Bakkafrost P/f

Earnings Release • May 5, 2020

Operational EBIT of DKK 248 Million for the First Quarter of 2020

Operational EBIT of DKK 248 Million for the First Quarter of 2020

The Bakkafrost Group delivered a total operating EBIT of DKK 248.1 million in Q1

2020. Harvested volumes for the Group were 17.9 thousand tonnes gutted weight,

whereof 10.7 thousand tonnes were harvested in the Faroe Islands (FO) and 7.3

thousand tonnes in Scotland (SCT). The combined Farming FO and VAP segments made

an operational EBIT of DKK 192.1 million. The farming segment made an

operational EBIT of DKK 202.9 million in the Faroe Islands (FO) and DKK 29.7

million in Scotland (SCT). Lower harvest volumes in the quarter had a negative

effect on the operational EBIT. The VAP segment made an operational EBIT of DKK

-10.8 million. The EBITDA for the FOF segment was DKK 40.2 million.

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

specified)

On the 8[th] of October 2019, Bakkafrost acquired majority of the Scottish

Salmon Company (SSC). From this date, SSC is a part of the Bakkafrost Group and

is consolidated into Bakkafrost's accounts. Unless otherwise stated, all figures

presented in this press release include SSC from this date on. SSC's figures

prior to this date are not included in the figures for the Group for the full

year 2019 or in other comparative figures prior to this date.

The Group made a profit for Q1 2020 of DKK -148.0 million (DKK 212.8 million).

The total volumes harvested in Q1 2020 were 17,935 tonnes gutted weight, whereof

10,667 tonnes were harvested in the Faroe Islands (13,707 tgw) and 7,268 tonnes

in Scotland. In total, 3.3 million smolts were transferred during Q1 2020,

whereof 2.3 million (1.7 million) were transferred in FO and 1.0 million were

transferred in SCT.

Commenting on the result, CEO Regin Jacobsen said:

"Overall we are satisfied with the results from this challenging quarter. In

times like these, we see the strength in our integrated value chain and in

particular having significant production capacity and flexibility in our VAP

segment. Swiftly, we have been able to shift volumes from the spot-oriented

market towards the VAP segment for the retail market and hereby maintaining a

high production.

We are pleased that the integration of SSC into Bakkafrost is on track and of

already seeing a positive development in the operation in Scotland; the tangible

results, however, are not expected to materialize until late this year. Our

staff in Scotland and the Faroe Islands are highly motivated and their

cooperation is very good.

The biological development is also good with strong growth in both the Faroe

Islands and Scotland.

The challenges this quarter have been: An unusually stormy January, which

reduced the fishery of species, used as raw material by Havsbrún, hence reducing

production - a severe storm in the end of February, causing a loss of around 1.2

million fish - and then the outbreak of the Covid-19 pandemic.

Since February, Covid-19 has disrupted the salmon market resulting in a drastic

drop in the salmon spot price and imposing logistical problems with air

transport. Over a few weeks, the demand for salmon has changed in favour of

products for the retail segment, but at great harm to the fresh-oriented HORECA

segment.

It will be interesting to see if the huge number of new consumers, buying salmon

from the supermarkets, will be a part of an increased demand for salmon, when

the HORECA segment re-opens during the next coming weeks and months."

The combined FO farming and VAP segments made an operational EBIT of DKK 192.1

million (DKK 231.1 million) in Q1 2020. The operational EBIT per kg in Q1 2020

was DKK 18.01 (DKK 16.86), which corresponds to NOK 25.10 (NOK 21.99) for the

combined FO farming and VAP segments.

The FO farming segment made an operational EBIT of DKK 202.9 million (DKK 229.7

million) in Q1 2020. The harvested volumes were lower, and the achieved prices

were higher in Q1 2020, compared to Q1 2019. A severe storm that hit the Faroe

Islands in late February, caused a loss due to mortality amounting to DKK 23.4

million.

The SCT farming segment made an operational EBIT of DKK 29.7 million in Q1 2020.

The VAP segment made an operational EBIT of DKK -10.8 million (DKK 1.3 million)

for Q1 2020.

The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 40.2 million (DKK

65.3 million) for Q1 2020, and the EBITDA margin was 13.0% (23.0%). During Q1

2020, Havsbrún sourced 64,807 tonnes (115,530 tonnes) of raw material.

The Group was impacted by the significant market disruption from Covid-19

especially towards the end of the quarter.

The net interest-bearing debt amounted to DKK 988.5 million at the end of Q1

2020 (DKK 522.0 million). Undrawn credit facilities amounted to DKK 2,465.3

million at the end of Q1 2020. The equity ratio was 66% at 31 March 2020,

compared to 65% at the end of 2019.

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. Bakkafrost's financial position is strong

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

facilities. Due to the uncertainty imposed by the Covid-19 pandemic, the Board

of Directors have decided by postpone the decision on dividend payment for 2019

until Bakkafrost's H1 presentation on 25 August 2020, at which time the Board of

Directors expect the level of uncertainty to have reduced.

