Bakkafrost P/f

Investor Presentation • Jun 12, 2019

Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day

Faroe Islands 12 June 2019

This presentation includes statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements.

No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly, none of the Company, or any of its principal shareholders or subsidiary under-takings or any of such person's officers or employees or advisors accept any liability whatsoever arising directly or indirectly from the use of this document.

OUTSTANDING OPERATIONAL AND FINANCIAL PERFORMANCE

• EBIT/kg conversion
  • Norwegian industry 1/3
  • Bakkafrost 80%
• Performance driven by
  • The unique Faroese regulatory framework
  • Business model adapted to market and biological requirements
  • Markets recognizing the uniqueness in taste, texture and nutrition

PERFORMANCE DRIVERS WITHIN THE FAROESE VETERINARY MODEL

THE SECRET BEHIND THE FAROESE BUSINESS MODEL

Structure of production zones

• Strong regulatory framework
• Few players to agree on coordination of unregulated matters avoids "tragedy of the commons"
• Limited overlap of players within production zones
• Autonomy to adjust production cycles/fallowing periods

Licenses

• Existing licenses are operated on a 12-year rolling lifespan system with automatic renewal unless
  • Subject to regulatory compliance
• Licenses give right to utilize given area of fjords for farming fish
• No MAB, but strict regulative measures on farming activity maintaining environmental sustainability

MARINE DIET – IMPACT ON FISH WELFARE AND PRODUCT NUTRITION

30%

Bakkafrost 2019 Norway 2015-2019

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Bakkafrost Key performance indicator 2016-18

Source: Kontali, Bakkafrost

Omega 3/Omega 6 ratio consumer portion 2017

Fish oil inclusion

Fish meal inclusion

9%

12%

16%

BIOLOGICAL PARAMETERS

Harvest Weight (HOG) 3 3,5 4 4,5 5 5,5 2016 2017 2018 Average harvest weight (HOG) Norway Bakkafrost

Economic Feed Conversion Ratio (EFCR)

• Indication of well managed/functioning biology
• Declining cost curve with weight (fixed cost dilution)
• Indication of animal welfare

SIGNIFICANT COST ADVANTAGE

• Costs materially below average level in Norway
• High other costs due to low capacity utilization
  • Wellboats, treatment vessels, processing
• 2018 costs somewhat higher than 2017
  • Isolated mortality incident
  • Adjustment difficulties for new mechanical sea lice method
• 2019YTD costs significantly improved from 2018
• Well invested infrastructure impacting depreciation
• Good prospects for fixed cost dilution in coming years

Source: Kontali, Company reports Note: (1) Harvesting, fish transportation and processing/packaging

PRICE ADVANTAGE – DIFFERENTIATING FACTORS

PRICE ADVANTAGE – DIFFERENTIATING FACTORS

Revenues by geography

Omega 3/Omega 6 ratio consumer portion 2017

THE BAKKAFROST BRAND AND FAROESE ORIGIN

• Premium pricing through visibility of
  • The Bakkafrost brand
  • Faroese origin
• Retail sales focus
  • Visibility in the shelves and wet counters
• Food service/Restaurants
  • Bakkafrost and/or Faroese origin on menus

VALUE ADDED PRODUCTS SIGNIFICANT PROPORTION OF SALES

• VAP contract coverage: 30-40%
  • Brand/Origin visibility
  • Reduced exposure to spot prices
• Contracts normally vary between 6-12 months
• Fixed prices
• 2018 impacted by change in product portfolio
• 2019 coverage at 2015-2017 level

Contract coverage - VAP

PRICE ADVANTAGE

• Significant price premium
  • Larger fish fetch a higher price
  • Good market access
  • Significant Bakkafrost brand premium component
• Faroese/Bakkafrost origin favoured in many markets
  • High marine index
  • Excellent texture and taste
  • High customer satisfaction index

SUMMARY – EBIT PER KG COMPARISON

• Material outperformance in EBIT/kg
  • Differentiated product
  • Sustainable farming
  • State of the art infrastructure
• Alignment between sustainability and profitability

