Bakkafrost P/f

Earnings Release • May 10, 2022

Operational EBIT of DKK 418 Million for the First Quarter of 2022

Operational EBIT of DKK 418 Million for the First Quarter of 2022

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

specified)

The Bakkafrost Group delivered a total operating EBIT of DKK 418 million (DKK

224 million) in Q1 2022 and made a profit of DKK 405 million (DKK 408 million).

The combined FO farming and VAP segments made an operational EBIT of DKK 442

million (DKK 218 million). The FO farming segment made an operational EBIT of

DKK 471 million (DKK 143 million). The SCT farming segment made an operational

EBIT of DKK -53 million (DKK -6 million). The VAP segment made an operational

EBIT of DKK -29 million (DKK 75 million). The EBITDA for the FOF segment was DKK

86 million (DKK 48 million).

Commenting on the result, CEO Regin Jacobsen said:

"Overall, we are pleased with the results from the Faroese farming operation and

our FOF segment. In this quarter, our farming operation in the Faroe Islands has

continued on the trajectory to higher volumes. The biology has been good and sea

lice levels low. The expansions of the Norðtoftir and Glyvradal hatcheries are

also progressing as planned and will be completed later this year.

Despite disappointing results in our Scottish farming operation, we are pleased

to see clear improvements during this quarter, following the challenging biology

and high mortality we had in Q3 and Q4 2021. At the beginning of Q1 2022, the

biology was still negatively affected at a few sites by the gill health issues

in the two previous quarters. This caused elevated mortality at these sites. The

issues reduced during Q1 2022 and in March we had no exceptional mortality, and

the Scottish farming operation was profitable again. In this quarter, we also

more than doubled our freshwater treatment capacity in Scotland with the

introduction of our second large freshwater treatment vessel. We are confident,

that this will significantly improve our ability to reduce the biological risk.

This will be put to the test in the fall when the risk is highest. In Q4 2022,

we also expect the Applecross 4 expansion to be finalised, which will enable us

to be self-sufficient with high-quality smolt of significantly larger size than

today. This will be the first major milestone in transforming the Scottish

farming operation.

The disruption in global supply chains has strengthened the need for local

sourcing. In this respect, Bakkafrost is in a good position as around two-thirds

of our sourcing is from local suppliers, and we have good access to locally

caught marine raw material for our feed production.

The salmon market has been exceptionally strong so far in 2022 with record high

salmon prices. We do not expect prices to remain as high as they have been

lately but expect prices to come down somewhat for the rest of 2022, however

still on a strong level due to a tight supply outlook."

Total harvested volumes for Q1 2022 was 21,400 tonnes gutted weight (21,000

tgw):

.                       FO: 17,500 tgw (14,000 tgw),

.                       SCT: 4,000 tgw (7,000 tgw).

In total, 4.2 million (4.0 million) smolts were transferred during Q1 2022:

.                       FO: 2.0 million (2.3 million),

.                       SCT: 2.3 million (1.6 million).

For the combined FO farming and VAP segments, the operational EBIT per kg in Q1

2022 was DKK 25.32 (DKK 15.56), which corresponds to NOK 33.79 (NOK 21.48). The

FO Farming segment achieved higher prices in Q1 2022 than in Q1 2021.

In Q1 2022, the SCT farming segment had incident-based costs of DKK 24 million

(DKK 8 million). The incidents were mainly in January and are zero in March.

The FOF segment made 20% (15%) EBITDA margin. Sales of fish feed amounted to

26,200 tonnes (23,700 tonnes) in Q1 2022. During Q1 2022, Havsbrún sourced

78,000 tonnes (48,500 tonnes) of raw material.

The net interest-bearing debt amounted to DKK 2,192 million at the end of Q1

2022, compared to DKK 2,126 million at year-end 2021. Undrawn credit facilities

amounted to DKK 2,999 million at the end of Q1 2022.

Bakkafrost aims at giving the shareholders a competitive return on their

investment, both through payments of dividends and by value growth of the equity

through positive operations.

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 29th 2022, decided to

pay out a dividend of DKK 5.14, corresponding to NOK 6.70* per share. The total

dividend of DKK  304 million (NOK 396 million) will be paid out on or around May

20th 2021.

The equity ratio was 64% on 31 March 2022, compared to 64% at the end of 2021.

*The dividend per share in NOK is subject to changes depending on the exchange

rate between NOK and DKK, which will be announced after the Annual General

Meeting.

OUTLOOK

Market

Supply decrease of 7%

The supply of salmon decreased 7.0% in Q1 2022, compared to Q1 2021 incl.

inventory movements. Without inventory movements, the supply was 6.7% lower,

according to the latest estimate from Kontali Analyse.

47% higher salmon prices

Salmon prices were 47.1% higher in this quarter compared to Q1 2021. Reduced

supply, increased demand for salmon and general inflation on food prices have

pushed salmon prices upwards. The demand for salmon has strengthened after Covid

-19 restrictions have been lifted in most markets. This is reinforced by higher

activity in the travel and hospitality industry.

Negative growth in H1 2022

In H1 2022, the global supply growth of Atlantic salmon is expected to be

negative with around 7%, compared to H1 2021. Overall, the market supply of

salmon in 2022 is expected to decrease around 1%, compared to 2021, including

inventory movements.

