Bakkafrost P/f

Earnings Release • May 9, 2023

Significant improvements in Scotland

Significant improvements in Scotland

(Figures in parenthesis refer to the same period last year unless otherwise

specified)

The Bakkafrost Group delivered a total operating EBIT of DKK 565 million (DKK

418 million) in Q1 2023 and made a profit of DKK 467 million (DKK 405 million).

The combined FO farming and VAP segments made an operational EBIT of DKK 321

million (DKK 442 million). The SCT farming segment made an operational EBIT of

DKK 155 million (DKK -53 million). The EBITDA for the FOF segment was DKK 129

million (DKK 86 million).

Commenting on the result, CEO Regin Jacobsen said:

"Overall, we are satisfied with the results in this quarter but especially with

the improved results in Scotland. We saw early signs of improvements in Q4,

where the application of best practices significantly improved the operations.

Through this quarter and so far this year, we have maintained strong operations

in Scotland. Premium high-quality salmon with our One Company strategy has

materialized in our sales and branding and created extra value. Our customers

recognize the high quality of our fish, whether it is farmed in Faroese or

Scottish origin.

As expected, we have had low harvest volumes in the Faroe Islands this quarter,

which impacted the financial results. The biological performance has been good

and exceptionally strong when it comes to growth rates and feed conversion. We

have had lower average harvest weights in the quarter due to our strong effort

to push mortality levels down, as we also have done with sea lice levels. This

led to earlier harvest at a lower weight. With the new capabilities gained with

our new FSV, Bakkafossur, we expect to increase harvest weights while we

continue to secure good fish welfare and low sea lice levels.

The VAP segment performed well in this quarter with positive margins despite

high salmon prices. For many years Bakkafrost has had the strategy to use around

40% of the harvest volume for value-added production in the VAP segment. This

strategy will be revised depending on the outcome of the Faroese Government's

proposal to adjust the revenue tax. This also applies to the previously

announced 5-year investment plan. On our Capital Market Day in Scotland on 6

June 2023, we will present our new 2024-2028 investment plan.

Salmon prices have been unusually high this quarter, and the supply lower than

in the first quarter of 2022. We expect higher supply growth in the second half

of 2023 and lower salmon prices."

Total harvested volumes for Q1 2023 were 19,100 tonnes gutted weight (21,400

tgw)

· FO: 11,000 tgw (17,500 tgw),

· SCT: 8,100 tgw (4,000 tgw).

In total, 3.8 million (4.2 million) smolts were transferred during Q1 2023

· FO: 2.1 million (2.0 million),

· SCT: 1.7 million (2.3 million).

The combined FO farming and VAP segments made an operational EBIT of DKK 321

million (DKK 442 million) in Q1 2023. The operational EBIT per kg in Q1 2023 was

DKK 29.14 (DKK 25.32), corresponding to NOK 42.98 (NOK 33.79). The FO Farming

segment achieved higher prices in Q1 2023 than in Q1 2022 but had a lower

harvest volume compared to Q1 2022.

The SCT farming segment made an operational EBIT of DKK 155 million (DKK -53

million). The SCT Farming segment achieved higher prices and had a higher

harvest volume in Q1 2023 compared to Q1 2022. In Q1 2023, the SCT farming

segment had incident-based costs of DKK 2 million (DKK 24 million).

During Q1 2023, the FOF segment sourcing of raw material was 156,000 tonnes

(78,000 tonnes),

the EBITDA margin was  17.6% (19.6%) EBITDA, and fish feed sales amounted to

22,300 tonnes (26,200 tonnes).

The net interest-bearing debt amounted to DKK 2,357 million at the end of Q1

2023, compared to DKK 2,664 million at year-end 2022. Undrawn credit facilities

amounted to DKK 2,857 million at the end of Q1 2023.

The long-term goal of the Board of Directors is that 30-50% of earnings per

share shall be paid out as a dividend. The financial position of Bakkafrost is

strong, with a solid balance sheet, a competitive operation and available credit

facilities. The Annual General Meeting convened on April 28th 2023, decided to

pay out a dividend of DKK 10.00, corresponding to NOK 15.63 per share. The total

dividend of DKK 591 million (NOK 924 million) will be paid out on or around May

22th 2023.

The equity ratio was 64% on March 31 2023, compared to 62% at the end of 2023.

OUTLOOK

Market

Supply decreased in Q1 2023

The supply of salmon decreased by 4.9% in Q1 2023 compared to Q1 2022, incl.

inventory movements. Without inventory movements, the supply decrease was 4.1%,

according to the latest estimate from Kontali Analyse.

31% higher salmon prices

Salmon spot prices were 31% higher this quarter compared to Q1 2022. Strong

demand for salmon, low supply increase and general inflation have contributed to

high salmon prices this quarter.

