Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q2 2022 Earnings Presentation

46 slides from Bakkafrost P/f's earnings presentation, Aug 23, 2022

  1. Slide 1: Q2 2022 Bakkafrost Group

    Q2 2022 BAKKAFROST GROUP Oslo 23 August 2022

  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 Q2 2022

    SUMMARY OF Q2 2022 SALES SEGMENT INFORMATION FINANCIALS MARKETS & OUTLOOK APPENDIX Vágsfjørður, South Island, Faroe Islands

  4. Slide 4: Highlights

    HIGHLIGHTS  Harvest in the Faroe Islands: 13,101 tgw in Q2 2022 (17,561 tgw in Q2 2021)  Harvest in Scotland: 6,646 tgw in Q2 2022 (10,634 tgw in Q2 2021)  Record Feed sales in a 2nd quarter of 31,243 tonnes in Q2 2022* (27,272 tonnes in Q2 Operation 2021*)  Market balance: Strong markets and ti

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER HIGHER OPERATIONAL EBIT DRIVEN MAINLY BY FARMING FAROE ISLANDS Q2 2021 Q2 2022 (DKK million) Q2 22 Q2 21 H1 22 H1 21 Operating revenue 1,684 1,618 3,323 2,793 OPERATIONAL EBIT/Kg (NOK) Operational EBITDA 724 534 1,278 888 Farming Faroe Islands Operational EBIT 587 407 1,004 63

  6. Slide 6: Sales

    SUMMARY OF Q2 2022 SALES SEGMENT INFORMATION FINANCIALS MARKETS & OUTLOOK APPENDIX

  7. Slide 7: Global Markets

    GLOBAL MARKETS HIGHER PRICES Y/Y AND Q/Q Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG] Average spot prices increased y/y and q/q Q1 Q2 Q3 Q4 130 in Q2 2022 110 (NOK/KG) 90 y/y: 63.31 69.7% 107.46 (Q2 2021) 44.15 (Q2 2022) 70 50 q/q: 80.17 34.0% 107.46 (Q1 2022) 27.29 (Q2 2022) 30 1 3 5 7 9 11 13

  8. Slide 8: Segment Information

    SUMMARY OF Q2 2022 SALES SEGMENT INFORMATION FINANCIALS MARKETS & OUTLOOK APPENDIX

  9. Slide 9: Farming – Harvest Volume

    FARMING – HARVEST VOLUME DECREASED HARVEST IN FO AND IN SCT – LOWER AVG. HARVEST WEIGHTS Q2 2021 Q2 2022 Harvest Volumes tonnes [HOG] Q2 22 Q2 21 H1 22 H1 21 Harvested volumes (tonnes HOG) North: 37% FO - North Region 4,801 2,530 14,847 13,952 FO: 17,561 -25% 13,101 West: 23% FO - West Region 3,082

  10. Slide 10: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE STRONG PERFORMANCE IN THE FAROES – WEAKENED IN SCOTLAND Q2 2021 Q2 2022 Farming FO (DKK million) Q2 22 Q2 21 H1 22 H1 21 Operational EBIT (mDKK) Operating revenue 1,140 961 2,338 1,606 Operational EBIT 617 343 1,088 486 FO: 343 80% 617 Operational EBIT margin 54% 36

  11. Slide 11: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Q2 2021 Q2 2022 Margin - EBIT per kg total harvested quantity [NOK/kg] Operational EBIT per kg (NOK) Q2 FO Q2 SCT H1 FO H1 SCT 80,00 FO: 26.52 36.86 63.38 63,38 60,00 SCT: 6.75 1.54 8.29 47,73 40,00 26,52 21,07 20,00 FO: Good biological development 8,29 6,75 3,54 Lo

  12. Slide 12: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) HIGHER VOLUMES AND HIGHER COST OF RAW MATERIAL Q2 2021 Q2 2022 (DKK million) Q2 22 Q2 21 H1 22 H1 21 Volumes (tonnes) Operating revenue 417 259 835 559 4,667 27% 5,944 Operational EBIT -108 5 -137 80 Operational EBIT margin -26% 2% -16% 14% Revenue (mDKK) Farming FO transf

