Mowi Asa · OSL:MOWI
Mowi Asa — Marine Harvest — Q3 2016 Earnings Presentation
43 slides from Mowi Asa's earnings presentation, Nov 2, 2016
Slide 1: Marine Harvest Q3 2016 Presentation
Marine Harvest Q3 2016 Presentation 2 November 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 - All-time high operational EBIT of EUR 180 million - Seasonally record high salmon prices on strong demand and decline in supply - However, severe biological issues in some areas - Positive operational EBIT in Marine Harvest Chile - Record high production and operational results in Mar
Slide 4: Key financials
Key financials Notes in report4 Marine Harvest Group - main figures Unaudited EUR million Operational revenue and other income 850.0 13% 751.8 2 491.7 11% 2 254.4 3 121.1 Operational EBIT 1) 179.9 131% 77.9 440.8 71% 257.1 346.8 Cash flow from operations 166.6 64.0 530.0 210.4 233.3 Net interest-bea
Slide 5: Salmon prices – weekly reference prices
Salmon prices – weekly reference prices Prices up to week 42 in 20165 - Seasonally record high prices in Europe and Asia - Prices in Americas continue to improve
Slide 6: Price achievement, contract & superior share
Price achievement, contract & superior share 6 Contract share 40% 70% 0% 18% Superior share 91% 94% 88% 95% 104% 110% 100% 114% 91% 96% 99% 104% 0% 20% 40% 60% 80% 100% 120% 140% Norwegian Scottish Canadian Chilean Q3 2015 Q3 2016
Slide 7: Operational EBIT comparison
Operational EBIT comparison 7 179.9 4.2 105.8 1.2 -2.4 -6.8 77.9 0 20 40 60 80 100 120 140 160 180 200 Op EBIT Q3 2015 Feed Farming Markets Consumer Products Other Op EBIT Q3 2016 E U R m i l l i o n
Slide 8: Norway
Norway 8 - Record quarterly results on seasonally all-time high prices - Contract share of 40% negatively impacted price achievement - Biological challenges continue and reduced biomass production - Early harvesting at lower average weights - High mortality due to frequent lice treatments - Reduced
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 - ISA related costs on one site in Region North. Will impact operational results negatively in Q4 2016 (approx EUR 4 million) 1.02 1.34 1.16 1.33 1.25 2.01 2.34 1.67 1.86 1.98 0.0 0.5 1.0 1.5 2.0 2.5 South
Slide 11: Scotland
Scotland 11 - Good spot price development - Harvest volumes reduced due to biological challenges - Contract share high - High health and feed costs - Farming turnaround process on track but requires time to see improvements Operational EBIT Salmon of Scottish Origin Q3 2016 vs Q3 2015 0 5 10 15 20 2
Slide 12: Canada
Canada 12 - Very good operations and financial results - Favorable price developments - Good harvest volumes - Improved growth and harvesting more larger sized fish - Positive cost development Operational EBIT Salmon of Canadian Origin Q3 2016 vs Q3 2015 0 5 10 15 20 25 30 Op EBIT Q3 2015 Price Volu
Slide 13: Chile
Chile 13 - Record high prices on reduced supply - Significant volume reduction due to the algal bloom - Full cost in box USD 5.32 per kg (GWE) in the quarter - New regulations likely to increase number of sites and costs going forward Operational EBIT Salmon of Chilean Origin Q3 2016 vs Q3 2015 -16
Slide 14: Ireland and Faroes
Ireland and Faroes 14 - Good contribution from Marine Harvest Ireland on higher prices and stable volumes - Very good contribution from Marine Harvest Faroes in the quarter SALMON OF IRISH ORIGIN EUR million Q3 2016 Q3 2015 Operational EBIT 4.6 3.1 Harvest volume (GWE) 2 901 3 411 Operational EBIT p
Slide 15: Consumer Products
Consumer Products 15 - Improving operations in a challenging raw material price environment - Continued good growth in the German, BeNeLux and Southern European markets - Break-even results at Rosyth as expected - Continued new product development and innovative packaging to support growth going for
Slide 16: Feed
Feed 16 - Record high production and results in the quarter - 87% feed self-sufficiency rate in Norway - Planning application submitted for new feed plant in Scotland FEED EUR million Q3 2016 Q3 2015 Operating revenues 140.4 114.2 Operational EBIT 12.4 8.2 Operational EBIT % 8.8% 7.2% Feed sold volu
Slide 17: Third Quarter 2016 Financials, Markets and Harvest Volumes
Third Quarter 2016 Financials, Markets and Harvest Volumes 17
Slide 18: Profit and Loss
Profit and Loss Notes in report18 Marine Harvest Group EUR million Operational revenue and other income 850.0 13% 751.8 2 491.7 11% 2 254.4 3 121.1 Operational EBIT 1) 179.9 131% 77.9 440.8 71% 257.1 346.8 Change in unrealized internal margin -18.2 -2.9 -16.9 -0.8 -2.2 Gain/loss from derivatives -0.
