Bakkafrost P/f · OSL:BAKKA

Bakkafrost P/f — Bakkafrost — Q4 2015 Earnings Presentation

42 slides from Bakkafrost P/f's earnings presentation, Feb 24, 2016

  1. Slide 1: Q4 2015 Bakkafrost Group

    Q4 2015 BAKKAFROST GROUP Oslo 24 February 2016

  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 Q4 2015

     SUMMARY OF Q4 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  4. Slide 4: Highlights

    HIGHLIGHTS Higher volumes from Farming  Harvested 13,675 tgw in Q4 2015 (12,651 tgw in Q4 2014)  Feed sales of 19,797 tonnes in Q4 2015* (23,133 tonnes in Q4 2014*)  Revenues of DKK 760 million in Q4 2015 (DKK 757 million in Q4 2014)  Operational EBIT of DKK 257 million in Q4 2015 (DKK 227 milli

  5. Slide 5: Summary of the Quarter

    SUMMARY OF THE QUARTER Positive results in all segments Q4 Q4  Farming/VAP division increased margin 2015 2014 2015 2014 (DKK million) from 19.48 NOK/kg in Q4 2014 to 21.83 Operating revenues 760 757 2,850 2,683 NOK/kg in Q4 2015 Operational EBITDA 285 255 1,109 931  VAP segment delivered a margin

  6. Slide 6: Markets and Sales

     SUMMARY OF Q4 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  7. Slide 7: Global Markets

    GLOBAL MARKETS Spot prices (NASDAQ) on superior 4-5 [NOK/kg HOG]  The NASDAQ salmon price for size 4-5:  Increased y/y Q4 2015 / Q4 2014 by ~19% - by 7.32 NOK/kg from 39.38 to 46.70  Increased q/q Q4 2015 / Q3 2015 by ~11% - by 4.80 NOK/kg from 41.89 to 46.70  5% global supply growth in Q4 2015,

  8. Slide 8: Markets & Sales

    MARKETS & SALES Total sales of salmon Q4 Q4 Good market diversification by markets 2015 2014 2015 2014 EU 39% 40% 36% 45%  Flat split between USA, Asia and Eastern Europe USA 20% 13% 19% 19%  Total sales to EU was 39% in Q4 2015, compared Asia 18% 10% 15% 16% with 40% in Q4 2014 – and 36% in 2015,

  9. Slide 9: 3% Global Volume Reduction Expected in 2016

    3% GLOBAL VOLUME REDUCTION EXPECTED IN 2016 Salmon suppliers, sold quantity (head on gutted - HOG) Increased supply in Q4-2015 of Atlantic Salmon (head on gutted - HOG) 4.8% supply increase in Q4-2015 Estimated volumes Q4 comparison Estimated volumes YTD comparison Suppliers Q4 2015E Q4 2014 Volume

  10. Slide 10: Market Development

    MARKET DEVELOPMENT 4.6% increased sales in global markets Demand - split by markets, sold quantity (head on gutted - HOG)  Total quantity increased 25,300 tonnes in the quarter, compared with last year, corresponding to 4.6%  Strong demand in EU and US market  Combined volume growth in volume by

  11. Slide 11: Segment Information

     SUMMARY OF Q4 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX Fuglafjørður, Fishmeal, -oil and feed plant Havsbrún and A 57 Farming site

  12. Slide 12: Farming – Harvest Volume

    FARMING – HARVEST VOLUME Harvested volumes Harvest Volumes Q4 Q4  Harvested volumes increased by 8% in Q4 tonnes [HOG] 2015 2014 2015 2014 2015, compared with Q4 2014 West 8,768 5,023 22,946 18,342  The West region harvested 64% of the total quantity in the quarter, and the North region North 4,90

  13. Slide 13: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Q4 Q4 Improved margin (DKK million) 2015 2014 2015 2014  The operational EBIT increased 19% from Operating revenues 635 630 2,274 2,099 DKK 181 million in Q4 2014 to DKK 215 million Operational EBIT 215 181 841 694 in Q4 2015 Operational EBIT margin 34% 29% 37% 33%

  14. Slide 14: Farming – Operational Performance

    FARMING – OPERATIONAL PERFORMANCE Margin - EBIT per kg total harvested quantity [NOK/kg] Operation 25.00  Farming EBIT of NOK 19.67 per kg in Q4 2015, compared to 16.53 in Q4 2014 20.00 19.67 19.63  Better performance, lower costs in the quarter 17.65 15.00 16.53  Farming North harvested early in

  15. Slide 15: Value Added Products (VAP)

    VALUE ADDED PRODUCTS (VAP) Q4 Q4 VAP revenues and margin (DKK million) 2015 2014 2015 2014  Revenues reduced by 26% to DKK 190 million in Q4 Operating revenues 190 259 737 913 2015 from DKK 259 million in Q4 2014 Operational EBIT 24 32 86 70  Higher inventory of goods for sale by end of Q4 2015 Op

  16. Slide 16: Fishmeal, Oil and Feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) Fishmeal, Oil and Feed Stable margin (DKK million) Q4 2015 Q4 2014 2015 2014  EBITDA DKK 45 million in Q4 2015, Operating revenues 239 225 1,048 971 compared with DKK 41 million in Q4 2014 EBITDA 45 41 202 182  EBITDA margin of 18.7% in Q4 2015, compared with 18.1% in

  17. Slide 17: Market Conditions Feed

    MARKET CONDITIONS FEED Volumes of raw material purchase and feed sale [tonnes] Tripled raw material intake in Q4 2015 35,000 120,000  In Q4 2015, Havsbrún sourced 63,582 tonnes of raw Raw material (tonnes) 30,000 100,000 Feed sale (tonnes) material, compared with 21,918 tonnes in Q4 2014 25,000 80,