  13. Slide 13: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) HIGHER EBITDA AND HIGHER SALES OF FEED AND FISHMEAL Q2 2021 Q2 2022 (DKK million) Q2 22 Q2 21 H1 22 H1 21 Operating revenue 523 347 965 669 EBITDA (mDKK) EBITDA 119 57 205 106 57 107% 119 EBITDA margin 23% 17% 21% 16% Feed sold (tonnes)* 31,243 27,272 57,435 50,989 EBITD

  14. Slide 14: Market Conditions Feed

    MARKET CONDITIONS FEED INCREASE IN INTERNAL AND EXTERNAL FEED SALES Q2 2021 Q2 2022 Volumes of raw material purchase and feed sale [tonnes] 180.000 50.000 Total feed sales increased (tonnes) 160.000 45.000 140.000 40.000 Raw material (tonnes) 27,272 15% 31,243 35.000 Feed sale (tonnes) 120.000 30.00

  15. Slide 15: Financials

    SUMMARY OF Q2 2022 SALES SEGMENT INFORMATION FINANCIALS MARKETS &OUTLOOK APPENDIX

  16. Slide 16: Group Profit and Loss

    GROUP PROFIT AND LOSS HIGHER REVENUE AND OPERATIONAL EBIT Q2 2021 Q2 2022 (DKK million) Q2 22 Q2 21 H1 22 H1 21 Operating revenue 1,684 1,618 3,323 2,793 Revenue (mDKK) Operational EBITDA 724 534 1,278 888 1,618 4% 1,684 Operational EBIT 587 407 1,004 631 Fair value adjustment of biological assets 5

  17. Slide 17: Operational EBIT and Adjusted Earnings per Share

    OPERATIONAL EBIT* AND ADJUSTED EARNINGS PER SHARE** 587 408 415 407 418 Operational EBIT* 339 303 (mDKK) 268 268 231 248 224 168 182 103 89 120 71 2018 2019 2020 2021 2022 1,075 1,325 622 821 1,004 6,77 6,48 5,89 4,98 4,83 4,80 4,82 4,07 3,79 3,61 Adjusted EPS** 3,19 2,95 (DKK) 2,55 2,06 1,89 1,27 0

  18. Slide 18: Balance Sheet

    BALANCE SHEET End Headlines (mDKK) (DKK million) Q2 22 2021 End 2021 Q2 2022 Intangible assets 4,507 4,496 Property, plant and equipment 5,091 4,889 PPE: 4,889 202 5,091 280 302 Right of use assets Financial assets 139 149 Biological assets: 2,448* 852 3,301* Long-term receivables 0 8 *(whereof mDKK

  19. Slide 19: Cash Flow

    CASH FLOW Q2 2021 Q2 2022 (DKK million) Q2 22 Q2 21 H1 22 H1 21 Cash flow, operations (mDKK) Cash flow from operations 542 532 693 669 Cash flow from investments -272 -245 -447 -513 532 10 542 Cash flow from financing -206 -107 -247 -70 Net change in cash 63 179 -1 86 Cash flow, investments (mDKK) C

  20. Slide 20: Net Interest-Bearing Debt (NIBD)

    NET INTEREST-BEARING DEBT (NIBD) NIBD INCREASED DURING Q2 2022 NIBD was increased by: Development in NIBD in DKK millions  Net investments (mDKK 272)  Dividend (mDKK 304)  Change in working capital (mDKK 105) NIBD was decreased by:  Cash flow, operating activities (mDKK -605) Financing end Q2 20

  21. Slide 21: Markets & Outlook

    SUMMARY OF Q2 2022 SALES SEGMENT INFORMATION FINANCIALS MARKETS & OUTLOOK APPENDIX Funningsfjørður, Faroe Islands

  22. Slide 22: Harvested and Sold Quantity by Origin

    HARVESTED AND SOLD QUANTITY BY ORIGIN  3% drop in global quarterly harvest volumes SUPPLY DEVELOPMENT Q2 2022 Q2 2021 Change %  7% down when including inventory movements Norway 272 287 -5.2 % UK 40 53 -24.3 % Faroes 18 23 -20.0 % Iceland 6 8 -22.1 %  9% drop in European harvest Ireland 5 4 14.3

  23. Slide 23: Salmon Markets, Sold Quantity

    SALMON MARKETS, SOLD QUANTITY  Good relative performance in EU/UK Salmon markets, sold quantity (head on gutted - HOG)  Positive food service dynamics following Estimated volumes Q1 comparison Estimated volumes FY comparison Q2 2022EQ2 2021E Volume % FY 2021E FY 2020 Volume % release of Covid-19 m