Slide 19: Financial position
Financial position 19 Marine Harvest Group EUR million Non-current assets 2 201.8 2 081.3 2 134.9 Current assets 2 241.5 1 873.9 2 061.2 Total assets 4 443.3 3 955.2 4 196.1 Equity 1 968.4 1 880.7 1 895.6 Non-current liabilities 1 765.5 1 448.4 1 684.7 Current liabilities 709.4 626.2 615.9 Total equ
Slide 20: Cash Flow and Net Interest Bearing Debt
Cash Flow and Net Interest Bearing Debt 20 Marine Harvest Group EUR million NIBD beginning of period - 832.4 - 875.5 -999.7 -1032.6 -1 032.6 Operational EBITDA 214.6 113.0 546.7 362.1 486.6 Change in working capital -19.7 -34.2 90.3 -66.6 -146.2 Taxes paid -7.8 -2.1 -82.2 -57.3 -68.3 Other adjustmen
Slide 21: 2016 Cash Flow Guidance
2016 Cash Flow Guidance 21 - Working capital buildup EUR ~30m - Support further organic growth - Capital expenditures EUR ~190m - Freshwater expansion projects EUR ~50m - Interest expenses EUR ~25m - Tax payables EUR ~85m - Long term NIBD target of EUR 1,050m - Quarterly dividend in Q4 2016 of NOK 2
Slide 22: Overview financing
Overview financing 22 - 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 15.3172 - EUR 375m issue
Slide 23: Supply development – Estimated volumes
Estimated volumes Compared to Q3 2015 Est. volumes Suppliers Q3 2016 Q3 2015 Volume % Q2 2016 Norway 272 000 273 900 -1 900 -0.7% 248 900 Scotland 36 600 43 700 -7 100 -16.2% 35 100 Faroe Islands 14 600 16 700 -2 100 -12.6% 17 800 Ireland 3 900 4 100 -200 -4.9% 2 900 Total Europe 327 100 338 400 -11
Slide 24: Development in reference prices
Development in reference prices Prices up to week 42 in 201624 Notes: (1) NASDAQ average superior GWE/kg (gutted weight equivalent) (2) Urner Barry average D trim 3-4 lbs FOB Miami (3) Reference price converted back-to-plant equivalent in GWE/kg (4) Urner Barry average GWE 10-12 lbs FOB Seattle Refe
Slide 25: Estimated volumes by market
Estimated volumes Compared to Q3 2015 Est. volumes 12 month comparison Markets Q3 2016 Q3 2015 Volume % Q2 2016 LTM PTM % EU 246 800 248 600 -1 800 -0.7% 225 000 969 700 964 600 0.5% Russia 15 700 29 300 -13 600 -46.4% 13 100 74 300 111 000 -33.1% Other Europe 17 100 20 200 -3 100 -15.3% 16 300 73 2
Slide 26: Industry supply outlook
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. 26 - 2016 guidance in line with previous guidance - 2017 guidance: Low growth. Global growth between 0-6% - Europe:
Slide 27: MHG 2016 and 2017 volume guidance
MHG 2016 and 2017 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. 27 - 2016 reduced guidance from 400,000 tonnes GWE to 381,000 tonnes GWE - Norway
Slide 28: Outlook
Outlook 28 - Market balance expected to remain tight in 2017 (low supply growth) - Future prices (NASDAQ) next twelve months have increased to EUR 7.4 per kg (NOK 68 per kg) - Biological challenges in Norway and Scotland mainly due to sea lice - Strong consumer demand in Europe and Asia. US continue
Slide 29: Appendix
B marineharvest Appendix
Slide 30: Dividend policy
Dividend policy 30 - 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 31: Contract coverage and sales contract policy
