Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q1 2020 Earnings Presentation

40 slides from Bakkafrost P/f's earnings presentation, May 5, 2020

  1. Slide 1: Q1 2020 Bakkafrost Group

    Q1 2020 BAKKAFROST GROUP Glyvrar 5 May 2020

  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 2020

    SUMMARY OF Q1 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX Faroe Islands, Funningsfjørður

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvest in the Faroe Islands (FO): 10,667 tgw in Q1 2020 (13,707 tgw in Q1 2019)  Harvest in Scotland (SCT): 7,268 tgw in Q1 2020 Operation  Feed sales of 19,123 tonnes in Q1 2020* (16,264 tonnes in Q1 2019*)  Raw material purchase of 64,807 tonnes in Q1 2020 (115,530 tonnes in Q1 20

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER Farming/VAP (FO)* Q1 Q1 (DKK million) 2020 2019 21.99 25.10 Operating revenue 1,255 964 (Q1 2019) (Q1 2020) Operational EBITDA 367 321 Farming (FO)* Operational EBIT 248 268 Profit for the period -148 213 21.86 26.51 (Q1 2019) (Q1 2020) Operational EBITDA margin 29.2% 33.4% Fa

  6. Slide 6: Markets and Sales

    SUMMARY OF Q1 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  7. Slide 7: Markets & Sales

    MARKETS & SALES SALES TO WESTERN EUROPE DECREASED – OTHER MARKETS INCREASED Sales & volume (FO only) Total sales of salmon by Q1 2020 Q1 2019 Western Europe markets (by value) FO SCT Total FO SCT Total Western Europe 52% 91% 67% 50% N/A 50% 50% 52% North America 28% 1% 18% 23% N/A 23% (Q1 2019) (Q1

  8. Slide 8: Global Markets

    GLOBAL MARKETS HIGHER PRICES AND GROWTH IN GLOBAL HARVEST Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Average spot prices increased in Q1 2020 Q1 Q2 Q3 Q4 (NOK/KG) y/y: 63.01 11.0% 69.92 (Q1 2019) 6.91 (Q1 2020) q/q: 58.28 20.0% 69.92 (Q1 2019) 11.64 (Q1 2020) Spot prices decreased significant

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

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN MODERATE DECLINE IN SUPPLY Global: 2.3% growth in harvest in Q1 2020 Harvest & Supply Development Q1 2020 Q1 2019 Change % SUPPLY DEVELOPMENT [Head On Gutted 1,000 tonnes] Q1 2020 Q1 2019 Change % Norway 270 267 1.5 % UK 31 37 -17.1 %  Europe: 1.

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

    SALMON MARKETS, SOLD QUANTITY (HEAD ON GUTTED – HOG) COVID-19 MAIN DRIVER Global: 0.4% more absorbed by the Salmon markets, sold quantity (head on gutted - HOG) market in Q1 2020 Salmon markets, sold quantity (head on gutted - HOG) Estimated volumes Q1 comparison Estimated volumes FY comparison  EU

  11. Slide 11: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK  Expectation of low single digit global supply growth SUPPLY SUPPLY--TOTAL TOTAL 700 6% 600 5%  Europe – Moderate growth 500 4% 400 3% 300  Americas – Moderate growth – Some volatility 200 2% 100 1% 0 0% Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021  Outlook for modest longer

  12. Slide 12: Segment Information

    SUMMARY OF Q1 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  13. Slide 13: Farming – Harvest Volume

    FARMING – HARVEST VOLUME LOWER HARVEST VOLUMES IN THE FAROE ISLANDS – INCREASED SMOLT TRANSFER Harvested volumes (tonnes HOG) Harvest Volumes tonnes [HOG] Q1 Q1 North: 59% 2020 2019 FO: 13,707 22% 10,667 (Q1 2019) (Q1 2020) West: 26% FO - North Region 6,265 6,743 South: 15% FO - West Region 2,769 6,