Spot Norway vs realized prices, NOK (2017)

Comparison – Group cost items (2017)

Source: Kontali, Company reports

Note: (1) Harvesting, fish transportation and processing/packaging

ORGANIC GROWTH DRIVERS

LARGE SMOLT STRATEGY - CONCEPT

• Risk management
• Production efficiency
• Growth

Larger smolt will reduce time of cycle in sea farming

• Harvest cycle every second year from the same fjords until effect from larger smolt evolves
• Smolt size will gradually increase from 100-200g to 500g by 2022
• Smolt release will gradually increase from ~10-11 million pcs to ~16 million pcs
• Production volume will gradually increase to ~76 thousand tonnes

10 12 14 16 18 20 Smolt release (million pcs)

Smolt size on released fish (size gram)

NEW PRODUCTION CLUSTER - SUÐUROY

• Suðuroy is isolated in the south of the Faroe Islands
  • Own production cluster
  • Risk reduction
• The farming operation on the islands was underdeveloped
• Bakkafrost started investment in 2016 when Faroe Farming was acquired
• The farming legislation stipulates that all salmon farmed in Suðuroy shall be harvested in Suðuroy

• Four farming sites operational in 2019
  • Froðba A-15
  • Porkeri A-19
  • Hov A-18
  • Hvalba A-23
• Implementing large smolt strategy in Suðuroy
• Suðuroy has capacity to harvest ~ 15 thousand tonnes annually in 2023

Harvest capacity in Suðuroy – tonnes HOG

~40% HARVEST GROWTH EXPECTED (2019-2023)

• Expecting growth ~22 thousand tonnes (HOG)
  • Large growth strategy
  • Development of Suðuroy

Estimated harvest profile 2019-2022 (Thousand tonnes HOG)

PAST CAPACITY DEVELOPMENT INFRASTRUCTURE

• Summary main investments 2014-2018
  • First stage of major smolt investment programme
  • Expansion of seawater capacity
    • Suðuroy
    • Large smolt strategy
  • Acquisition of 2 farming service vessels
  • Acquisition of live fish carrier
  • Commissioning of Glyvrar processing site
• Large smolt capacity current bottleneck
• Material free capacity in all other parts of infrastructure

2014 2018

EXPECTED IMPACT OF 2019-2022 INVESTMENT PROGRAMME

• Investment focus
  • Large smolt capacity
  • Vessels Transportation
• Bottleneck shift from smolt to seawater sites
• Infrastructure rigged for application of new technology

2018 2022

INFRASTRUCTURE PREPARED FOR APPLICATION OF NEW TECHNOLOGY

• Large ongoing R&D efforts in the industry
  • Incentive system in Norway "sponsoring" R&D efforts
  • 11 significant projects approved so far for full-scale trials
  • Total investment estimate of MNOK 7,000
• Bakkafrost is following the developments carefully
  • Prepared to adopt proven technology

EXAMPLE OF OFFSHORE PRODUCTION CYCLE

SUMMARY INVESTMENT PROGRAMME 2019-2022

• Investments next four years amount to ~ DKK 2.5 billion
• Nearly DKK 2.0 billion relates to future growth
• Annually maintenance capex ~ DKK 100-150 million

Planned investments 2019 - 2022

Hatcheries

• Glyvradalur, expansion 9,750m3
• Norðtoftir, expansion 12,000m3
• Ónavík Suðuroy, new hatchery 12,000m3

Broodstock

• Skálavík
• 30 million roe per year production. Ready to upscale to 50 million roe per year

Fishmeal, oil and fish feed

• Increased capacity and flexibility

Planned hatchery in Ónavík Suðuroy

New farming sites

• Hvalba A-23
• Hov A-18
• Nes A-85

Transportation vessels

• Live fish carrier for transportation and treatment 6,000 m3

R&D projects

• Offshore projects to take growth beyond 76 thousand tonnes

Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Financial headlines

Faroe Islands 12 June 2019

BAKKAFROST HAS A GOOD HISTORIC PERFORMANCE

THE BALANCE SHEET IS STRONG (ULTIMO 2018)

