Bakkafrost P/f

Earnings Release • Aug 24, 2021

Operational EBIT of DKK 631 Million for the First Half of 2021

Operational EBIT of DKK 631 Million for the First Half of 2021

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

specified)

The Bakkafrost Group delivered a total operating EBIT of DKK 407.5 million in Q2

2021. Total harvested volumes were 28.2 thousand tonnes gutted weight (tgw).

Faroe Islands (FO): 17.6 tgw, Scotland (SCT): 10.6 tgw. The combined FO farming

and VAP segments made an operational EBIT of DKK 348.4 million. The FO farming

segment made an operational EBIT of DKK 343.2 million. The SCT farming segment

made an operational EBIT of DKK 52.9 million. The VAP segment made an

operational EBIT of DKK 5.3 million. The EBITDA for the FOF segment was DKK 57.4

million.

The Group made a profit for Q2 2021 of DKK 428.1 million (DKK 471.7 million).

For H1 2021, the profit was DKK 835.9 million (DKK 323.7 million).

Commenting on the result, CEO Regin Jacobsen said:

"Overall, we are satisfied with the results from this quarter. Despite the

salmon market still being somewhat hampered by the Covid-19 pandemic, the

market was quite strong in the quarter. Especially the US market has

been strong and taken increasing volumes of salmon. The global harvest was only

1% up, compared to the same quarter last year. However, inventories have been

released resulting in an increase in global supply of nearly 9%, compared to the

second quarter last year. Looking ahead, the salmon market outlook is tight for

the rest of 2021 as well as for H1 2022.

We are especially pleased with the progress made in our hatcheries in the Faroe

Islands from which we in this quarter released 3.2 million smolt with an average

size of 422g. Hence, we are closing in on our 500g target in our large-smolt

strategy. We are very excited about this development and that

our ongoing expansions of hatcheries in the Faroe Islands and in Scotland is

progressing well. Especially in Scotland, having larger smolts is a key enabler

for improving the performance of the farming operation. This is

therefore also an important investment area for us, which not only benefits our

operation, but also the suppliers in local communities where we operate. In the

first half of this year, our sourcing from local suppliers amounted to

DKK 876 million in the Faroe Islands and DKK 500 million in Scotland."

Total harvested volumes for Q2 2021 were 28,196 tonnes gutted weight. FO:

17,561 tgw (12,941 tgw), SCT: 10,634 tgw (7,937). Total harvested volumes in H1

2021 were 49,223 tgw (38,813 tgw). FO: 31,586 tgw (23,608 tgw), SCT:

17,637 tgw (15,205 tgw).

In total, 5.2 million (5.8 million) smolts were transferred during Q2 2021. FO:

3.2 million (2.9 million), SCT: 2.1 million (2.8 million). In H1 2021, 9.2

million (9.1 million) smolts were transferred. FO: 5.5 million (5.2 million),

SCT 3.7 million (3.9 million).

The combined FO farming and VAP segments made an operational EBIT of DKK 348.4

million (DKK 134.4 million) in Q2 2021. The operational EBIT per kg in Q2 2021

was DKK 19.84 (DKK 10.38), which corresponds to NOK 26.93 (NOK 15.34) for the

combined FO farming and VAP segments. For H1 2021, the combined FO farming and

VAP segments made an operational EBIT of DKK 566.7 million (DKK 326.5 million).

The FO farming segment made an operational EBIT of DKK 343.2 million (DKK 85.8

million) in Q2 2021. The harvested volumes were higher, and the achieved prices

were higher in Q2 2021, compared to Q2 2020. For H1 2021, the operational EBIT

was DKK 486.5 million (DKK 288.7 million).

The SCT farming segment made an operational EBIT of DKK 52.9 million (DKK 28.8

million) in Q2 2021. Costs of DKK 6.6 million relate to incident-based mortality

in Q2 2021. For H1 2021, the operational EBIT was DKK 46.6 million (DKK 58.5

million).

The VAP segment made an operational EBIT of DKK 5.3 million (DKK 48.6 million)

for Q2 2021. For H1 2021, the operational EBIT was DKK 80.3 million (DKK 37.8

million).

The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 57.4 million (DKK

49.9 million) for Q2 2021, and the EBITDA margin was 16.5% (18.6%). The EBITDA

was DKK 105.7 million (DKK 90.1 million), corresponding to an EBITDA margin of

15.8% (15.6%).

During Q2 2021, Havsbrún sourced 59,289 tonnes (122,512 tonnes) of raw material,

and in H1 2021, Havsbrún sourced 107,836 tonnes (187,319 tonnes) of raw

material.

In Q2 2021, Bakkafrost's full-time employees from 2020, still employed in

Bakkafrost, have received bonus shares with the value of 2% of their salary in

2020. In total, Bakkafrost allocated 12,118 shares to its employees. The total

allocation amounted to DKK 6.6 million and was based on the closing share price

on the allocation day, 15 June 2021.

