SalMar ASA

Investor Presentation • Nov 9, 2018

SalMar ASA

Presentation Q3 2018

CEO Olav-Andreas Ervik CFO Trond Tuvstein

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Highlights

• Strong operational performance with cost improvements and good price achievement
• Record high volume for sales & processing with positive contribution
• Total operational EBIT 939 MNOK
• Guiding of 143,000 tons for 2018 maintained
• Expect harvest of 145,000 tons for 2019

SalMar - a fully integrated salmon farmer

TRACEABLE SUPPLY CHAIN

4

Farming Central Norway

	Q3 2018	Q3 2017	YTD 2018	YTD 2017
Operating income (NOKm)	1 916	1 358	4 385	3 836
Operational EBIT (NOKm)	871	488	1 897	1 534
Operational EBIT %	45,4 %	36,0 %	43,3 %	40,0 %
Harvested volume (tgw)	32,9	23,2	71,9	60,6
EBIT/kg	26,45	21,05	26,39	25,33

21,05

13,30

• Strong operational quarter with record high harvest volume
• Strong underlying cost improvement QoQ and YoY
• 2017 spring generation fully harvested in the quarter and is the main contributor to harvest volume
• Expect an increase in costs in Q4 due to harvesting of autumn 2017 generation
• Guiding of 100,000 tons in 2018, maintained

23,82

Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

29,74

26,45

Farming Northern Norway

16,18

	Q3 2018	Q3 2017	YTD 2018	YTD 2017
Operating income (NOKm)	175	623	1 945	2 236
Operational EBIT (NOKm)	51	293	863	1 148
Operational EBIT %	29,2 %	47,1 %	44,4 %	51,3 %
Harvested volume (tgw)	3,2	10,8	30,2	34,7
EBIT/kg	16,18	27,29	28,61	33,11

• Operational performance as expected

• Low harvest volume due to
• Lower then expected growth
• Production optimization (new MAB)
• Fall 2016 generation finished harvested and startup of harvesting of spring 2017 generation.
• High cost/kg due to low volume and end/start harvesting of two generations
• Expect reduced cost and significant increase in harvest volume in Q4
• 10,8 Guiding of 43,000 tons in 2018, maintained

Sales & Processing

	Q3 2018	Q3 2017	YTD 2018	YTD 2017
Operating income (NOKm)	2 828	2 763	8 354	8 158
Operational EBIT (NOKm)	73	46	-92	-128
Operational EBIT %	2,6 %	1,7 %	-1,1 %	-1,6 %

• Good price achievement

• Contract share at 42%
• Strong operational performance from all areas within the segment
• Record high harvest volume with strong capacity-utilisation
• Contract share currently around 35% for Q4 2018

Norskott Havbruk

	Q3 2018	Q3 2017	YTD 2018	YTD 2017
Operating income (NOKm)	547	632	1 545	1 603
Operational EBIT (NOKm)	156	184	503	554
Operational EBIT %	28,4 %	29,0 %	32,6 %	34,6 %
Value adjustments biomass	-83	-86	-60	35
Profit before tax	70	95	438	583
SalMar's share after tax	30	42	182	235
Harvested volume (tgw)	8,1	9,4	20,8	23,8
EBIT/kg	19,25	19,46	24,18	23,29

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

26,67 27,98

19,25

16,00

• Good biological performance and average weights for the sites harvested in the quarter
• Cost increase from Q2 driven by higher costs in Shetland region
• Results negatively impacted by lower harvest volumes in Scotland / Orkney regions
• New RAS facility on track with first eggs in November 2018 and first release of smolt in Autumn 2019
• Harvest guidance at 26,000 tons for 2018 maintained

Arnarlax HF

	Q3 2018	Q3 2017	YTD 2018	YTD 2017
Operating income (NOKm)	69	114	287	454
Operational EBIT (NOKm)	-32	-5	-69	56
Operational EBIT %	-46,2 %	-4,2 %	-24,2 %	12,3 %
Value adjustments biomass	48	-7	60	-133
Profit before tax	13	-18	-41	-107
SalMar's share after tax	5	-10	-10	-40
Harvested volume (tgw)	1,2	1,7	4,7	6,5
EBIT/kg	-27,05	-2,91	-14,77	8,61

