SalMar ASA                How to deliver margins trough low cost production in salmon                farming and value add...
Content                 About SalMar                 Q3 – YTD 2011www.salmar.no                 Delivering margins:       ...
SalMar ASA                                    Northern Norway :13 licenses / 18 000 tgw                    SalMar Japan KK...
Built brick by brick ……..                                       120                                                  Scott...
…to become an integrated salmon farmerwww.salmar.no                • Brood stock      • Hatch, vaccination   • 71 wholly o...
Content                 About SalMar                 Q3 – YTD 2011www.salmar.no                 Delivering margins:       ...
Short summary of Q3/YTD 2011                Central Norway                 3Q 11      YTD 11     FY 2010                  ...
Group profit and loss – 3Q/YTD                NOK million                3Q 11      3Q 10      YTD 11     YTD 10     Op. i...
Content                 About SalMar                 Q3 – YTD 2011www.salmar.no                 Delivering margins:       ...
SalMar has over time delivered “best in class”www.salmar.no                Source: Pareto Securities                      ...
SalMar has over time delivered “best in class”                    -     2011 more challenging with start up cost, and low ...
Best performing SalMar site 2005G                                              Production cost (live fish) pr. kg:        ...
Marked difference from best performing 2005G                        to 2010 production cost levels                        ...
Illustration of developments in key cost                     components                      Cost component               ...
What can be done to counteract this development?                 Cost component            Focus areas and actions to miti...
Content                 About SalMar                 Q3 – YTD 2011www.salmar.no                 Delivering margins:       ...
InnovaMar – a strategic and value creating                investment                Harvest and processing capacity       ...
InnovaMar 2012 – Harvest / HOG                                  Key Innovations                   Automatic stunning      ...
InnomvaMar 2012 – VAP                                   Key Innovations                  Direct flow of pre – rigor raw ma...
Thank you for your attention                See www.salmar.no for more informationwww.salmar.no                           ...
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Yngve Myhre - CEO SalMar ASA - How to deliver margins trough low cost production in salmon farming and value added production in Norway

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Yngve Myhre, administrerende direktør i SalMar på Havbrukskonferansen 22. november 2011 på Radisson Blu Scandinavia i Oslo.

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Yngve Myhre - CEO SalMar ASA - How to deliver margins trough low cost production in salmon farming and value added production in Norway

  1. 1. SalMar ASA How to deliver margins trough low cost production in salmon farming and value added production in Norway CEO Yngve Myhre 22 November 2011www.salmar.no
  2. 2. Content About SalMar Q3 – YTD 2011www.salmar.no Delivering margins: – Farming – VAP 2
  3. 3. SalMar ASA Northern Norway :13 licenses / 18 000 tgw SalMar Japan KK – sales Central Norway : 58 licenses / 77 100 tgw including Segment Rauma 50% of Scottish Sea Farms Ltd. And 24,8% of P/f Bakkafrostwww.salmar.no • Founded in 1991, Frøya, Norway, listed on Oslo Stock Exchange May 8th 2007 • Revenues 2010: NOK 3,4 billion EBIT: NOK 973 million 600 employees • 71 wholly owned farming licenses in Norway. 80 including all partnerships • One of the largest and most cost effective salmon farming companies in the world 3