• Balance sheet of DKK 5.8 billion
• High proportion Property, Plant and Equipment
  • Well invested infrastructure
• Low proportion Intangibles
  • Historic value of licenses
• Net working capital DKK ~1.9 billion (~1.5 billion excl. fair value)
  • ~60% of net revenues (49% excl. fair value)
  • DKK ~42 per kg harvest (DKK 35 excl. fair value)
• 70% equity ratio
• NIBD/EBITDA ~ 0.4x

THE CAPITAL EMPLOYED HAS INCREASED STEADILY

• Increasing capital employed
  • Result of expansive investment programme
• Very high return on capital employed
  • Variation between 25-35%
• Reduction in 2017 capital employed
  • Unusually low NIBD
• Reduction in 2018 return on capital employed
  • Temporary reduction in harvest

Capital Employed

Notes:

(1) Capital employed defined as Equity + Net Interest Bearing Debt (2) Return on capital employed defined as Operational EBIT/Capital Employed

HIGH LEVEL OF CAPITAL EMPLOYED WITH VERY COMPETITIVE RETURN

Property, Plant & Equipment vs. Intangibles

Return on Capital Employed

• Bakkafrost has the highest capital employed per kg harvest
• Significantly more capital tied up in PPE
  • State of the art infrastructure prepared for higher throughput
• Significantly less capital tied up in licences
• Still very competitive return on capital employed

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INVESTMENTS IN LARGE SMOLT IS CHEAPER THAN LICENCE AUCTION IN NORWAY

• Large investments associated with large smolt strategy
• A number of benefits, including capacity increase
• Harvest increase of 20k tonnes
  • Auction Norway MNOK ~2,500
  • Large smolt MNOK ~1,000

20,000 tonnes HOG – Large smolt strategy vs. auction prices Norway

• Maintenance Capex Historical maintenance capex < DKK 100 million
• Investments in PPE last five years has lifted maintenance capex
• Maintenance is expected to be around DKK 100 150 million
• If cash generation from operation come under pressure, a maintenance at this level should be manageable

CASH CONVERSION, REINVESTMENT AND DIVIDEND

"We can have the cake and eat it too..."

Capital expenditure

Corporate tax

18% of taxable income

Revenue tax

• % of Nasdaq salmon price of harvested volumes
  • 0.5%: salmon price < ~ NOK 421
  • 2.5%: ~ NOK 421 < salmon price < ~ NOK 471
  • 5.0%: salmon price > ~ NOK 471
• Only applicable on salmon sea farming operation
• Revenue tax is deductible in taxable income
• Recognized as cost and not tax in P/L

Revenue tax

Notes:

FINANCING AND MEETING OUR FINANCIAL TARGETS

Financial targets

• Equity ratio: > 50%
• Dividend: 30-50% of adjusted EPS

Financing

• EUR 200m senior secured credit facility
  • Tenor 5 years with maturity Q1 2023
  • Accordion option to increase with another EUR 200m
    • Subject to bank approval

Dividend of adjusted EPS

• Current NIBD/EBITDA ratio (NIBD/Op. EBITDA) of 0.41x
• Available liquidity of MDKK ~970
  • Equivalent to leverage ratio of 1.20x if fully drawn
• Significant leverage capacity beyond current financing

Illustration Debt Capacity

ACCESS TO CAPITAL - EQUITY

• Share widely held among international institutional investors
• High liquidity in the share
• International roadshows every quarter

Shareholder Location (number per location) Share Liquidity (days req. to trade 5%/MEUR~115)

Bakkafrost OSEAX Rebased

30% SUPPLY INCREASE EXPECTED BY 2025 (CAGR <4%)

(Thousand tonnes HOG)	Total growth	Average growth	Growth %	CAGR %
Norway	359	51	31.8%	4.0%
Other Europe	123	18	53.3%	6.3%
Chile	77	11	12.6%	1.7%
North America	23	3	15.3%	2.1%
Other - Cage based	10	1	18.1%	2.4%
Land based	53	8	1291.3%	45.7%
Global	645	92	29.6%	3.8%

• Generally very strong market outlook
• Significant premium for superior products in high end markets
• Bakkafrost is focused on carefully managing and developing its brand in the market
• It all comes down to the quality of the product!

