SalMar ASA

Investor Presentation • Aug 23, 2018

SalMar ASA

Presentation Q2 2018

CEO Olav-Andreas Ervik CFO Trond Tuvstein

Agenda

• Highlights
• Strategic priorities
• Operational update
• Ocean Farming
• Financial update
• Outlook

Highlights

• Good operational performance and cost improvements
• Price achievement impacted by high contract share
• Total Operational EBIT NOK 878.6 million
• Invested NOK 363 million in new MAB capacity
• Ocean Farming concepts developing according to plan

3

SalMar - a fully integrated salmon farmer

TRACEABLE SUPPLY CHAIN

• Rauma strain Central Norway: • Essential for the performance in the entire value chain

• 53 611 MAB-tons

• Northern Norway: 33 406 MAB-tons

Genetics Smolt Farming Harvesting & VAP Sales

• InnovaMar on Frøya

• Vikenco at Aukra

• SalMar AS

• Japan, Vietnam and Korea
• Global span

Farming Central Norway

	Q2 2018	Q2 2017	FY 2017
Operating income (NOKm)	1 092	1 436	5 198
Operational EBIT (NOKm)	496	633	1 891
Operational EBIT %	45.4 %	44.1 %	36.4 %
Harvested volume (tgw)	16.7	21.2	87.5
EBIT/kg	29.74	29.89	21.63

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

• Good biological development
• Prices achieved impacted by unfavourable harvest distribution
• Costs/kg impacted by treatment costs for the 2016 autumn generation, representing 18% of harvest volume
• Costs expected to come down in Q3 due to strong biological performance for the 2017 spring generation
• Expect harvest volume of 100,000 tons in 2018, up 4,000 tons from previous guiding

Farming Northern Norway

	Q2 2018	Q2 2017	FY 2017
Operating income (NOKm)	1 208	932	2 865
Operational EBIT (NOKm)	581	492	1 376
Operational EBIT %	48.1 %	52.8 %	48.0 %
Harvested volume (tgw)	17.4	13.8	47.7
EBIT/kg	33.40	35.73	28.84

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

24.02

33.40

• Operational performance as expected

• Prices achieved supported by favourable distribution of harvest volumes

• Costs increased due to high accumulated treatment costs for 2016 autumn generation
• 100% of the volume in the quarter
• Harvest volume moved from Q3 to Q4 2018 / Q1 2019
• Harvest profile
• Production optimization
• Investment in additional MAB-capacity will improve operational flexibility going forward
• Expect harvest volume of 43,000 tons in 2018

Sales & Processing

-5.0 %

	Q2 2018	Q2 2017	FY 2017
Operating income (NOKm)	3 002	2 996	10 925
Operational EBIT (NOKm)	-150	-113	48
Operational EBIT %	-5.0 %	-3.8 %	0.4 %

• Contract share of 45 % at prices below average spot
• Satisfactory performance
• Improved capacity-utilisation qoq
• Higher volumes
• Contract share currently around 35% for Q3 2018 and 35% for remaining volume 2018

Norskott Havbruk

Q2 2018	Q2 2017	FY 2017
479	599	2 088
174	227	669
36.3 %	37.9 %	32.1 %
16	27	9
190	253	670
76	98	273
6.2	8.4	31.0
27.98	26.91	21.59

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

9.4

• Another strong quarter
• Solid operational performance
• Good biological performance on all sites in all regions
• Contract share of 45%
• New RAS facility being built with first eggs in Q4 2018 and first release of smolt in 2019
• Harvest guidance at 26,000 tons for 2018

Arnarlax HF

	Q2 2018	Q2 2017	FY 2017
Operating income (NOKm)	78	194	625
Operational EBIT (NOKm)	3	26	60
Operational EBIT %	3.3 %	13.4 %	9.6 %
Value adjustments biomass	15	-53	-186
Profit before tax	9	-49	-165
SalMar's share after tax	3	-17	-56
Harvested volume (tgw)	1.0	2.8	9.7
EBIT/kg	2.70	9.32	6.23

