Mowi Asa · OSL:MOWI
Mowi Asa — Marine Harvest — Q4 2015 Earnings Presentation
47 slides from Mowi Asa's earnings presentation, Feb 17, 2016
Slide 1: Marine Harvest Q4 2015 Presentation
Marine Harvest Q4 2015 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, the anticipated
Slide 3: Highlights
Highlights 3 Operational EBIT of NOK 837m - Good contribution from MH Farming Norway - All-time high results in MH Feed - Consumer Products negatively impacted by operational start-up issues in Rosyth Strong demand in Europe and Asia Improving market conditions in Americas Successful issuanc
Slide 4: Key financials
Key financials 4Notes in appendix Marine Harvest Group - main figures Unaudited NOK million Operational revenue and other income 8 060 6 863 27 959 25 496 Operational EBIT 1) 837 1 032 3 107 4 254 Cash flow from operations 233 534 2 090 3 944 Net interest-bearing debt (NIBD) 9 592 9 268 9 592 9 268
Slide 5: Salmon prices
Salmon prices 5 Prices in Europe at good levels in the quarter and strong in December and into 2016 Weak prices in Americas, however, increasing in December and into 2016 0 1 2 3 4 5 6 7 0 10 20 30 40 50 60 70 2012 2013 2014 2015 2016 U S D p e r l b s ( M i a m i a n d S e a t t l e ) N O K p e
Slide 6: Price achievement by origin
Price achievement by origin 6Note: Q4 2015 average price achievement is measured versus reference prices in all markets (Norway/Faroes (NASDAQ), Scotland (NASDAQ+ NOK 3.47), Canada (UB Seattle), Chile (UB Miami) Contract share 50% 57% 0% 10% Superior share 95% 93% 90% 90% 101% 116% 98% 113% 100% 110
Slide 7: Operational EBIT comparison
Operational EBIT comparison 7 837 13 ‐ 29 ‐ 200 ‐ 15 36 1 032 0 200 400 600 800 1 000 1 200 Op EBIT Q4 2014 MH Feed Farming Markets Consumer Products Other Op EBIT Q4 2015 N O K m i l l i o n
Slide 8: Norway
Norway 8 Good results in the quarter driven by improved prices - Contract share as high as 73% in December Concerning cost development - Increased costs in the quarter driven by sea lice and feed (currency and eFCR) - Expect high costs also in the first half of 2016 Increased MAB by 5% for eac
Slide 9: Norway: Sales contract portfolio
Norway: Sales contract portfolio 9Note: 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. High contract share of 79
Slide 10: Norway: Operational EBIT/kg per region
Norway: Operational EBIT/kg per region 10Including contribution from Sales and Marketing 8.9 14.0 10.5 15.0 12.6 8.9 16.2 4.5 14.8 12.1 0 2 4 6 8 10 12 14 16 18 South West Mid North Total N O K p e r k g Q4 2014 Q4 2015
Slide 11: Norway: The Egg – a new enclosed technology
Norway: The Egg – a new enclosed technology 11 Application for 14 development licenses New enclosed technology (2016-2018 testing and verification) Many advantages to conventional farmed salmon production
Slide 12: Scotland
Scotland 12 Losses in Rosyth are mainly recognised in the Scottish business unit (NOK -87m) Lower prices measured in GBP driven by increased competition from Norwegian salmon Higher volumes have reduced production cost (scale effect) Challenging biological conditions (sea lice and algal bloo
Slide 13: Canada
Canada 13 Overall good performance in a challenging market Low prices in market currency (USD) due to high supply growth from Americas Higher costs driven by biology and feed (CAD/NOK) SALMON OF CANADIAN ORIGIN NOK million Q4 2015 Q4 2014 Operational EBIT 31 25 Harvest volume (GWT) 9 383 6 819
Slide 14: Chile
14 Very low prices in the quarter Challenging biology and regulatory framework - Full cost in box USD 5.1 per kg (GWE) Production costs expected to increase further in the first half of 2016 Decline in smolt stockings of 17% in the last four months of 2015 supportive for prices going forward
Slide 15: Ireland and Faroes
Ireland and Faroes 15 Good contribution from Faroes in the quarter Production costs in both regions expected to increase further in the first half of 2016 SALMON OF IRISH ORIGIN NOK million Q4 2015 Q4 2014 Operational EBIT 1 9 Harvest volume (GWT) 2 761 2 069 Operational EBIT per kg (NOK) 0.22 4