Long term supply outlook (Kontali)

SUMMARY

• Outstanding financial performance
  • Structural, technical and market based advantages
  • Material upgrade of infrastructure carried out in recent years
• Significant investment programme underway
  • Further reinforcement of infrastructure
  • Targeting 70% increase in harvest within 2023
• On shore infrastructure rigged for significantly higher throughput
  • Growth within existing licences beyond 2023
  • Well positioned to take advantage of new seawater farming methods

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Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Large Smolt Strategy Faroe Islands 12 June 2019

22,600 m2, Largest tanks: Diameter 18m

ILLUSTRATION: REQUIRED EXTENSION FOR ON SHORE PRODUCTION UP TO 5 KG

Eeggstanks is 33 pcs x 80.000=2.640.000 eggs
Startfeedings is 12 tanks a 30m3	360m3
Productions stepp I is 16 tanks a 200m3 3.200m3
Productions stepp II is 12 tanks a 500m3 6.000m9
Productions stepp III is 16 tanks a 1.200m3 19.200m3 Strond er 28.760r
Produstions stepp V is 120 tanks a 1.700m² 204.000

LARGE SMOLT STRATEGY - CONCEPT

• Risk management
• Production efficiency
• Growth

EXPERIENCE OF RELEASING LARGE SMOLT IN THE FAROES

• Large smolt responding well to seawater release
• Low mortality in 2019
• Other companies in the Faroes have similar experience
• Critical factors
  • Adjustments and progressions
  • Pumping equipment
  • Piping system for transport
  • Heat regulation
  • CO2 Awareness

Indication of relationship size/growth

• Strond: 29,000 m3
• Viðareiði: 11,248 m3
• Norðtoftir: 5,150 m3
• Glyvrardalur: 1,537 m3
• Húsar: 1,350 m3
• Gjógv: 1,260 m3

Larger smolt will reduce time of cycle in sea farming

• Harvest cycle every second year from the same fjords until effect from larger smolt evolves
• Smolt size will gradually increase from a level of 100-200g to a level of 500g by 2022
• Smolt release will gradually increase from ~10-11 million pcs to ~16 million pcs
• Harvest volume will gradually increase to ~76 thousand tonnes
• Graph indicating smolt release per annum separated in size categories

Smolt release (million pcs)

0

100

FAROESE BROODSTOCK PROGRAMME

• DKK 200m Faroese broodstock investment
• Optimised genetic diversity
  • Growth
  • Quality
  • Sea lice resistance
  • Reduced disease pathogens
• Good results already
• From 2021 all roe will be used

			Do
	Fire - Fire

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Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Cost components Faroe Islands 12 June 2019

DRIVERS FOR COST PERFORMANCE

SIGNIFICANT COST ADVANTAGE

• Costs materially below average level in Norway
• High other costs due to low capacity utilization
  • Wellboats, treatment vessels, processing
• 2018 costs somewhat higher than 2017
  • Isolated mortality incident
  • Adjustment difficulties for new mechanical sea lice method
• 2019 YTD costs significantly improved from 2018
• Well invested infrastructure impacting depreciation
• Good prospects for fixed cost dilution in coming years

Source: Kontali, Company reports Note: (1) Harvesting, fish transportation and processing/packaging

HARVEST WEIGHT

• Bakkafrost's average harvest weight around 6 kg LWE last five years
• Cost dynamics
  • Declining cost with size of fish

Cost Dynamics and Weight Harvest Weight (HOG)

MORTALITY RATE

• Mortality rate has been lower, compared to Norway
• 2018 was a challenging year for Bakkafrost
  • Implementing new treatment methods
  • Extraordinary high mortality in individual farming sites
• Development in 2019 positive

