Mowi Asa · OSL:MOWI
Mowi Asa — Marine Harvest — Q2 2016 Earnings Presentation
44 slides from Mowi Asa's earnings presentation, Aug 18, 2016
Slide 1: Marine Harvest Q2 2016 Presentation
Marine Harvest Q2 2016 Presentation 18 August 2016 1
Slide 2: Forward looking statements
Forward looking statements Notes in report2 This presentation may be deemed to include forward-looking statements, such as statements that relate to Marine Harvest’s contracted volumes, goals and strategies, including strategic focus areas, salmon prices, ability to increase or vary harvest volume,
Slide 3: Highlights
Highlights 3 - Record high operational EBIT of EUR 149 million - Unprecedented prices on strong demand and reduced supply - Establishment of aquaculture shipping JV - Divestment of shares in Grieg Seafood - Quarterly dividend of NOK 3.20 per share - NOK 1.10 per share is related to the divestment of
Slide 4: Key financials
Key financials Notes in report4 Marine Harvest Group - main figures Unaudited EUR million Operational revenue and other income 832.1 767.3 1 641.6 1 502.6 3 121.1 Operational EBIT 1) 149.0 84.0 260.9 179.3 346.8 Cash flow from operations 213.3 85.2 363.4 146.4 233.3 Net interest-bearing debt (NIBD)
Slide 5: Salmon prices – weekly reference prices
Salmon prices – weekly reference prices Prices up to week 31 in 20165 - Prices in Europe and Asia at record high levels - Improving prices in Americas 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 8 9 2012 2013 2014 2015 2016 US D pe r lbs (M iami an d S ea ttle ) EUR pe r kg (O slo ) Reference price Norway EUR (
Slide 6: Price achievement, contract & superior share
Price achievement, contract & superior share 6 105% 117% 100% 111% 83% 83% 99% 105% 0% 20% 40% 60% 80% 100% 120% 140% Norwegian Scottish Canadian Chilean Q2 2015 Q2 2016 Contract share 52% 69% 0% 23% Superior 9 95 90 90
Slide 7: Operational EBIT comparison
Operational EBIT comparison 7 149.0 0.2 71.6 2.8 -10.4 0.9 84.0 0 20 40 60 80 100 120 140 160 180 Op EBIT Q2 2015 Feed Farming Markets Consumer Products Other Op EBIT Q2 2016 EU R m illi on
Slide 8: Norway
Norway 8 - Good results in the quarter driven by record high prices - Contract share of 52% negatively impacted price achievement - High costs - Higher sea lice mitigation costs - Higher feed cost per kg harvested due to higher eFCR - Expect high costs also in the third quarter Operational EBIT Salm
Slide 9: Norway: Sales contract portfolio
Norway: Sales contract portfolio Note: Marine Harvest Norway’s fixed price/fixed volume contracts with third party customers and MH’s processing entities. MH’s processing entities cover a large proportion of their sales exposure through third party end product contracts. 9 0 5 000 10 000 15 000 20 0
Slide 10: Norway: Operational EBIT/kg per region
Norway: Operational EBIT/kg per region Note: Including contribution from Sales and Marketing10 1.20 1.27 1.11 1.28 1.22 2.22 2.03 1.54 2.52 2.12 0.0 0.5 1.0 1.5 2.0 2.5 3.0 South West Mid North Total EUR pe r k g Q2 2015 Q2 2016 - ISA outbreak in one site in Region North. Will impact operational res
Slide 11: Scotland
Scotland 11 - Results impacted by high contract share - Good spot price contribution - Losses at Rosyth plant impacted results of EUR 3.5 million - Prior biological challenges affected farming costs - Costs expected to remain high in the third quarter Operational EBIT Salmon of Scottish Origin Q2 20
Slide 12: Canada
Canada 12 - Record high operating results - Favorable price development and stable volumes - Higher costs expected in the third quarter Operational EBIT Salmon of Canadian Origin Q2 2016 vs Q2 2015 0 5 10 15 20 25 30 Op EBIT Q2 2015 Price Volume Feed Other SW costs Non SW costs Trans- lation Op EBIT
Slide 13: Chile
Chile Note: 1) Impairment charges and restructuring provision recognized in financial EBIT (after operational EBIT)13 - Increased prices during the quarter on reduced supply - Significant volume reduction due to the algal bloom - Negative effects of the algal bloom of EUR 3.8 million in the quarter
Slide 14: Ireland and Faroes
Ireland and Faroes 14 - High costs in Ireland (adverse weather and biological challenges) - Very good contribution from Marine Harvest Faroes in the quarter SALMON OF IRISH ORIGIN EUR million Q2 2016 Q2 2015 Operational EBIT 1.3 6.2 Harvest volume (GWT) 1 452 2 948 Operational EBIT per kg (EUR) 0.86
Slide 15: Consumer Products