  24. Slide 24: Short Term Supply Outlook

    SHORT TERM SUPPLY OUTLOOK  Expectation of limited global supply growth SUPPLY - TOTAL 1.600 10%  Flat development 2H 2022 1.400 8% 6% 1.200  Low/mid single digit growth expected in 2023 1.000 4% 2% 800 0%  European drivers 600 -2% -4% 400  Reduced 2H 2022 MAB pressure due to licence auction -6%

  25. Slide 25: Outlook

    OUTLOOK Market Contracts  Global harvest decreased 2.8% in Q2 2022 vs Q2 2021  For 2022, Bakkafrost has signed contracts for around 32% of the total expected harvest volumes in the Faroe Islands  Global supply for 2022 expected to decrease moderately and Scotland - decrease 1% for FY 2022 Farming

  26. Slide 26: Appendix

    SUMMARY OF Q2 2022 SALES SEGMENT INFORMATION FINANCIALS & ESG MARKETS & OUTLOOK APPENDIX Applecross 4 expansion, Scotland

  27. Slide 27: Hatchery Expansions - Faroe Islands

    HATCHERY EXPANSIONS - FAROE ISLANDS INCREASING HATCHERY CAPACITY FROM 15 TO 23 MILLION AT 500G  The Strond hatchery has significantly increased smolt capacity Ónavík (2025) 2.4m smolt @500g  Large smolts grow strongly after release  Very low feed conversion rate Glyvradal expansion (2024) 0,3 =>

  28. Slide 28: Hatchery Expansion - Scotland

    HATCHERY EXPANSION - SCOTLAND INCREASING HATCHERY CAPACITY TO +18 MILLION AT 500G  Significant increase in smolt capacity in Scotland 2026: Large Hatchery no. 3 2025: Large Hatchery no. 2 2024: Applecross 5 10m smolt @500g 2023: Applecross 4 8m smolt @250g TBD TBD BAKKAFROST / Q2 2022 PRESENTATION

  29. Slide 29: Scotland Site Overview

    SCOTLAND SITE OVERVIEW 7,742 TONNES OF CONSENT INCREASE SINCE THE ACQUISITION Total consent has increased by 11.6% (7,742 tonnes) since the acquisition in Q4 2019 Total consent is 74,765 tonnes in 44 farming sites: North: 24 sites / 44,415 tonnes consent  Uist, 5 sites  Sky & mainland, 6 sites  L

  30. Slide 30: Farming Scotland

    FARMING SCOTLAND FRESHWATER TREATMENT CAPACITY HAS BEEN UPSCALED IN Q1 (…MORE TO COME) • Freshwater treatment capacity has been more than doubled in Q1 2022 • Enables a preventive treatment strategy to ensure strong gill health ahead of the challenging autumn Ronja Star In service mid Sep22 • 4,000m

  31. Slide 31: Scotland – Strategic Rationale

    SCOTLAND – STRATEGIC RATIONALE 1. Provides access to the attractive Scottish 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, the Faroe Islan

  32. Slide 32: Scotland – Strategic Rationale

    SCOTLAND – STRATEGIC RATIONALE 3. Potential for significant improvement  Scottish Salmon profitability to improve over five years through transfer of best practices  Synergies  Targeted investment programmes 4. Financially attractive  Acquiring the business at a reasonable value, multiple to the

  33. Slide 33: ~6.2BN Planned Investments 2022-2026

    ~ 6.2BN PLANNED INVESTMENTS 2022-2026 FRONTLOADED TO ACCELERATE BUSINESS TRANSFORMATION IN SCOTLAND Faroe Islands: Planned investment profile 2022-2026 (DKK 1,000) • Hatchery capacity (2026 capacity: +23m smolt at 500g) 1.000 Planned investments • Increase feed capacity to cater 200,000 tonnes (HOG)

  34. Slide 34: Planned Investments Ensure Significant Uplift in Capacity

    PLANNED INVESTMENTS ENSURE SIGNIFICANT UPLIFT IN CAPACITY VALUE CHAIN SYNCHRONISED AT 180KT HOG HARVEST CAPACITY IN 2026 • Value chain synchronised at 180kt capacity in 2026 Development in capacity constraints 2018 2022 2026 • Extra capacity as “insurance” & flexibility and for growth: planned later

