Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q4 2013 Earnings Presentation

48 slides from Bakkafrost P/f's earnings presentation, Feb 25, 2014

  1. Slide 1: Q4 2013 Fourth Quarter Bakkafrost Group

    Dette billede k an ik k e v ises i øjeblik k et. Q4 2013 FOURTH QUARTER BAKKAFROST GROUP Glyvrar 25 February 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 Q4 2013

    Dette billede k an ik k e v ises i øjeblik k et.  SUMMARY OF Q4 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2014-2017  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  ~65% of harvest volumes in Q4 2013  50% of farming licenses  Harvested 11,097 tgw in Q4 2013 (13,044 tgw in Q4 2012)  Feed sale of 20,270 tonnes in Q4 2013* (25,047 tonnes in

  5. Slide 5: Summary of Q4 2013

    SUMMARY OF Q4 2013 Margin  Strong results  Farming EBIT/kg NOK 13.02 (Q4 2012 6.40 NOK/kg)  Fishmeal, Oil and Feed 8.45% EBITDA margin  VAP negative EBIT/kg of NOK -1.29 Market  Tight market and high prices  Strong salmon prices despite global salmon production is running close to full capacit

  6. Slide 6: Biological surveillance in the Faroe Islands

    BIOLOGICAL SURVEILLANCE IN THE FAROE ISLANDS Regular inspection and testing  Daily, every two weeks, monthly and quarterly  Inspection check, lice and gill test, veterinary inspection and sampling, authority inspection and sampling Four farming companies operate in the Faroes  Easier to coordinat

  7. Slide 7: Announcement February 9th 2014 reg. ISA-virus

    ANNOUNCEMENT FEBRUARY 9TH 2014 REG. ISA-VIRUS Suspicion of a possible pathogenic ISA-virus at Bakkafrost farming site A-80 announced the 9th of February this year  The announcement reffered to farming site A-80, where only one cage of fish was left for harvesting A-80  No clinical signs have been

  8. Slide 8: Markets and Sales

    Dette billede k an ik k e v ises i øjeblik k et.  SUMMARY OF Q4 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  9. Slide 9: Global Markets

    GLOBAL MARKETS Spot prices on fresh salmon 4-5 [NOK/kg HOG] 55,00  The NASDAQ salmon price on size 4-5kg increased 50,00 in Q4 2013 by ~58% compared with Q4 2012 45,00 - from 26.38 to 41.73 NOK/kg 40,00  The increase was 2% from Q3 2013 to Q4 2013, from 35,00 39.94 to 40.73 NOK/kg – 0.79 NOK up pe

  10. Slide 10: Markets & Sales

    MARKETS & SALES Overseas High-End markets also dominated Q4 2013 Sales Q4 Q4 by markets 2013 2012 2013 2012  Asian market becoming more and more important EU 50% 41% 47% 50%  Eastern European market reduced from 18% in Q4 USA 17% 20% 19% 16% 2012 to 11% in Q4 2013 of total sales Asia 22% 21% 27% 1

  11. Slide 11: Low supply growth expected in 2014 and 2015

    LOW SUPPLY GROWTH EXPECTED IN 2014 AND 2015  We expect a back-end loaded total global Global supply of Atlantic Salmon (head on gutted - HOG) supply growth of 4-6% in 2014 and 1% in 2015 2011 2012 2013E 2014E 2015E Norway 904 1.066 1.029 1.096 1.103  Norway is expected to increase volumes UK 139 1

  12. Slide 12: Demand development split by markets

    DEMAND DEVELOPMENT SPLIT BY MARKETS Salmon markets, sold quantity (head on gutted - HOG) Estimated volumes Q4 comparison  The EU market is still the largest market for Markets Q4 2013 E Q4 2012 Volume % salmon EU 236.400 233.600 2.800 1% USA 85.500 79.500 6.000 8%  US, Latin America and ASEAN larg

  13. Slide 13: Global Salmon Initiative – a driver for innovation and sustainable aquaculture

    GLOBAL SALMON INITIATIVE – A DRIVER FOR INNOVATION AND SUSTAINABLE AQUACULTURE DEVELOPMENT Sustainability Cooperation Transparency BAKKAFROST / Q4 PRESENTATION 2013 Page 13

  14. Slide 14: Financial Highlights

    Dette billede k an ik k e v ises i øjeblik k et.  SUMMARY OF Q4 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2014-2017  OUTLOOK

  15. Slide 15: Financial Highlights

    FINANCIAL HIGHLIGHTS Q4 Q4 Improved results compared to last year (DKK million) 2013 2012 2013 2012 Operating revenues 666.6 582.1 2,491.1 1,855.5  Strong salmon spot prices main reason for Operational EBITDA 148.7 119.8 673.7 403.3 higher operational EBIT Operational EBIT 125.9 99.2 587.0 323.0 

