed conversion ratio 19 1,5 Mortality rate (%) 17 1,4 15 13 1,3 11 9 1,2 7 1,1 5 2016 2017 2018 1 Norway Bakkafrost 2014 2015 2016 2017 2018 Norway Bakkafrost Harvest Weight (HOG) 5,5  Indication of well

  10. Slide 10: Significant cost advantage

    SIGNIFICANT COST ADVANTAGE Comparison – Group cost per kg, NOK (2017)  Costs materially below average level in Norway Bakkafrost  High other costs due to low capacity utilization  Wellboats, treatment vessels, processing Norway  2018 costs somewhat higher than 2017 32 33 34 35 36 37 38  Isolate

  11. Slide 11: Price advantage – differentiating factors

    PRICE ADVANTAGE – DIFFERENTIATING FACTORS Page 11

  12. Slide 12: Price advantage – differentiating factors

    PRICE ADVANTAGE – DIFFERENTIATING FACTORS Size distribution and price Revenues by geography 35,0% 80,0 Eastern Europe 70,0 25% Western 30,0% Price Norway, NOK/kg HOG Europe 60,0 31% Proportion of harvest 25,0% 50,0 20,0% 40,0 15,0% 30,0 10,0% 20,0 5,0% 10,0 Asia 24% North America 0,0% 0,0 20% 1-2 kg

  13. Slide 13: The Bakkafrost brand and Faroese origin

    THE BAKKAFROST BRAND AND FAROESE ORIGIN  Premium pricing through visibility of  The Bakkafrost brand  Faroese origin  Retail sales focus  Visibility in the shelves and wet counters  Food service/Restaurants  Bakkafrost and/or Faroese origin on menus Page 13

  14. Slide 14: Value added products significant proportion of sales

    VALUE ADDED PRODUCTS SIGNIFICANT PROPORTION OF SALES  VAP contract coverage: 30-40% Contract coverage - VAP  Brand/Origin visibility 100%  Reduced exposure to spot prices 90% 80%  Contracts normally vary between 6-12 months 70%  Fixed prices 60%  2018 impacted by change in product portfolio 50

  15. Slide 15: Price advantage

    PRICE ADVANTAGE  Significant price premium Comparison – Price 2017  Larger fish fetch a higher price Bakkafrost realised superior  Good market access  Significant Bakkafrost brand premium component Spot Norway  Faroese/Bakkafrost origin favoured in many markets 54,0 56,0 58,0 60,0 62,0 64,0 66,

  16. Slide 16: Summary – EBIT per kg comparison

    SUMMARY – EBIT PER KG COMPARISON Group operational EBIT/kg Spot Norway vs realized prices, NOK (2017) 68,0 66,0 2018 64,0 NOK per kg (HOG) 62,0 60,0 2017 58,0 56,0 0 5 10 15 20 25 30 35 54,0 Bakkafrost Norway Spot Norway Weight Brand Realised Downgrades Total realised premium superior price Source:

  17. Slide 17: Organic growth drivers

    ORGANIC GROWTH DRIVERS Large smolt strategy New production cluster New farming methods Growth Drivers Historic harvest (tonnes HOG) 60.000 50.000 40.000 30.000 20.000 10.000 0 2012 2013 2014 2015 2016 2017 2018 Page 17

  18. Slide 18: Large smolt strategy - concept

    LARGE SMOLT STRATEGY - CONCEPT  Risk management  Production efficiency  Growth Page 18

  19. Slide 19: Large smolt strategy – expected impact

    LARGE SMOLT STRATEGY – EXPECTED IMPACT Larger smolt will reduce time of cycle in sea farming Smolt release (million pcs) 20  Harvest cycle every second year from the same fjords until effect 18 16 from larger smolt evolves 14 12  Smolt size will gradually increase from 100-200g to 500g by 2022 10

  20. Slide 20: New production cluster - Suðuroy

    NEW PRODUCTION CLUSTER - SUÐUROY  Suðuroy is isolated in the south of the Faroe Islands  Own production cluster  Risk reduction  The farming operation on the islands was underdeveloped  Bakkafrost started investment in 2016 when Faroe Farming * was acquired  The farming legislation stipulates

  21. Slide 21: New production cluster - Suðuroy

    NEW PRODUCTION CLUSTER - SUÐUROY Harvest capacity in Suðuroy – tonnes HOG  Four farming sites operational in 2019 16.000  Froðba A-15 14.000  Porkeri A-19 12.000 10.000  Hov A-18 8.000  Hvalba A-23 6.000 4.000  Implementing large smolt strategy in Suðuroy 2.000 0 2019E 2020E 2021E 2022E 2023E