Slide 16: Consumer Products
Consumer Products 16Please note that Consumer Products is the combined operations of the former VAP Europe and Morpol Good seasonal demand with strong growth in Southern Europe, Germany and UK Positive contributions from the Chilled segment continues Start-up costs in Rosyth of NOK -95m in the
Slide 17: Feed
Feed 17 Record quarterly volume and operational EBIT Production capacity increased to approximately 310,000 tonnes Approved investment in a new feed plant in Scotland FEED NOK million Q4 2015 Q4 2014 Operating revenues 946 652 Operational EBIT 74 61 Operational EBIT % 7.8% 9.3% Feed sold volum
Slide 18: Fourth Quarter 2015 Financials, Harvest Volumes and Markets
Fourth Quarter 2015 Financials, Harvest Volumes and Markets 18
Slide 19: Profit and Loss
Profit and Loss 19Notes in appendix Marine Harvest Group NOK million Operational revenue and other income 8 060 17% 6 863 27 959 10% 25 496 Operational EBIT 1) 837 1 032 3 107 4 254 Change in unrealized internal profit feed - 13 - 56 - 19 - 92 Unrealized salmon derivatives - 58 36 - 112 54 Net fair
Slide 20: Financial Position
Financial Position 20 Marine Harvest Group NOK million Non-current assets 20 483 18 662 Current assets 19 759 18 294 Assets held for sale 17 19 Total assets 40 260 36 974 Equity 18 187 14 718 Non-current liabilities 16 164 16 572 Current liabilities 5 909 5 684 Total equity and liabilities 40 260 36
Slide 21: Cash Flow and Net Interest Bearing Debt
Cash Flow and Net Interest Bearing Debt 21 Marine Harvest Group NOK million NIBD beginning of period -8 742 -7 230 -9 268 -7 791 . Operational EBITDA 1 162 1 300 4 359 5 221 Change in working capital -722 -623 -1 310 -721 Taxes paid -106 -87 -611 -295 Other adjustments -102 -56 -348 -261 Cash flow f
Slide 22: 2016 Cash Flow Guidance
2016 Cash Flow Guidance 22 2016 cash flow estimates - Working capital buildup NOK 300m (EUR 32m) • Support further organic growth - Capital expenditures NOK 1,800m (EUR 189m) • Freshwater expansion projects NOK 450m (EUR 47m) - Interest expenses NOK 270m (EUR 28m) - Tax payables NOK 700m (EUR 74m)
Slide 23: Overview of financing
Overview of financing 23 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 16.0887 EUR 375m is
Slide 24: Supply development: Estimated volumes compared to Q4 2014
Estimated volumes Compared to Q4 2014 Est. volumes Suppliers Q4 2015 Q4 2014 Volume % Q3 2015 Norway 309 900 300 700 9 200 3.1% 273 870 Scotland 43 600 36 400 7 200 19.8% 44 370 Faroe Islands 22 500 22 900 -400 -1.7% 16 650 Ireland 4 100 3 300 800 24.2% 4 140 Total Europe 380 100 363 300 16 800 4.6%
Slide 25: Development in reference prices
Development in reference prices 25Source: Marine Harvest and Kontali 0 1 2 3 4 5 6 7 0 10 20 30 40 50 60 70 2012 2013 2014 2015 2016 U S D p e r l b s ( M i a m i a n d S e a t t l e ) N O K p e r k g ( O s l o ) Weekly reference prices Reference price Norway NOK (NASDAQ average superior Oslo, GWE/k
Slide 26: Estimated volumes by market compared to Q4 2014
Estimated volumes Compared to Q4 2014 Est. volumes 12 month comparison Markets Q4 2015 Q4 2014 Volume % Q3 2015 LTM PTM % EU 276 800 259 900 16 900 6.5% 249 300 983 900 916 200 7.4% Russia 24 900 37 300 -12 400 -33.2% 28 530 96 000 130 900 -26.7% Other Europe 22 500 23 800 -1 300 -5.5% 20 700 82 300
Slide 27: Industry supply outlook: Guidance of declining growth of -6% to -2% for 2016
Industry supply outlook: Guidance of declining growth of -6% to -2% for 2016 27Actual 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. 2013 2014 2015 2016 GWE tonnes (thou
Slide 28: MHG 2016 volume guidance
MHG 2016 volume guidance 28Actual 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. 2016 reduced guidance from 440,000 tons GWE to 436,000 tons GWE - Chile decreased by 4
Slide 29: Outlook
Outlook 29 Market balance expected to be tight in 2016 - Future prices (NASDAQ) for 2016 have increased to NOK 50 per kg (EUR 5.1 per kg) Strong consumer demand in Europe and Asia Challenging market conditions in the Americas, however, a decline in Chilean smolt stocking is expected to improve
