SalMar ASA

Earnings Release • May 19, 2020

SalMar ASA

Presentation Q1 2020

CEO Gustav Witzøe CFO & COO Trine Sæther Romuld

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Covid-19 update

Limited impact on Q1 results

Safe

workplace

• Implemented strict precautionary disease prevention measures
• Securing health and safety for our employee's priority number 1
• No employees infected

Supporting our communities

• Close collaboration with local authorities
• Donation of personal protective equipment to local health authorities
• Temporary employment of people who have been laid off from other businesses
• Stimulated local businesses

Operational & financial flexibility

• Great employees who go the extra mile
• Farming operations running as normal, good biological performance in the quarter
• Large and flexible harvesting and processing capacity
• Capex projects continuing according to plan
• Strong balance sheet and flexible financing facilities

SalMar – strategic highlights

fixed price allotment in

February 2020

on 2nd production cycle OF1, harvest scheduled to Q3 2020

First quarter highlights

• Highest operational EBIT recorded in a quarter
• Total operational EBIT 1,065 MNOK and harvest volume 40,000 tons
• Strong results in Central Norway with good biological performance
• Good results in Northern Norway despite biological challenges
• Strong operational results within Sales & Processing, but profitability affected by lower contribution from fixed price contracts
• Guiding of 152,000 tons in Norway and 12,000 tons on Iceland maintained

Farming Central Norway

	Q1 2020	Q1 2019	FY 2019
Operating income (NOKm)	1,584	1,177	5,670
Operational EBIT (NOKm)	742	473	2,165
Operational EBIT %	46.8 %	40.2 %	38.2 %
Harvested volume (tgw)	22.2	18.2	95.3
EBIT/kg	33.50	25.91	22.71

Harvest volume (1,000 tons) EBIT/kg (NOK)

• Strong operations and good results in the period
• Stable cost development and volume as expected
• Improved price achievement after weak price achievement in Q4 2019
• Autumn 18 generation accounted for 75 % of the volume with stable cost development from Q4
• Started harvesting of spring 19 generation with good biological performance and lower cost level compared with previous generations
• Expect somewhat higher volume and lower cost in Q2 2020
• Will finish harvesting of autumn 2018 generation in Q2 and continue with spring 19 who will be the main contributor to harvest volume
• Guiding of 103,000 tons harvest volume in 2020 maintained

Farming Northern Norway

	Q1 2020	Q1 2019	FY 2019
Operating income (NOKm)	896	900	2,789
Operational EBIT (NOKm)	389	348	931
Operational EBIT %	43.4 %	38.7 %	33.4 %
Harvested volume (tgw)	13.6	15.1	48.0
EBIT/kg	28.68	23.05	19.41

• Significant cost improvements compared to previous quarters
• Results negatively impacted by high harvesting cost due to sanitary harvesting of fish from ISA-sone
• Price achievement impacted by high volume towards the end of the quarter
• Spring 18 generation accounted for 29 % of harvested volume and was finished in the quarter
• Autumn 18 generation main contributor to harvest volume with good biological performance
• Expect somewhat lower volume and lower costs in Q2 2020
• Guiding of 49,000 tons harvest volume in 2020 maintained

Sales & Processing

	Q1 2020	Q1 2019	FY 2019
Operating income (NOKm)	3,350	2,820	11,699
Operational EBIT (NOKm)	-17	14	124
Operational EBIT %	-0.5 %	0.5 %	1.1 %

• Strong operations and efficiency improvements from harvesting and processing activities
• Profitability impacted by negative contribution from fixed price contracts
• Contract share at 24 % in the period
• Contract share currently at 25 % for Q2 2020 and 20 % for FY 2020 with prices slightly up from the level in 2019
• Construction work on InnovaNor is progressing according to plan

Arnarlax (Iceland)

	Q1 2020	Q1 2019	FY 20191
Operating income (NOKm)	280	133	627
Operational EBIT (NOKm)	21	25	100
Operational EBIT %	7.6 %	18.9 %	16.0 %
Harvested volume (tgw)	4.3	2.1	9.8
EBIT/kg	4.92	11.77	10.21
1) Consolidated results from February 2019

Harvest volume (1,000 tons) EBIT/kg (NOK)

