Mowi Asa · OSL:MOWI
Mowi Asa — Marine Harvest — Q4 2013 Earnings Presentation
52 slides from Mowi Asa's earnings presentation, Feb 5, 2014
Slide 1: Marine Harvest Q4 2013 Presentation
Marine Harvest Q4 2013 Presentation
Slide 2: Forward looking statements
Forward looking statements 2 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, production capa
Slide 3: Highlights
Highlights 3 All time high revenues Strong market driven by increased demand Operational EBIT NOK 1,034 million Listed on NYSE 28 January 2014 Quarterly dividend of NOK 1.20 per share (ex. 10:1 reverse split)
Slide 4: Key financials
Key financials 4 Marine Harvest Group - main figures NOK million Operational revenue and other income 6 743 4 071 19 230 15 569 Operational EBIT 1) 1 034 64 3 210 643 Cash flow from operations - 51 - 169 1 982 1 553 Net interest-bearing debt (NIBD) 7 797 5 381 7 797 5 381 Underlying EPS as of 31.12
Slide 5: Record high prices in Europe
Record high prices in Europe 5 Global supply growth ~4% Strong prices in all markets Price of Canadian salmon in Seattle outperformed Chilean salmon in Miami
Slide 6: Price achievement by origin
Price achievement by origin 6 Note: Q3 2013 average price achievement is measured versus reference prices in all markets (Norway/Faroes (NOS), Scotland (NOS+ NOK 2.89), Canada (UB Seattle), Chile (UB Miami) Contract share 36% 73% 0% 27% Superior share 92% 90% 88% 91%
Slide 7: Norway
Norway 7 Strong market led to significant margin improvement Price achievement negatively impacted by sales contracts Increased costs High feed cost High sea lice awareness Note: Details on Nova Sea listed in appendix SALMON OF NORWEGIAN ORIGIN NOK million Q4 2013 Q4 2012 Operational EBIT 825 254 Ha
Slide 8: Norway: Sales contract portfolio
Norway: Sales contract portfolio 8 Note: Marine Harvest Norway’s fixed price/fixed volume contracts with third party customers and MH’s processing entities. MH’s processing entities covers a large proportion of their sales exposure through third party end product contracts.
Slide 9: Norway: Operational EBIT/kg per region
Norway: Operational EBIT/kg per region 9 Including contribution from Sales and Marketing
Slide 10: Scotland
Scotland 10 Strong price achievement despite high contract coverage 15% higher feed costs despite improved feed conversion ratio Other seawater costs impacted by early harvest due to AGD (one site) Non-seawater costs positively impacted by fixed cost dilution SALMON OF SCOTTISH ORIGIN NOK million Q4
Slide 11: Canada
Canada 11 83% increase in market prices for Canadian salmon in the quarter 100% spot exposure Higher biological costs and adverse effect from fixed cost dilution SALMON OF CANADIAN ORIGIN NOK million Q4 2013 Q4 2012 Operational EBIT 58 - 52 Harvest volume 5 726 10 753 Operational EBIT per kg 10.20 -
Slide 12: Chile
Chile 12 Increased market prices and strong price achievement in the quarter Price of Chilean salmon however lagging Canadian in the US market Very high costs in the quarter due to tough biological conditions USD 5.0 per kg HOG in box Biological concerns remain SALMON OF CHILEAN ORIGIN NOK million Q
Slide 13: Ireland and Faroes
Ireland and Faroes 13 SALMON OF FAROESE ORIGIN NOK million Q4 2013 Q4 2012 Operational EBIT 27 13 Harvest volume 1 874 1 943 Operational EBIT per kg 14.48 6.45 - of which MH Markets 0.06 0.55 - of which MH VAP Europe 0.00 0.01 - of which Morpol Processing 0.00 na Exceptional items incl in op. EBIT 0
Slide 14: Value Added Products Europe (VAP Europe)