2,70

-27,05

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

• Ongoing structuring continue to affect costs, company still in early phase

• Expect harvest volume of 6,100 tons in 2018, down 600 tons from previous guiding

• Capital increase in place to support further growth

Offshore fish farming – a new era

OCEAN FARM 1 – ENABLING OCEAN FARMING

• Successful test harvest completed at end of Q3 2018
• Remaining volume for 1st generation to reach market in Q4 2018
• Plan to release 2nd generation of smolt in 2019

SMART FISH FARM - ENABLING DEEP OCEAN FARMING

• Partnering with MariCulture for the development of a semi submersible production unit enabling offshore fish farming at high seas
• Applied for 16 licenses within "development license scheme", awaiting approval from authorities
• Will largely resolve current space challenges for the industry

PILOT PHASE

Operational EBIT deviation analysis (qoq)

• Spot prices significantly down during the quarter
• Strong improved earnings from Sales & Processing due to
• Good price achievement
• High capacity-utilization
• Strong biological performance and cost improvement and in Farming
• Total EBIT/kg increased by 0.23 despite lower average spot prices

Group profit and loss

NOK million	Q3 2018	Q3 2017	YTD 2018	YTD 2017	FY 2017
Operating income	2 766,4	2 676,6	8 241,5	8 036,6	10 817,2
Cost of goods sold	1 004,5	1 155,8	3 328,5	3 459,4	4 722,5
Payroll expenses	256,3	219,2	761,4	687,5	929,1
Other operating expenses	443,7	398,1	1 260,2	1 137,1	1 584,8
EBITDA	1 061,9	903,5	2 891,4	2 752,6	3 580,8
Depreciations and write-downs	122,8	102,1	365,5	297,6	418,6
Operational EBIT	939,1	801,3	2 525,9	2 455,0	3 162,2
Fair value adjustment	255,0	469,5	432,1	0,6	-370,0
Operational profit	1 194,1	1 270,9	2 958,0	2 455,6	2 792,2
Income from investments in associates	34,4	32,9	170,7	190,0	208,9
Net interest costs	-29,3	-24,4	-77,4	-69,2	-95,9
Other financial items	6,1	15,9	35,0	-14,9	-49,1
Profit before tax	1 205,3	1 295,3	3 086,2	2 561,5	2 856,2
Tax	269,3	305,5	665,7	564,9	558,4
Net profit for the period	936,0	989,8	2 420,6	1 996,5	2 297,8
Items to be reclassified to profit and loss in subsequent periods:
Change in translation diff. associates	-3,7	-14,8	-47,2	8,0	41,7
Change in translation diff. subsidaries	-0,9	-4,3	-3,6	-2,9	3,5
Cash flow hedge, net tax	0,0	-2,1	0,0	-11,5	-11,5
Total comprehensive income	931,4	968,5	2 369,7	1 990,1	2 331,6
Allocation of the periods net profit:
Non-controlling interests	13,8	8,4	19,6	21,6	23,8
Shareholders in SalMar ASA	922,2	981,3	2 400,9	1 974,9	2 274,0
Earnings per share (NOK)	8,19	8,74	21,33	17,58	20,24
Earnings per share - diluted 14	8,17	8,71	21,27	17,53	20,18

• Revenue driven by high volumes from Farming Central Norway
• Stable price achievement YoY
• Strong cost improvements in Farming Central Norway and strong capacityutilisation in processing
• EBIT/kg at NOK 26,03 vs 23,60 in Q3 17