• Feed conversion ratio around 1.2 and 1.3
• Development in 2017 and especially in 2018 had a negative impact on economical FCR
• Development in 2019 should see economical FCR in a positive direction

Economic Feed Conversion Ratio

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Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Suðuroy and New Farming Technology Faroe Islands 12 June 2019

BACKGROUND NEW LICENCES

• Bakkafrost acquired the company Faroe Farming in 2016
  • Prior to this, Faroe Farming was an associated company of Bakkafrost (49%)
• Due to farming license cap in the Faroe Islands, Bakkafrost had to relinquish one license (Hov)
• In 2018, Bakkafrost got licenses to all fjords in Suðuroy, but had to relinquish other licenses
• Suðuroy was an underdeveloped area with unused potential
• Bakkafrost is now sole operator in Suðuroy

Acquired assets in 2016

• Farming site Porkeri A-19
• Farming site Froðba A-15
• Farming site Hov A-18
  • Hov was chosen to be relinquished because of license cap
• Harvest facility was rented
• Old fish processing facility not in use

Investment and changes until now

• Farming site Hov A-18 in operation again
  • Other farming site relinquished instead of Hov A-18
• Farming sites updated, e.g.
  • Move farming sites to outskirt of fjords
  • New feeding barges
  • 200 meter circumference cages
• Updated old fish processing facility to new harvest facility
  • Investment ~ DKK 50 million

PLANNED INVESTMENTS IN SUÐUROY

• New farming site in Hvalba A-23 ~ DKK 50-70 million
  • No prior farming operation
  • First smolt release in summer 2019
  • First harvest expected in 2020
• New hatchery at Ónavík (Smolt) ~ DKK 250-300 million
  • Annual capacity of 3.0m 500g smolt

HARVEST CAPACITY

• Four farming sites operational in 2019
  • Froðba A-15
  • Porkeri A-19
  • Hov A-18
  • Hvalba A-23
• Implementing large smolt strategy in Suðuroy
• Suðuroy has capacity to harvest ~ 15 thousand tonnes annually in 2023

Harvest in Suðuroy tonnes HOG [red = after Bakkafrost acquisition]

Harvest capacity in Suðuroy – tonnes HOG

INFRASTRUCTURE PREPARED FOR APPLICATION OF NEW TECHNOLOGY

• Large ongoing R&D efforts in the industry
  • Incentive system in Norway "sponsoring" R&D efforts
  • 11 significant projects approved for full scale trials
  • Total investment estimate of MNOK 7,000
• Bakkafrost is following the developments carefully
  • Prepared to adopt new technology

Source: Kontali, Norwegian Fishery Directorate Page 69

TECHNOLOGIES DEVELOPED FOR PROTECTED WATERS

• Salmon farming currently carried out in protected waters
  • Global supply constraint with "open technology"
  • Biological carrying capacity reached/exceeded
• Aim of unlocking production capacity with new technology
• Main purpose closed production
  • Reduce exposure to surrounding threats
  • Reduce/eliminate negative effects on environment
• Unlocking production capacity justifies significant increase in
  • Upfront investments
  • Operating costs
• No proven technology to date
  • Excited to follow large-scale trials in coming years

Subsea farming

Closed production in Sea

• Idea of moving production from protected to open waters
• Vast unutilized capacity in waters matching criteria
  • Biological conditions
  • Seawater temperatures
• Significant challenges, compared to traditional technology
  • Waves and current
  • Transportation requirements
  • Safety requirements
  • Investment and opex requirement
• Method replicates the life of a wild salmon
  • Smoltification in fresh water
  • Early grow out in protected waters
  • Later grow out in the ocean

PRODUCTION CYCLE - EXAMPLE

FAROE ISLANDS' AND BAKKAFROST'S INFRASTRUCTURE MEET CRITERIA

• Proven technology for protected waters can be adopted on an opportunistic basis
• Bakkafrost has the best conditions to produce strong fish ready to meet ocean environment (offshore)
• Infrastructure prepared for significant increase in throughput
• Sources of capital readily available

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Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Investment programme Faroe Islands 12 June 2019

Fishmeal, fish oil and fish feed

• Fishmeal, oil and feed inventory buildings (2014-2017)
• Storage tunnels (2017)
• Salmon meal and oil factory (2018)

Hatcheries

• Expansions of Norðtoftir and Viðareiði (2013-2016)
• New hatchery Strond (2016-)

Farming

Cages, nets, land bases, catamarans and feeding barges etc.