The Group has been impacted by the market disruption from Covid-19 from late Q1

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 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 9 April 2021, decided to pay

out a dividend of DKK 3.65, corresponding to NOK 4.96 per share. The total

dividend of DKK 215.9 million (NOK 293.3 million) was paid out on 30 April

The net interest-bearing debt amounted to DKK 1,903 million at the end of Q2

2021, compared to DKK 1,753 million at year-end 2020. Undrawn credit facilities

amounted to DKK 1,523 million at the end of Q2 2021.

The equity ratio was 67% at 30 June 2021, compared to 66% at the end of 2020.

OUTLOOK

Market

The global harvest of Atlantic salmon was 1.0% higher in Q2 2021, compared to Q2

2020, according to the latest estimate from Kontali Analyse. Combined with

released inventories, the supply to the market increased 8.9% in Q2 2021,

compared to Q2 2020. Despite increased supply, there was a strong development in

salmon prices during the quarter, in part driven by reopening of the food

service industry in main salmon markets. Hence, the overall market conditions

have continued to improve during this quarter, and further improvement is

expected as Covid-19 mass-vaccination progresses in key markets.

Supply is shrinking short term. In Q3 2021, the global harvest growth of

Atlantic salmon is expected to be negative with around 4%, compared to Q3 2020.

Overall, the market supply of salmon in 2021 is expected to increase around 5

-6%, compared to 2020, when including expected inventory movements.

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

Russia. The Covid-19 pandemic has caused global market disruptions and a shift

from foodservice to retail. The market is still affected by these changes but is

gradually normalising. Due to our highly flexible value chain, Bakkafrost is

well positioned to adapt to these changes and maintains a strong focus on

ensuring a well-balanced flow to the different markets to increase

diversification and mitigate the market risk.

Farming

Overall, the biological performance of the harvested fish in the Faroe Islands

has been strong during Q2 2021. The growth has been strong with very low feed

conversion ratio and the quality of the harvested fish has been good. Our

mechanical delousing capacity has been strengthened even more with the

introduction of new mechanical delousing technology. This will improve fish

welfare even more and reduce mortality.

The average size of transferred smolt continues to increase in the Faroe

Islands, and Bakkafrost is well on track in pursuing the large-smolt strategy.

In Q2 2021, the average weight of the transferred smolt was 422g (286g in Q2

2020). In 2022 the average smolt size is expected to be 500g. To enable this and

add further capacity, the existing hatcheries at Norðtoftir and Glyvradalur are

being expanded. This work is well under way and the increased production output

will be available already in 2022, enabling Bakkafrost to produce 20 million

smolts of 500g in the Faroe Islands.

The gradual improvement of the farming operation in Scotland is continuing. Many

investments are made in the marine farming operation, however the main priority

is on the planned expansion of freshwater capacity. This will be achieved with

the construction of 3 large hatcheries, based on the same template used in the

Faroe Islands. This will enable implementation of the same large-smolt strategy

as pursued in the Faroe Islands. The effect on the farming operation in Scotland

will be gradual over the next years. Once fully implemented, the large-smolt

strategy will be a game changer for the farming operation. The Applecross

hatchery is the first of the 3 future hatcheries and is currently being

expanded. So far, additional capacity and improved RAS capability has been

secured with the expansion and we expect to see some improvements from this

later this year. The Applecross hatchery expansion is expected to be finalised

by the end of 2022.

Bakkafrost focuses on reducing biological risk continuously and has over the

past years made significant investments to diminish this risk, but also to

improve efficiency and ensures sustainable growth. The large-smolt strategy

occupies a central role in this in the Faroe Islands as well as in Scotland.

Bakkafrost expects to release around 14.5 million smolts in 2021 in the Faroe

Islands, compared to 14.3 million smolts in 2020, 12.7 million smolts in 2019

and 12.6 million smolts in 2018. The smolt release in Scotland is expected to be

11.0 million smolts in 2021, compared to 10.4 million smolts in 2020, 12.4

million smolts in 2019 and 8.6 million smolts in 2018. The number and average

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

production.

Bakkafrost's harvest volumes for 2021 in the Faroe Islands are expected to be

66,000 tonnes gutted weight and 40,000 tonnes gutted weight in Scotland. Hence

the total harvest volume is expected to be 106,000 tonnes gutted weight,

compared with 85,686 tonnes harvested in 2020.

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

dependent on the biological development.

VAP (Value Added Products)

Bakkafrost has made large investments in building a highly flexible value chain

which includes a state-of-the-art VAP factory with high capacity. This enables

Bakkafrost to adapt well to the rapidly changing market situations, which is a

great advantage during market disruptions as the one seen during the Covid-19

pandemic. Due to the flexibility and large capacity of the VAP factory,

Bakkafrost has been able to meet the significantly increased demand from the

retail segment by redirecting volumes into the VAP segment.