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE OPERATIONAL EBIT MARGIN INCREASED IN THE FAROE ISLANDS Faroe Islands (FO) Operational EBIT (mDKK) 230 203 (Q1 2019) (Q1 2020) Skálafjørður, Faroe Islands View from Bakkafrost’s Headquarters Operational EBIT margin (%) Q1 Q1 Farming FO (DKK million) 30 32 2020 2019 (

  15. Slide 15: Farming – Operational Performance: EBIT per kg

    FARMING – OPERATIONAL PERFORMANCE EBIT/KG IN THE FAROE ISLANDS DOWN 3.07 NOK/KG BY LOSSES FROM STORM Margin (FO) - EBIT per kg total harvested quantity [NOK/kg] Operational EBIT per kg EBIT (NOK 29.58) negatively affected by NOK 3.07 per kg by losses in severe storm, down to 26.51 NOK per kg 30,00 F

  16. Slide 16: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) HIGHER VOLUMES AT HIGHER RAW MATERIAL PRICES Q1 Q1 (DKK million) 2020 2019 Volumes (tonnes) Operating revenue 274 261 4,689 t 5,408 t (Q1 2019) (Q1 2020) Operational EBIT -11 1 Operational EBIT margin -4% 1% Revenue (mDKK) VAP produced volumes (tgw) 5,408 4,689 261 274 (Q1

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

    FISHMEAL, OIL AND FEED (FOF) REDUCED RAW MATERIAL SOURCING IN Q1 Q1 Q1 (DKK million) 2020 2019 EBITDA (mDKK) Operating revenue 310 283 65 40 (Q1 2019) (Q1 2020) EBITDA 40 65 EBITDA margin 13.0% 23.0% EBITDA margin (%) Feed sold (tonnes)* 19,123 16,264 23.0 13.0 (Q1 2019) (Q1 2020) Fishmeal sold exte

  18. Slide 18: Market Conditions Feed

    MARKET CONDITIONS FEED SIGNIFICANT INCREASE IN FEED SALES Volumes of raw material purchase and feed sale [tonnes] Total feed sales increased (tonnes) 180.000 40.000 160.000 35.000 16,264 18% 19,123 140.000 30.000 Raw material (tonnes) (Q1 2019) (Q1 2020) Feed sale (tonnes) 120.000 25.000 100.000 20.

  19. Slide 19: Financials & ESG

    SUMMARY OF Q1 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX Faroe Islands, Toftavatn and Skálafjørður behind

  20. Slide 20: Group Profit and Loss

    GROUP PROFIT AND LOSS SIGNIFICANTLY HIGHER REVENUE, BUT REDUCED OPERATIONAL EBIT Revenue (mDKK) Q1 Q1 (DKK million) 2020 2019 964 1,255* (Q1 2019) (Q1 2020) Operating revenue 1,255 964 * FO: 843 Operational EBITDA* 367 321 Operational EBIT (mDKK) Operational EBIT* 248 268 268 248* Fair value adjustm

  21. Slide 21: Operational EBIT and Adjusted Earnings per Share

    OPERATIONAL EBIT* AND ADJUSTED EARNINGS PER SHARE 459 408 415 350 335 339 331 307 303 254 255 252 268 268 231 248 168 Operational EBIT* (mDKK) 2016 2017 2018 2019 2020 1,165 1,378 1,075 1,325 248 6,84 6,48 5,64 5,60 5,89 5,08 4,98 4,83 4,72 3,79 4,07 3,59 3,62 3,57 3,61 3,19 Adjusted EPS 2,55 (DKK)

  22. Slide 22: Balance Sheet

    BALANCE SHEET Headlines (mDKK) (DKK million) Q1 2020 End 2019 Intangible assets: 4,386 Intangible assets 4,386 4,396 (Q1 2020) Property, plant and equipment 3,763 3,780 Right of use assets 480 333 PPE: 3,763 (Q1 2020) Financial assets 119 119 Long-term receivables 4 4 Biological assets: 1,902 -410 1

  23. Slide 23: Cash Flow

    CASH FLOW Q1 Q1 (DKK million) Cash flow, operations (mDKK) 2020 2019 77 365 Cash flow from operations 365 77 (Q1 2019) (Q1 2020) Cash flow from investments -101 -106 Cash flow from financing -772 54 Cash flow, investments (mDKK) Net change in cash -508 25 -101 -106 Cash at the end of the period 801

