Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q3 2015 Earnings Presentation

42 slides from Bakkafrost P/f's earnings presentation, Nov 3, 2015

  1. Slide 1: Q3 2015 Bakkafrost Group

    Q3 2015 BAKKAFROST GROUP Oslo November 3rd 2015

  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 Q3 2015

     SUMMARY OF Q3 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Summary of the Quarter

    SUMMARY OF THE QUARTER Higher volumes from Farming  Harvested 12,982 tgw in Q3 2015 (10,881 tgw in Q3 2014)  Feed sales of 27,011 tonnes in Q3 2015* (29,808 tonnes in Q3 2014*)  Revenues of DKK 677 million in Q3 2015 (DKK 584 million in Q3 2014)  Operational EBIT of DKK 206 million in Q3 2015 (D

  5. Slide 5: Summary of the Quarter: Positive results, but lower margins

    SUMMARY OF THE QUARTER Positive results, but lower margins Q3 Q3 M9 M9  Farming/VAP division decreased margin 2015 2014 2015 2014 (DKK million) from 19.73 NOK/kg in Q3 2014 to 18.10 Operating revenues 677 584 2,091 1,926 NOK/kg in Q3 2015 Operational EBITDA 232 233 823 676  VAP segment delivered a

  6. Slide 6: Summary of the Quarter

    SUMMARY OF THE QUARTER  Market  Good development in salmon prices  High influence from currency market  Good market diversification  Operation  Farming - Higher costs - Margin, however, maintained at NOK 17.25 per kg, compared with 17.02 in Q3 2014  VAP - Margin reduced from 17% to 5%, compar

  7. Slide 7: Markets and Sales

     SUMMARY OF Q3 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  8. Slide 8: Global Markets

    GLOBAL MARKETS Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] 55.00  The NASDAQ salmon price for size 4-5: 50.00  Increased y/y Q3 2015 / Q3 2014 by ~21% 45.00 - by 7.21 NOK/kg from 34.68 to 41.89 40.00  Increased q/q Q2 2015 / Q1 2015 by ~8% 35.00 - by 3.16 NOK/kg from 38.73 to 41.89 30.00 25

  9. Slide 9: Markets & Sales

    MARKETS & SALES Total sales of salmon Q3 Q3 M9 M9 Good market diversification by markets 2015 2014 2015 2014 EU 34% 35% 34% 46%  Access to all markets USA 19% 21% 18% 22%  Flexible and efficient market adaptation Asia 17% 20% 14% 22% Eastern Europe 30% 24% 34% 10%  Strong market position in US, A

  10. Slide 10: 0% Global Growth Expected in 2016

    0% GLOBAL GROWTH EXPECTED IN 2016  The global supply estimates for 2016 are on Global supply of Atlantic Salmon (head on gutted - HOG) same level as 2015 2012 2013 2014 2015E 2016E Norway 1.066 1.029 1.076 1.096 1.090  Biological issues and fully utilized licenses are UK 143 142 154 157 160 the ma

  11. Slide 11: Demand Development Split by Markets

    DEMAND DEVELOPMENT SPLIT BY MARKETS  5% increased demand on EU Salmon markets, sold quantity (head on gutted - HOG) market in Q3 2015, compared with Estimated volumes Q3 comparison Estimated volumes YTD Q3 comparison Q3 2014 – and 8% YTD 2015 Markets Q3 2015 E Q3 2014 Volume % YTD 2015 E YTD 2014 V

  12. Slide 12: Segment Information

     SUMMARY OF Q3 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Fishmeal, -oil and feed plant Havsbrún, Fuglafjørður

  13. Slide 13: Segment Farming – Harvest Volume

    SEGMENT FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q3 Q3 M9 M9  Harvested volumes increased by 19% in Q3 tonnes [HOG] 2015 2014 2015 2014 2015, compared with Q3 2014 West 9,136 1,033 14,178 13,319  The West division harvested 70% of the total quantity in the quarter, and the North

  14. Slide 14: Segment Farming – Operational Performance

    SEGMENT FARMING – OPERATIONAL PERFORMANCE Q3 Q3 M9 M9 Revenues and margin (DKK million) 2015 2014 2015 2014  Revenues increased 28%, and volumes Operating revenues 558 435 1,639 1,469 increased 19%, compared to Q3 2014 Operational EBIT 183 167 626 513  The operational EBIT increased 10% from Opera