  16. Slide 16: Key Financials, Group

    KEY FINANCIALS, GROUP Q4 Q4  Improved cash flow from operations in Q4 (DKK million) 2013 2012 2013 2012 2013 – mainly due to decrease in inventory Cash flow from 187.1 103.8 517.5 285.6 since Q3 2013 operations Total assets* 3,112.2 2,570.9 3,112.2 2,570.9  Increase in total assets relates to inve

  17. Slide 17: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvest Volume Q4 Q4 Harvested volumes tonnes [HOG]* 2013 2012 2013 2012 West 2,992 5,590 12,065 20,847  Harvested volumes decreased by 15% from 13,044 tgw in Q4 2012 to 11,097 tgw in Q4 North 8,105 7,454 29,203 23,494 2013 due to the 2 year harvesting cycle Total 11,097 13

  18. Slide 18: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Revenues and margin (DKK million) Q4 2013 Q4 2012 2013 2012  Revenues increased in Q4 2013 due to higher Operating revenues 526 435 1,992 1,372 salmon prices despite decrease in volumes Operational EBIT 131 84 642 274  Margin increased from 19% in Q4 2012 to 25% i

  19. Slide 19: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 18,00 16,00  Margin more than doubled in Q4 2013 compared 14,00 with Q4 2012, and increased 162% for the full 12,00 year 2013 compared with 2012, from 6.20 10,00 NOK/kg up to 16.27 NOK/kg 8,00 16.27 6

  20. Slide 20: Segment VAP

    SEGMENT VAP Q4 Q4 Revenues and margin (DKK million) 2013 2012 2013 2012  Revenues increased 33%, while volume increased Operating revenues 203 153 666 526 12% Operational EBIT -6 11 -90 37  Margins negative in Q4 in total, but margins were Operational EBIT -3% 7% -14% 7% positive in November margi

  21. Slide 21: Segment VAP

    SEGMENT VAP Margin - EBIT per kg total harvested quantity [NOK/kg] Strategy 25 20  VAP production is a long term strategy. Sales of products are directly to end markets. Contracting 15 products optimizes markets and stabilises cash flow 10 5  Losses during periods with high increase in spot 0 pric

  22. Slide 22: Segment Fishmeal, Oil and Feed (FOF)

    SEGMENT FISHMEAL, OIL AND FEED (FOF)  Raw material intake for fishmeal/oil production was Fishmeal, Oil and Feed 18 thousand tonnes in Q4 2013 compared with 8 thousand tonnes in Q4 2012 Q4 Q4 (DKK million) 2013 2012 2013 2012  EBITDA margin increased from 7.43% to 8.45% due higher production of fi

  23. Slide 23: Group Financials

    Dette billede k an ik k e v ises i øjeblik k et.  SUMMARY OF Q4 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2013-2017  OUTLOOK

  24. Slide 24: Group Profit and Loss

    GROUP PROFIT AND LOSS Q4 Q4  Revenue up 15% corresponding to DKK 85 (DKK million) 2013 2012 2013 2012 million) due to: Operating revenues 667 582 2,491 1,855  Improved market prices for salmon (spot and VAP) Operational EBITDA* 149 120 674 403  Harvest volumes down 15% Operational EBIT* 126 99 58

  25. Slide 25: Balance Sheet

    BALANCE SHEET (DKK million) 2013 2012  Investments in PPE of DKK ~64 million in Q4 2013 Intangible assets 295 294 and 165 million YTD 2013 in addition to prepayments of DKK 34 on construction of PPE Property, plant and equipment 917 813 Financial assets 115 91  Financial assets increased due to po

  26. Slide 26: Cash Flow

    CASH FLOW Q4 Q4 (DKK million) 2013 2012 2013 2012  Improved cash flow from operations in Q4 2013 Cash flow from operations 187 104 518 285 improved due to strong salmon prices Cash flow from investments -97 -45 -205 -67 Cash flow from financing -72 -44 -156 -211  Cash flow from investments represe

  27. Slide 27: Dividend

    DIVIDEND Dividend  Proposed dividend of DKK 4.50 (NOK ~5.03) per DPS in % of adj. EPS * share to be paid out in Q2 2014 100% 99%  Bakkafrost purchased treasury shares in 2013, 90% equivalent to DKK 0.59 (NOK 0.66) per share. 80%  Dividend incl. an acquisition of treasury shares is 70% DKK 5.09 (N

  28. Slide 28: Investments 2014 - 2017

    Dette billede k an ik k e v ises i øjeblik k et.  SUMMARY OF Q4 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2014 - 2017  OUTLOOK

  29. Slide 29: Investments - Preparing for the Future

    INVESTMENTS - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales Investment plan 2013-2017:  Seven plants into one integrated plant (Packaging, Harvest and VAP) at Glyvrar to take out synergies, reduce costs and meet future market trends  New

  30. Slide 30: Investments 2014 - 2017

    INVESTMENTS - PREPARING FOR THE FUTURE INVESTMENTS 2014 - 2017 DKK 280 million DKK 280 million DKK 170 million DKK 170 million BAKKAFROST / Q4 PRESENTATION 2013 Page 30