For 2021 Bakkafrost has signed contracts covering around 31% of the expected

harvest volumes in the Faroe Islands and Scotland combined. Bakkafrost's long

-term strategy is to sell around 40% of the harvested volumes of salmon as VAP

products at contracts.

The contracts are at fixed prices, based on the salmon forward prices at the

time they are agreed and the expectations for the salmon spot price for the

contract period. The contracts last for 6 to 12 months.

FOF (Fishmeal, oil and feed)

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

availability of raw material.

The ICES 2021 recommendation for blue whiting is 929 thousand tonnes, which is a

20% reduction from the recommendation for 2020.

Bakkafrost expects a decrease in production volumes of fishmeal and fish oil in

2021, compared to 2020.

Havsbrún's sales of fish feed for 2021 is expected to be 120,000 tonnes,

depending on external sales.

The major market for Havsbrún´s fish feed is the local Faroese market, including

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

farming operation.

Investments

Bakkafrost's investment programme for the period from 2020 to 2022 in the Faroe

Islands, will amount to around DKK 1.8 billion, including maintenance capex, and

will reinforce Bakkafrost's integrated business model and ensure a capacity

across the value chain to be able to produce 100,000 tonnes gutted weight of

salmon in the Faroe Islands. The aim of the investment programme is to minimize

the biological risk, increase efficiency and create sustainable organic growth.

Bakkafrost's focus on producing larger smolts plays a key role in achieving this

goal.

All in all, Bakkafrost is on track with the investment programme. The hatchery

at Strond is finalized, and the expansion of the hatcheries at Norðtoftir and

Glyvradalur in the Faroe Islands and the Applecross hatchery in Scotland are

well underway. The increased production capacity in these hatcheries will be

available in 2022.

In Q2 2020, Bakkafrost commissioned a new 7,000 m3 well boat with hybrid

technology to reduce the carbon emission and ensure optimal energy consumption.

The vessel will be delivered in H1 2022 and will play an important role in

Bakkafrost's large-smolt strategy and plans to grow beyond 100,000 tonnes in the

Faroe Islands with offshore farming, as well as adding freshwater treatment

capacity.

Bakkafrost's recently finished Biogas plant is an important stepping-stone on

Bakkafrost's sustainable growth path, as it delivers an efficient and

sustainable solution to waste management. By converting the growing biological

waste from the increasing operation into clean energy, the biogas plant alone is

expected to save the environment from 11,000 tonnes of CO2 per year. The Biogas

plant is now operational, supplying electricity into the Faroese electricity

grid as well as providing heating for the residents in Tórshavn, the capital of

the Faroe Islands.

In addition to the planned investments in the value chain in the Faroe Islands,

Bakkafrost expects to make investments of around DKK 350-400 million per year

for 2020-2024 in the Scottish operation. A significant part of this will be

invested in building 3 large hatcheries to increase smolt capacity and become

self-sufficient with large smolt.

Investments have also been made in expansion of the harvest capacity in Scotland

to increase the flexibility of the operation and accommodate the increased

harvest volumes expected in coming years.

Bakkafrost will have a Capital Market Day on 14-15 September 2021, where more

details on the investment plan for the Faroe Islands and Scotland will be

presented.

Financial

Despite the uncertainties imposed by the Covid-19 pandemic, long term market

balances in the world 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.

During Q4 2019, Bakkafrost refinanced its bank facilities amounting to 352

million EUR with a further accordion option of 150 mEUR. In addition, bank

facilities amounting to 100 million GBP were ensured to refinance The Scottish

Salmon Company. In 2020 the two facilities were merged into one new EUR 463

million facility agreement (plus 150 million accordion option)

A high equity ratio together with Bakkafrost's bank financing, makes

Bakkafrost's financial situation strong. This enables Bakkafrost to carry out

its investment plans in the Faroe Islands as well as in Scotland, hereby

strengthening the Group, enabling M&A's and organic growth opportunities as well

as to fulfil its unchanged dividend policy in the future.

Please find the Company's Q2 2021 report and the Q2 2021 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 Fuglafjørður (Faroe Islands). The Group

has primary processing in Glyvrar and Vágur (Faroe Islands), and secondary

processing (VAP) in Glyvrar (Faroe Islands). The Group operates sea farming

in Norðoyggjar, Eysturoy, Streymoy and Suðuroy (Faroe Islands) and in Scotland.

The Group has broodstock operations in Streymoy and Sandoy (Faroe Islands) and

in Scotland. The Group has a biogas plant in Streymoy (Faroe Islands). The

headquarter is located in Glyvrar (Faroe Islands) and has sales and

administration offices in Grimsby (UK), Edinburgh (Scotland) and in New Jersey

(US). The Bakkafrost Group has 1,699 employees (full-time equivalents).

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