  4. 4. Built brick by brick …….. 120 Scottish Sea Farms (SalMars share) 100 12 SalMar Northern Norway 18 80 000 s gutted weight SalMar Central Norway 14 13 60 12 7 11 11 14 14 25 % annual 40 12 10 4 77 growth in volumes 10 12 3 3 50 51 20 10 45 42 2 2 3 30 17 23 22 9 11 13 14 0 7 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Gwww.salmar.no 33 % annual growth in EBIT 4
  5. 5. …to become an integrated salmon farmerwww.salmar.no • Brood stock • Hatch, vaccination • 71 wholly owned • InnovaMar facility • SalMar Sales AS and smoltification licenses • Roe • Vikenco • SalMar Japan KK • 7 production • 80 including all facilities partnerships • Genetics • Harvesting • SalMar Korea • Essential for the • High quality sites • “Raumastammen” performance in the • VAP • Long time partners entire value chain • Fish health • Scale, quality and • Global reach cost 5
  6. 6. Content About SalMar Q3 – YTD 2011www.salmar.no Delivering margins: – Farming – Processing and VAP 6
  7. 7. Short summary of Q3/YTD 2011 Central Norway 3Q 11 YTD 11 FY 2010 Phasing in of InnovaMar in 2011 Operating income (NOK mill) 1 001,9 2 551,5 3 137,2 EBIT bef. value adj. biomass 127,1 379,8 733,6 Room for improvement. especially in VAP Relatively low contract coverage (20%) Harvest volume (1,000 tgw) 23,1 42,5 47,2 EBIT/ kg gw (NOK) 5,51 8,9 15,55 Strong growth, some biological challenges Northern Norway 3Q 11 YTD 11 FY 2010 Operating income (NOK mill) 147,8 409,1 506,0 EBIT bef. value adj. biomass 10,0 121,0 211,2 All sales done in spot market Harvest volume (1,000 tgw) 5,8 12,4 13,6 Steady cost levels EBIT/ kg gw (NOK) 1,73 9,7 15,55www.salmar.no Segment Rauma 3Q 11 YTD 11 FY 2010 Operating income (NOK mill) 139,2 415,9 257,2 Most sales done in spot market EBIT bef. value adj. biomass 9,2 70,7 66,8 Increased production costs in 2H 2011 Harvest volume (1,000 tgw) 3,0 6,9 4,2 EBIT/ kg gw (NOK) 3,06 10,3 15,92 Contributions from harvesting and VAP Norskott / SSF 3Q 11 YTD 11 FY 2010 Operating income (NOK mill) 154,6 549,9 1 026,8 EBIT bef. value adj. biomass 20,9 130,9 279,4 Higher cost level than in Norway Harvest volume (1,000 tgw) 4,5 14,3 27,1 High contract coverage EBIT/ kg gw (NOK) 4,67 9,1 10,31 7
  8. 8. Group profit and loss – 3Q/YTD NOK million 3Q 11 3Q 10 YTD 11 YTD 10 Op. income in line with Q3 2010 – Higher volumes Operating income 1 077,2 1 002,3 2 763,6 2 279,8 – Lower salmon prices Cost of goods sold 665,1 477,3 1 571,5 1 106,5 Payroll expenses 114,7 83,1 270,0 204,6 EBIT NOK 134 mill Other operating expenses 128,9 114,3 299,8 275,8 EBITDA 168,5 327,6 622,4 692,8 Depreciations 34,5 26,9 94,5 66,0 Negative value adjustment of biomass EBIT before biomass adj. 134,0 300,7 528,0 626,8www.salmar.no Value adjustment biomass -71,0 -48,9 -385,3 171,1 Income from associated companies EBIT after biomass adj. 63,1 251,8 142,7 797,9 mainly 50% of Scottish Sea Farms and 24,8 % of Bakkafrost after tax Income from ass. comp. 30,8 13,2 81,8 81,5 results. Other financial items -49,4 -22,4 -74,6 -54,1 – Share of EBIT SSF: -8,9 mill Earnings before tax 44,5 242,6 149,9 825,2 – Share of EBIT Bakka: 38,9 mill Tax 3,8 64,2 19,1 208,2 Result for the period 40,7 178,4 130,8 617,0 Other financial items include both Earnings per share (NOK) 0,38 1,73 1,16 5,99 interest and currency effects 8
  9. 9. Content About SalMar Q3 – YTD 2011www.salmar.no Delivering margins: – Farming – Processing and VAP 9
  10. 10. SalMar has over time delivered “best in class”www.salmar.no Source: Pareto Securities 10
  11. 11. SalMar has over time delivered “best in class” - 2011 more challenging with start up cost, and low contract share EBIT/kg 18 16 SALM 14 12 10www.salmar.no 8 6 4 2 0 4q06 1q07 2q07 3q07 4q07 1q08 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 -2 Source: Company financial reports 11
  12. 12. Best performing SalMar site 2005G Production cost (live fish) pr. kg: – Well below 11.00 (10,55) – Equal to 15,38 gutted in box Feed costs NOK 6,47 average pr. kgwww.salmar.no Salary costs NOK 0,63 pr. kg Administration costs NOK 0,35 pr. kg Other operating costs NOK 0,28 pr. kg Health & veterinarian cost NOK 0,06 pr. kg Source: SalMar 12