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

markets to increase diversification and mitigate the market risk. Bakkafrost

operates in the main salmon markets, Europe, 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 strong in

this quarter. Sea lice levels and mortality rates have all been low.

With Bakkafrost's new wellboat, Bakkafossur, which will have 7,000m[3] tank

capacity for seawater, 3,000m[3] for freshwater and reverse osmosis system

onboard, Bakkafrost's capabilities to further reduce the biological risks in the

Faroe Islands will be further strenghtened.

The expansion of hatchery capacity in the Faroe Islands to fulfil Bakkafrost's

goal to build an annual production capacity of over 23 million smolt of 500g in

2026 is progressing as planned. Operational adjustments and fine tuning have

also been made in the smolt production at the Strond hatchery, which is now

outperforming historical performance.

The farming operation in Scotland has performed much better in this quarter,

compared to Q3 and Q4 2021. The main root-cause for the mortality in Scotland in

H2 2021 was compromised gill health in combination with secondary complications,

such as blooms of micro-jellyfish/hydrozoans and fish handling during necessary

treatments and lack of fresh water treatment capacity. Towards the end of Q4

2021, the situation stabilised on somewhat elevated mortality rates, which for a

few sites remained until the middle of Q1 2022. Hence, the situation improved

during Q1 2022 and in March 2022, the Scottish farming segment did not have any

exceptional mortality and the Scottish farming segment was profitable again.

Bakkafrost has implemented many changes in the Scottish farming operation,

including a new farming strategy. The benefits from this is gradually emerging

as salmon produced according to the new farming strategy is beginning to be

harvested.

In March 2022, the Scottish farming operation was reinforced with a new wellboat

with large freshwater treatment capacity. This more than doubled the freshwater

treatment capacity in Scotland and is expected to play an important role in

mitigating compromised gill health, hence reducing risk of mortality caused by

secondary complications.

Bakkafrost's implementation of the large smolt strategy in Scotland is

progressing well and the current expansion phase of the Applecross hatchery is

expected to be finalised by the end of 2022. By then, the hatchery will have the

capacity to produce around 8 million smolt at 250g. Further planned expansion of

the Applecross hatchery will be finalised by end of 2023 and bring the total

production capacity up to 10 million smolt at 500g.

New hatcheries will increase the total production capacity up to around 18

million smolt of around 500g in 2026. In Q1 2022 the average weight of released

smolt in Scotland was 102g, which is 15% higher than in Q1 2021. In 2022 the

average weight of in the released smolt in Scotland is expected to be around

120g.

During Q1 2022, Bakkafrost secured the land for the construction of the second

large hatchery in Scotland. Depending on the final surveys, construction of the

next large hatchery is expected to commence in H2 2022.

Having large smolt in Scotland is vital to transform the farming operation and

reduce the biological risk in Scotland. It will however take time for Bakkafrost

to materialise this as it takes time to build the necessary hatchery capacity.

Smolt release

Bakkafrost expects to release around 14.9 million large smolts in 2022 in the

Faroe Islands and around 10.8 million smolts of around 120g in Scotland. The

number and average weight of smolts released are key elements of predicting

Bakkafrost's future production.

Million smolt released 2022 2021 2020 2019 2018

FO 14.9 14.4 14.3 12.7 12.6

SCT 10.8 11.1 10.4 12.4 8.6

Harvest volumes for 2022 in the Faroe Islands are expected to reach 68,000

tonnes gutted weight and 35,000 tonnes gutted weight in Scotland, giving at

total of 103,000 tonnes gutted weight.

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

dependent on the 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 between 6 to 12 months.

For 2022 Bakkafrost has signed contracts covering around 32% of the expected

harvest volumes in the Faroe Islands and Scotland combined.

FOF (Fishmeal, Oil and Feed)

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

availability of raw material.

The ICES 2022 recommendation for blue whit­ing is 753 thousand tonnes, which is

a 19% reduction from the recommendation for 2021.

Bakkafrost expects the production volumes of fishmeal and fish oil in 2022 to be

on similar levels as in 2021. Havsbrún's sales of fish feed in 2022 is expected

to be around 130,000 tonnes.

The major market for Havsbrún's fish feed is the local Faroese market, primarily

Bakkafrost FO's internal use of fish feed, and the feed used in the Scottish

farming operation.

Lately, the prices on vegetable raw materials have increased significantly. This

affects the whole animal protein market as well as other food producers.

Bakkafrost is in a relatively good competitive position due to the low inclusion

of vegetable ingredients in the feed combined with low feed conversion ratio and

good access to marine raw materials.

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 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

smolt 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 Bakkafrost will also invest in more

treatment vessel capacity to improve 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 above 23 million smolt at 500g, investments in a

broodstock facility and expansion of feed production capacity.

With the investment plan Bakkafrost expects to sustainably grow 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.

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 the finan­cial flexibility going forward.

In December 2021 (with closing in Q1 2022), Bakkafrost entered a term sheet for

a 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, and the facility agreement is planned for signing by the

end of February 2022. 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 2022 report and the Q1 2022 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, New Jersey 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, which

started operation in Q2 2020. The headquarter is located in the Faroe Islands,

and the Group has sales and administration offices in Grimsby (UK), Edinburgh

(Scotland) and in New Jersey (US). The Bakkafrost Group has 1,653 employees

(full-time equivalents).

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