Low growth in 2023

In H1 2023, the global supply is expected to be around 1-2% lower than in H1

2022. In H2 2023, the global supply is expected to grow around 4-5%. For the

full year 2023, the global supply growth is expected to be around 2%, excluding

inventory movements.

Bakkafrost has a strong focus on ensuring a well-balanced flow to the different

markets to increase diversification and mitigate market risk. Bakkafrost

operates in the main salmon markets, Europe, the USA, and the Far East. Since

the beginning of the war in Ukraine, Bakkafrost has stopped all trading with

Russia.

Farming

The biological performance in the Faroese farming operation has been good, and

sea lice levels continue to be low. Mortality levels have also been low for

several quarters in a row, and Bakkafrost has continued to focus strongly on

driving the mortality levels even lower. In this quarter, this has in part been

achieved by, in some cases advancing harvest rather than treating large fish

close to their intended harvest weight as the latter can increase mortality.

This strategy, combined with a backend-loaded harvest profile for 2023, has led

to reduced harvest weights in this quarter. Bakkafrost expects to increase

harvest weights in the Faroe Islands in the coming quarters. One important tool

for this is Bakkafrost's new 10,000m3 Live Fish Carrier, Bakkafossur, which

arrived in the Faroe Islands at the beginning of January 2023. During Q1 2023,

the operation of Bakkafossur has been tuned in and ramped up. Going forward, the

new capabilities gained with this vessel enable Bakkafrost to pursue low

mortality, low sea lice levels as well increased harvest weight. Also, the

vessel is designed to support future off-shore farming in the Faroe Islands.

The expansions of the Norðtoftir and Glyvradal hatcheries in the Faroe Islands

are now in operation. Combined, these capacity expansions increase the smolt

production capacity in the Faroe Islands with around 6.5 million smolts of 500g.

These are important milestones to fulfil Bakkafrost's goal to build an annual

smolt production capacity in the Faroe Islands of over 23 million smolts of 500g

in 2026.

In Scotland, the farming operation improved considerably in Q1 2023 as the

biological development has been more under control. The first signs of improved

control emerged in Q4 2022. In Q1 2023 and so far in Q2, this development has

continued. Hence, Bakkafrost has been able to harvest large fish in Scotland and

maintain lower mortality, which also has impacted positively on the harvest

volume and price achievement.

The turn-around operation in Scotland prioritises the mitigation of biological

risk. However, Bakkafrost Scotland is still subject to higher biological risk

than in the Faroe Islands. It needs to be demonstrated if the positive

development of biology in the past two quarters can be maintained during the

traditionally more challenging periods in the fall. The risk picture is expected

to be gradually transformed as Bakkafrost's large-smolt strategy materialises in

Scotland. As demonstrated in the Faroe Islands, large high-quality smolt will

have a lower risk exposure in the marine environment due to shorter production

cycles in the sea and the robustness of the smolt. Therefore, it is Bakkafrost's

topmost priority in Scotland to build new modern hatcheries. The ongoing

expansion of the Applecross hatchery is progressing but slightly delayed, and

the Applecross-4 expansion is expected to be operational with fish in the tanks

in May 2023 - 2 months behind schedule. The first batch of large smolt delivered

from Applecross-4 is planned for Q3 2023 - one quarter later than planned and

will contribute to increasing the mean weights and quality of the smolt stocked

in Scotland in 2023.

The full capacity of the Applecross hatchery, including the next expansions,

will be in operation in mid-2024, bringing the overall annual production

capacity from Applecross to around 10 million high-quality smolts of around

500g.

In Q1 2023, the average weight of released smolt in Scotland was 111g, which is

9% higher than in Q1 2022.

Bakkafrost plans to build 3 large hatcheries in Scotland, which will increase

the total annual production capacity to around 18 million smolts of around 500g

in 2026.

Smolt release

Bakkafrost expects to release around 16 million large smolts in 2023 in the

Faroe Islands and around 9.6 million smolts in Scotland. The number and the

average weight of smolts released are key elements of predicting Bakkafrost's

future production.

Million smolt released 2023 2022 2021 2020 2019 2018

FO 16,0 14,5 14,4 14,3 12,7 12,6

SCT 9,6 10,8 11,1 10,4 12,4 8,6

The average weight of the smolt released in Scotland in 2023 is expected to

increase to around 150-175g. In 2023, the number of released smolt will be lower

than in previous years as the focus is on stabilising the operation before

increasing the volume. In this respect, smolt quality is more important than the

released volume.

In 2023, Bakkafrost expects to harvest around 68,000 tonnes gutted weight in the

Faroe Islands and 30,000 tonnes gutted weight in Scotland, giving a total of

around 98,000 tonnes gutted weight.

The estimates for harvest volumes and smolt releases in both geographies are

dependent on biological development.