Value Added Products Europe (VAP Europe) 14 Please note that the operational EBIT for salmon in MH VAP Europe also is included in the results per country of origin Poor performance in the quarter Inability to pass through higher raw material costs Strike hampered optimal Christmas sales High structu
Slide 15: Morpol Processing
Morpol Processing 15 Please see historic figures for Morpol in appendix Strong performance despite very high market prices Raw material break even price of ~NOK 44 in the quarter Strong cost performance in the quarter Q1 2014 profitability challenged by current high raw material price MORPOL PROCESS
Slide 16: Fish feed project proceeding according to plan
Fish feed project proceeding according to plan 16 220 thousand tonnes capacity – 60% of MHG requirement in Norway(1) ~NOK 800m investment - Completion July 2014 Notes: (1) Based on 2014 harvest volume estimate
Slide 17: Fourth Quarter 2013 Financials, Harvest Volumes and Markets
Fourth Quarter 2013 Financials, Harvest Volumes and Markets 17
Slide 18: Profit and Loss
Profit and Loss 18 Marine Harvest Group Q4. 13 Q4. 12 2013 2012 NOK million Operational revenue and other income 6 743 4 071 19 230 15 569 Operational EBIT 1) 1 034 64 3 210 643 Unrealised gains on salmon derivatives -12 -19 -30 -106 Fair value adjustment on biological assets 1 155 402 1 825 350 One
Slide 19: Financial Position
Financial Position 19 NIBD/Equity within target of less than 50% Marine Harvest Group NOK million Non-current assets 16 469 13 580 Current assets 16 086 9 738 Assets held for sale 1 046 0 Total assets 33 601 23 317 Equity 16 372 11 689 Non-current liabilities 11 721 8 297 Current liabilities 5 320 3
Slide 20: Cash Flow and Net Interest Bearing Debt
Cash Flow and Net Interest Bearing Debt 20 Marine Harvest Group NOK million NIBD beginning of period -7 882 -5 005 -5 381 -6 467 Operational EBITDA 1 269 234 3 972 1 321 Change in working capital -1 236 - 373 -1 787 472 Taxes paid - 69 - 22 - 116 - 123 Other adjustments - 15 - 8 - 89 - 117 Cash flow
Slide 21: 2014 Cash Flow Guidance and Financing Update
2014 Cash Flow Guidance and Financing Update 21 2014 cash flow estimates Working capital buildup NOK 800m Requirements for commencing operations in feed plant Organic growth farming – Scotland and Canada Capital expenditures NOK 1,700m NOK 1,000m – Maintenance NOK 500m – Structural investments – org
Slide 22: Supply development Q4 2013
Supply development Q4 2013 22 4% increase in global harvest volumes – in line with expectations 2% in Europe 8% increase in the Americas Note: (1) Atlantic Salmon (HOG tons) Source: Kontali Estimated volumes Compared to Q4 2012 Est. volumes Q4 2013 Q4 2012 Volume % Q3 2013 Suppliers Norway 308,800 3
Slide 23: Development in reference prices
Development in reference prices 23 Reference prices Q4 2013 Change vs Q4 2013 Change vs NOK Q4 2012 Market (4) Q4 2012 Norway (1) NOK 40.97 55.9% EUR 4.98 39.5% Chile (2) NOK 55.45 52.3% USD 9.16 43.1% North America (3) NOK 45.26 82.8% USD 7.48 71.7% Notes: (1) Average superior HOG price per kg (FCA
Slide 24: Global volume by market
Global volume by market 24 Note: Atlantic Salmon (HOG tons) EU growth in line European supply growth Very strong demand in the US markets Import from Europe increasing for the first time in several quarters Russian consumers sensitive to current high prices Generally good demand in South America and
Slide 25: Industry supply outlook