Group balance sheet

NOK million	30.09.2018	30.06.2018	31.12.2017	30.09.2017
ASSETS
Intangible fixed assets	3 388,9	3 383,0	2 925,0	2 929,2
Tangible fixed assets	3 590,7	3 596,0	3 604,8	3 578,9
Financial fixed assets	1 085,9	1 041,8	1 080,9	1 052,5
Total fixed assets	8 065,5	8 020,8	7 610,6	7 560,6
Inventory	5 027,3	4 398,6	4 394,6	4 904,8
Accounts receivables	528,5	649,8	501,1	551,6
Other short-term receivables	203,7	243,1	242,9	227,4
Cash and cash equivalents	489,4	157,1	177,1	193,6
Total current assets	6 249,0	5 448,7	5 315,6	5 877,4
TOTAL ASSETS	14 314,4	13 469,4	12 926,2	13 438,0
EQUITY AND LIABILITIES
Paid-in equity	589,1	577,9	557,6	561,9
Reserves	7 230,1	6 311,6	7 022,4	6 686,0
Minority interests	100,5	87,0	88,1	85,9
Total equity	7 919,7	6 976,5	7 668,1	7 333,8
Provisions for liabilities	1 460,1	1 402,3	1 362,2	1 421,9
Int. bearing long-term liabilities	1 081,6	2 337,5	1 156,0	1 463,8
Total long-term liabilities	2 541,7	3 739,9	2 518,2	2 885,7
Int. bearing short-term liabilities	734,9	335,6	243,6	344,8
Other short-term liabilities	3 118,1	2 417,5	2 496,3	2 873,7
Total short-term liabilities	3 853,0	2 753,1	2 739,9	3 218,5
TOTAL EQUITY AND LIABILITIES	14 314,4	13 469,4	12 926,2	13 438,0
Net interest bearing debt	1 327,1	2 516,0	1 222,5	1 615,0
Equity share	55,3 %	51,8 %	59,3 %	54,6 %

• Investments in line with ongoing investment programs
• Fair value of biomass increased by NOK 275.5 million
• Interest-bearing debt reduced by NOK 856.6 million during the quarter
• NIBD at NOK 1 327.1 million by the end of the quarter
• Financial position remains strong with equity ratio increased to 55,3%

Group cash flow

NOK million	Q3 2018	Q3 2017	YTD 2018	YTD 2017	FY 2017
Profit before tax	1 170,1	1 295,3	3 051,1	2 561,5	2 856,2
Tax paid in period	0,0	0,0	-14,1	-19,8	-423,2
Depreciation	122,8	102,1	365,5	297,6	418,6
Share of profit/loss from associates	0,8	-32,9	-135,5	-190,0	-208,9
Realized and unrealized gains on financial assets	0,0	0,0	0,0	0,0	0,0
Gains exit subsidiaries	0,0	0,0	0,0	-11,0	-10,2
Change in fair value adjustments	-255,0	-469,5	-432,1	-0,6	370,0
Change in working capital	291,2	26,7	-96,9	64,7	196,6
Other changes	24,1	48,6	80,8	145,9	175,4
Net cash flow from operating activities	1 354,0	970,3	2 818,8	2 848,3	3 374,4
Net cash flow from investing activities	-134,8	-234,6	-689,6	-645,1	-758,0
Change in interest-bearing debt	-856,6	-727,7	416,3	-841,2	-1 250,9
Dividend paid out	0,0	-9,8	-2 147,2	-1 366,0	-1 366,0
Interest paid	-29,3	-24,4	-77,4	-69,2	-95,9
Other changes	0,0	0,0	-5,0	-4,0	-3,8
Net cash flow from financing activities	-886,0	-761,9	-1 813,3	-2 280,4	-2 716,6
Net change in cash for the period	333,2	-26,3	316,0	-77,2	-100,2
Foreign exchange effects	-0,9	-4,3	-3,6	-2,9	3,5
Cash in the beginning of the period	157,1	224,2	177,1	273,7	273,7
Cash at the end of the period	489,4	193,6	489,4	193,6	177,1

• Cash flow from operations driven by strong earnings and working capital release
• Net cash flow from investments at NOK -134.8 million
• Investments in operating assets NOK 112 million
• Received dividends of NOK 80 million
• Investment in Arnarlax NOK 93 million
• Cash holding increased by NOK 332.3 million during the quarter

Outlook

• Slight increase in cost expected in Q4 2018
• Contract share for volume in Q4 2018 currently around 35%
• Successful test harvest completed for Ocean Farm at end of Q3 2018, remaining volume to reach market in Q4 2018
• Guiding of 143,000 tons maintained for 2018
• Expect harvest of 145,000 tons for 2019
• Expect continued good demand in core markets and limited increase in global supply

THANK YOU FOR YOUR ATTENTION

www.salmar.no