  22. Slide 22: ~40% harvest growth expected (2019-2023)

    ~40% HARVEST GROWTH EXPECTED (2019-2023) Estimated harvest profile 2019-2022 (Thousand tonnes HOG)  Expecting growth ~22 thousand tonnes (HOG)  Large growth strategy 80 40% Growth  Development of Suðuroy 70 9% CAGR Harvest, thousand tonnes (HOG) 60 50 40 30 20 10 0 2019 2020 2021 2022 2023 Page 2

  23. Slide 23: Past capacity development infrastructure

    PAST CAPACITY DEVELOPMENT INFRASTRUCTURE Development in capacity constraints  Summary main investments 2014-2018  First stage of major smolt investment programme 2014 2018 Smolt  Expansion of seawater capacity  Suðuroy FOF  Large smolt strategy Seawater  Acquisition of 2 farming service vessel

  24. Slide 24: Expected impact of 2019-2022 investment programme

    EXPECTED IMPACT OF 2019-2022 INVESTMENT PROGRAMME Development in capacity constraints  Investment focus  Large smolt capacity 2018 2022  Vessels – Transportation Smolt  Bottleneck shift from smolt to seawater sites FOF  Infrastructure rigged for application of new technology Seawater Vessels -

  25. Slide 25: Industry R&D into new production technologies

    INDUSTRY R&D INTO NEW PRODUCTION TECHNOLOGIES LARGE SCALE TRIALS UNDERWAY Page 25

  26. Slide 26: Infrastructure prepared for application of new technology

    INFRASTRUCTURE PREPARED FOR APPLICATION OF NEW TECHNOLOGY Semi-closed production in Sea  Large ongoing R&D efforts in the industry 2 individual projects  Incentive system in Norway “sponsoring” R&D efforts 6kt licence capacity  11 significant projects approved so far for full-scale trials MNOK 80

  27. Slide 27: Example of offshore production cycle

    EXAMPLE OF OFFSHORE PRODUCTION CYCLE Page 27

  28. Slide 28: Summary investment programme 2019-2022

    SUMMARY INVESTMENT PROGRAMME 2019-2022 Planned investments 2019 - 2022  Investments next four years amount to ~ DKK 2.5 billion 765  Nearly DKK 2.0 billion relates to future growth 715  Annually maintenance capex ~ DKK 100-150 million 590 390 2019 2020 2021 2022 Broodstock Smolt Farming VAP FOF P

  29. Slide 29: Investments on land

    INVESTMENTS ON LAND Hatcheries • Glyvradalur, expansion 9,750m3 • Norðtoftir, expansion 12,000m3 • Ónavík Suðuroy, new hatchery 12,000m3 Broodstock • Skálavík Planned hatchery in Ónavík Suðuroy • 30 million roe per year production. Ready to upscale to 50 million roe per year Fishmeal, oil and fish f

  30. Slide 30: Investments in sea

    INVESTMENTS IN SEA New farming sites • Hvalba A-23 • Hov A-18 • Nes A-85 Transportation vessels • Live fish carrier for transportation and treatment 6,000 m3 R&D projects • Offshore projects to take growth beyond 76 thousand tonnes Page 30

  31. Slide 31: Capital Markets Day – Financial headlines

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Financial headlines Faroe Islands 12 June 2019 Page 31

  32. Slide 32: Bakkafrost has a good historic performance

    BAKKAFROST HAS A GOOD HISTORIC PERFORMANCE Revenue and margin Harvest and Group operational EBIT/kg 60 30 4.000 40% 3.500 35% 50 25 3.000 30% Thousand tonnes (HOG) Operational EBIT margin 40 20 2.500 25% MDKK DKK 2.000 20% 30 15 1.500 15% 20 10 1.000 10% 10 5 500 5% 0 0% 0 0 2014 2015 2016 2017 2018

  33. Slide 33: The balance sheet is strong (ultimo 2018)

    THE BALANCE SHEET IS STRONG (ULTIMO 2018)  Balance sheet of DKK 5.8 billion 100% Int. bearing debt; 14%  High proportion Property, Plant and Equipment 90% Other; 20%  Well invested infrastructure 80% Non int. bearing debt; FV Adj. ; 6% 16%  Low proportion Intangibles 70% Biomass (cost); 18%  Hi

