PREPARING FOR THE FUTURE - IntraFish Events2018.intrafishevents.com/london/...Gunnar_Nielsen.pdf · of DKK 459 million in Q2 2017 (DKK 307 million in Q2 2016) Cash flow from operations.

PREPARING FOR THE FUTUREBAKKAFROST GROUPIntraFish Seafood Investor Forum - London 5 September 2017

Page 2BAKKAFROST / IntraFish Seafood Investor Forum 2017

DISCLAIMER

This presentation includes statements regarding futureresults, which are subject to risks and uncertainties.Consequently, actual results may differ significantly fromthe results indicated or implied in these statements.

No representation or warranty (expressed or implied) ismade as to, and no reliance should be placed on, thefairness, accuracy or completeness of the informationcontained herein. Accordingly, none of the Company,or any of its principal shareholders or subsidiaryundertakings or any of such person’s officers oremployees or advisors accept any liability whatsoeverarising directly or indirectly from the use of thisdocument.

SUMMARY OF Q2 2017 FIVE YEARS INVESTMENTS FOR THE

FUTURE

UPCOMING INVESTMENTS

~110

km

Brukernavn

Presentasjonsnotater

Good morning ladies and gentlemen and welcome to this presentation of the financial results for the first quarter of 2014 for Bakkafrost. My mane is Teitur Samuelsen and I am the CFO of Bakkafrost. Normally it would be our CEO Regin Jacobsen, that would be presenting here, but this morning he is in New York and will present at a investor conference there. The agenda for this morning’ s presentation is 1) a summary of the quarter, 2) a look at markets and sales in the quarter, 3) a look at the tree different segments within Bakkafrost, 4) Group financials, and finally, we shall have a look at the outlook for the company and industry in general.


HIGHLIGHTS

Harvested 18,402 tgw in Q2 2017 (13,004 tgw in Q2 2016)

Feed sales of 17,032 tonnes in Q2 2017* (16,295 tonnes in Q2 2016*)

Raw material purchase of 163,100 tonnes in Q2 2017 (83,970 tonnes in Q2 2016)

Revenues of DKK 1,206 million in Q2 2017 (DKK 790 million in Q2 2016)

Operational EBIT** of DKK 459 million in Q2 2017 (DKK 307 million in Q2 2016)

Cash flow from operations of DKK 498 million in Q2 2017 (DKK 248 million in Q2 2016)

Positive results in Farming and FOF segments, while loss in VAP segment

Dividend of DKK 8.70 per share (NOK 10.69) paid out in April 2017

*) Including internal sales of 16,012 tonnes in Q2 2017 (14,260 tonnes in Q2 2016)**) EBIT before fair value adjustments of biomass, onerous contracts provisions, income from associates, badwill and revenue tax

Operation

Revenues andMargins

Cash Flow

Segments

Dividend


Same trend as in Q1 2017, sales to Europe and Eastern Europe increased, as sales to USA and Asia decreased

EU market share increased from 39% in Q2 2016 to 46% in Q2 2017

USA decreased from 23% to 16%

Asia decreased from 21% to 16%

Eastern Europe increased from 17% to 22%

VAP/contract share was 29% in Q2 2017, compared with 36% in Q2 2016

MARKETS & SALES

Contract share, VAP products [% of qty]

Fresh salmon onlyby markets

Q2 2017

Q22016

H12017

H12016

EU 28% 19% 28% 19%

USA 21% 30% 23% 29%

Asia 22% 28% 20% 29%

Eastern Europe 29% 23% 29% 23%

Total sales of salmon by markets

Q2 2017

Q2 2016

H12017

H12016

EU 46% 39% 46% 39%

USA 16% 23% 17% 23%

Asia 16% 21% 15% 21%

Eastern Europe 22% 17% 22% 17%

29% 36% 28% 30%

71% 64% 72% 70%

0%

20%

40%

60%

80%

100%

Q2 2017 Q2 2016 H1 2017 H1 2016

VAP on contract HOG, spot

Brukernavn


Bakkafrost has a good market diversification and good access to all markets. During the last five years Bakkafrost has established a strong precense in all major salmon markets. This allows Bakkafrost to have a flexible and efficient market adaption to the differnt situations that we see from time to time. The focos is on the high end segment where value is created for high a quality product. In the fourth quarter 2015 EU market had 39% of Bakkafrost total sales, compared with 40% last year. The remaining 61% is more or less equal spread on the other three big markets: USA with 20%, Asia with 18% and Eastern Europe with 23%. Especially Estern Europe dropped significantly from Q4 2014 to Q4 2015 from 37% to 23%. The share of VAP products sold on contract was 32% in the fourth quarter compared with 37% last in the fourth quarter last year.


