This document discusses the status and outlook of the salmonid feed production industry in 2012. It provides an overview of Cermaq, one of the world's largest producers of salmonid feed, and its EWOS division. It then discusses trends in the global feed and raw material markets, noting expectations for stability in prices. The document emphasizes the value of using functional feeds to improve fish growth and performance, even in a market with low salmon prices. Functional feeds can increase production volume and lower costs per kilo produced through faster growth rates and improved feed efficiency.

1. Status and development in
salmonid feed production 2012
Havbrukskonferansen 22. November 2011
Kjell Bjordal
Head EWOS Group/COO Feed Cermaq

2. Agenda
• Intro to Cermaq and EWOS
• Status & Outlook in feed- and
raw material markets
• The value of growth
– Use of functional feed in a low Photograph: Tom Haga
salmon price market
Photograph: Ragge Strand

3. This is Cermaq
 A global leader in the aquaculture industry
 Two business units; EWOS and Mainstream
 EWOS: The world’s 2nd largest producer of salmonid feed
– market share of app. 35 %
 Sales 2010: 876.000 tons
 Sales 2011E: > 1 mill tons
 Mainstream: A leading salmon farming company
 Sales 2010: 97.000 tons (gwe)
 Sales 2011E: 105.000 tons (gwe)
 Total EBIT 2010 NOK mill 1.439
 Approx 3.500 employees
 Operations in Norway, Chile, Canada , Scotland and
Vietnam
3

4. • Operations in Norway, Canada, Chile, Scotland, Vietnam
– 7 factories globally; 875 employees
– 21 feed production lines
• Increased attention on functional feeds
– Ensure healthy fish and improved growth
• Extensive R&D through Ewos Innovation
– Fish nutrition, Raw materials, Fish performance and health
– 3 locations, 80 People, NOK 80 mill per year in R&D
1000
900
thousand tonnes
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0
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EWOS NorAqua /FK

5. Status & Outlook in
feed- and raw material markets
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6. Development in feed markets
2006 2007 2008 2009 2010 2011E 2012E
Norway 933 800 1 083 000 16 % 1 136 700 5 % 1 302 500 15 % 1 307 500 0 % 1 463 000 12 % 1 531 600 5%
Chile 1 006 300 1 082 400 8 % 1 018 200 -6 % 594 000 -42 % 698 400 18 % 926 400 33 % 934 100 1%
UK 194 800 211 300 8 % 201 300 -5 % 207 400 3 % 207 500 0 % 221 400 7 % 218 700 -1 %
North America 194 200 201 400 4 % 193 800 -4 % 191 500 -1 % 204 900 7 % 191 700 -6 % 193 500 1%
Faraoe Islands 28 900 45 600 58 % 59 700 31 % 62 200 4 % 61 700 -1 % 81 300 32 % 84 700 4%
Total 2 358 000 2 623 700 11 % 2 609 700 -1 % 2 357 600 -10 % 2 480 000 5 % 2 883 800 16 % 2 962 600 3%
Source Kontali Nov 2011
• Global feed sales in 2012 influenced by
– Salmon price development
– MTB limitations impact on harvest volume in 2H 2012
– Changes in biological conditions
• Chilean feed suppliers indicate higher growth in Chile than Kontali
6

