SalMar ASA

Earnings Release • May 15, 2018

SalMar ASA

Presentation Q1 2018

CEO Olav-Andreas Ervik CFO Trond Tuvstein

Olav-Andreas Ervik new CEO of SalMar

• 41 years, from Frøya
• More than 20 years of experience from the aquaculture industry
• Worked in SalMar since 2012
• Director Farming since 2014
• Favourite cultural tenant: "What we do today we do better than yesterday"

Agenda

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

Q1 2018 – Satisfying performance

• Strong price achievement in the quarter
• Stable biological and cost development in Central Norway
• Operational EBIT in Northern Norway impacted by increased costs on harvested volume
• Total Operational EBIT NOK 708.1 million, up from NOK 670.7 in the same period last year

SalMar - a fully integrated salmon farmer

TRACEABLE SUPPLY CHAIN

• Rauma strain 100 wholly owned • Essential for the performance in the entire value chain

• licenses in Norway

• 112 including R&D and partnerships

Genetics Smolt Farming Harvesting & VAP Sales

• InnovaMar on Frøya

• Vikenco at Aukra

• SalMar AS

• Japan, Vietnam and Korea
• Global span

SalMar in front – Passion for Salmon

Farming Central Norway

	Q1 2018	Q1 2017	FY 2017
Operating income (NOKm)	1 376.2	1 042.7	5 198.5
Operational EBIT (NOKm)	530.6	412.0	1 891.5
Operational EBIT %	38.6 %	39.5 %	36.4 %
Harvested volume (tgw)	22.3	16.2	87.5
EBIT/kg	23.82	25.49	21.63

• Stable cost development expect reduced costs going forward
• Harvest volume mainly from Autumn-16 generation
• Some accelerated harvesting due to fish welfare
• 13% organic salmon in the quarter
• Expect harvest volume of 96,000 tons in 2018

Farming Northern Norway

	Q1 2018	Q1 2017	FY 2017
Operating income (NOKm)	561.1	681.0	2 864.8
Operational EBIT (NOKm)	230.8	362.3	1 376.1
Operational EBIT %	41.1 %	53.2 %	48.0 %
Harvested volume (tgw)	9.6	10.1	47.7
EBIT/kg	24.02	35.74	28.84

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

10.1

• Satisfactory performance in the quarter
• Sea lice treatments negatively affects cost and profitability
• Unfavourable distribution of harvest volumes compared to price development in the period
• Expect higher cost on harvested biomass going forward
• Harvest volume of 47,000 tons in 2018

Sales & Processing

	Q1 2018	Q1 2017	FY 2017
Operating income (NOKm)	2 524.5	2 398.3	10 924.8
Operational EBIT (NOKm)	-15.3	-61.3	47.8
Operational EBIT %	-0.6 %	-2.6 %	0.4 %

Operating income (NOKm) EBIT-margin (%)

• Strong price achievement
• Contract share of 39 % at prices below average spot
• Profitability negatively impacted by seasonal lower volumes
• Higher fixed cost/kg
• Contract share currently around 50% for Q2 2018 and 36% for remaining volume 2018

Norskott Havbruk

	Q1 2018	Q1 2017	FY 2017
Operating income (NOKm)	518.7	372.4	2 088.0
Operational EBIT (NOKm)	173.4	143.3	669.3
Operational EBIT %	33.4 %	38.5 %	32.1 %
Value adjustments biomass	7.0	94.4	9.0
Profit before tax	178.0	235.4	670.3
SalMar's share after tax	76.3	94.7	272.8
Harvested volume (tgw)	6.5	5.9	31.0
EBIT/kg	26.67	24.22	21.59

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

• Strong result in the quarter
• Solid operational performance
• Positive biological development in all farming areas
• Contract share of 32%
• Harvest guidance at 26,000 tons for 2018

Arnarlax HF

1.35

-15.65

	Q1 2018	Q1 2017	FY 2017
Operating income (NOKm)	139.8	146.2	625.4
Operational EBIT (NOKm)	-40.2	34.7	60.2
Operational EBIT %	-28.8 %	23.8 %	9.6 %
Value adjustments biomass	-3.2	-73.3	-186.0
Profit before tax	-63.2	-39.6	-165.2
SalMar's share after tax	-18.6	-13.2	-55.7
Harvested volume (tgw)	2.6	2.0	9.7
EBIT/kg	-15.65	16.95	6.23
Harvest volume (1,000 tons)	EBIT/kg (NOK)

• Earnings impacted by increased level of mortality
• Handling of fish at very cold sea temperatures
• Transportation of fish between sites
• All the cost related to the increased level of mortality is booked in the quarter
• Ongoing structuring continue to affect costs company still in early phase
• Revised guiding: Now expect harvest volumes of 8,000 tons in 2018

Ocean Farm continue to perform well

Expect first harvest 2H 2018

Operational EBIT deviation analysis (qoq)

• Increased earnings driven by significantly higher spot prices in the quarter
• Earnings from Sales & Processing affected by seasonality and negative contract contributions
• Increased cost and unfavourable timing of harvest in Farming Northern Norway affect farming results