  34. Slide 34: The capital employed has increased steadily

    THE CAPITAL EMPLOYED HAS INCREASED STEADILY  Increasing capital employed Capital Employed 5.000 40%  Result of expansive investment programme 4.500 35%  Very high return on capital employed 4.000 30% Return on capital employed 3.500  Variation between 25-35% 25% 3.000 MDKK  Reduction in 2017 ca

  35. Slide 35: High level of capital employed with very competitive return

    HIGH LEVEL OF CAPITAL EMPLOYED WITH VERY COMPETITIVE RETURN Capital Employed Return on Capital Employed Bakkafrost Bakkafrost Mowi Mowi Lerøy Seafood Lerøy Seafood Salmar Salmar Grieg Seafood Grieg Seafood 0 20 40 60 80 100 120 140 0% 5% 10% 15% 20% 25% 30% 35% NOK/kg Return on capital employed Prop

  36. Slide 36: Investments in large smolt is cheaper than licence auction in Norway

    INVESTMENTS IN LARGE SMOLT IS CHEAPER THAN LICENCE AUCTION IN NORWAY  Large investments associated with large 20,000 tonnes HOG – Large smolt strategy vs. auction prices Norway smolt strategy  A number of benefits, including capacity increase Large smolt strategy  Harvest increase of 20k tonnes 

  37. Slide 37: How will maintenance capex requirement develop?

    HOW WILL MAINTENANCE CAPEX REQUIREMENT DEVELOP?  Historical maintenance capex < DKK 100 million Maintenance Capex  Investments in PPE last five years has lifted 200 maintenance capex 175  Maintenance is expected to be around DKK 100 – 150 million 150  If cash generation from operation come under

  38. Slide 38: Cash conversion, reinvestment and dividend

    CASH CONVERSION, REINVESTMENT AND DIVIDEND EBITDA and Cash Conversion Ratio Dividend payments 600 1.800 80% 1.600 70% 500 1.400 60% 1.200 400 50% MDKK MDKK 1.000 40% 300 800 30% 600 200 400 20% 200 10% 100 0 0% 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Operational EBITDA Cash conversion ra

  39. Slide 39: Faroese tax regime

    FAROESE TAX REGIME Corporate tax Revenue tax  18% of taxable income 5,5% 5,0% Revenue tax 4,5% 4,0%  % of Nasdaq salmon price of harvested volumes 3,5%  0.5%: salmon price < ~ NOK 421 3,0%  2.5%: ~ NOK 421 < salmon price < ~ NOK 471 2,5%  5.0%: salmon price > ~ NOK 471 2,0% 1,5%  Only applicab

  40. Slide 40: Financing and meeting our financial targets

    FINANCING AND MEETING OUR FINANCIAL TARGETS Financial targets Dividend of adjusted EPS  Equity ratio: > 50% 60% 50% 50% 50% 49% 49% 50%  Dividend: 30-50% of adjusted EPS 46% 40% Financing 30%  EUR 200m senior secured credit facility 20%  Tenor 5 years with maturity Q1 2023 10%  Accordion option

  41. Slide 41: Good access to capital - debt

    GOOD ACCESS TO CAPITAL - DEBT  Current NIBD/EBITDA ratio (NIBD/Op. EBITDA) of 0.41x Illustration Debt Capacity  Available liquidity of MDKK ~970 5.000 4.500  Equivalent to leverage ratio of 1.20x if fully drawn 4.000 3.500  Significant leverage capacity beyond current financing 3.000 MDKK 2.500

  42. Slide 42: Access to capital - equity

    ACCESS TO CAPITAL - EQUITY Share Price Development  Share widely held among international institutional investors 600,00 500,00  High liquidity in the share 400,00 NOK 300,00  International roadshows every quarter 200,00 100,00 0,00 Bakkafrost OSEAX Rebased Shareholder Location (number per locati

  43. Slide 43: Supply increase expected by 2025 (CAGR <4%)

    30% SUPPLY INCREASE EXPECTED BY 2025 (CAGR <4%) Total growth Average Growth % CAGR % Long term supply outlook (Kontali) (Thousand tonnes HOG) growth Norway 359 51 31.8% 4.0% 3.000 Other Europe 123 18 53.3% 6.3% Chile 77 11 12.6% 1.7% 2.500 North America 23 3 15.3% 2.1% Other - Cage based 10 1 18.1%

  44. Slide 44: Summary

    SUMMARY  Outstanding financial performance  Structural, technical and market based advantages  Material upgrade of infrastructure carried out in recent years  Significant investment programme underway  Further reinforcement of infrastructure  Targeting 70% increase in harvest within 2023  On

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  46. Slide 46: Capital Markets Day – Large Smolt Strategy