  35. Slide 35: Investing in Sustainable Growth

    INVESTING IN SUSTAINABLE GROWTH 150,000 TONNES HARVEST IN 2026, FAROE ISLANDS AND SCOTLAND COMBINED 2022-2026 Capex of DKK 6.2 bn builds 180,000t capacity by Volumes Faroe Islands Scotland 2026 1.800 16,00 2021 67,217t 29,672t 1.600 14,00 1.400 Investments per kg (DKK) 12,00 1.200 10,00 DKK million

  36. Slide 36: Markets & Sales

    MARKETS & SALES TOTAL SALES TO WESTERN EUROPE, NORTH AMERICA AND ASIA EUROPE INCREASED – EASTERN EUROPE DECREASED Sales & volume Total sales of Q2 2022 Q2 2021 H1 2022 H1 2021 salmon by markets FO SCT Total FO SCT Total FO SCT Total FO SCT Total Q2 2021 Q2 2022 Western Europe 52% 86% 62% 51% 73% 59%

  37. Slide 37: Development in Supply and Sold Quantity by Origin

    DEVELOPMENT IN SUPPLY AND SOLD QUANTITY BY ORIGIN Global Supply of Atlantic Salmon (head on gutted - HOG) Expected supply growth in 2022 2017 2018 2019 2020 2021E 2022E Norway 1.078 1.129 1.198 1.223 1.378 1.361  1% decrease in Global supply UK 159 137 171 160 179 172 Ireland 15 13 14 14 14 15  2%

  38. Slide 38: Q2 2022 Market Environment

    Q2 2022 MARKET ENVIRONMENT PRICE NORWAY 12,0 90 All time high pricing in Q2 2021 10,6 80 10,0  Drop in supply 8,2 70 8,0 60  Significant price increases for land based proteins 6,2 6,1 50 EUR DKK 6,0 5,2 5,2 5,3 4,5 40  Lower than normal share of volumes in the spot market 4,0 4,0 30 20 2,0 10 Na

  39. Slide 39: Q2 2022 – Average Pricing Well Below Spot Price

    Q2 2022 – AVERAGE PRICING WELL BELOW SPOT PRICE PRICE NORWAY (NOK)  Nasdaq spot price reflecting marginal pricing per week 120 6 4 100  Statistics Norway (SSB) publish average price for all whole 2 80 fish sold per week 0 60 -2  Incorporates bilateral contracts of variable duration -4 40 -6  SSB

  40. Slide 40: Price Movement Largely in Line with Protein Peers

    PRICE MOVEMENT LARGELY IN LINE WITH PROTEIN PEERS European wholesale prices (indexed) Factors impacting ability to pass through cost inflation 160 150  Relative end consumer price elasticity 140 130  Ability and lead time for implementation of required supply 120 contraction to adapt to price elas

  41. Slide 41: Development per Quarter

    DEVELOPMENT PER QUARTER Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 (mDKK) 2020 2020 2020 2021 2021 2021 2021 2022 2022 Revenue 1,134 1,123 1,139 1,176 1,618 1,272 1,488 1,639 1,684 Operational EBIT 182 103 89 224 407 71 120 418 587 Profit/Loss 472 177 -38 408 428 131 -3 405 845 Harvest FO (tgw) 12,941 11,135 15,957

  42. Slide 42: Dividend

    DIVIDEND Dividend Dividend per share in % of adj. EPS* • A dividend for 2021 of DKK 5.14 per share was paid 99% out in Q2 2022 • Dividend payment equals 50% of adjusted EPS 59% 49%* 49% 50% 50% 50% 50% 46% 40% Dividend policy  Competitive return through: 19%  Dividends 0%  Increase in the value o

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    BAKKAFROST / Q2 2022 PRESENTATION Page 43

  44. Slide 44: Facilities and locations

    Facilities and locations BAKKAFROST / Q2 2022 PRESENTATION Page 44

  45. Slide 45: Faroe Islands

    FAROE ISLANDS  18 islands – 1,387 km2 TAXES  Total percent of GDP: 43.8% (2020)  54,072 inhabitants (July 2022)  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 market p

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    BAKKAFROST / Q2 2022 PRESENTATION Page 46

Bakkafrost — Q2 2022 Earnings Presentation on 6ix