Record high results

Sold volumes from Farming highest ever

Sourced raw material intake for FOF highest ever

Highest Operational EBIT ever in one quarter

Farming/VAP increased the margin from 27.88 NOK/kg in Q2 2016 to 29.77 NOK/kg in Q2 2017

VAP segment delivered a margin of -13.01 NOK/kg in Q2 2017, compared with -18.37 NOK/kg in Q2 2016

Farming margin was 33.50 NOK/kg in Q2 2017, compared with 34.47 NOK/kg in Q2 2016

FOF delivered a margin of 15.1% in Q2 2017, compared with 20.7% in Q2 2016

Group Operational EBIT was DKK 459 million in Q2 2017, compared with DKK 307 million in Q2 2016

SUMMARY OF THE QUARTER

(DKK million)Q2

2017Q2

2016H1

2017H1

2016Operating revenues 1,206 790 2,060 1,694

Operational EBITDA 505 336 882 618

Operational EBIT 459 307 795 561

Profit for the period 398 224 477 437

Operational EBITDA margin 41.8% 42.6% 42.8% 36.5%

Operational EBIT margin 38.1% 38.9% 38.6% 33.1%

Operational EBIT/Kg (Farming) (NOK) 33.50 34.47 33.71 32.68

Operational EBIT/Kg (Farming and VAP) (NOK) 29.77 27.88 29.51 27.76

Operational EBIT/Kg (VAP) (NOK) -13.01 -18.37 -14.88 -15.07

EBITDA margin (Fishmeal, -oil and feed) 15.1% 20.7% 15.6% 22.5%

Brukernavn


A brief summary of the financial numbers in the fourth quarter


OPERATIONAL EBIT* AND EARNINGS PER SHARE

Operational EBIT(DKK million)

834 1,001 1,165 795

*) EBIT before fair value adjustments of biomass, onerous contracts provisions, income from associates, badwill and revenue tax

13.33 16.62 27.57 9.82

Earnings per share(DKK)

186235 254

335

212

303 307

459

209 206255

227257

350

2014 2015 2016 YTD 2017

1,782,71

4,39

1,632,60

3,914,61

8,19

4,363,44

7,13

4,59

6,56

11,44

2014 2015 2016 YTD 2017

Brukernavn


# 19 Group profit and loss First, we will look at the Group’s profit and loss. The numbers are in million Danish kroner. The profit and loss statement shows a revenue amounting to 760 million Danish kroner in the fourth quarter in 2015, compared to 757 million for the same quarter in 2014. Although the harvested volumes are higher and prices have improved in Q4 2015, compared to Q4 2014, the revenue is nearly unchanged, as the revenue in the VAP segment has decreased. The revenue for the full year was 2.85 billion Danish kroner, compared to 2.68 billion in 2014. The operational EBIT in fourth quarter 2015 was 257 million, compared to an operational EBIT of 227 million same quarter in 2014. The margins in the Farming and FOF segment were higher in Q4 2015, compared to Q4 2014, while the margins in the VAP segment was lower. The operational EBIT for full year 2015 was 1 billion Danish kroner. Bakkafrost had a fair value adjustment on biological assets of 83 million. The increase in fair value in fourth quarter is because of higher spot prices at the end of fourth quarter 2015. It is worth noting that the fair value adjustment is negatively affected by 52 million Danish kroner, as the new license tax from 2016 will be classified as cost. I will come back to that in a separate slide later. There is provision for onerous contracts of -51 million Danish kroner in Q4 2015, as the spot prices were high at year end 2015. Income from associates were 20 million Danish kroner in Q4 2015, compared to -4 million Q4 2014. The financial costs in the fourth quarter amounts to positive 1 million. Of these 3.6 million relates to positive unrealised currency gain of the bond loan. Taxes in fourth quarter 2015 was positive of 9 million. The reason is reduction of deferred taxes as a consequence of the tax changes in December 2015. As I mentioned, I will come back to this later. The profit after tax amounts to 319 million in fourth quarter 2015, compared to 222 million for same quarter in 2014.

SUMMARY OF Q2 2017

FIVE YEARS

INVESTMENTS FOR THE

FUTURE UPCOMING INVESTMENTS

Brukernavn


Some of the pictures in the presentation is from our new well boat Hans á Bakka – This one is from the Christening ceremony in Glyvrar 30 July 2015�We see Eydna Jacobsen, godmother of the ship together with our two grand daugthers Rósa and Eydna wich braught here flowers after the Christening ceremony.


INVESTMENT PROGRAMME

Investments will be made step by step in the relevant parts of the value chain to secure:

Biological risk

Efficiency

Organic growth

Brukernavn


The investments will be made step by step, and the overall goal is to improve effeciency, reduce risk and to create organic growth. The whole value chain will be more efficient and have a higher capacity.


INVESTMENT PROGRAMME I: 2014 - 2017

New wellboat (live fish carrier)

Increasing hatchery capacity to produce 200-300g smolt

Efficient and future-proved harvest/VAP factory

2014 2015 2016 2017

Faming Harvest/Harvest Smolt Feed Wellboat

Investment Programme 2014 – 2017 (1,370 mDKK)

250

550

340

230

Brukernavn


The investments will be made step by step, and the overall goal is to improve effeciency, reduce risk and to create organic growth. The whole value chain will be more efficient and have a higher capacity.