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Large Smolt Strategy Faroe Islands 12 June 2019 Page 46

  47. Slide 47: Strond: 500 gram smolt plant (8 million p.a.)

    STROND: 500 GRAM SMOLT PLANT (8 MILLION P.A.) 22,600 m2, Largest tanks: Diameter 18m Proportion of plant required to produce 8m 100g smolt p.a. Page 47

  48. Slide 48: Illustration: required extension for on shore production up to 5 kg

    ILLUSTRATION: REQUIRED EXTENSION FOR ON SHORE PRODUCTION UP TO 5 KG Page 48

  49. Slide 49: Large smolt strategy - concept

    LARGE SMOLT STRATEGY - CONCEPT  Risk management  Production efficiency  Growth Page 49

  50. Slide 50: Experience of releasing large smolt in the Faroes

    EXPERIENCE OF RELEASING LARGE SMOLT IN THE FAROES 2019 Smolt mortality  Large smolt responding well to seawater release 7 6  Low mortality in 2019 5 % mortality  Other companies in the Faroes have similar 4 experience 3 2  Critical factors 1 0  Adjustments and progressions 100-150 150-200 200-3

  51. Slide 51: Overview smolt plants

    OVERVIEW SMOLT PLANTS  Strond: 29,000 m3  Viðareiði: 11,248 m3  Norðtoftir: 5,150 m3  Glyvrardalur: 1,537 m3  Húsar: 1,350 m3  Gjógv: 1,260 m3 Page 51

  52. Slide 52: Phasing of new smolt

    PHASING OF NEW SMOLT Larger smolt will reduce time of cycle in sea farming Smolt release (million pcs) 20  Harvest cycle every second year from the same fjords until effect 18 from larger smolt evolves 16 14  Smolt size will gradually increase from a level of 100-200g to a 12 10 level of 500g by 2

  53. Slide 53: Faroese broodstock programme

    FAROESE BROODSTOCK PROGRAMME  DKK 200m Faroese broodstock investment  Optimised genetic diversity  Growth  Quality  Sea lice resistance  Reduced disease pathogens  Good results already  From 2021 all roe will be used Page 53

  54. Slide 54: Strond (8M smolt at 500g), fully operational by 2021

    STROND (8M SMOLT AT 500G, FULLY OPERATIONAL BY 2021 Page 54

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  56. Slide 56: Capital Markets Day – Cost components

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Cost components Faroe Islands 12 June 2019 Page 56

  57. Slide 57: Drivers for cost performance

    DRIVERS FOR COST PERFORMANCE Page 57

  58. Slide 58: Significant cost advantage

    SIGNIFICANT COST ADVANTAGE Comparison – Cost per kg, NOK (2017)  Costs materially below average level in Norway Bakkafrost  High other costs due to low capacity utilization  Wellboats, treatment vessels, processing Norway  2018 costs somewhat higher than 2017 32 33 34 35 36 37 38  Isolated mort

  59. Slide 59: Harvest weight

    HARVEST WEIGHT  Bakkafrost’s average harvest weight around 6 kg LWE last five years  Cost dynamics  Declining cost with size of fish Cost Dynamics and Weight Harvest Weight (HOG) 5,5 Average harvest weight (HOG) 5 COST PER KG 4,5 4 3,5 3 2016 2017 2018 0 1 2 3 4 5 6 7 Norway Bakkafrost HARVEST WE

  60. Slide 60: Mortality rate

    MORTALITY RATE  Mortality rate has been lower, compared to Norway Mortality Rate 23  2018 was a challenging year for Bakkafrost 21 19  Implementing new treatment methods Mortality rate (%) 17  Extraordinary high mortality in individual farming sites 15 13 11  Development in 2019 positive 9 7 5

  61. Slide 61: Economic feed conversion ratio

    ECONOMIC FEED CONVERSION RATIO  Feed conversion ratio around 1.2 and 1.3 Economic Feed Conversion Ratio  Development in 2017 and especially in 2018 had a 1,6 negative impact on economical FCR Economic feed conversion ratio 1,5  Development in 2019 should see economical FCR in 1,4 a positive direc

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  63. Slide 63: Capital Markets Day – Suðuroy and New Farming Technology

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Suðuroy and New Farming Technology Faroe Islands 12 June 2019 Page 63

  64. Slide 64: Background new licences

    BACKGROUND NEW LICENCES  Bakkafrost acquired the company Faroe Farming in 2016  Prior to this, Faroe Farming was an associated company of Bakkafrost (49%)  Due to farming license cap in the Faroe Islands, Bakkafrost had to relinquish one license (Hov)  In 2018, Bakkafrost got licenses to all fjo