Consumer Products 15 - High raw material prices negatively impacted costs - Strong demand in the German, UK, BeNeLux and Southern European markets - French salmon market continues to be challenging - Rosyth turnaround on track - Losses of EUR 3.5 million in the second quarter - Break-even is still e
Slide 16: Feed
Feed 16 - Good production level in the quarter - Production ambition of 320,000 tonnes in 2016 FEED EUR million Q2 2016 Q2 2015 Operating revenues 69.4 58.4 Operational EBIT 3.3 3.1 Operational EBIT % 4.7% 5.3% Feed sold volume 55 956 47 608 Feed produced volume 74 821 58 189 Exceptional items 0 0
Slide 17: Aquaculture shipping JV announces two newbuild contracts
Aquaculture shipping JV announces two newbuild contracts * after receiving a NOK 20 million grant from Innovation Norway17 - Type: 3,000 m3 multipurpose well boat - Destination: Canadian farming operations - Price: NOK 225 million, of which NOK 25 million relates to freshwater production - Delivery:
Slide 18: Second Quarter 2016 Financials, Markets and Harvest Volumes
Second Quarter 2016 Financials, Markets and Harvest Volumes 18
Slide 19: Profit and Loss
Profit and Loss Notes in report19 Marine Harvest Group EUR million Operational revenue and other income 832.1 8% 767.3 1 641.6 9% 1 502.6 3 121.1 Operational EBIT 1) 149.0 78% 84.0 260.9 46% 179.3 346.8 Change in unrealized internal margin -1.7 0.8 1.2 2.1 -2.2 Unrealized salmon derivatives 5.1 1.1
Slide 20: Financial position
Financial position 20 Marine Harvest Group EUR million Non-current assets 2 138.9 2 165.9 2 134.9 Current assets 2 057.7 1 821.0 2 059.4 Assets held for sale 1.8 0.9 1.8 Total assets 4 198.4 3 987.9 4 196.1 Equity 1 921.5 2 031.3 1 895.6 Non-current liabilities 1 653.7 1 401.8 1 684.6 Current liabil
Slide 21: Cash Flow and Net Interest Bearing Debt
Cash Flow and Net Interest Bearing Debt 21 Marine Harvest Group EUR million NIBD beginning of period -960.1 -866.5 -999.7 -1 032.6 -1 032.6 Operational EBITDA 184.4 119.5 332.0 249.2 486.6 Change in working capital 75.4 13.8 110.0 -32.4 -146.2 Taxes paid -48.5 -40.3 -74.5 -55.2 -68.3 Other adjustmen
Slide 22: 2016 Cash Flow Guidance
2016 Cash Flow Guidance 22 - Working capital buildup EUR ~30m - Support further organic growth - Capital expenditures EUR ~190m - Freshwater expansion projects EUR ~50m - Interest expenses EUR ~30m - Tax payables EUR ~75m - Long term NIBD target of EUR 1,050m - Quarterly dividend in Q3 2016 of NOK 3
Slide 23: Overview financing
Overview financing 23 - EUR 805m Facility Agreement - Maturity – Q4 2019 - Covenants: - 35% equity ratio - Accordion option EUR 45m - Lenders: DNB, Nordea, Rabobank and ABN Amro - EUR 340m issued in November 2015 - Tenor 5 years, annual coupon 0.125%(1), conversion price EUR 15.7020 - EUR 375m issue
Slide 24: Supply development
Supply development Note: Atlantic Salmon (GWE tons)24 - Global supply growth in the low end of expectations - Norway: As expected. Reduction caused by harvesting of smaller sized fish and biological challenges - Chile: Steeper decline than expected due to the fishermen’s protest. Algal bloom effecti
Slide 25: Development in reference prices
Development in reference prices Prices up to week 31 in 201625 Reference prices Q1 2016 Change vs Q1 2016 Change vs Market Q1 2015 NOK Q1 2015 Norway (1) EUR 6.15 31.9% NOK 58.58 43.9% Chile (2) USD 4.30 6.7% NOK 37.04 18.5% Chile, GWE (3) USD 4.36 9.8 N K 37.58 22.0 North America (4) USD 2.92 17.3%
Slide 26: Global volume by market
Global volume by market Source: Kontali Note: Atlantic Salmon (HOG tons), LTM Last twelve months, PTM Previous twelve months 26 - Strong underlying demand globally - Europe: Key markets (UK, Germany, Southern Europe) continue to show strong demand - Russia negatively impacted by high salmon prices -
Slide 27: Industry supply outlook
Industry supply outlook: Guidance of declining growth of -8% to -6% for 2016 Actual harvest volumes will be affected by e.g. water temperatures, development in biological growth, biological challenges such as diseases, algae blooms etc. and market developments. 27 - 2016 guidance: -8% to -6% - 2017:
Slide 28: MHG 2016 volume guidance
MHG 2016 volume guidance Actual harvest volumes will be affected by e.g. water temperatures, development in biological growth, biological challenges such as diseases, algal blooms etc. and market developments. 28 - 2016 reduced guidance from 414,000 tons GWE to 400,000 tons GWE - Norway reduced by 9
Slide 29: Outlook