FSV

Hans á Bakka (2015), Martin (2016) and Róland (2017)

Harvesting and processing

• Glyvrar, merging 7 factories into 1 (2014-2017)
• Vágur, Suðuroy (2018)

Investment in value chain from 2013 to 2018

CURRENT CAPACITY CONSTRAINTS

• Summary of main investments 2014-2018
  • First stage of major smolt investment programme
  • Expansion of seawater capacity
    • New seawater licences in Suðuroy
    • Release of capacity through large smolt strategy
  • Acquisition of 2 multiskill service vessels
  • Acquisition of wellboat
  • Commissioning of Glyvrar processing site
• Large smolt capacity current bottleneck
• Material free capacity in all other parts of infrastructure

2014 2018

SUMMARY OF PLANNED INVESTMENTS

• Hatcheries
• Broodstock
• Upgrade fish feed factory
• New farming sites
• Transportation and treatment vessel
• R&D projects

Investments 2019 - 2022

IMPACT ON FUTURE CAPACITY CONSTRAINTS

• Investment focus
  • Large smolt capacity
  • Vessels Transportation
• Bottleneck shift from smolt to seawater sites
• Infrastructure rigged for application of new technology

Page 80

GLYVRADALUR - EXPANSION

• Glyvradalur
• Investment ~ DKK 200 million
• Expansion of ~ 9,750 m3
• Capacity after expansion ~ 11,000 m3
• Expansion will be in growth section
• Construction is expected to start in 2019
• Shorter start-up phase than new projects
• First smolt release expected in 2021

NORÐTOFTIR - EXPANSION

• Norðtoftir
• Investment ~ DKK 240 million
• Expansion of ~ 12,000 m3
• Capacity after expansion ~ 17,500 m3
• Expansion will be in growth section
• Construction is expected to start in 2019
• Shorter start-up phase than new projects
• First smolt release expected in 2021

ÓNAVÍK - SUÐUROY

• Ónavík, Suðuroy
• Investment ~ DKK 300 million
• ~ 12,000 m3
• New facility investment more expensive than expansion:
  • Administration part
  • Start feeding
• Around same production as Viðareiði
• Construction is expected to start in 2020
• Longer start-up phase than expansion projects
• First smolt release expected in 2023

COST OF LARGE SMOLT STRATEGY VS. LICENCE AUCTION NORWAY

• A number of benefits, including capacity increase
• Harvest increase of 20k tonnes
  • Auction Norway MNOK ~2,500
  • Large smolt MNOK ~1,000

20,000 tonne HOG – Large smolt strategy vs. auction prices Norway

FISHMEAL, FISH OIL AND FISH FEED

• Increased fishmeal and fish oil capacity to support marine index
  • Silos and storage
  • Production facility
• Increased fish feed capacity and flexibility
  • New feeding line

• Hvalba A-23
  • New land base
  • Cages, feeding system etc.
  • Feeding barge
  • Outskirt of fjord
• Hov A-18
• Nes A-85
• Possible relocation of existing farming sites within fjords
  • Gøtuvík A-47
  • Haraldssund A-72

TRANSPORTATION AND TREATMENT OF FISH

• New live fish carrier
• Investment ~ DKK 300-350 million
  • 6,000 m3
  • Freshwater treatment equipment
  • Higher daily deliveries to processing plant, due to higher production (waiting cages not allowed in the Faroe Islands)
• Hans á Bakka (existing live fish carrier)
  • Smolt transportation
  • Bath treatment
• Offshore ready in marine department
  • 2 x live fish carriers (6,000 m3 and 3,000 m3)
  • 2 x farming service vessels with DP