  65. Slide 65: Current assets Suðuroy

    CURRENT ASSETS SUÐUROY Acquired assets in 2016 Investment and changes until now  Farming site Porkeri A-19  Farming site Hov A-18 in operation again  Farming site Froðba A-15  Other farming site relinquished instead of Hov A-18  Farming site Hov A-18  Farming sites updated, e.g.  Hov was chos

  66. Slide 66: Planned investments in Suðuroy

    PLANNED INVESTMENTS IN SUÐUROY  New farming site in Hvalba A-23 ~ DKK 50-70 million  No prior farming operation  First smolt release in summer 2019  First harvest expected in 2020  New hatchery at Ónavík (Smolt) ~ DKK 250-300 million *  Annual capacity of 3.0m 500g smolt *) Hov A-18 started op

  67. Slide 67: Harvest capacity

    HARVEST CAPACITY Harvest in Suðuroy tonnes HOG  Four farming sites operational in 2019 [red = after Bakkafrost acquisition] 10.000  Froðba A-15 9.000 8.000  Porkeri A-19 7.000 6.000 5.000  Hov A-18 4.000 3.000  Hvalba A-23 2.000 1.000 0  Implementing large smolt strategy in Suðuroy 2012 2013 2

  68. Slide 68: New technology

    \w/ NEW TECHNOLOGY BAKKAFROST ON SHORE PRODUCTION IN SEA OFFSHORE CLOSED/SEMI CLOSED SYSTEMS Page 68

  69. Slide 69: Infrastructure prepared for application of new technology

    INFRASTRUCTURE PREPARED FOR APPLICATION OF NEW TECHNOLOGY Semi-closed production in Sea  Large ongoing R&D efforts in the industry 2 individual projects  Incentive system in Norway “sponsoring” R&D efforts 6kt licence capacity  11 significant projects approved for full scale trials MNOK 800 inves

  70. Slide 70: Technologies developed for protected waters

    TECHNOLOGIES DEVELOPED FOR PROTECTED WATERS Semi-closed production in Sea  Salmon farming currently carried out in protected waters  Global supply constraint with “open technology”  Biological carrying capacity reached/exceeded  Aim of unlocking production capacity with new technology Subsea far

  71. Slide 71: Technologies developed for offshore farming

    TECHNOLOGIES DEVELOPED FOR OFFSHORE FARMING  Idea of moving production from protected to open waters Offshore farming  Vast unutilized capacity in waters matching criteria  Biological conditions  Seawater temperatures  Significant challenges, compared to traditional technology  Waves and curre

  72. Slide 72: Production cycle - example

    PRODUCTION CYCLE - EXAMPLE Page 72

  73. Slide 73: Faroe Islands' and Bakkafrost's infrastructure meet criteria

    FAROE ISLANDS’ AND BAKKAFROST’S INFRASTRUCTURE MEET CRITERIA  Proven technology for protected waters can be adopted on an opportunistic basis  Bakkafrost has the best conditions to produce strong fish ready to meet ocean environment (offshore)  Infrastructure prepared for significant increase in

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  75. Slide 75: Capital Markets Day – Investment programme

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Investment programme Faroe Islands 12 June 2019 Page 75

  76. Slide 76: Summary of investments so far

    SUMMARY OF INVESTMENTS SO FAR Fishmeal, fish oil and fish feed Investment in value chain from 2013 to 2018  Fishmeal, oil and feed inventory buildings (2014-2017)  Storage tunnels (2017)  Salmon meal and oil factory (2018) Hatcheries  Expansions of Norðtoftir and Viðareiði (2013-2016)  New hatc

  77. Slide 77: Current capacity constraints

    CURRENT CAPACITY CONSTRAINTS  Summary of main investments 2014-2018  First stage of major smolt investment programme 2014 2018 Smolt  Expansion of seawater capacity  New seawater licences in Suðuroy Feed  Release of capacity through large smolt strategy Seawater  Acquisition of 2 multiskill se

  78. Slide 78: Summary of planned investments

    SUMMARY OF PLANNED INVESTMENTS  Hatcheries Investments 2019 - 2022 765  Broodstock 715  Upgrade fish feed factory 590  New farming sites 390  Transportation and treatment vessel  R&D projects 2019 2020 2021 2022 Broodstock Smolt Farming VAP FOF Page 78