Contract coverage and sales contract policy 31 - Q4 2016 contract shares (% of guided volume): - Norway 54% - Scotland 55% - Canada 0% - Chile 24% - 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 32: Quarterly segment overview
Quarterly segment overview 32 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 103.8 3.1 25.0 6.9 4.6 8.6 151.9 SALES AND MARKETING Markets 10.2 2.8 2.1 3.0 0.0 0.4 0.0 18.5 Consumer Products 1.9 0.0 0.0 0.0 0.0 0.0 0.3 2.2 SUBTOTAL 115.9 5.9 27.0 9.9 4
Slide 33: YTD segment overview
YTD segment overview 33 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 291.2 20.4 71.1 -25.8 3.3 18.0 378.2 SALES AND MARKETING Markets 28.4 9.5 6.2 10.2 0.1 0.6 0.0 54.9 Consumer Products 6.2 -10.4 0.0 0.0 -0.1 0.0 1.1 -3.2 SUBTOTAL 325.8 19.4 77.2 -
Slide 34: Quarterly segment overview MH Operating Units
Quarterly segment overview 34 MH Operating Units EUR million Norway Scotland Canada Chile Ireland Faroes Markets Consumer Products MH Feed Other Elim Group* Revenues and other income 359.0 57.0 66.6 43.1 23.0 16.4 686.4 321.2 140.4 3.1 -866.3 850.0 Operating EBITDA 116.7 7.1 28.1 11.7 5.4 9.1 19.6 7
Slide 35: Development in harvest volumes
Development in harvest volumes 35 2012 Total Total Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 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 64.6 62.0 234.0 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 62
Slide 36: Net capital expenditure guidance
0 50 100 150 200 250 300 2008 2009 2010 2011 2012 2013 2014 2015 2016E E U R m i l l i o n Net capital expenditure guidance 36 Maintenance level
Slide 37: Net working capital guidance
Net working capital guidance 37 -100 -50 0 50 100 150 200 250 2008 2009 2010 2011 2012 2013 2014 2015 2016E W o r k i n g c a p i t a l t i e - u p ( E U R m i l l i o n )
Slide 38: Guidance on financial commitments and cost of debt
0 20 40 60 80 100 120 2011 2012 2013 2014 2015 2016E E U R m i l l i o n Guidance on financial commitments and cost of debt 38 Interest expenses Contractual repayments
Slide 39: Nova Sea
Nova Sea 39 - 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 40: Debt distribution and interest rate hedging
Debt distribution and interest rate hedging 40 - External interest bearing debt is distributed as follows: EUR 70%, USD 13%, GBP 4%, 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 41: Hedging and long term currency exposure
Hedging and long term currency exposure 41 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 42: Strategic currency hedging
Strategic currency hedging 42 STRATEGIC CURRENCY HEDGING MEUR Rate MUSD Rate 2016 49.8 8.91 7.2 1.32 2017 199.2 9.40 28.8 1.32 2018 149.4 9.62 12.0 1.32 P/L effect of contracts maturing in Q3 -1.2 (MEUR) MEUR Market value 30/06/2016 -3.5 Change (1) 16.6 Market value 30/09/2016 13.1 DESIGNATED MARKET
Slide 43: Tax losses carried forward (YE 2015)
Tax losses carried forward (YE 2015) Details are available in the 2015 Annual Report43 - 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