SalMar ASA

Investor Presentation • Feb 26, 2020

SalMar ASA

Presentation Q4 2019

CEO Gustav Witzøe CFO & COO Trine Sæther Romuld

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Oceans of opportunity

Two directions going forward – coastal and offshore fish farming

• Cost leadership and leading role in industry development
• Seek attractive M&A opportunities
• Take our share in growth opportunities

COASTAL OFFSHORE

• SalMar Ocean pioneering and leading the way in offshore fish farming
• Potential to be main growth driver going forward
• Confident through the results of Ocean Farm 1, strong biological performance so far on 2nd production cycle

SalMar – strategic highlights

• Best distribution

Fourth quarter highlights

• Total operational EBIT 658 MNOK and harvest volume 40,300 tons
• Strong operational improvements for Northern Norway
• Weak price achievement in Central Norway due to large volume in the period where prices where lowest
• Lower volume has affected capacity utilization and spot price increase has given lower contribution from fixed price contracts
• Guiding of 152,000 tons in Norway maintained and increase guidance on Iceland to 12,000 tons
• Propose dividend for 2019 of NOK 21.00 per share

Farming Central Norway

	Q4 2019	Q4 2018	FY 2019	FY 2018
Operating income (NOKm)	1,349	1,577	5,670	5,962
Operational EBIT (NOKm)	418	636	2,165	2,533
Operational EBIT %	31.0 %	40.3 %	38.2 %	42.5 %
Harvested volume (tgw)	24.4	28.2	95.3	100.1
EBIT/kg	17.13	22.53	22.71	25.31

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

• Results in the period impacted by unfavorable harvest distribution
  • High volumes at the beginning of the period where price where the lowest
  • Earlier harvest of autumn 2018 as a preventive measure to reduce biological risk due to sea lice pressure in the beginning of the period
  • Impacting both costs and price achievement negatively
• Spring 18 generation accounted for 55 % of the volume and was finished harvested in the quarter
• Expect a lower volume due to seasonality and stable costs in Q1 2020
  • Continue harvesting of autumn 2018 generation in Q1 and will start harvesting of spring 2019 generation which has shown good biological results.
• Expect to harvest 103,000 tons in 2020

Farming Northern Norway

	Q4 2019	Q4 2018	FY 2019	FY 2018
Operating income (NOKm)	746	701	2,789	2,645
Operational EBIT (NOKm)	270	291	931	1,154
Operational EBIT %	36.2 %	41.6 %	33.4 %	43.6 %
Harvested volume (tgw)	13.4	12.2	48.0	42.4
EBIT/kg	20.21	23.86	19.41	27.24

• Results as expected in the period
• Significant cost improvements compared to previous quarters
• Spring 18 generation accounted for 55% of harvested volume
• Started Autumn 18 generation harvesting with good biological performance
• Expect similar volume and costs at the same level in Q1 2020
• Expect to harvest 49,000 tons in 2020

Sales & Processing

	Q4 2019	Q4 2018	FY 2019	FY 2018
Operating income (NOKm)	3,002	3,078	11,699	11,432
Operational EBIT (NOKm)	8	79	124	-13
Operational EBIT %	0.3 %	2.6 %	1.1 %	-0.1 %

• Higher fixed cost per kg due to lower volumes
• Contract share at 20 % in the period with lower positive contribution compared with previous quarter due to spot price increase
• Contract share currently at 30% for Q1 2020 and 20% for FY 2020 with prices slightly up from the level in 2019
• Expect lower volume in Q1 2020 due to seasonality
• Construction work on InnovaNor is progressing according to plan

Arnarlax (Iceland)

	Q4 2019	Q4 2018	FY 20191	FY 2018
Operating income (NOKm)	165	114	627	400
Operational EBIT (NOKm)	27	-10	100	-79
Operational EBIT %	16.3 %	-8.4 % 16.0 %		-19.7 %
Harvested volume (tgw)	2.6	2.0	9.8	6.7
EBIT/kg	10.35	-4.82	10.21	-11.82
1) Consolidated results from February 2019

• Positive contribution in the period

• Stable production costs and stable capacity utilization at the harvesting plant
• Harvested from 17 generation in the quarter and started harvesting of 18 generation
• Expect higher volume in Q1 and higher costs
  • Larger harvesting of 18G due to increased mortality caused by winter wounds in a period with severe winter storms in January and February 2020
• Guiding increased to 12,000 tons harvest volume in 2020
  • Revised harvest plan for 2020 with more harvest before the winter starts due to lessons learned from increased mortality in the beginning of 2020

Norskott Havbruk (Scottish Sea Farms)

	Q4 2019	Q4 2018	FY 2019	FY 2018
Operating income (NOKm)	392	512	1,834	2,057
Operational EBIT (NOKm)	49	158	292	661
Operational EBIT %	12.6 %	30.8 %	15.9 %	32.1 %
Value adjustments biomass	109	50	-48	-10
Profit before tax	152	202	229	640
SalMar's share after tax	73	83	106	265
Harvested volume (tgw)	5.3	6.7	25.9	27.5
EBIT/kg	9.28	23.70	11.29	24.06