BROODSTOCK

• Breeding programme based on gene pool of local wild salmon strain
  • Adaptability to local biology
  • Product differentiation
  • Veterinary control
• Support branding strategy
• Independence of external suppliers

BROODSTOCK

• Skálavík
• Capacity to produce 30 million roe per year
• Ready to upscale production to 50 million roe per year
• Location in remote area with no farming operation

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Bakkafrost A world-class company in the salmon industry

Capital Markets Day Sustainability Faroe Islands 12 June 2019

FILM: SUSTAINABILITY AT BAKKAFROST - ADAPTING TO A CHANGING WORLD

SUSTAINABILITY CHALLENGES

• Health, safety and wellbeing
• Highly unionized workforce
• Good labour conditions
• Investment in training

(Total number of lost time injuries/total number of working hours) x 1,000,000.

Includes number of injuries at work and work-related, leading to unfitness for work and absence from the next working day or working shift between January – December.

HEALTHY SALMON

• No antibiotics
• Move towards non-medicinal treatment of sea lice
• Certified sustainable marine content
• Unique nutritional profile
• 86% 2019 harvest expected to be ASC certified

HEALTHY ENVIRONMENT

• Industry-leading feed-to-food ratio
• Sustainable meal, oil and feed production
  • Certified marine ingredients
  • Non-GMO
  • Pro-terra soy
  • REDcert
• Efficient buildings
• Packaging review
• Minimizing impact on fjords

HEALTHY COMMUNITIES

• Largest employer with more than 1k jobs
• DKK 1.579 million in taxes since 2010
• Employed people across 24 municipalities in the Faroes
• Updated community investment policy and strategy
• DKK 10 million Healthy Living Fund announced
• 3-year investment into natural sciences

SUSTAINABILITY REPORTING, RATINGS & INITIATIVES

• 2017 1st Report Oslo Børs CR Guidance
• 2018 2nd Report Global Reporting Initiative
• GSI collaboration, sharing best practice solutions
• UN Global Compact (Ocean Action Business Platform)
• Ocean Disclosure Project

• Healthy Living Plan focused on:
  • Managing sustainability risks: for example biosecurity, operating within planetary boundaries;
  • Capitalizing on opportunities: for example getting price premium from quality and brand, and cost benefits through efficiencies; and
  • Creating 'system value'.

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Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Vessels and Processing Plant Faroe Islands 12 June 2019

SERVICE VESSELS

Hans á Bakka – Live Fish Carrier

Length: 75.80 m – Breadth: 16.00 m - Fish holds: 3,000 m3 Hans á Bakka is mainly used for transport of live salmon to the processing plant in Glyvrar and can carry up to 450 tonnes wfe.

Martin – Farming Service Vessel

Length: 73.40 m – Breadth: 16.63 m - Gross tonnage: 2,466 t

Martin is treating salmon for lice and is also used in other farming operations, such as towing and anhcor handling

SERVICE VESSELS

Róland – Farming Service Vessel

Length: 71.99 m – Breadth: 16.01 m - Gross tonnage: 2,168 t Róland is treating salmon for sea lice and is also used in other farming operations, such as towing and anchor handling. Róland is also cleaning nets with two ROV net-cleaners.

In addition Bakkafrost has 3 smaller Live Fish Carriers:

Vesthav mainly used for transport of live salmon to the processing plant in Suðuroy.

Stígabrúgv used for transport of smolt.

Víkingur used for transport of smolt.