  79. Slide 79: Impact on future capacity constraints

    IMPACT ON FUTURE CAPACITY CONSTRAINTS  Investment focus  Large smolt capacity 2018 2022  Vessels – Transportation Smolt  Bottleneck shift from smolt to seawater sites Feed  Infrastructure rigged for application of new technology Seawater Vessels - Treatment Vessels - Transportation Primary proc

  80. Slide 80: Glyvradalur - expansion

    GLYVRADALUR - EXPANSION  Glyvradalur  Investment ~ DKK 200 million  Expansion of ~ 9,750 m3  Capacity after expansion ~ 11,000 m3  Expansion will be in growth section  Construction is expected to start in 2019  Shorter start-up phase than new projects  First smolt release expected in 2021 Pa

  81. Slide 81: Norðtoftir - expansion

    NORÐTOFTIR - EXPANSION  Norðtoftir  Investment ~ DKK 240 million  Expansion of ~ 12,000 m3  Capacity after expansion ~ 17,500 m3  Expansion will be in growth section  Construction is expected to start in 2019  Shorter start-up phase than new projects  First smolt release expected in 2021 Pag

  82. Slide 82: Ónavík - Suðuroy

    ÓNAVÍK - SUÐUROY  Ónavík, Suðuroy  Investment ~ DKK 300 million  ~ 12,000 m3  New facility investment more expensive than expansion:  Administration part  Start feeding  Around same production as Viðareiði  Construction is expected to start in 2020  Longer start-up phase than expansion proj

  83. Slide 83: Cost of large smolt strategy vs. licence auction Norway

    COST OF LARGE SMOLT STRATEGY VS. LICENCE AUCTION NORWAY 20,000 tonne HOG – Large smolt strategy vs. auction prices Norway  Large investments associated with large smolt strategy  A number of benefits, including capacity increase Large smolt strategy  Harvest increase of 20k tonnes  Auction Norwa

  84. Slide 84: Fishmeal, fish oil and fish feed

    FISHMEAL, FISH OIL AND FISH FEED  Increased fishmeal and fish oil capacity to support marine index  Silos and storage  Production facility  Increased fish feed capacity and flexibility  New feeding line Page 84

  85. Slide 85: Seawater

    SEAWATER  Hvalba A-23  New land base  Cages, feeding system etc.  Feeding barge  Outskirt of fjord  Hov A-18  Nes A-85  Possible relocation of existing farming sites within fjords  Gøtuvík A-47  Haraldssund A-72 Page 85

  86. Slide 86: Transportation and treatment of fish

    TRANSPORTATION AND TREATMENT OF FISH  New live fish carrier  Investment ~ DKK 300-350 million  6,000 m3  Freshwater treatment equipment  Higher daily deliveries to processing plant, due to higher production (waiting cages not allowed in the Faroe Islands)  Hans á Bakka (existing live fish carr

  87. Slide 87: Broodstock

    BROODSTOCK  Breeding programme based on gene pool of local wild salmon strain  Adaptability to local biology  Product differentiation  Veterinary control  Support branding strategy  Independence of external suppliers Page 87

  88. Slide 88: Broodstock

    BROODSTOCK  Skálavík  Capacity to produce 30 million roe per year  Ready to upscale production to 50 million roe per year  Location in remote area with no farming operation Page 88

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  90. Slide 90: Capital Markets Day – Sustainability

    Bakkafrost A world-class company in the salmon industry Capital Markets Day Sustainability Faroe Islands 12 June 2019 Page 90

  91. Slide 91: Healthy Living sustainability plan: highlights

    HEALTHY LIVING SUSTAINABILITY PLAN: HIGHLIGHTS Page 91

  92. Slide 92: Film: Sustainability at Bakkafrost - adapting to a changing world

    FILM: SUSTAINABILITY AT BAKKAFROST - ADAPTING TO A CHANGING WORLD Sources: FAO, GSI, UN SGD Page 92

  93. Slide 93: Sustainability challenges

    SUSTAINABILITY CHALLENGES Sources: UN, Earth Overshoot Day 2019, FAO, IPCC 2018 Report Page 93

  94. Slide 94: The role of aquaculture

    THE ROLE OF AQUACULTURE Page 94 Source: Global Salmon Initiative

  95. Slide 95: Bakkafrost's Healthy Living sustainability plan

    BAKKAFROST’S HEALTHY LIVING SUSTAINABILITY PLAN Page 95

  96. Slide 96: Healthy business

    HEALTHY BUSINESS BIOGAS ENERGY SYSTEM BIOGAS CHP PLANT POWER [eka a > me TP a ORGANIC = LJ WASTE FROM mcrerron GD >- RESIDUES a) OM es DC >. 4 a) > co $289 semcrieamns 27 “ F=Ib% > dicestare \w/ BAKKAFROST ORGANIC WASTE. 90-100,000 tonnes ra LIQUID FERTILIZER 40-45,000 tonnes ria RENEWABLE ENERGY cu