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

• Earnings impacted by low volumes, high mortality and high cost
• Ongoing structuring continue to affect costs company still in early phase
• Expect harvest volumes of 6,700 tons in 2018
• Private Placement completed

Smart Fish Farm – Open ocean farming

• Partnering with MariCulture for the development of "Smart Fish Farm"
• Within "development license scheme"
• A semi submersible production unit enabling fish farming possible at high seas
• Will largely resolve current space and environment challenges for the industry
• Applied for 16 development licences

Operational EBIT deviation analysis (qoq)

• Higher prices drive revenues
• Earnings from Sales & Processing impacted by 45% contact share at prices below spot
• Farming impacted by:
• Weaker price achievement due to unfavourable timing of harvest in Central Norway
• Underlying cost improvement qoq

Group profit and loss

NOK million	2Q 2018	2Q 2017	YTD 2018	YTD 2017	FY 2017
Operating income	2 944,0	2 929,9	5 475,0		5 360,0 10 817,2
Cost of goods sold	1 270,8	1 223,4	2 324,0		2 303,6 4 722,5
Payroll expenses	265,2	238,2	505,0	468,3	929,1
Other operating expenses	408,0	384,1	816,5		739,0 1 584,8
EBITDA	1 000,0	1 084,3	1 829,4		1 849,1 3 580,8
Depreciations and write-downs	121,4	101,3	242,7	195,5	418,6
Operational EBIT	878,6	983,0	1 586,8		1 653,7 3 162,2
Fair value adjustment	25,5	-286,8	177,1	-469,0	-370,0
Operational profit	904,1	696,1	1 763,9		1 184,7 2 792,2
Income from investments in associates	78,8	74,9	136,3	157,1	208,9
Net interest costs	-25,1	-20,3	-48,1	-44,8	-95,9
Other financial items	9,8	-33,1	28,9	-30,8	-49,1
Profit before tax	967,6	717,6	1 881,0		1 266,2 2 856,2
Tax	204,6	154,0	396,4	259,4	558,4
Net profit for the period	763,0	563,6	1 484,6		1 006,8 2 297,8
Items to be reclassified to profit and loss in subsequent periods:
Change in translation diff. associates	-24,2	21,3	-43,6	22,8	41,7
Change in translation diff. subsidaries	-3,4	0,4	-3,2	1,4	-0,3
Cash flow hedge, net tax	-	-6,9	-	-9,4	-11,5
Change in fair value of currency instruments	4,0	-	0,4	-	3,9
Total comprehensive income	739,5	578,4	1 438,3		1 021,6 2 331,6
Allocation of the periods net profit:
Non-controlling interests	-2,4	4,1	5,8	13,2	23,8
Shareholders in SalMar ASA	765,5	559,5	1 478,8		993,6 2 274,0
Earnings per share (NOK) 14	6,80	4,98	13,14	8,85	20,24
Earnings per share - diluted	6,78	4,97	13,11	8,82	20,18

• Stable revenue development yoy
• Stable price achievement year-over-year
• Volume down 1,000 tons to 34,000 tons
• Earnings impacted by higher cost year over- year related to amortisations and one-offs
• EBIT/kg at NOK 25.80 vs NOK 28.12 in Q2 17