Group profit and loss

NOK million	1Q 2018	Q1 2017	FY 2017
Operating income	2 531,0	2 430,1	10 817,2
Cost of goods sold	1 053,2	1 080,3	4 722,5
Payroll expenses	239,8	230,1	929,1
Other operating expenses	408,6	354,9	1 584,8
EBITDA	829,4	764,8	3 580,8
Depreciations and write-downs	121,3	94,1	418,6
Operational EBIT	708,1	670,7	3 162,2
Fair value adjustment	151,6	-182,1	-370,0
Operational profit	859,8	488,6	2 792,2
Income from investments in associates	57,5	82,2	208,9
Net interest costs	-22,9	-24,5	-95,9
Other financial items	19,1	2,2	-49,1
Profit before tax	913,4	548,5	2 856,2
Tax	191,8	105,3	558,4
Net profit for the period	721,6	443,2	2 297,8
Items to be reclassified to profit and loss in subsequent periods:
Change in translation diff. associates	-19,4	1,4	41,7
Change in translation diff. subsidaries	0,2	1,1	-0,3
Cash flow hedge, net tax	-	-2,5	-11,5
Change in fair value of currency instruments	-3,6	-	3,9
Total comprehensive income	698,8	443,2	2 331,6

• Revenues and earnings driven by higher volumes year-over-year
• EBIT/kg at NOK 22.21 vs NOK 25.50 in Q1 17
• Average salmon price (NASDAQ) down NOK 5.52/kg year-over-year
• Negative earnings contribution from Sales & Processing in the quarter

Group balance sheet

NOK million	31.03.2018	31.03.2017	31.12.2017
ASSETS
Intangible fixed assets	3 011,5	2 928,2	2 925,0
Tangible fixed assets	3 578,0	3 239,4	3 604,8
Financial fixed assets	1 056,9	990,9	1 080,9
Total fixed assets	7 646,4	7 158,5	7 610,6
Inventory	4 431,3	4 750,4	4 394,6
Accounts receivables	645,3	553,0	501,1
Other short-term receivables	250,3	277,9	242,9
Cash and cash equivalents	489,1	218,4	177,1
Total current assets	5 816,1	5 799,7	5 315,6
TOTAL ASSETS	13 462,5	12 958,2	12 926,2
EQUITY AND LIABILITIES
Paid-in equity	567,1	541,1	557,6
Reserves	7 713,0	6 499,4	7 022,4
Minority interests	96,3	91,6	88,1
Total equity	8 376,5	7 132,1	7 668,1
Provisions for liabilities	1 390,1	1 406,7	1 362,2
Int. bearing long-term liabilities	1 100,1	1 883,9	1 156,0
Total long-term liabilities	2 490,3	3 290,6	2 518,2
Int. bearing short-term liabilities	124,3	162,6	243,6
Other short-term liabilities	2 471,4	2 372,9	2 496,3
Total short-term liabilities	2 595,7	2 535,5	2 739,9
TOTAL EQUITY AND LIABILITIES	13 462,5	12 958,2	12 926,2
Net interest bearing debt	735,3	1 828,0	1 222,5
Equity share	62,2 %	55,0 %	59,3 %

• CAPEX in line with ongoing investment programs
• Fair value of biomass increased by NOK 171.6 million in the quarter
• Net Interest-bearing debt reduced by NOK 487.2 million during the quarter
• Solid financial position

Group cash flow

NOK million	Q1 2018	Q1 2017	FY 2017
Profit before tax	913,4	548,5	2 856,2
Tax paid in period	-11,3	-14,1	-423,2
Depreciation	121,3	94,1	418,6
Share of profit/loss from associates Realized and unrealized gains on financial assets	-57,5 -	-82,2 -	-208,9 -
Gains exit subsidiaries	-	-	-10,2
Change in fair value adjustments	-151,6	182,1	370,0
Change in working capital	-227,0	-35,8	196,6
Other changes	45,0	40,6	175,4
Net cash flow from operating activities	632,2	733,3	3 374,4
Net cash flow from investing activities	-118,7	-168,1	-758,0
Change in interest-bearing debt	-175,3	-593,1	-1 250,9
Dividend paid out	-	-	-1 366,0
Interest paid	-22,9	-24,5	-95,9
Other changes	-	-4,0	-3,8
Net cash flow from financing activities	-198,2	-621,6	-2 716,6
Net change in cash for the period	315,3	-56,3	-100,2
Foreign exchange effects	-3,3	1,1	3,5
Cash in the beginning of the period	177,1	273,7	273,7
Cash at the end of the period	489,1	218,5	177,1

• Cash flow from operations driven by high salmon prices and satisfactory operational performance
• Net cash flow from investments at NOK -118.7 million
• Operating assets NOK 90.9 million
• Growth NOK 110,1 million
• Received dividends of NOK 82.2 million
• Cash increased by NOK 312.0 million during the period
• 2018 CAPEX estimated to NOK 356 million
• Maintenance NOK 276 million
• Smolt and hatchery NOK 80 million

Outlook

• Guiding of 143,000 tons for 2018 maintained
• Overall stable cost development expected in 2Q 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 36%
• Global supply expected to increase by 4% in 2018
• Expect continued good demand in core markets

THANK YOU FOR YOUR ATTENTION!

salmar.no