  18. Slide 18: Group Financials

     SUMMARY OF Q4 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  19. Slide 19: Group Profit and Loss

    GROUP PROFIT AND LOSS  Revenues nearly unchanged at DKK 760 Q4 Q4 million. Harvested volumes are higher, but (DKK million) 2015 2014 2015 2014 lower VAP volumes Operating revenues 760 757 2,850 2,683  Operational EBIT increased from DKK 227 Operational EBITDA* 285 255 1,109 931 million to DKK 257

  20. Slide 20: Balance Sheet

    BALANCE SHEET  Investments in PPE of DKK ~ 224 million in Q4 (DKK million) 2015 2014 2015 Intangible assets 295 295  Financial assets increased due to positive Property, plant and equipment 1,531 1,041 operation in associated companies Financial assets 131 126 Long-term receivables 0 1  The carry

  21. Slide 21: Cash Flow

    CASH FLOW  Cash flow from operations was negatively affected Q4 Q4 by changes in inventory and paid taxes in Q4 2015 (DKK million) 2015 2014 2015 2014 Cash flow from operations -6 173 768 870 Cash flow from investments -219 -79 -602 -232  Cash flow from investments represents Cash flow from financ

  22. Slide 22: Refinancing of Bank Loan

    REFINANCING OF BANK LOAN New financing in place 2016 2017 2018 2019 2020  DKK 850 multicurrency revolving credit facility DKK 850 million RCF  DKK 750 million accordion option DKK 750 million Accordion Option  Five years period  Flexibility NOK 500 million Bond  Reflects good market condition C

  23. Slide 23: Financing

    FINANCING Financing of the Group NIBD NIBD and andfunding available avaible funding  Total funding to ~ DKK 1,281 million 2,000  Bonds NOK 500 million due Feb 2018 (swapped into 1,800 DKK) 1,600 1,400  Revolving credit facility of DKK 850 million due in 2020 1,200 1,000  NIBD end Q4 2015: DKK 39

  24. Slide 24: Tax Changes on Farming in the Faroes

    TAX CHANGES ON FARMING IN THE FAROES Changes in license tax on farming in the Faroes Changes in licence tax 2016 2014 and 2015  Approved by the parliament in December 2015 Taxable income 0% 4.5%  Effective from 1 January 2016 Farming revenue 4.5% 0.5%  Effect on Q4 2015  Temporary differences in

  25. Slide 25: Outlook

     SUMMARY OF Q4 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  26. Slide 26: Outlook

    OUTLOOK Market Fishmeal, oil and feed  Tight market balance in 2016, global supply reduction of 3%  Forecast for feed sales 80,000 tonnes in 2016  Forward prices for 2016 have increased to NOK 50 per kg Business development Farming  Optimizing of the Value Chain according to the announced invest

  27. Slide 27: Appendix

     SUMMARY OF Q4 2015  MARKETS AND SALES  SEGMENT INFORMATION  GROUP FINANCIALS  OUTLOOK  APPENDIX

  28. Slide 28: 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 / Q4 PRESENTATION 201

  29. Slide 29: Investments – Programme 2016 - 2017

    INVESTMENTS – PROGRAMME 2016 - 2017 Status on main investments  Harvest/VAP factory  New 8,000m3 Hatchery at Viðareiði  Live fish carrier Hans á Bakka  Installation of machinery in progress  Construction in progress  Operation started  Operation to start up in Q2 2016  To start operation in

  30. Slide 30: 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

  31. Slide 31: 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 Nov 2015 Jan 2016  Reduce risk in farming  Reduce total time of pr

  32. Slide 32: Bakkafrost - Preparing for the Future

    BAKKAFROST - PREPARING FOR THE FUTURE Financing of the investments 2016-2017  Use free cash flow from operations  Unused financing of approximately DKK 890 million  Partly new financing if advantageous  Flexibility to postpone investment in case of adverse events Unchanged dividend policy BAKKAF

  33. Slide 33: 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

  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  49,192 inhabitants (January 2016)  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 :

  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 – Q4 2015

    DEVELOPMENT PER QUARTER Q1 2012 – Q4 2015 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (mDKK) 2015 2015 2015 2015 2014 2014 2014 2014 2013 2013 2013 2013 2012 2012 2012 2012 Revenue 760 677 800 613 757 584 711 631 667 741 610 473 582 457 416 400 Op. EBIT 257 206 303 235 227 209 212 186 124 187 16

  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 *  Proposed dividend of DKK 8.25 (NOK 10.38) per share to be paid in Q2 2016 100% 99% 90% 80% Dividend policy 70% 60%  Competitive return through: 49%** 49% 46%*** 48% 50% 40%  Dividends 40%  Increase in the value of the equity 30% 19% 20%  Generally, the

  40. Slide 40: Monthly Exchange Rates

    MONTHLY EXCHANGE RATES USD/DKK NOK/DKK RUB/DKK • USD increased in value Q4 2015 • NOK has reduced value in 2015 against • RUB has lost value since April 2015, and is most currencies. This means Norwegian now at its lowest • More than 50% of the revenue of export has gained competitive advantage, Bak

  41. Slide 41: Largest Shareholders

    LARGEST SHAREHOLDERS 20 largest shareholders Share development No of shares Account name type Citizenship Traded daily 12 months development 4.594.437 9,4% Jacobsen Oddvør FRO NOK/share 4.491.217 9,2% Jacobsen Johan Regin FRO 3.510.329 7,2% NORDEA BANK DANMARK A/S NOM DNK 1.719.461 3,5% SKANDINAVISK

  42. Slide 42: Bakkafrost

    \i/ BAKKAFROST

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