Strategic rationale for strong growth in Norway

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SalMars CEO Yngve Myhre makes the argument for why and how the company and the Norwegian aquaculture industry in general is ready for future growth.

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Strategic rationale for strong growth in Norway

  1. 1. 28 November 2013 Strategic rationale for strong growth in Norway www.salmar.no CEO Yngve Myhre.
  2. 2. Agenda About SalMar Q3 2013 / 9M 2013 Strategic rationale for strong growth in Norway 2
  3. 3. SalMar ASA : an overview Northern Norway :23 licenses / 28 000 tgw (2013E) www.salmar.no Central Norway : 58 licenses / 86 000 tgw (2013E) 3 SalMar Japan KK – sales SalMar Korea Group: 2012: 102 600 tgw / 2013E 114 000 tgw / 2014e 133 000 tgw 50% of Scottish Sea Farms Ltd. And 14,9% of P/F Bakkafrost • Founded in 1991, Frøya, Norway, listed on Oslo Stock Exchange May 8th 2007 • Revenues: NOK 4,2 billion, FY 2012 result: NOK 483 million Approx. 920 employees • 81 wholly owned farming licenses in Norway. 92 including all partnerships. • One of the largest and most cost efficient salmon farming companies in the world
  4. 4. SalMar has been built brick by brick … www.salmar.no 22 % annual growth in volumes 4 25 % annual growth in EBIT
  5. 5. www.salmar.no …to become an fully integrated salmon farmer… 5 • Brood stock • Hatch, vaccination and smoltification • 81 owned licenses • Rauma genetics • 7 production facilities • Essential for the performance in the entire value chain • SalMar Sales AS • Vikenco • SalMar Japan KK • Harvesting • Roe • InnovaMar facility • SalMar Korea • VAP • Long time partners • 92 including all partnerships • High quality sites • Fish health • Scale, quality and cost
  6. 6. …and is now one of the leading salmon producers in the world www.salmar.no The fourth largest salmon producer in the world 6 The third largest salmon producer in Norway The largest producer of organic salmon in the world
  7. 7. Delivering industry leading margins… …consistently over time Unrelenting focus on biological performance (production costs) No 1 priority: Realize the efficiency gains of InnovaMar Further develop sales and distribution capabilities Keep cost leadership in Norway Organic and strategic growth – even better utilization of licenses www.salmar.no Growth through acquisitions 1. 2. 3. Central and Northern Norway Scotland, Other areas Updated pr 3q13 4q rolling EBIT/kg 20 SALM 15 10 5 0 -5 4q06 7 2q07 4q07 2q08 4q08 2q09 Source: Company presentations, EBIT/kg (4q rolling volume weighted) 4q09 2q10 4q10 2q11 4q11 2q12 4q12 2q13
  8. 8. Agenda www.salmar.no About SalMar Q3 2013 / 9M 2013 Strategic rationale for strong growth in Norway 8
  9. 9. Third quarter highlights Another strong quarter, heading for strongest year ever – Higher revenues and continued EBIT-improvement q/q driven by stronger prices Average salmon-price up ~50% from Q3 12 www.salmar.no Operational and biological challenging quarter, increase of SAV2 (PD) in Central Norway Enhanced underlying performance in S&P, earnings dampened by fixed price contracts Harvest volume (1,000 tons) 35,4 Operating income (NOKm) 34,8 13,84 1 695 29,6 23,2 22,8 EBIT/kg (NOK) 1 227 1 329 1 277 1 433 10,14 3,14 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 10,36 4,26 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 9