VAP (Value added products)

Bakkafrost's highly flexible value chain includes a state-of-the-art VAP factory

with high capacity. This enables Bakkafrost to adapt well to the rapidly

changing market situations.

Bakkafrost's long-term strategy is to sell around 40% of the harvested volumes

of salmon as VAP products on contracts. The contracts are at fixed prices with a

duration of 6 to 12 months. Depending on the outcome of the Faroese government's

proposal to adjust the Faroese revenue tax, Bakkafrost might revise this

strategy.

For 2023, Bakkafrost has signed contracts covering around 23% of the expected

harvest volumes in the Faroe Islands and Scotland combined.

FOF (Fishmeal, oil and feed)

The outlook of fishmeal and fish oil production is dependent on the availability

of raw materials.

The ICES 2023 recommendation for blue whiting is 1,360 thousand tonnes, which is

an 81% increase from the recommendation for 2022.

In 2023 Bakkafrost expects similar production volumes of fishmeal and fish oil

as in 2022.

Havsbrún's sales of fish feed in 2022 was 128,000 tonnes and is expected to

increase to around 130,000 tonnes in 2023.

The major markets for Havsbrún's fish feed are the internal Faroese and Scottish

Farming segments.

Investments

On the Capital Markets Day on 14-15 September 2021, Bakkafrost announced a 6.2bn

DKK investment plan for 2022-2026. The investments will enable a transformation

of the operation in Scotland and provide sustainable growth in the Faroe Islands

as well as Scotland.

The main purpose of the investments in Scotland is to replicate Bakkafrost's

successful operation in the Faroe Islands. Bakkafrost will build 3 large energy

-efficient hatcheries in Scotland, enabling the implementation of Bakkafrost's

large smolt strategy and giving an annual production capacity above 18 million

smolts at 500g. Having large smolt in Scotland will transform the performance,

lower the biological risk and increase harvest volumes. In addition to building

hatchery capacity, Bakkafrost plans to build a new processing plant to

strengthen processing capabilities and increase flexibility in operation.

Bakkafrost will also invest in more service vessel capacity to improve the

mitigation of biological risk. Further, Bakkafrost will make investments in

marine site development.

The investments in the Faroe Islands include increasing annual hatchery

production capacity to around 23 million smolts at 500g, investments in a

broodstock facility and expansion of feed production capacity.

With the investment plan, Bakkafrost expects to sustainably grow the total

annual harvest volumes to 150,000 tonnes in 2026. Over the same period, the

total annual production capacity in Bakkafrost's value chain will reach 180,000

tonnes gutted weight.

Tax

The Faroese Government has proposed changes to the revenue tax in the Faroe

Islands. Depending on the outcome of this, Bakkafrost will revise the investment

plan accordingly.

Capital Market Day in Scotland in 2023

Bakkafrost's next Capital Markets Day will be on 6 June 2023 and will be held in

Scotland.

Financial

The long-term market balance in the global market for salmon products will most

likely remain favourable for Bakkafrost. Bakkafrost has a long value chain and a

cost-efficient production of high-quality salmon products and will likely

maintain financial flexibility going forward.

In March 2022, Bakkafrost finalised a new sustainability-linked 700 mEUR

multicurrency revolving credit facility agreement with an additional accordion

option of 150 mEUR. The facility has a tenor of five years plus an extension of

one year. In combination with Bakkafrost's high equity ratio, the facility gives

the necessary financial strength and flexibility for the Group's investment

plans aimed at significant organic growth and structural cost reductions in

Scotland. It will also enable M&A's and further organic growth opportunities as

well as support an unchanged dividend policy in the future.

Please find the Company's Q1 2023 report and the Q1 2023 presentation enclosed.

Contacts:

· Regin Jacobsen, CEO of P/F Bakkafrost: +298 235001 (mobile)

· Høgni Dahl Jakobsen, CFO of P/F Bakkafrost: +298 235060 (mobile)

This information is subject of the disclosure requirements pursuant to section 5

-12 of the Norwegian Securities Trading Act.

About Bakkafrost:

Bakkafrost is the largest salmon farmer in the Faroe Islands and the second

-largest salmon farmer in Scotland. The Group is fully integrated from feed

production to smolt, farming, VAP and sales. The Group has production of

fishmeal, fish oil and salmon feed in the Faroe Islands and primary and

secondary processing in the Faroe Islands, Scotland and Denmark. The Group

operates sea farming and broodstock operations in both the Faroe Islands and

Scotland. The Group has built a biogas plant in the Faroe Islands. The

headquarter is located in the Faroe Islands, and the Group has sales and

administration offices in Grimsby (UK), Edinburgh (Scotland), Boulogne-Sur-Mer

(France), New Jersey (US) and Munkebo (DK). The Bakkafrost Group has 1,778

employees (full-time equivalents).

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