Group balance sheet

NOK Million	30.06.2018	31.03.2018	31.12.2017	30.06.2017
ASSETS
Intangible fixed assets	3 383.0	3 011.5	2 925.0	2 929.9
Tangible fixed assets	3 596.0	3 578.0	3 604.8	3 420.7
Financial fixed assets	1 041.8	1 056.9	1 080.9	1 060.3
Total fixed assets	8 020.8	7 646.4	7 610.6	7 410.9
Inventory	4 398.6	4 431.3	4 394.6	4 350.4
Accounts receivables	649.8	645.3	501.1	546.6
Other short-term receivables	243.1	250.3	242.9	298.2
Cash and cash equivalents	157.1	489.1	177.1	224.2
Total current assets	5 448.7	5 816.1	5 315.6	5 419.4
TOTAL ASSETS	13 469.4	13 462.5	12 926.2	12 830.3
EQUITY AND LIABILITIES
Paid-in equity	577.9	567.1	557.6	551.2
Reserves	6 311.6	7 713.0	7 022.4	5 725.9
Minority interests	87.0	96.3	88.1	87.3
Total equity	6 976.5	8 376.5	7 668.1	6 364.4
Provisions for liabilities	1 402.3	1 390.1	1 362.2	1 332.2
Int. bearing long-term liabilities	2 337.5	1 100.1	1 156.0	2 320.3
Total long-term liabilities	3 739.9	2 490.3	2 518.2	3 652.4
Int. bearing short-term liabilities	335.6	124.3	243.6	216.1
Other short-term liabilities	2 417.5	2 471.4	2 496.3	2 597.4
Total short-term liabilities	2 753.1	2 595.7	2 739.9	2 813.5
TOTAL EQUITY AND LIABILITIES	13 469.4	13 462.5	12 926.2	12 830.3
Net interest bearing debt	2 516.0	735.3	1 222.5	2 312.2
Equity share	51.8 %	62.2 %	59.3 %	49.6 %

• Investments in new MAB-capacity
• Investments in operating assets mainly maintenance and according to plan
• Net Interest-bearing debt increased by NOK 1,780.7 million qoq following dividend pay-outs of NOK 2,147.2 million
• Solid financial position with equity ratio of 51.8%

Group cash flow

NOK million	Q2 2018	Q2 2017	YTD 2018	YTD 2017	FY 2017
Profit before tax	967,6	717,6	1 881,0	1 266,2	2 856,2
Tax paid in period	-2,7	-5,7	-14,1	-19,8	-423,2
Depreciation	121,4	101,3	242,7	195,5	418,6
Share of profit/loss from associates Realized and unrealized gains on financial assets	-78,8 -	-74,9 -	-136,3 -	-157,1 -	-208,9 -
Gains exit subsidiaries	-	-11,0	-	-11,0	-10,2
Change in fair value adjustments	-25,5	286,8	-177,1	469,0	370,0
Change in working capital	-161,1	73,8	-388,1	38,0	196,6
Other changes	11,8	56,7	56,7	97,3	175,4
Net cash flow from operating activities	832,6	1 144,6	1 464,8	1 877,9	3 374,4
Net cash flow from investing activities	-441,1	-242,4	-559,8	-410,5	-758,0
Change in interest-bearing debt	1 448,2	479,6	1 272,9	-113,4	-1 250,9
Dividend paid out	-2 147,2	-1 356,2	-2 147,2	-1 356,2	-1 366,0
Interest paid	-25,1	-20,3	-48,1	-44,8	-95,9
Other changes	-	-	-	-4,0	-3,8
Net cash flow from financing activities	-724,1	-896,9	-922,3	-1 518,4	-2 716,6
Net change in cash for the period	-332,6	5,3	-17,3	-51,0	-100,2
Foreign exchange effects	0,6	0,4	-2,7	1,4	3,5
Cash in the beginning of the period	489,1	218,4	177,1	273,7	273,7
Cash at the end of the period 16	157,1	224,2	157,1	224,2	177,1

• Cash flow from operations driven by solid operational performance. Impacted by working capital increase
• Net cash flow from investments at NOK -441,1 million
• Investments in new MAB-capacity of NOK 363.1 million
• Operating assets NOK 157.9 million
• Received dividends of NOK 80.0 million
• Paid dividends of NOK 2 147.2 million
• Cash holding decreased by NOK 332.0 million during the period
• 2018 CAPEX estimated to NOK 356 million

Outlook

• Reduced cost expected in 3Q 2018
• Ocean Farm volumes to reach the market in 2H 2018
• Continue to explore opportunities for capacity growth
• Contract share for remaining 2018 volumes currently at 35%
• Global supply expected to increase by ~6% in 2018
• Expect continued good demand in core markets
• Guiding of 143,000 tons for 2018 maintained

THANK YOU FOR YOUR ATTENTION!

salmar.no