Salmon Evolution Asa · OSL:SALME
Salmon Evolution Asa — Q3 2021 Earnings Presentation
36 slides from Salmon Evolution Asa's earnings presentation, Nov 16, 2021
Slide 1: Q3 2021 Presentation
Q3 2021 PRESENTATION 16 November 2021
Slide 2: Disclaimer
DISCLAIMER This presentation (the “Presentation”) has been prepared by Salmon Evolution ASA (the “Company” and together with is subsidia ries, the “Group”) except where context otherwise requires, solely for information purposes. This Presentation, and the information contained herein, does not cons
Slide 3: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations • Financials • Summary and outlook • Appendices 3 Q3 2021 Presentation
Slide 4: Salmon Evolution – Extending the Ocean Potential
SALMON EVOLUTION – EXTENDING THE OCEAN POTENTIAL A Norwegian land-based salmon farming company with a goal to become a global supplier of high-quality and sustainable salmon First production facility under construction in Norway – Joint v enture with Dongwon Industries for a 16,800 tonnes annual har
Slide 5: Q3 2021 Highlights
Q3 2021 HIGHLIGHTS Q3 2021 • Construction of Phase 1 at Indre Harøy progressing according to plan – on time on budget • Intensified focus on preparations for first smolt release at Indre Harøy in Q1 2022 – recruitment of operating personnel • Acquired renowned smolt company Kraft Laks AS securing in
Slide 6: Acquisition of Kraft Laks
ACQUISITION OF KRAFT LAKS Background Kraft Laks AS – Key financials • Kraft Laks has been a family ow ned smolt producer NOKm 2020 2019 2018 located in Dalsfjorden in Volda municipality Revenues 27.6 30.9 26.9 • Current production of around 1.8 million smolt p.a. but license to produce 5 million smo
Slide 7: Teaming up with market leader Cargill to unlock land-based growth potential
TEAMING UP WITH MARKET LEADER CARGILL TO UNLOCK LAND-BASED GROWTH POTENTIAL Comments Salmon growth curve at different TGC levels 6,000 • Entered into strategic feed partnership with market leader Cargill 5,000 • Salmon Evolution to become Cargill’s global flagship customer within land-based full gro
Slide 8: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations • Financials • Summary and outlook • Appendices 8 Q3 2021 Presentation
Slide 9: Conservative approach in a "disruptive industry"
CONSERVATIVE APPROACH IN A “DISRUPTIVE INDUSTRY” 1 Biology is the most important consideration → Shown through our choice of technology There is much to learn, even though we have decades of experience 2 → That’s why we start in Norway International expansion can be accelerated with strong local par
Slide 10: Optimized biology with HFS technology
OPTIMIZED BIOLOGY WITH HFS TECHNOLOGY HYBRID FLOWTHROUGH ADVANTAGES INCREASED COMPLEXITY ABOVE 65% RECIRCULATION • No biofilters – less complexity • Prov en technology used in smolt production for • Each tank functions as one decades independent biozone • Fresh seawater as • Maintenance flexibility,
Slide 11: Our technology extends the ocean potential
OUR TECHNOLOGY EXTENDS THE OCEAN POTENTIAL NEW AREAS POSSIBLE FOR LOW RISK PRODUCTION THROUGH USE OF HFS Too cold Too cold Conventional production area Conventional production area Possible with HFS Possible Possible with HFS with HFS Too warm Too warm Too warm Possible with HFS Possible with HFS Co
Slide 12: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations – Norway • Financials • Summary and outlook • Appendices 12 Q3 2021 Presentation
Slide 13: Indre Harøy construction progress according to plan
INDRE HARØY CONSTRUCTION PROGRESS ACCORDING TO PLAN • Ten out of twelve fish tanks now assembled, remaining fish tanks expected to be completed in Q4 • Solid progress on construction of buildings and structures • Water intake station nearing completion; water pipes and pumps already installed and in
Slide 14: Seven out of twelve fish tanks assembled
• Seven out of twelve fish tanks assembled • Phase 1 at Indre Harøy will consist of 12 fish tanks each with a diameter of 28 meter and a height of 13 meter • Fully developed, Indre Harøy will consist of 48 fish tanks with a combined cubic capacity of 240,000m3 14 Q3 2021 Presentation
Slide 15: Massive transformation of construction site over the last 6 months
MASSIVE TRANSFORMATION OF CONSTRUCTION SITE OVER THE LAST 6 MONTHS Indre Harøy 16 April 2021 Indre Harøy 24 October 2021 15 Q3 2021 Presentation
Slide 16: Coating of walls in first tanks completed
• Coating of walls in first tanks completed • Installation of tank equipment in process – on track for first smolt release in March 2022 16 Q3 2021 Presentation
Slide 17: Both water inlet pipes have been successfully installed
• Both water inlet pipes have been successfully installed • Seawater intake at 25 and 95 meter water depth ensuring fresh and ideally tempered seawater free from sea lice • The seawater is pumped through particle and UV-filters for cleansing and then distributed to the twelve independently connected
Slide 18: Concrete work on water intake station completed
• Concrete work on water intake station completed – full intake station expected to be completed during December 2021 • Water pumps and filters already installed – in process of installing electrical equipment 18 Q3 2021 Presentation