  13. 13. Marked difference from best performing 2005G to 2010 production cost levels NOS Price 2010 : NOK 37,45 Estimated average production cost best performing listed companies 2010: – NOK 22,00 per kg gutted weightwww.salmar.no – Average Norway above NOK 24 per kg (SalMar estimate) Comparison Top performer 2005 G Sample 2010 harvest Delta Cost live weight 10,55 15,94 -5,39 Cost gutted in sea 12,71 19,20 -6,49 Harvest & well boat 2,67 2,80 -0,13 Cost gutted weight 15,38 22,00 -6,62 Source: SalMar estimates 13
  14. 14. Illustration of developments in key cost components Cost component Cost development Comment (approximation) Feed Costs + NOK 3 – 4 A product of price of feed and feed conversion ratio Health & veterinarian + NOK 0,5 – 1,5 Sea lice treatments, medicine & vaccines, veterinary costs Administration + NOK 0,2 – 0,4 Corporate HQ, listing costs, IT &www.salmar.no telecom, business support etc. Smolt + NOK 0,2 – 0,5 Price, mortality rate Harvesting + NOK 0,1 – 0,3 Charter costs, fuel, salary, packaging, utilization Other operating costs + NOK 0,5 – 1,0 Depreciation, insurance, maintenance, salary , rent Total + NOK 4,5 – 7,7 Source: SalMar estimates of development for the industry in general 14
  15. 15. What can be done to counteract this development? Cost component Focus areas and actions to mitigate cost increase (examples) Feed Costs Feed conversion ratio, selection of feed (feed composition), commodity prices Health & veterinarian Sea lice treatment: Wrasse, mechanical, less use of chemicals Administration “Rightsizing” the organization, streamline IT & communications platforms, effective business support Smolt Size, timing, mortality rate, vaccineswww.salmar.no Harvesting Volume, high capacity utilization, automation, flexibility Reduce production time Feeding strategies, size of smolt, use of lights, fewer and in sea effective treatments of sea lice Other operating costs Centralized purchasing arrangements, efficient working practices, high utilization of fixed assets How much of the cost increase can be addressed? NOK 2,50 – 3,50 15
  16. 16. Content About SalMar Q3 – YTD 2011www.salmar.no Delivering margins: – Farming – Processing and VAP 16
  17. 17. InnovaMar – a strategic and value creating investment Harvest and processing capacity The InnovaMar facility Economies of scale Optimize biological production − Flexibility −www.salmar.no Fish welfare − Product quality − Optimal use of raw material Reduced need for transportation  Investment of EUR 70 million - 10 000 tons GW in august 2011  17 500 square meters  Capacity >70 000 tons GW per shift - Pre rigor processing online  Capacity > 25 000 tons GW to filet Handling of waste & byproducts per shift 17
  18. 18. InnovaMar 2012 – Harvest / HOG Key Innovations Automatic stunning Automatic in feed, gutting and cleaning Capacity of 120 fish/minute Direct flow to pre rigor lines Automation and improved working conditions Hygienic design of plant and machinerywww.salmar.no Expected quality and cost improvements Reduced handling and improved shelf life Flexibility in use of raw material (fresh/frozen/fillet) Capacity and economies of scale Reduced use of man hour Flexibility in selection of sizes to customers needs Estimated cost saving of 10-20% compared to industry average in Norway 18
  19. 19. InnomvaMar 2012 – VAP Key Innovations Direct flow of pre – rigor raw material Flexibility to produce pre – rigor and post rigor volumes in three separate lines (50/50 share) Total capacity of 50-60 fish/minute. >15 tons/hour Traceability (organic salmon 2x125 grams) Moving down the value chain Product flexibility, with potential to sell volumes to awww.salmar.no less price sensitive market segment Expected quality and cost improvements Improved shelf life Meeting to strict quality standards Improved yield Reduced need for transport (lower CO2 emissions) Target of 100+ tones raw material per shift/day Improve efficiency of 10-20% versus old plant 19
  20. 20. Thank you for your attention See www.salmar.no for more informationwww.salmar.no 20

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