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

    NET INTEREST-BEARING DEBT (NIBD) NIBD IN Q1 2020 AROUND SAME LEVEL AS IN Q4 2019 NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 101)  Acquisition of minorities (mDKK 168) NIBD was decreased by:  Cash flow, operating activities (mDKK -280)  Cash flow, working ca

  25. Slide 25: Page 25

    BAKKAFROST / Q1 2020 PRESENTATION Page 25

  26. Slide 26: Outlook

    SUMMARY OF Q1 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX Faroe Islands, Gøtuvík

  27. Slide 27: Outlook

    OUTLOOK Market  Global harvest in Q1 2020 increased around 2.3%, compared to Q1 2019  Global harvest in Q2 2020 is expected to increase around 2-4%, compared to Q2 2019  Global harvest growth 2020 is expected to be around 2-4%, compared to 2019 Farming  In 2020, Bakkafrost expects to harvest 50,

  28. Slide 28: Outlook

    OUTLOOK VAP  Contracted around 47% of expected Q2 2020 harvest volume and 40% of the harvest volume in the Faroe Islands for 2020  Long-term strategy is to sell 40-50% of the harvested volumes in the Faroe Islands at fixed price contracts Fishmeal, Oil and Feed  Feed sales are expected to be arou

  29. Slide 29: Appendix

    SUMMARY OF Q1 2020 MARKETS AND SALES SEGMENT INFORMATION FINANCIALS & ESG OUTLOOK APPENDIX

  30. Slide 30: 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 Is

  31. Slide 31: 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  Targeted investment programmes 4. Financially attractive acquiring the business at a reasonable value, mu

  32. Slide 32: 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

  33. Slide 33: Development in Harvested and Sold Quantity by Origin

    DEVELOPMENT IN HARVESTED AND SOLD QUANTITY BY ORIGIN Expected supply growth in 2020 Global Supply of Atlantic Salmon (head on gutted - HOG)  4% growth in Global supply 2016 2017 2018 2019E 2020E Norway 1.055 1.078 1.129 1.198 1.238  2% growth in European supply UK 142 159 138 165 164 Ireland 14 15

  34. Slide 34: Q1 2020 Market Environment

    Q1 2020 MARKET ENVIRONMENT HIGHER MARKET PRICES, COMPARED TO Q1 2019 PRICE NORWAY 8,0 60,0  Increased market prices compared to Q1 2019 7,2 6,6 7,0 6,2 6,3 6,4 50,0 5,7 5,8 5,6 6,0  Nasdaq Norway price EUR 6.6 in Q1 2020 5,0 40,0 5,0  4% up vs. Q1 2019 EUR DKK 4,0 30,0 3,0  18% up vs. Q4 2019 2,

  35. Slide 35: Growing to 100kt

    GROWING TO 100KT 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 CAPACITY annual harvest

  36. Slide 36: Development per Quarter

    DEVELOPMENT PER QUARTER Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 (mDKK) 2018 2018 2018 2018 2019 2019 2019 2019 2020 Revenue 851 954 622 750 964 947 996 1605 1255 Operational EBIT 268 408 168 231 268 339 303 415 248 Profit/Loss 272 339 356 -7 213 189 181 220 -148 Harvest FO (tgw) 12,238 12,902 7,217 12,234 13,707

  37. Slide 37: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • Dividend for 2019 - decision postponed until August 99% 2020 because of the disruption caused by Covid-19 Dividend policy 49%** 49% 46% 50% 50% 50% 40%  Competitive return through:  Dividends 19%  Increase in the value of the equity  Gener

  38. Slide 38: Page 38

    BAKKAFROST / Q1 2020 PRESENTATION Page 38

  39. Slide 39: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 41.8% (2016)  52,337 inhabitants (March 2020)  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 marke

  40. Slide 40: Page 40

    BAKKAFROST / Q1 2020 PRESENTATION Page 40

Bakkafrost — Q1 2020 Earnings Presentation on 6ix