Slide 19: March 2022 smolt already 200+ grams and thriving at Kraft Laks
MARCH 2022 SMOLT ALREADY 200+ GRAMS AND THRIVING AT KRAFT LAKS Phot o: COO Ingjarl Skarvøy (left) and Kraft Laks General Manager Knut Endre Heltne (right) 19 Q3 2021 Presentation
Slide 20: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations – Korea • Financials • Summary and outlook • Appendices 20 Q3 2021 Presentation
Slide 21: First mover advantage in South Korea – a fast growing and high paying market
FIRST MOVER ADVANTAGE IN SOUTH KOREA – A FAST GROWING AND HIGH PAYING MARKET FOR SALMON WITH SOLID PRICE POTENTIAL Positioned to achieve a premium on South Korean prices Salmon demand in South Korea is growing rapidly Supply of farmed At lantic salmon t o South Korea (HOG) NOK / kg (HOG) Norw ay 86%
Slide 22: K Smart Farming – South Korea expansion started
K SMART FARMING – SOUTH KOREA EXPANSION STARTED • K Smart JV with Dongwon Industries formalized end of March Jeongseon smolt site – as is and first tranche of equity inv estment (NOK 27.4m) completed in May • Ownership split 49/51% for SE and Dongwon, respectively • Target construction start for pha
Slide 23: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations • Financials • Summary and outlook • Appendices 23 Q3 2021 Presentation
Slide 24: Recent spike in European electricity prices would have had a limited effect on production cost
RECENT SPIKE IN EUROPEAN ELECTRICITY PRICES WOULD HAVE HAD A LIMITED EFFECT ON SALMON EVOLUTION’S PRODUCTION COST Comments 2021 YTD electricity prices (EUR/MWh) Commodity spot price (EUR/MWh) • Salmon Ev olution is strategically located in NO3 which 120 SYS NO3 NO1 together with NO4 to a large exten
Slide 25: Group Profit & Loss
GROUP PROFIT & LOSS Summary of result YTD YTD (figures in NOK 1000) Note Q3 2021 Q3 2020 2021 2020 2020 • Kraft Laks included from August 2021 – solid Total operating income 12 251 674 12 251 704 704 contribution on both revenues and Cost of goods sold -2 450 -2 450 operating profit Personnel expens
Slide 26: Solid contribution from Kraft Laks in Q3 2021
SOLID CONTRIBUTION FROM KRAFT LAKS IN Q3 2021 Indre Harøy, other & eliminations (NOKm) Kraft Laks – smolt (NOKm)* 5.0 14.0 0.3 0.3 0.0 12.0 -5.0 -11.9 -12.3 10.0 -10.0 8.0 -15.0 -31.9 -33.1 6.0 12.0 12.0 -20.0 -25.0 4.0 7.9 7.6 7.9 7.6 -30.0 2.0 -35.0 0.0 Q3 2021 YTD 2021 Q3 2021 YTD 2021 Revenues E
Slide 27: Capex Indre Harøy
CAPEX INDRE HARØY Accumulated CAPEX Q3 2021 • On time and on budget (NOK million) • All time high capex in Q3 on back of solid 745 Capitalized internal G&A progress on site Investments (Indre Harøya) Land • Total CAPEX of NOK 238.5 million in Q3 506 • NOK 229.7 million related to turnkey project wit
Slide 28: High activity level on site
HIGH ACTIVITY LEVEL ON SITE Capex plan for Phase 11 • Q4 2021 capex expected to be in line with Q3 (NOK million) – gradual reduction in capex from Q1 200 • Concrete works for buildings, structures and fish tanks nearing completion 135 131 • Installation of process equipment and above- ground piping
Slide 29: Fully funded for committed projects
FULLY FUNDED FOR COMMITTED PROJECTS Total funding Total uses 100 25 525 1,670 2,069 1,419 200 77 Raised equity Long term Overdraft Kraft Laks Total funding Indre Harøy K Smart Kraft Laks Extra buffer debt facility Sellers credit funding need incl. cash buffer and WC* 29 Q3 2021 Presentation *Net of
Slide 30: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations • Financials • Summary and outlook • Appendices 30 Q3 2021 Presentation
Slide 31: Roadmap to 70,000 tonnes HOG
ROADMAP TO 70,000 TONNES HOG 2020 2022 2024 2028 2030 NORWAY Phase 1 Phase 2 Phase 3 Norway expansion 7.9kt 7.9kt 15.7kt 20kt 50kt 31.5kt I ndre Harøy based on current licenses ASIA South Korea South Korea phase 1 phase 2 + 8.4kt 8.4kt 20kt+ Further expansion possible w ith local partners TOTAL 70kt
Slide 32: Summary & Outlook
SUMMARY & OUTLOOK • Construction of facility at I ndre Harøy progressing according to plan – on time on budget • K Smart project in Korea progressing as expected • Acquisition and integration of Kraft Laks successfully completed – strong smolt performance • First harv est end 2022 w ell aligned w it
Slide 33: Q&A
Q&A www.salmonevolution.no 33 Q3 2021 Presentation
Slide 34: Agenda
Agenda • Introduction and highlights • Extending the ocean potential™ • Operations • Financials • Summary and outlook • Appendices 34 Q3 2021 Presentation
Slide 35: Debt financing package at highly competitive terms
DEBT FINANCING PACKAGE AT HIGHLY COMPETITIVE TERMS Summary of bank debt term sheet • Nordea and Sparebanken Vest (the “Lenders”) Lenders • Innovation Norw ay • NOK 525 million senior secured credit facility w hich will be used to finance construction capex for Indre Harøy phase 1 (the “Construction
Slide 36: Cash Flow
CASH FLOW Cash flow summary (figures in NOK 1000) Q3 2021 Q3 2020 YTD 2021 YTD 2020 2020 Net cash flow from operating activities -22 438 22 067 -57 801 14 711 -10 021 Net cash flow from investments activities -324 823 -26 306 -544 403 -94 551 -165 961 Net cash flow from financing activities 56 161 5