PROCESSING PLANT - GLYVRAR

• The plant 23,500 m2
• Capacities per day:
  • Receiving 450 tonnes LW
  • Gutting 375 tonnes GW
  • Filleting 160 tonnes
• 100,000 tonnes through Harvest per year

• Long ramp-up time for the production
• Bottlenecks have been identified and handled
• New stun & bleed system installed
• Pallet robot system further automated
• Synergies from integrated production

Harvest productivity per week

• Currently high costs per kg
  • Low utilization of plant
• Significant potential through higher throughput
  • Staff costs
  • Maintenance
  • Other
  • Depreciation

OBJECTIVES

• Capacity
• Efficiency
• Flexibility
• Quality
• Meet future demands
• Minimize biological risk

VALUE ADDED PRODUCTS ABILITY TO MEET CUSTOMER REQUIREMENTS

• Good flexibility to produce finished products demanded by the market
  • Fresh and frozen natural products
• From live to finished quality products within 4 hours
  • Sub chilling
  • Various types of packaging
  • Retail and catering
  • Highest productivity
• State of the art equipment
  • 30 35,000 tonnes of raw material / year
• Lowest cost of production per unit
• High flexibility and multi product capability

PLANT SETUP

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Bakkafrost presentation A world-class company in the salmon industry

Capital Markets Day Market Faroe Islands 12 June 2019

30% SUPPLY INCREASE EXPECTED BY 2025 (CAGR <4%)

	Total growth	Average	Growth %	CAGR %
(Thousand tonnes HOG)		growth
Norway	359	51	31.8%	4.0%
Other Europe	123	18	53.3%	6.3%
Chile	77	11	12.6%	1.7%
North America	23	3	15.3%	2.1%
Other - Cage based	10	1	18.1%	2.4%
Land based	53	8	1291.3%	45.7%
Global	645	92	29.6%	3.8%

• Generally very strong market outlook
• Significant premium for superior products in high end markets
• Bakkafrost is focused on carefully managing and developing its brand in the market
• It all comes down to the quality of the product!

2.500 3.000

Long term supply outlook (Kontali)

PRICE ADVANTAGE – DIFFERENTIATING FACTORS

• Superior Quality is the fulcrum
  • Size
  • Taste
  • Health (Omega-3 and Omega 3/Omega 6 ratio)
  • Food safety
• Products free from
  • Antibiotics
  • GMO ingredients
  • Ethoxyquin
  • Chemical lice bath treatments
• Cleaned for environmental pollutants (dioxin and dl-PCB)

SALES ORGANIZATION

• Main sales office is in Glyvrar in the Faroe Islands
• Local sales offices in UK and USA
• Sales, logistics and marketing is handled in-house

• Even split among the 4 main markets
• Close relationship with key customers (partners)
• Fresh sales
  • 20% B2C
  • 80% B2B
• Frozen sales
  • 80% B2C
  • 20% B2B

Sales breakdown – All products 2018

Sales breakdown – Fresh products 2018

THE BAKKAFROST BRAND AND FAROESE ORIGIN

• Premium pricing through visibility of
  • The Bakkafrost brand
  • Faroese origin
• Retail sales focus
  • Visibility in the shelves and wet counters
• Food service/Restaurants
  • Bakkafrost and/or Faroese origin on menus

VALUE ADDED PRODUCTS SIGNIFICANT PROPORTION OF SALES

• VAP contract coverage: 30-40%
  • Brand/Origin visibility
  • Reduced exposure to spot prices
• Contracts normally vary between 6-12 months
• Fixed prices
• 2018 impacted by change in product portfolio
• 2019 coverage at 2015-2017 level

Contract coverage - VAP

PRICE ADVANTAGE

• Significant price premium
  • Larger fish fetch a higher price
  • Good market access
  • Significant Bakkafrost brand premium component
• Faroese/Bakkafrost origin favoured in many markets
  • High marine index
  • Excellent texture and taste
  • High customer satisfaction index

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SATISFIED CLIENTS – ANNUAL SURVEY TO EXISTING CLIENTS

• Customer net promoter score 8.24 out of 10
• Satisfaction with the salmon quality provided by Bakkafrost:
  • 97% are satisfied, more than satisfied, or very satisfied
• Satisfaction with delivery service:
  • 82% are satisfied, more than satisfied, or very satisfied
• Satisfaction with the service provided by your Bakkafrost contact:
  • 95% are satisfied, more than satisfied, or very satisfied

CERTIFICATIONS

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