Outlook 29 - Market balance expected to be tight in 2016 (negative supply growth) - Future prices (NASDAQ) next twelve months have increased to EUR 6.4 per kg (NOK 59 per kg) - Strong consumer demand in Europe and Asia - New Chilean regulations have major deficiencies - Aquaculture shipping joint ve
Slide 30: Appendix
Appendix 30
Slide 31: Dividend policy
Dividend policy 31 - The quarterly dividend level shall reflect the present and expected future cash flow generation of the Company - To this end, a target level for net interest bearing debt is determined, reviewed and updated on a regular basis - When the target is met, at least 75% of the annual
Slide 32: Contract coverage and sales contract policy
Contract coverage and sales contract policy 32 - Q3 2016 contract shares (% of guided volume): - Norway 41% - Scotland 67% - Canada 0% - Chile 25% - Contracts typically have a duration of 3-12 months - Contracts are entered into on a regular basis - Policy opens for contracts of up to 48 month durat
Slide 33: Quarterly segment overview
Quarterly segment overview 33 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 102.4 5.8 26.5 -5.6 1.4 5.6 136.0 SALES AND MARKETING Markets 9.6 3.0 1.0 4.0 0.0 0.1 0.0 17.8 Consumer Products -1.5 -3.8 0.0 0.0 -0.1 0.0 0.5 -4.8 SUBTOTAL 110.6 5.0 27.4 -
Slide 34: YTD segment overview
YTD segment overview 34 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 187.5 17.3 46.1 -32.7 -1.2 9.4 226.4 SALES AND MARKETING Markets 18.2 6.7 4.1 7.2 0.0 0.2 0.0 36.4 Consumer Products 4.3 -10.5 0.0 0.0 -0.1 0.0 0.9 -5.4 SUBTOTAL 209.9 13.6 50.2 -2
Slide 35: Quarterly segment overview MH Operating Units
Quarterly segment overview 35 MH Operating Units EUR million Norway Scotland Canada Chile Ireland Faroes Markets Consumer Products MH Feed Other Elim Group* Revenues and other income 309.2 61.9 72.6 39.6 11.1 14.2 654.3 325.1 69.4 4.9 -730.2 832.1 Operating EBITDA 114.8 10.0 29.3 -0.7 2.2 6.1 18.8 0
Slide 36: Development in harvest volumes
Development in harvest volumes 36 2012 Total Total Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3E Q4E Total Norway 202.5 217.5 255.3 222.5 55.1 68.7 64.3 69.9 258.0 65.2 64.0 58.9 66.6 254.8 54.0 53.7 63.0 82.3 253.0 Chile 10.6 26.0 40.2 28.3 17.7 16.4 16.7 16.6 67.5 16.1 13.2 18.4 14.8 6
Slide 37: Net capital expenditure guidance
0 50 100 150 200 250 300 2008 2009 2010 2011 2012 2013 2014 2015 2016E EUR m illi on Net capital expenditure guidance 37 Maintenance level
Slide 38: Net working capital guidance
Net working capital guidance 38 -100 -50 0 50 100 150 200 250 2008 2009 2010 2011 2012 2013 2014 2015 2016E W ork ing cap ita l ti e- up (EUR m illi on )
Slide 39: Guidance on financial commitments and cost of debt
Guidance on financial commitments and cost of debt 39 0 20 40 60 80 100 120 2011 2012 2013 2014 2015 2016E EUR m ill io n Interest expenses Contractual repayments
Slide 40: Nova Sea
Nova Sea 40 - Leading integrated salmon producer in Northern Norway - 33.33 wholly owned licenses - 4 partly owned licenses - Marine Harvest has an ownership in Nova Sea of ~48% through direct and indirect shareholdings - 2015 dividends of NOK 200m (paid in Q2-16) - Marine Harvest’s direct share NOK
Slide 41: Debt distribution and interest rate hedging
Debt distribution and interest rate hedging 41 - External interest bearing debt is distributed as follows: EUR 73%, USD 13%, GBP 1%, other currencies 13%. - Policy: Marine Harvest ASA shall hedge 70%-100% of the Group’s long-term interest-bearing debt by currency with fixed interest or interest rate
Slide 42: Hedging and long term currency exposure
Hedging and long term currency exposure 42 POLICY - EUR/NOK - Marine Harvest shall hedge between 0% and 30% of its assumed annual expenses in NOK against the EUR with a horizon of two years. The annual hedging shall be evenly distributed across the months of the year. - USD/CAD - Marine Harvest shal
Slide 43: Strategic currency hedging
Strategic currency hedging 43 STRATEGIC CURRENCY HEDGING MEUR Rate MUSD Rate 2016 99.6 8.99 14.4 1.32 2017 199.2 9.40 28.8 1.32 2018 99.6 9.63 3.6 1.35 P/L effect of contracts maturing in Q2 0.9 (MEUR) MEUR Market value 31/03/2016 -8.4 Change (1) 4.9 Market value 30/06/2016 -3.5 EUR/NOK USD/CAD DESI
Slide 44: Tax losses carried forward (YE 2015)
Tax losses carried forward (YE 2015) Details are available in the 2015 Annual Report44 - Most of the deferred tax assets have not been recognised on the statement of financial position - The NOL’s will be used to offset taxable profit in the countries going forward - The utilisation of the deferred