OUTLOOK

Market

The global harvest of Atlantic salmon was around 2.3% higher in Q1 2020,

compared to Q1 2019, according to the latest estimate from Kontali Analyse. The

market was affected negatively by the market disruption caused by Covid-19

pandemic, especially towards the end of the quarter.

Looking forward the market dynamics will still be affected by the Covid-19

situation which imposes greater uncertainty to the market development estimates.

In Q2 2020, the global harvest of Atlantic salmon is expected to increase around

2-4%, compared to Q2 2019. The estimated global harvest of Atlantic salmon for

2020 is an increase of around 2-4%, compared to 2019.

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

Russia. During 2020, variation in sales distribution between the different

markets is driven by the change in demand from quarter to quarter in the

different regions. In Q1 2020 and during the coming quarters, the sales

distribution will most likely be affected by changing market dynamics caused by

the Covid-19 pandemic. Bakkafrost, however, aims to have a balanced market

diversification to reduce market risk.

Farming

The outlook for the farming segment in the Faroe Islands is good, and the

overall operational performance is very good. There are many possibilities in

the Scottish operation. The gradual improvements will start this year and will

be revealed over the next years. The estimates for harvest volumes and smolt

releases in both geographies are dependent on the biological development.

Bakkafrost focuses on reducing biological risk continuously and has made several

new investments and procedures to diminish this risk. Bakkafrost focuses on

using non-medical methods in treatments against sea lice and has invested in new

technology to follow this strategy, including farming supply vessels for

mechanical delousing and mechanical cleaning of nets in the pens.

The quality and performance of the smolts have also increased significantly, and

there are clear signs that the large smolt and non-medical delousing strategies

are working successfully in the Faroe Islands. Looking ahead, Bakkafrost will

extend these strategies into the Scottish farming operation.

Overall, the biological performance in the Faroese and Scottish operations have

been strong during Q1 2020 with good growth and low mortality rates, except for

the mortality caused by the severe storm that hit our farming sites in the Faroe

Islands in late February. The loss of around 1.2 million fish has caused

Bakkafrost to lower the expected harvest volume for 2020 in the Faroe Islands to

50,000 tonnes gutted weight, while the expected harvest in 2020 in Scotland is

increased to 39,000 tonnes gutted weight.

Farming SCT has signed contracts for around 25% of the expected harvest volumes

in Farming SCT in 2020. These contracts usually last for 12 months.

Bakkafrost expects to release 15.0 million smolts in 2020 in the Faroe Islands,

compared to 12.7 million smolts in 2019 and 12.6 million smolts in 2018. The

smolt release in Scotland is expected to be 10.7 million smolts in 2020,

compared to 12.4 million smolts in 2019 and 8.6 million smolts in 2018. The

number of smolts released is a key element of predicting Bakkafrost's future

production.

VAP (Value Added Products)

Bakkafrost has signed contracts covering around 47% of the expected Faroese

harvest volumes in Q2 2020 and 40% of the harvest volume for 2020. Bakkafrost's

long-term strategy is to sell around 40-50% of the Faroese harvested volumes of

salmon as VAP products at fixed price contracts.

The VAP 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 the production of fishmeal and fish oil is dependent on the

availability of raw material. The ICES 2020 recommendation for blue whiting is

1,162 thousand tonnes, which corresponds to an increase of 2%, compared to

ICES's recommendation for 2019.

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

2020, compared to 2019. Havsbrún's sales of fish feed in 2020 are expected to be

110,000 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.

Investments

Bakkafrost's investment programme for the period from 2020 to 2022, excluding

investments in The Scottish Salmon Company, 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.

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 mEUR

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

amounting to 100 mGBP were ensured to refinance The Scottish Salmon Company.

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 un-changed dividend policy in the future.

Covid-19 pandemic

Bakkafrost plays an important role in ensuring healthy food for the world's

growing population, and this role is especially important in the difficult times

the world is facing now.

Bakkafrost has implemented a range of measures to protect our workforce and

ensure continuous production. New procedures and social distancing are

implemented widely in the business, and production and office facilities have

been modified where necessary to prevent infection. In the Faroe Islands all our

employees are offered free Covid-19 screening by health professionals every

second week until late June 2020.

Bakkafrost is taking all necessary steps to protect the business, and we are

constantly adapting to the changing market conditions and shifting demands from

customers.

As an extraordinary precautionary measure, in March 2020, the Board of Directors

postponed the decision on dividend payments for 2019 until 25 August 2020, due

to the uncertainty caused by the Covid-19 pandemic.

Please find the Company's Q1 2020 report and the Q1 2020 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 built a biogas plant in Streymoy (Faroe Islands) which

started operation in Q1 2020. 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 1,553 employees

(full-time equivalents).

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