Industry supply outlook 25 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. 2008 2009 2010 2011 2012 2013 HOG tonnes (thousands) Low Y/Y growth High Y/Y growth Norw
Slide 26: MHG – 2014 volume guidance
MHG – 2014 volume guidance 1 Assets to be divested in Shetland and Orkneys are excluded from the figures 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. Salmon spe
Slide 27: Outlook
Outlook 2 Strong market poses attractive 2014 net cash flow opportunity Forward prices of NOK 38.5 per kg for Q2-Q4 2014 However, higher 2H 2014 supply growth year on year Relatively high investments in 2014 to cater for organic growth Strategic focus areas Successful development of green-field feed
Slide 28: Appendix
Appendix 3
Slide 29: Q1 contract coverage and sales contract policy
Q1 contract coverage and sales contract policy 4 Q1 2014 contract shares (% of guided volume): Norway 42% Scotland 69% Canada 0% Chile 36% Contracts typically have a duration of 3-12 months Contracts are entered into on a regular basis Policy opens for contracts of up to 36 month duration SALES CONT
Slide 30: Development in reference prices
Development in reference prices 5 Reference prices Q4 2013 Change vs Q4 2013 Change vs NOK Q4 2012 Market (4) Q4 2012 Norway (1) NOK 40.97 55.9% EUR 4.98 39.5% Chile (2) NOK 55.45 52.3% USD 9.16 43.1% North America (3) NOK 45.26 82.8% USD 7.48 71.7% Notes: (1) Average superior HOG price per kg (FCA
Slide 31: Key performance indicators
Key performance indicators 6 MH Markets MH VAP EUROPE MORPOL PROCESSING Sales and Marketing Q4. 13 Q4. 13 Q4. 13 Operational revenues and other income 4 518 1 359 1 357 Operational EBIT 106 - 37 64 EBIT margin % 2.3% -2.7% 4.7% Q4. 13 Q4. 12 Group EBIT per kg (NOK) 10.26 1.05 - Contribution from Far
Slide 32: Norway: Operational EBIT/kg per region YTD
Norway: Operational EBIT/kg per region YTD 7 Including contribution from Sales and Marketing
Slide 33: Key financials
Key financials 8 Marine Harvest Group - main figures NOK million Operational revenue 6 743 4 071 19 230 15 569 Operational EBITDA 1) 1 269 234 3 972 1 321 Operational EBIT 1) 1 034 64 3 210 643 EBIT 2 059 455 4 690 969 Net financial items - 385 58 -1 205 - 180 Profit or loss for the period 1 310 289
Slide 34: Q4 segment overview
Q4 segment overview 9 Marine Harvest Group - analytical figures NOK million Norway Scotland Canada Chile Ireland Faroes Other 1) MH Group OPERATIONAL EBIT MH FARMING 789 80 48 19 - 36 27 928 MH SALES AND MARKETING MH Markets 44 35 11 16 0 0 0 106 MH VAP Europe - 24 - 3 0 0 0 0 - 10 - 37 Morpol Proce
Slide 35: 2013 segment overview
2013 segment overview 10 Marine Harvest Group - analytical figures NOK million Norway Scotland Canada Chile Ireland Faroes Other 1) MH Group OPERATIONAL EBIT MH FARMING 2 245 494 288 - 78 - 30 81 3 001 MH SALES AND MARKETING MH Markets 187 105 48 13 1 3 - 10 347 MH VAP Europe - 37 - 4 0 0 - 1 0 - 16
Slide 36: Q4 segment overview MH Operating Units
Q4 segment overview 11 MH Operating Units Farming Farming Farming Farming Farming Farming Norway Scotland Canada Chile Ireland Faroes Markets VAP EU Morpol Other 1) Elim MH Group* Revenues and other income 2 561 674 260 484 98 88 4 518 1 359 1 357 114 - 4 769 6 743 Operating EBITDA 881 106 67 42 - 2
Slide 37: Development in harvest volumes
Development in harvest volumes 12 2007 2008 2009 2010 Total Total Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Norway 168.2 171.1 201.7 202.5 48.4 54.1 47.6 67.4 217.5 62.7 64.0 58.5 70.1 255.3 47.3 53.5 53.1 68.6 222.5 Chile (1) 90.6 75.4 36.2 10.6 2.7 1.2 11.0 11.0 26.0 9.7 9.