• Challenging quarter for Arnarlax resulting in a weak result

• Large harvesting of 18G due to increased mortality caused by winter wounds
• Results negatively impacted by high mortality costs of 30 MNOK (7.07 per kg)
• Expect significant lower volume and weak margins in Q2
• Will continue harvesting from 18G in Q2
• Price drop due to Covid-19 affecting Arnarlax more significantly due to no positive FX effect in price
• Guiding of 12,000 tons harvest volume in 2020 maintained

Norskott Havbruk (Scottish Sea Farms)

	Q1 2020	Q1 2019	FY 2019
Operating income (NOKm)	264	405	1,834
Operational EBIT (NOKm)	42	109	292
Operational EBIT %	15.9 %	27.0 %	15.9 %
Value adjustments biomass	-74	-53	-48
Profit before tax	-38	56	229
SalMar's share after tax	-27	25	106
Harvested volume (tgw)	2.9	4.8	25.9
EBIT/kg	14.36	22.78	11.29

Harvest volume (1,000 tons) EBIT/kg (NOK)

• Good growth and biological performance with low mortality rates in the quarter
• Costs improved from Q4 19
• Low harvest volumes in the quarter
• Mainland and Orkney Islands main contributors to harvest volume
• SalMar share after tax affected by fair value adjustment
• Guiding of 26,000 tons harvest volume in 2020 maintained

Operational EBIT deviation analysis (qoq)

Group profit and loss

NOK million	Q1 2020	Q1 2019	Δ%	FY 2019
Operating income	3,625.6	2,963.4	22 %	12,237.6
EBITDA	1,250.1	970.2	29 %	3,786.0
Depreciations and write-downs	185.0	164.0		718.4
Operational EBIT	1,065.0	806.2	32 %	3,067.6
Fair value adjustment	-480.0	-172.8		-33.0
EBIT	585.0	633.3	-8 %	3,034.6
Income from investments in associates	-22.5	28.7		118.7
Net financial items	-167.9	189.5		5.1
Net interest costs	-42.4	-37.1		-157.7
Other financial items	-125.4	226.5		162.8
Profit before tax	394.6	851.4	-54 %	3,158.4
Tax	90.9	139.1		613.9
Net profit for the period	303.7	712.3	-57 %	2,544.5
Items to be reclassified to P&L	303.1	-9.4		39.9
Total comprehensive income	606.9	703.0	-14 %	2,584.4
Earnings per share (NOK)	3.58	6.38	-44 %	22.06
Harvested volume (tgw)	40.0	35.5	13 %	153.1
EBIT per kg (NOK)	26.61	22.71	17 %	20.04
Nasdaq spot price (average)	69.10	62.13	11 %	57.96

• Higher revenue YoY due to increased spot prices and higher volume
• EBIT/kg increased YoY following higher prices
• Significant FX changes in NOK vs. foreign currencies in the quarter affecting several items
• Negative fair value adjustment in the quarter due to unrealized change in forward currency contracts
• Other financial items negative due to currency effects
• Positive translation differences due to currency effects

Group balance sheet

• Investments in line with ongoing investment programs
• Stable standing biomass YoY and lower QoQ
• Net Interest-bearing debt decreased with NOK 671 million during the quarter
• NIBD at NOK 2,231 million at the end of the quarter
• Solid financial position with equity ratio increased to 55.7% and NIBD/EBITDA lowered to 0.55
• Flexible credit facilities

1) NIBD does not include IFRS 16 leasing liabilities

Movement in net interest bearing debt

• Cash flow from operations positively impacted by release of working capital
• Net cash flow from investments at NOK -434 million
• Licenses fixed price NOK 106 million
• Farming and Ocean NOK 112 million
• Smolt and hatchery NOK 38 million
• Sales & Processing NOK 171 million
• Capex Iceland NOK 10 million
• Net interest-bearing debt decreased with NOK 671 million

Outlook

• CAPEX projects continues according to plan
• Expect similar volume and lower costs in Norway in Q2 2020
• Expect significant lower volume and weak margins on Iceland in Q2 2020
• Contract share for Q2 2020 currently around 25% and FY 2020 around 20% with prices slightly up from level in 2019
• Guiding of 152,000 tons in Norway and 12,000 tons on Iceland maintained.
• Expect moderate increase in global supply in 2020
• Covid-19 has led to significant market uncertainties

THANK YOU FOR YOUR ATTENTION

www.salmar.no