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

• Weak results in the period
• Harvest volume in the quarter impacted by biological challenges earlier in the year in Shetland & Mainland regions
  • Mainland and Orkney Islands main contributors to harvest volume in Q4
• Costs impacted by low volumes and high mortality costs
  • Mortality costs affecting cost with 52 p/kg in addition to harvest of fish with lower average weights
  • Expect improvements in Q1 2020
• Good biological status in all regions by the end of the quarter
• First smolt delivery from new RAS facility in the quarter with larger and more robust smolt
• Expect to harvest 26,000 tons in 2020

Operational EBIT deviation analysis (qoq)

Group profit and loss

NOK million	Q4 2019	Q4 2018	Δ%	FY 2019	FY 2018	Δ%
Operating income	3,186.7	3,101.1	3 %	12,237.6	11,342.6	8 %
EBITDA	863.9	1,057.2	-18 %	3,786.0	3,948.6	-4 %
Depreciations and write-downs	205.7	122.3		718.4	487.8
Operational EBIT	658.1	934.9	-30 %	3,067.6	3,460.8	-11 %
Fair value adjustment	218.4	413.7		-33.0	845.8
EBIT	876.5	1,348.6	-35 %	3,034.6	4,306.6	-30 %
Income from investments in associates	77.8	82.3		118.7	252.9
Net financial items	-62.9	-64.6		5.1	-107.0
Net interest costs	-42.9	-27.7		-157.7	-105.1
Other financial items	-20.0	-36.8		162.8	-1.9
Profit before tax	891.4	1,366.3	-35 %	3,158.4	4,452.6	-29 %
Tax	168.2	207.7		613.9	873.3
Net profit for the period	723.2	1,158.7	-38 %	2,544.5	3,579.2	-29 %
Earnings per share (NOK)	5.93	10.36	-43 %	22.06	31.70	-30 %
Harvested volume (tgw)	40.3	40.5	0 %	153.1	142.5	7 %
EBIT per kg (NOK)	16.31	23.11	-29 %	20.04	24.29	-18 %
Nasdaq spot price (average)	57.31	55.89	3 %	57.96	59.97	-3 %

• Higher revenue YoY due to increased spot prices
• Positive fair value adjustment in the quarter due to higher standing biomass QoQ and higher forward prices
• Net interest costs increased YoY due to implementation of IFRS 16
• EBIT/kg decreased YoY following higher cost and weaker price achievement

Group balance sheet

• Investments in line with ongoing investment programs
• Stable standing biomass YoY and higher QoQ
• Interest-bearing debt increased with NOK 208 million during the quarter
  • NIBD at NOK 2902 million by the end of the quarter
• Solid financial position with equity ratio increased to 54.2% and NIBD/EBITDA at 0.8

1) NIBD does not include IFRS 16 leasing liabilities

Movement in net interest bearing debt

• Cash flow from operations impacted by taxes paid
• Net cash flow from investments at NOK -361 million
  • Farming and Ocean NOK 124 million
  • Smolt and hatchery NOK 67 million
  • Sales & Processing NOK 193 million
  • Capex Iceland NOK 18 million
  • Received dividend from associated companies NOK 43 million
• Net interest-bearing debt increased with NOK 175 million

* Inclusion IFRS 16 adjusted for purchase price analysis for Arnarlax which was finalized in Q4

Outlook

• Expect lower volume and stable costs in Q1 2020
• Contract share for Q1 2020 currently around 30% and FY 2020 around 20% with prices slightly up from level in 2019
• Guiding of 152,000 tons in Norway maintained, increased guidance on Iceland to 12,000 tons and Scottish Sea Farms expect 26,000 tons in 2020.
• Ocean strategy continues according to plan
• CAPEX in 2020 currently estimated to NOK 1,421 million
  • Maintenance CAPEX NOK 283 million
  • Investments for further growth within smolt and hatchery NOK 354 million, Sales & Processing NOK 556 million, Farming NOK 180 million, Ocean NOK 46 million
• Proposed dividend NOK 21.00 per share
• Expect continued good demand in core markets and moderate increase in global supply

Capital Markets Day 15th and 16th of June 2020

• We are looking forward to welcome you to Frøya
• You will get the opportunity to visit our harvesting and processing facility InnovaMar, one of our best conventional farming sites and Ocean Farm 1 - the worlds first offshore fish farm
• In addition the executive management will give insights into the strategic ambitions going forward
• See our webpage for registration

New Head of Investor Relations

• Former Head of Investor Relations Runar Sivertsen new Director of Strategic Projects in SalMar
• Håkon Husby new Head of Investor Relations from 1 st of March 2020
• Worked in SalMar since August 2018
• Background from Management Consulting and Risk Management advisory
• MSc. Applied Physics and Mathematics

Tel: +47 936 30 449

Email: hakon.husby@salmar.no

THANK YOU FOR YOUR ATTENTION

www.salmar.no