BEGINNING TO TAKE SHAPE

Viðareiði S-21 new site opened in 2016

Wellboat Hans á Bakka delivered 2015

New packaging factory started production 2014

Harvest operation started 2016

VAP production started 2017

New HQ opened in 2016

SUMMARY OF Q2 2017

FIVE YEARS INVESTMENTS FOR THE

FUTURE

UPCOMING INVESTMENTS

Brukernavn


Some of the pictures in the presentation is from our new well boat Hans á Bakka – This one is from the Christening ceremony in Glyvrar 30 July 2015�We see Eydna Jacobsen, godmother of the ship together with our two grand daugthers Rósa and Eydna wich braught here flowers after the Christening ceremony.


Finalizing Harvest/VAP factory

Increase hatchery capacity to produce 500g smolt

New feed line to increase capacity and new salmon meal and –oil plant

590570

360410

280

2016 2017 2018 2019 2020

Farming Hatcheries Harvest/VAP FOF

Investment Programme 2016 – 2020 (2,210 mDKK)

INVESTMENT PROGRAMME II: 2016 - 2020

Brukernavn


As I mentioned, healthy feed is also important for the biology and thus performance. Havsbrún, our feed producing company uses local marine raw material. Our feed contains high marine ingredient. This gives a good track record of our performances and also gives our salmon a different taste – a taste of the Faroe Islands. The integration in our group gives opportunities for full traceability. As something new, Bakkafrost started using cleaned fish oil in our feed. This was decided eventhough farmed salmon is well below all limits concerning pollutants. We took this decision in November 2014 and started the production in 2015 and the first salmon fed with feed, containing cleaned fish oil, will be on the market later this year.


Two FSV (Farming Service Vessel)

Total FSV investment in 2016 & 2017 around DKK 130 million

Important part of Bakkafrost’s strategy to have natural treatments against sea lice

Lump fish

Fresh water SPA (Hans á Bakka)

Warm water SPA (Martin & Róland)

TWO FSV – NOT INCLUDED IN INVESTMENT PROGRAMME

M/S Hans á Bakka

Lumpfish

M/S MartinM/S Róland

Brukernavn


As I mentioned, healthy feed is also important for the biology and thus performance. Havsbrún, our feed producing company uses local marine raw material. Our feed contains high marine ingredient. This gives a good track record of our performances and also gives our salmon a different taste – a taste of the Faroe Islands. The integration in our group gives opportunities for full traceability. As something new, Bakkafrost started using cleaned fish oil in our feed. This was decided eventhough farmed salmon is well below all limits concerning pollutants. We took this decision in November 2014 and started the production in 2015 and the first salmon fed with feed, containing cleaned fish oil, will be on the market later this year.


HATCHERY CAPACITY INCREASE

Capacity increase in order to produce large smolt

The hatchery capacity increased in 2016 with the new Hatchery at Viðareiði 8,000 m3

New Hatchery at Strond 29,000 m3 in operation in 2018

Total capacity 4 folded from 2015 to 2018

Capacity development (m3)

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2015 2016 2017 2018

Strond

Viðareiði


TRANSFER TO SEAWATER TRANFER TO PROCESSING

FRESHWATER STAGE (MONTHS) SEAWATER STAGE (MONTHS) FALLOWING1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1 2

6 kg GW

TRANSFER TO SEAWATER TRANFER TO PROCESSING

FRESHWATER STAGE (MONTHS) SEAWATER STAGE (MONTHS) FALLOWING1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1 2 3 4 5 6 7 8 9 10 11 12 1 2

6 kg GW

100 g

500 g

DE-BOTTLENECKING: SHORTENING THE SEA-WATER PRODUCTION CYCLE

Allowing for~30% increased production capacity De-bottlenecking of value chain – cycle in sea reduced by ~5 months (~30%)

Synchronised fallowing Sites/companies in each area need to implement new cycle simultaneously to achieve full capacity effect

Reducing exposure to biological risks in the sea water environment Both spring and fall releases exposed to one summer season

30% REDUCTION


INCREASED SMOLT SIZE LEADS TO INCREASED TOTAL VOLUME

Larger smolt (PS) will reduce time of cycle in farming

Smolt size will gradually increase to 500 gram by 2020

Smolt release will gradually increase to ~14 million pieces as production cycle decreases from 24 to ~14 months (incl. fallowing period)

Production volume will gradually increase to ~7 thousand tonnes

8,6

10,79,5

10,411,3

10,4 11 1112

13

02468

101214

Smolt release (million pcs)Smolt size on released fish (size gram)

107 122 113 119 144 160200

230

430

500

0

100

200

300

400

500

600

Production volume (1,000 tonnes)

0,91,3 1,1 1,2

1,6 1,72,2

2,5

4,7

6,0

0

1

2

3

4

5

6

7

Farming volume – growth potential with PS (1,000 tonnes)

36,3

44,341,3 44,0

50,647,5

53,5

70,0

0

10

20

30

40

50

60

70

80


PREPARING FOR THE FUTURE - IntraFish Events2018.intrafishevents.com/london/...Gunnar_Nielsen.pdf · of DKK 459 million in Q2 2017 (DKK 307 million in Q2 2016) Cash flow from operations.

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