  31. Slide 31: Hatchery at Norðtoftir

    INVESTMENTS - PREPARING FOR THE FUTURE Fishmeal & Oil Feed Hatchery Farming Wellboat Harvest Value Added Products Sales Hatchery at Norðtoftir  Finalised spring 2014  Investment of DKK 53 million  Recycling of 99% of water - saving water and heating  Capacity of 2 million 100g smolts per year 

  32. Slide 32: Building a new well boat

    INVESTMENTS - PREPARING FOR THE FUTURE Building a new well boat  Owned and operated by Bakkafrost  Rolls Royce design  Contract signed with the shipyard Tersan in Yalova, Turkey  Planned to be delivered mid 2015  Estimated total costs DKK 230 million Specifications  Length overall 75.8 meters

  33. Slide 33: Packaging plant at Glyvrar

    INVESTMENTS – PREPARING FOR THE FUTURE Present Packaging plant at Glyvrar New Packaging plant at Glyvrar Phase 1: Integration with Harvest  Construction in process  Estimated costs DKK 26 million  Start up during summer 2014  3,500 m2 including existing 1,300 m2 storage BAKKAFROST / Q4 PRESENTAT

  34. Slide 34: Outlook

    Dette billede k an ik k e v ises i øjeblik k et.  SUMMARY OF Q4 2013  MARKETS AND SALES  FINANCIAL HIGHLIGHTS  SEGMENT INFORMATION  GROUP FINANCIALS  INVESTMENTS 2014-2017  OUTLOOK

  35. Slide 35: Outlook

    OUTLOOK Market VAP  Tight salmon marked expected in H1 2014 Around 70% of the VAP capacity for 2014 contracted.  Increase in supply in H2 2014 • Contracted volumes corresponds to 30% of harvested  Spot prices now around NOK 48 per kg volumes in 2014 • Contract prices on a significant higher level

  36. Slide 36: Thank You!

    Dette billede k an ik k e v ises i øjeblik k et. THANK YOU!

  37. Slide 37: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  48,282 inhabitants (June 1st 2013)  Home rule – within the Kingdom of Denmark  Part of the Danish monetary union, Danish krone (DKK) Key sectors (% of wage earners, 2012)  Service/public admin.: ~36%  Private service: ~33%  Construction: ~12%  Fishing :

  38. Slide 38: Bakkafrost's Value Chain

    BAKKAFROST’S VALUE CHAIN 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 • Vertical integr

  39. Slide 39: Monthly Exchange Rates

    Page 39 2014M01 2014M01 2013M11 2013M11 2013M09 2013M09 2013M07 2013M07 2013M05 2013M05 2013M03 2013M03 GBP/DKK RUB/DKK 2013M01 2013M01 2012M11 2012M11 2012M09 2012M09 2012M07 2012M07 2012M05 2012M05 2012M03 2012M03 2012M01 2012M01 2011M11 2011M11 19,5 19 18,5 18 17,5 17 16,5 16 15,5 15 960 940 920

  40. Slide 40: 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

  41. Slide 41: Bakkafrost - Preparing for the Future

    BAKKAFROST - PREPARING FOR THE FUTURE 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:  Effiency  Biological risk  Organic growth BAKKAFROST / Q4 PRESENTATION 2013 Page 41

  42. Slide 42: 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 / Q4 PRESENTATION 2013 Page 42

  43. Slide 43: Financing of the investments 2014-2017

    BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2014-2017  Use free cash flow from operation  Unused financing of DKK 684 million  Partly new financing if advantageous Unchanged dividend policy BAKKAFROST / Q4 PRESENTATION 2013 Page 43

  44. Slide 44: Financing

    FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding  Total funding to DKK ~ 1,353 million 1600  Bonds NOK 500 million due Feb 2018 (swapped into 1400 DKK) 1200  Instalment loan of DKK 300 million, repayable with DKK 1000 25 million each quarter 800  Revolving cred

  45. Slide 45: Why are we doing this?

    WHY ARE WE DOING THIS?  Business as usual is no longer an option “The salmon sector is finally working together and embracing sustainability. This  If the industry is to expand its is going to radically change aquaculture social license, the way we operate and have ripple effects in the entire glo

  46. Slide 46: What are we focusing on?

    WHAT ARE WE FOCUSING ON? Standards Biosecurity Feed All GSI members Make significant Working with our have committed to progress on sea lice partners to identify reaching the ASC management, sustainable sources standard by 2020 through the of feed cooperation and support of all GSI members BAKKAFROS

  47. Slide 47: GSI Member Companies

    GSI MEMBER COMPANIES BAKKAFROST / Q4 PRESENTATION 2013 Page 47

  48. Slide 48: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share price development since listing in NOK No of shares share Name Origin Last 12 4.594.901 9,5% JACOBSEN Oddvør Føroyar months 4.491.217 9,3% JACOBSEN Regin Føroyar 2.454.264 5,1% TF ÍLØGUR P/F Føroyar 1.310.750 2,7% SKANDINAVISKA ENSKILDA BANKEN AB SV

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