  10. 10. Group profit and loss Q3/9M 2013 boosted by higher prices, Revenues NOK million Q3 2013 Q3 2012 9M 2013 9M 2012 1 695,4 823,3 165,5 288,5 1 227,2 713,4 122,4 239,3 4 404,8 2 112,2 436,6 791,4 2 879,6 1 578,3 338,8 621,4 4 204,8 2 324,8 483,2 886,0 418,1 152,1 1 064,6 341,2 510,8 57,7 40,9 153,2 122,6 170,2 Operational EBIT 360,4 111,2 911,4 218,6 340,7 Fair value adjustment Particular biological events Non-recurring gains on aquisition Operational profit -94,9 265,5 -25,6 -3,5 82,2 57,8 197,5 1 166,7 93,4 -54,6 77,4 334,8 290,4 -54,6 62,4 638,9 30,5 35,7 11,8 -41,0 124,6 192,5 51,1 -118,5 93,9 -124,3 331,7 52,9 1 483,8 267,4 608,5 65,7 25,8 241,3 53,2 127,1 266,0 27,1 1 242,5 214,2 481,4 Operating income Cost of goods sold Payroll expenses Other operating expenses EBITDA www.salmar.no average salmon price at NOK 38.87/kg up 50% yoy* FY 2012 Depreciations Income from investments in associates Other financial items Profit before tax Tax Net profit for the period Strong operational EBIT at NOK 360m vs. NOK 111m in Q312 and NOK 316m in Q2 Harvest volume 34,800 tons, in line with Q3 12 Contract share of 25%, with average price below average spot. Contract share 5% of company volumes so far in 2014. Operational and biological challenging Group EBIT/kg at: - Q3-13 NOK 10.36 9M-13 NOK 11.28 * Historical prices adjusted 10
  11. 11. Agenda www.salmar.no About SalMar Q3 2013 / 9M 2013 Strategic rationale for strong growth in Norway 11
  12. 12. There is still room for significant production growth in Norway Norway SINTEF Fisheries and Aquaculture et.al. states that the Norwegian seafood industry can be six times bigger within 40 years (from BNOK 90 to BNOK 550). www.salmar.no Aquaculture has a key role: 12 - Volume: From 1.0 – 5.0 mill tons. (5x). Approx. 5% py. - Turnover: From 34.0 BNOK – 238.0 BNOK. (7x) Realizing growth potential requires sustainable production 21 000 km coast line (50% of the equator) Coastal area of 90 000 km2 Combined agricultural land in Norway, Sweden, Denmark and Finland Competent regulators and authorities
  13. 13. www.salmar.no And we know that the conditions for further growth is here… Natural habitat of the Atlantic salmon. Gulf Stream, temperature regime and strong unidirectional currents. IMR: Marine and coastal currents makes sure that nutrients are not a problem in the big picture - and much more fish can be produced.
  14. 14. www.salmar.no We can`t ignore biology and geography
  15. 15. …but it requires an absolute focus on sustainability www.salmar.no "Why is there disease" Environment Pathogen 15
  16. 16. www.salmar.no Biology and technology key drivers to ensure sustainable growth SalMar believes that the use of new technologies and the utilisation of more exposed sites can promote further growth for the Norwegian aquaculture industry in the years ahead.
  17. 17. Strong partnerships vital to drive the industry forward Depending on close collaboration with various stakeholders and “healthy” industry regulations Feed a growing population and meet demand www.salmar.no Efficient and flexible cooperation with the competent national / regional / local authorities and agencies Strict but flexible regulations is key Assessment procedures before permission is granted Monitoring the environment during production Rest periods before new production SalMar is actively working to influence the development of industry regulations More flexible MAB scheme Recommend a growth rate of approx. 5% per year going forward Work closely with other players and local communities Fish Farming, Feed ,Technology, etc. Finding the key to the future of aquaculture
  18. 18. SalMar sees great potential for further growth and development SalMar sees significant growth opportunities: 18 SalMar has had a growth of nearly 22% p.y. − www.salmar.no − With 6% (total) growth, p.y. till 2025 we see a potential doubling of total harvest volumes. − Estimated 7000 tons of organic salmon in 2013, tripled to 2025 (10% of total production). − Strong growth also expected short term. 2014 World: 4%. SalMar 15%.
  19. 19. Thank you for your attention www.salmar.no See: www.salmar.no for more information

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