  15. Slide 15: Segment Farming – Operational Performance

    SEGMENT FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 25.00  Farming EBIT of NOK 17.25 per kg in Q3 2015 compared to 17.02 in Q3 2014 20.00 20.03  Lower EBIT/kg in DKK, but marginal higher 17.25 18.15 17.02 EBIT/kg in NOK 15.00  EBIT/kg negativ

  16. Slide 16: Segment Value Added Products (VAP)

    SEGMENT VALUE ADDED PRODUCTS (VAP) Q3 Q3 M9 M9 VAP revenues and margin (DKK million) 2015 2014 2015 2014  Stable market conditions Operating revenues 167 155 547 654 Operational EBIT 9 27 62 38  Revenues increased by 8% from DKK 155 million in Q3 2014 to DKK 167 million in Q3 2015 Operational EBIT

  17. Slide 17: Segment Value Added Products (VAP)

    SEGMENT VALUE ADDED PRODUCTS (VAP) Margin - EBIT per kg total harvested quantity [NOK/kg] Lower combined margin from VAP and Farming 30  VAP operational EBIT was 2.95 NOK/kg and Farming 25 20 operational EBIT was 17.25 NOK/kg in Q3 2015 15  Combined VAP/Farming operational EBIT was 18.10 10 5 NOK/

  18. Slide 18: Segment Fishmeal, Oil and Feed (FOF)

    SEGMENT FISHMEAL, OIL AND FEED (FOF) Fishmeal, Oil and Feed Reduced volumes y/y  EBITDA DKK 42 million in Q3 2015, (DKK million) Q3 2015 Q3 2014 M9 2015 M9 2014 compared with DKK 62 million in Q3 2014 Operating revenues 320 287 809 746  EBITDA margin of 13.0% in Q3 2015, compared with 21.5% in Q3

  19. Slide 19: Market Conditions Feed

    MARKET CONDITIONS FEED Volumes of raw material purchase and feed sale [tonnes] Timing of raw material purchase affects profit 35,000 120,000 Raw material (tonnes)  Raw material intake YTD 2015 similar to YTD 2014 at 30,000 100,000 Feed sale (tonnes) 171 thousands tonnes 25,000 80,000 20,000 60,000

  20. Slide 20: Group Financials

     SUMMARY OF Q3 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  21. Slide 21: Group Profit and Loss

    GROUP PROFIT AND LOSS Q3 Q3 M9 M9  Revenues increased DKK 93 million or 16%. (DKK million) 2015 2014 2015 2014 The increase is due to higher volumes in Q3 Operating revenues 677 584 2,091 1,926 2015, than corresponding period 2014 Operational EBITDA* 232 233 823 676 Operational EBIT* 206 209 744 60

  22. Slide 22: Balance Sheet

    BALANCE SHEET End M9 End M9 End  Investments in PPE of DKK ~ 204 million in Q3 (DKK million) 2015 2014 2014 2015. The final part of the Hans á Bakka investment was in Q3 2015 Intangible assets 295 295 295 Property, plant and equipment 1,346 973 1,041  Financial assets are unchanged in Q3 2015, Fin

  23. Slide 23: Cash Flow

    CASH FLOW  Cash flow from operations improved because of Q3 Q3 M9 M9 good operational EBIT and changes in working (DKK million) 2015 2014 2015 2014 capital affected the cash flow positively in Q3 2015 Cash flow from operations 367 280 773 697 Cash flow from investments -204 -47 -382 -153 Cash flow

  24. Slide 24: Outlook

     SUMMARY OF Q3 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  25. Slide 25: Outlook

    OUTLOOK Market Fishmeal, oil and feed  0% global supply growth in 2016  Forward prices increased to around NOK 44 per kg  Forecast for feed sales next 12 months  79,000 tonnes in 2015  80,000 tonnes in 2016 Farming  2015 estimated harvest volumes unchanged at 49,000 - 51,000 tonnes HOG Busines

  26. Slide 26: Appendix

     SUMMARY OF Q3 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  27. Slide 27: Investments – Programme 2014-2017

    INVESTMENTS – PROGRAMME 2014 - 2017 Fishmeal & Oil Feed Hatchery Farming Live fish carrier 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 / Q3 PRESENTATION 201

  28. Slide 28: Investments – Programme 2015-2017

    INVESTMENTS – PROGRAMME 2015 - 2017 Status on main investments  Harvest/VAP factory  New 8,000m3 Hatchery at Viðareiði  Live fish carrier Hans á Bakka  Construction of buildings in progress  Construction in progress  Testing - expected finalized in Jan-2016  To start operation in Q2 2016  Fo