Slide 38: Morpol ASA – Historical data
Morpol ASA – Historical data 13 NOK million Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Total revenue 731 660 742 1,314 994 889 805 1,170 904 854 794 1,201 953 1,129 1,113 EBITDA before fair value adjustments 54 -3 17 122 77
Slide 39: 2014 Net capital expenditure guidance
2014 Net capital expenditure guidance 14 Maintenance level
Slide 40: 2014 Net working capital guidance
2014 Net working capital guidance 15
Slide 41: Guidance on financial commitments and cost of debt
Guidance on financial commitments and cost of debt 16 Please note the approximations are subject to changes Interest expenses Contractual repayments
Slide 42: Dividend policy
Dividend policy 17 The dividend level shall reflect the present and future cash generation potential of the Company Marine Harvest will target a net interest-bearing debt/equity ratio of less than 0.5x When target level is met, at least 75% of the annual free cash flow after operational and financia
Slide 43: Nova Sea
Nova Sea 18 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 2013 dividends of NOK 40m (Q2) Marine Harvest’s share NOK ~20m Proportion of income afte
Slide 44: Overview of financing
Overview of financing 19 EUR 775m Facility Agreement Maturity – Q1 2015 Lenders: DNB, Nordea, Rabobank and ABN Amro Semi annual repayments of EUR 16m (current availability EUR 695m) Covenants: Declining NIBD/EBITDA(1) ratio 3.25x up to Q4 2012 3.25 up to Q2 2014 3.00 thereafter 40% equity ratio Conv
Slide 45: Debt distribution and interest rate hedging
Debt distribution and interest rate hedging 20 POLICY: External interest bearing debt is distributed as follows: EUR 61%, USD 13%, GBP 4%, other currencies 22% Marine Harvest ASA shall hedge 100% of the Group’s long-term interest-bearing debt by currency with fixed interest or interest rate derivati
Slide 46: Hedging and long term currency exposure
Hedging and long term currency exposure 21 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 one year. The annual hedging shall be evenly distributed across the months of the year. USD/CAD Marine Harvest shall not hed
Slide 47: Long term currency hedging
Long term currency hedging 22 CURRENT PORTFOLIO 31/12/2013 STRATEGIC CURRENCY HEDGING MEUR Rate MUSD Rate MUSD Rate 2014 200 8.19 P/L effect of contracts in Q3 4 (MNOK) MNOK Market value 30/09/2013 6 Change (1) -56 Market value 31/12/2013 -50 Note: (1) Quarterly changes in market value booked agains
Slide 48: Impact of currency/interest rate movements
Impact of currency/interest rate movements 23 Impact on Profit and Loss (versus Q4 2012) Currency impact on net financial items Negative impact of NOK 40m (Positive NOK 123m) Impact from currency on Financial Position (versus 30/9/13) Increase in interest-bearing debt due to currency NOK 187m Averag
Slide 49: Fair value adjustment of biomass
Fair value adjustment of biomass 24 Under IFRS (IAS 41) the company is required to value biological assets at a fair market value. During the second half of 2011, the largest salmon farming companies in Norway, with support from audit firms, formed an industry working group where the objective was t
Slide 50: Tax losses carried forward (YE 2013)
Tax losses carried forward (YE 2013) 25 Most of the deferred tax assets have 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 tax asset on NOL’s gives rise to a tax expense in the acc
Slide 51: The Board's current authorisations
The Board’s current authorisations 26 The Board was given the following proxies at the AGM General share capital increase (up to 10% of share capital) Proxy to set aside shareholders pre-emption right to subscribe Targeted authority to increase share capital Issuance of up to 82m shares in one or mo
Slide 52: Sensitivities
Sensitivities 27 ESTIMATED SENSITIVITIES ON ANNUAL RESULTS OP. EBIT EFFECT CASH FLOW EFFECT DRIVER NOK million Change in global average salmon price of NOK 1 (1) 405 370 (2) Annual harvest volume Change in total harvest volume of 10,000 tonnes (3) 60 55 (2) Marginal volume Change in global feed pric