Slide 30: Appendix
Appendix 30
Slide 31: Dividend policy
Dividend policy 31 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 32: Contract coverage and sales contract policy
Contract coverage and sales contract policy 32 Q1 2016 contract shares (% of guided volume): - Norway 56% - Scotland 50% - Canada 0% - Chile 12% 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 33: Quarterly segment overview
Quarterly segment overview 33 NOK million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 602 19 26 - 186 - 2 39 497 SALES AND MARKETING Markets 84 30 5 5 0 8 7 139 Consumer Products 123 - 78 0 0 2 0 41 89 SUBTOTAL 809 - 30 31 - 181 1 47 48 725 Feed 74 74 Other en
Slide 34: YTD segment overview
YTD segment overview 34 NOK million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 2 389 115 90 - 571 77 36 2 136 SALES AND MARKETING Markets 300 117 31 104 0 6 28 587 Consumer Products 179 - 74 0 0 4 0 66 176 SUBTOTAL 2 868 159 120 - 466 81 42 95 2 899 Feed 192
Slide 35: Quarterly segment overview MH Operating Units
Quarterly segment overview 35 MH Operating Units NOK million Norway Scotland Canada Chile Ireland Faroes Markets Consumer Products MH Feed Other Elim Group* Revenues and other income 2 815 679 384 488 188 140 5 628 3 408 946 141 - 6 758 8 060 Operating EBITDA 713 62 50 - 145 6 43 148 143 96 46 0 1 1
Slide 36: Development in harvest volumes
Development in harvest volumes 36 2012 Total Total Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1E Q2-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 54.0 211.0 265.0 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 62.5 14.0 38.
Slide 37: Net capital expenditure guidance
0 200 400 600 800 1000 1200 1400 1600 1800 2000 2008 2009 2010 2011 2012 2013 2014 2015 2016E N O K m i l l i o n CAPITAL EXPENDITURE Net capital expenditure guidance 37 Maintenance level
Slide 38: Net working capital guidance
Net working capital guidance 38 -1 000 -500 0 500 1 000 1 500 2 000 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 ( N O K m i l l i o n )
Slide 39: Guidance on financial commitments and cost of debt
0 100 200 300 400 500 600 700 800 900 2011 2012 2013 2014 2015 2016E N O K m i l l i o n Guidance on financial commitments and cost of debt Please note the approximations are subject to changes Interest expenses Contractual repayments 39
Slide 40: Nova Sea
Nova Sea 40 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 2014 dividends of NOK 150m (paid in Q2- 15) - Marine Harvest’s share NOK ~69m
Slide 41: Debt distribution and interest rate hedging
Debt distribution and interest rate hedging 41 POLICY: External interest bearing debt is distributed as follows: EUR 72%, USD 13%, GBP 4%, other currencies 11%. 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 42: Hedging and long term currency exposure
Hedging and long term currency exposure 42 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 43: Strategic currency hedging
Strategic currency hedging 43 STRATEGIC CURRENCY HEDGING MEUR Rate MUSD Rate 2016 176 9.13 29 1.32 2017 175 9.37 17 1.32 2018 15 9.79 P/L effect of contracts maturing in Q4 -42 (MNOK) MNOK Market value 30/09/2015 -188 Change (1) 12 Market value 31/12/2015 -176 DESIGNATED MARKET CURRENCIES Norway Chi
Slide 44: Fair value adjustment of biomass
Fair value adjustment of biomass 44 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 w
Slide 45: Tax losses carried forward (YE 2014)
Tax losses carried forward (YE 2014) 45 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 t
Slide 46: The Board's current authorisations
The Board’s current authorisations 46 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 - Purchase of own shares (up to 10% of share capital) • Maximum price: NOK 140 p
Slide 47: Sensitivities
Sensitivities 47 ESTIMATED SENSITIVITIES ON ANNUAL RESULTS OP. EBIT EFFECT CASH FLOW EFFECT DRIVER NOK million Change in global average salmon price of NOK 1 (1) (2) 436 400 Annual harvest volume Change in total harvest volume of 10,000 tonnes (2) (3) 100 92 Marginal volume Change in global feed pri