  97. Slide 97: Healthy business

    \W/ HEALTHY BUSINESS BAKKAFROST Sustainability has become a key factor for consumers of consumers in major European markets say they trust retailers to only offer fish from sustainable sources of UK consumers say they would be more likely to buy fish from a brand/retailer that provided a sustainabil

  98. Slide 98: Healthy people

    HEALTHY PEOPLE  Health, safety and wellbeing  Highly unionized workforce  Good labour conditions  Investment in training (Total number of lost time injuries/total number of working hours) x 1,000,000. Includes number of injuries at work and work-related, leading to unfitness for work and absence

  99. Slide 99: Healthy salmon

    HEALTHY SALMON  No antibiotics  Move towards non-medicinal treatment of sea lice  Certified sustainable marine content  Unique nutritional profile  86% 2019 harvest expected to be ASC certified Page 99

  100. Slide 100: Healthy environment

    HEALTHY ENVIRONMENT  Industry-leading feed-to-food ratio  Sustainable meal, oil and feed production  Certified marine ingredients  Non-GMO  Pro-terra soy  REDcert  Efficient buildings  Packaging review  Minimizing impact on fjords Page 100

  101. Slide 101: Healthy communities

    HEALTHY COMMUNITIES  Largest employer with more than 1k jobs  DKK 1.579 million in taxes since 2010  Employed people across 24 municipalities in the Faroes  Updated community investment policy and strategy  DKK 10 million Healthy Living Fund announced  3-year investment into natural sciences P

  102. Slide 102: Sustainability reporting, ratings & initiatives

    SUSTAINABILITY REPORTING, RATINGS & INITIATIVES  2017 1st Report - Oslo Børs CR Guidance  2018 2nd Report - Global Reporting Initiative  GSI collaboration, sharing best practice solutions  UN Global Compact (Ocean Action Business Platform)  Ocean Disclosure Project Page 102

  103. Slide 103: Summary

    SUMMARY  Healthy Living Plan focused on:  Managing sustainability risks: for example biosecurity, operating within planetary boundaries;  Capitalizing on opportunities: for example getting price premium from quality and brand, and cost benefits through efficiencies; and  Creating ‘system value’.

  104. Slide 104: Page 104 Page 15

    Page 104 Page 15

  105. Slide 105: Capital Markets Day – Vessels and Processing Plant

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Vessels and Processing Plant Faroe Islands 12 June 2019 Page 105

  106. Slide 106: Service vessels

    SERVICE VESSELS  Hans á Bakka – Live Fish Carrier Length: 75.80 m – Breadth: 16.00 m - Fish holds: 3,000 m3 Hans á Bakka is mainly used for transport of live salmon to the processing plant in Glyvrar and can carry up to 450 tonnes wfe. Hans á Bakka is also equipped for freshwater treatment of salmo

  107. Slide 107: Service vessels

    SERVICE VESSELS  Róland – Farming Service Vessel Length: 71.99 m – Breadth: 16.01 m - Gross tonnage: 2,168 t Róland is treating salmon for sea lice and is also used in other farming operations, such as towing and anchor handling. Róland is also cleaning nets with two ROV net-cleaners.  In addition

  108. Slide 108: Processing plant - Glyvrar

    PROCESSING PLANT - GLYVRAR  The plant 23,500 m2  Capacities per day: Hans á Bakka Gutting and Value Added Products Administration  Receiving 450 tonnes LW Box storage  Gutting 375 tonnes GW  Filleting 160 tonnes Styropor box production  100,000 tonnes through Harvest per year Page 108

  109. Slide 109: Cost saving and synergies achieved

    COST SAVING AND SYNERGIES ACHIEVED  Long ramp-up time for the production Harvest productivity per week  Bottlenecks have been identified and handled  New stun & bleed system installed  Pallet robot system further automated  Synergies from integrated production Page 109

  110. Slide 110: Fixed cost dilution potential

    FIXED COST DILUTION POTENTIAL  Currently high costs per kg  Low utilization of plant  Significant potential through higher throughput  Staff costs  Maintenance  Other  Depreciation Page 110

  111. Slide 111: Objectives

    OBJECTIVES  Capacity  Efficiency  Flexibility  Quality  Meet future demands  Minimize biological risk Page 111