  29. Slide 29: Building New Harvest & VAP Factory

    BUILDING NEW HARVEST & VAP FACTORY New Harvest & VAP factory in Glyvrar Merging 7 factories into one facility  Improve efficiency and create synergies  Double capacity  Significant reduction of internal transportation between own factories  New products  Reduce risk in farming  Start-up in Q2

  30. Slide 30: Building New Hatcheries

    BUILDING NEW HATCHERIES New Hatchery in Viðareiði (S-21)  Significant capacity expansion in progress  Recycling of 99% of water - saving water and heating  The goal is to increase average size of smolts from 100g to 300g in 2018  Reduce risk in farming  Reduce total time of production cycle at

  31. Slide 31: Larger Smolt – Reduced Risk and Organic Growth

    LARGER SMOLT – REDUCED RISK AND ORGANIC GROWTH Results with large smolt in the Faroe Islands Actual growth period with larger smolt Months for growth Growth potential • Reduced risk until harvest vs 100g smolt • Up to 6 months reduced growth period will reduce risk significantly • Reduced mortality

  32. Slide 32: 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 802 million  Partly new financing if advantageous  Flexibility to postpone investment in case of adverse events Unchanged dividend policy BAKKAF

  33. Slide 33: Financing

    FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding  Total funding to DKK ~ 984 million 1,400  Bonds NOK 500 million due Feb 2018 (swapped into 1,200 DKK) 1,000  Revolving credit facility of DKK 553 million due in 2017 800  NIBD end Q3 2015: DKK 182 million 600 40

  34. Slide 34: A Good Regulatory Farming Environment

    A GOOD REGULATORY FARMING ENVIRONMENT Key Performing Indicators developed positively post New Veterinary System During the period 2001-2004 the Faroe Islands were severely struck by ISA outbreaks Disease leading to a back to square ISA outbrakes one for Faroe salmon industry Mortality-% Harvest 12 1

  35. Slide 35: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2  48,788 inhabitants (April 2015)  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%  Fishing : ~1

  36. Slide 36: Faroe Islands – Excellent Conditions for Cost Effective Farming

    FAROE ISLANDS – EXCELLENT CONDITIONS FOR COST EFFECTIVE FARMING Average Seawater Temperatures  Natural growth area for wild salmon ºC Faroe Islands Norway (Trøndelag) GEOGRAPHY  Faroese fjords provide separation between locations 16  Improves biological control and area management 14 12  Stable

  37. Slide 37: Development per Quarter Q1 2012 – Q3 2015

    DEVELOPMENT PER QUARTER Q1 2012 – Q3 2015 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2015 2015 2015 2014 2014 2014 2014 2013 2013 2013 2013 2012 2012 2012 2012 Revenue 677 800 613 757 584 711 631 667 741 610 473 582 457 416 400 Op. EBIT 206 303 235 227 209 212 186 124 187 169 105 99 86 78 6

  38. Slide 38: The Value of a Strict Sanitary Regime

    THE VALUE OF A STRICT SANITARY REGIME Margin EBIT/kg last 15 years (NOK/kg) Margin EBIT/kg last 5 years (NOK/kg) Margin EBIT/kg 2014E (NOK/kg) During the last 15 years, 2000 - 2014 The last five years - 2010-2014 In 2014, BAKKA had a farming Norway had the highest margin of the BAKKA had a strong av

  39. Slide 39: Dividend

    DIVIDEND Dividend DPS in % of adj. EPS *  Dividend of DKK 6.00 (NOK 6.78) per share paid in April 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 pay dividend

  40. Slide 40: Monthly Exchange Rates

    MONTHLY EXCHANGE RATES USD/DKK USD/DKK NOK/DKK NOK/DKK RUB/DKK RUB/DKK 750 95 17 16 700 90 15 14 650 85 13 12 600 80 11 10 550 75 9 8 500 70 • USD increased very much in value 2H • NOK has reduced value especially in Q3 • RUB has lost value since April 2015, and is 2014 and 1Q 2015. The trend in Q3

  41. Slide 41: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development No of shares Account name type Citizenship Traded daily Last 12 months 4.594.437 9,4% Jacobsen Oddvør FRO NOK/share 4.491.217 9,2% Jacobsen Johan Regin FRO 1.856.508 3,8% SPAR NORD BANK A/S S/A CLIENT ACCONOM DNK 1.508.860 3,1% DANSKE BA

  42. Slide 42: Bakkafrost

    \// BAKKAFROST ESTABLISHED 1950,

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