7. Fishmeal production development
3
2,5
2
Million tons
1,5
2010
1
2011E
0,5 2012E
0
Source IFFO 2011
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8. Fishoil production development
0,8
0,7
0,6
0,5
Million tons
0,4
0,3 2010
0,2
2011E
2012E
0,1
0
Source IFFO 2011
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9. General vegetable market trends
• We expect stable and sufficient supply of soy, both for GM and non-
GM qualities
• Speculators seem to withdraw cash from traded commodities
• Use of biofuel will influence total world demand, will subsidies for non
fossil fuel be withdrawn in current financial markets?
• Fish feed is a price taker for vegetable raw materials
• Advanced formulation capabilities for feed, make feed manufacturers
less and less susceptible for price fluctuations on individual raw
materials
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10. Conclusion: Less volatility in and more stable
raw material pricing expected for the next
quarters
Raw Material Prices
(USD/tonne)
• Fish quotas already set in Peru, fish meal
2000 production is expected to stabilize on 2,5
1800 mill tons, significantly higher than 2010
1600
1400 • Chinese demand drive markets, but the
1200
1000
Chinese users seem to have established
800 a substitution competence balancing
600
400
growth in demand
200 • In conclusion; fish meal prices stable or
0
2008 2009 2010 2011
slightly downwards
Fishmeal Peru, FOB Soymeal extracted, FOB
• Vegetable proteins expected to maintain
Fish Oil Scandinavia, CIF Vegetable Oil, FOB stable or slightly downward prices in 2012
unless extreme weather conditions occur
• Vegetable oils: Crops have been good –
importance of substitutes for rape oil as
biodiesel have been significant. Uncertain
Main uncertainty is currency development trend, but no dramatic price changes
expected
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11. The value of growth
Use of functional feed in a
low salmon price market
Faster growth / more resistant fish
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12. Functional feed improve fish performance
– EWOS adapt – designed for fish to cope with transition from FW to SW;
functional components to increase the ability to handle new pathogens in a
new environment and fatty acid profile to benefit a good/even smoltification
– EWOS robust – strengthens and optimises immune response of the fish.
Contains a functional component which makes salmon less attractive to
sea lice by masking the salmon host odors and a powerful immune
stimulant and boost to prepare the fish against pathogens
– EWOS synergy – new base for medicated feed
– EWOS alpha – clinical diet for fish suffering from Pancreas disease
– EWOS opal 120 with boost-contains boost and prebiotica to strengthen
the fish
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13. Value of growth
• Feed contributes to almost 50 % of salmon production cost
• Choice of feed determines not only feed cost, but also growth rate
• Advanced feed is here a Functional feed, low cost a reformulated feed
Cost distribution for 5.5 kilo live Growth patterns for advanced,
weight salmon fed on standard standard and low cost feed
feed
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14. What is the value of growth?
Our model use following input parameters
• Production parameters (feed dependent)
– Growth rate and size distribution
– Production time
– Mortality
– Feed conversion ratio (FCR)
• Economical parameters
– Smolt cost
– Feed cost
– Salmon price per size interval
– Cost of transport, slaughting & packing
– Capital interests – capital cost
– Other variable costs
– Fixed costs
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15. At low salmon prices;
will EWOS functional grower feeds still be more beneficial
than standard feeds?
• Currently many salmon
farms see productions
costs about 25 NOK/kg
• Benefit of increasing
production volume by
using EWOS functional
grower feeds is
maintained for prices
far below break even
costs (25-13nok/kg), as
higher sales volumes
increases the cash flow
to cover fixed costs
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16. Benefits of using EWOS functional health feeds
• Additional cost of using EWOS suggested functional feed
program through a life cycle approximates 250
KNOK/production site (MTB)
• Such additional cost will be covered by reducing the need
of medicated de-licing with only one treatment
(approximate costs from 300 – 1,000 KNOK/site,
depending on method)
• -or by improving survival by only 2% at salmon prices of
22 NOK/kg)
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17. Customer experiences with EWOS functional
feeds against sea lice in 2011
4,50
EWOS robust EWOS alpha EWOS robust
4,00
Sea lice (individuals)
3,50
3,00
2,50
2,00
Lice numbers
1,50
Attached stages
Fastsittende
1,00
Mobile stages
Bevegelig
0,50 Mature stages
Kjønnsmoden
0,00
15 19 23 27 31 35 39
Week number 17

18. Are we living as we preach?
• Continued significant
use of EWOS
MS Norway* Functional Feed in
Mainstream following
Salmon price reduction
Functional Feed
Standard Feed
MS Chile**
Functional Feed
Standard Feed
* Aug – Oct 2011 (Atlantic)
** YTD Oct 2011 (Atlantic)
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19. EWOS outlook
• Continued growth in Chile from increased
salmon production
– Market growth 2011 maintained at 45 %
– Reduced growth rate for 2012
Bilde
• Focus on fish performance and fish
health expected to support continued
large share of value added feed
• High raw material volatility to continue,
but limited changes expected in Q4 2011
• Investments in all plants in Norway to
increase capacity with 75 000 tonnes in
time for peak season 2012
• Full year EBIT margin of 5-7 %
maintained

20. 20