  112. Slide 112: Value added products ability to meet customer requirements

    VALUE ADDED PRODUCTS ABILITY TO MEET CUSTOMER REQUIREMENTS  Good flexibility to produce finished products demanded by the market  Fresh and frozen natural products  From live to finished quality products within 4 hours  Sub chilling  Various types of packaging  Retail and catering  Highest pr

  113. Slide 113: Plant setup

    PLANT SETUP \Wi/ BAKKAFROST ke] = i) c a 2) © oO Page 113

  114. Slide 114: Page 114 Page 10

    Page 114 Page 10

  115. Slide 115: Capital Markets Day – Market

    Bakkafrost presentation A world-class company in the salmon industry Capital Markets Day Market Faroe Islands 12 June 2019 Page 115

  116. Slide 116: Mintel presentation

    MINTEL PRESENTATION Page 116

  117. Slide 117: Supply increase expected by 2025 (CAGR <4%)

    30% SUPPLY INCREASE EXPECTED BY 2025 (CAGR <4%) Total growth Average Growth % CAGR % Long term supply outlook (Kontali) (Thousand tonnes HOG) growth Norway 359 51 31.8% 4.0% 3.000 Other Europe 123 18 53.3% 6.3% Chile 77 11 12.6% 1.7% 2.500 North America 23 3 15.3% 2.1% Other - Cage based 10 1 18.1%

  118. Slide 118: Price advantage – differentiating factors

    PRICE ADVANTAGE – DIFFERENTIATING FACTORS Page 118

  119. Slide 119: Key selling points

    KEY SELLING POINTS  Superior Quality is the fulcrum  Size  Taste  Health (Omega-3 and Omega 3/Omega 6 ratio)  Food safety  Products free from  Antibiotics  GMO ingredients  Ethoxyquin  Chemical lice bath treatments  Cleaned for environmental pollutants (dioxin and dl-PCB) Page 119

  120. Slide 120: Sales organization

    SALES ORGANIZATION  Main sales office is in Glyvrar in the Faroe Islands Bakkafrost Sales Faroe Islands (Main office) Bakkafrost Sales Bakkafrost Sales  Local sales offices in UK and USA Logistics Marketing  Sales, logistics and marketing is handled in-house Bakkafrost UK Bakkafrost USA United Ki

  121. Slide 121: Well diversified customer base

    WELL DIVERSIFIED CUSTOMER BASE Sales breakdown – All products 2018  Even split among the 4 main markets North America; 18% Europe; 30%  Close relationship with key customers (partners) Asia ; 25%  Fresh sales Eastern Europe;  20% B2C 27%  80% B2B Sales breakdown – Fresh products 2018 North Amer

  122. Slide 122: The Bakkafrost brand and Faroese origin

    THE BAKKAFROST BRAND AND FAROESE ORIGIN  Premium pricing through visibility of  The Bakkafrost brand  Faroese origin  Retail sales focus  Visibility in the shelves and wet counters  Food service/Restaurants  Bakkafrost and/or Faroese origin on menus Page 122

  123. Slide 123: Value added products significant proportion of sales

    VALUE ADDED PRODUCTS SIGNIFICANT PROPORTION OF SALES  VAP contract coverage: 30-40% Contract coverage - VAP  Brand/Origin visibility 100%  Reduced exposure to spot prices 90% 80%  Contracts normally vary between 6-12 months 70%  Fixed prices 60%  2018 impacted by change in product portfolio 50

  124. Slide 124: Price advantage

    PRICE ADVANTAGE  Significant price premium Comparison – Price 2017  Larger fish fetch a higher price Bakkafrost realised superior  Good market access  Significant Bakkafrost brand premium component Spot Norway  Faroese/Bakkafrost origin favoured in many markets 54,0 56,0 58,0 60,0 62,0 64,0 66,

  125. Slide 125: Satisfied clients – annual survey to existing clients

    SATISFIED CLIENTS – ANNUAL SURVEY TO EXISTING CLIENTS  Customer net promoter score 8.24 out of 10  Satisfaction with the salmon quality provided by Bakkafrost:  97% are satisfied, more than satisfied, or very satisfied PRODUCT PICS  Satisfaction with delivery service:  82% are satisfied, more t

  126. Slide 126: Certifications

    CERTIFICATIONS aSc ASC-AQUA.ORG BRC FOOD CERTIFICATED \Wi/ BAKKAFROST Page 126

  127. Slide 127: Page 127 Page 13

    Page 127 Page 13

Bakkafrost — Investor Day (June 2019) on 6ix