SalMar ASA

Investor Presentation • Feb 15, 2018

SalMar ASA

Presentation Q4 2017

CEO Trond Williksen CFO Trond Tuvstein

Agenda

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

Q4 2017 - In line - lowered costs

• Operations in line with expectations higher volumes, improved biology, lowered costs
• EBIT per kilo impacted by lower spot prices but positive contribution from industry segment
• Ocean Farm performing well
• Proposed dividend for 2017 of NOK 19.00 per share

SalMar - a fully integrated salmon farmer

TRACEABLE SUPPLY CHAIN

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

13.30

	Q4 2017	Q4 2016	FY 2017	FY 2016
Operating income (NOKm)	1 362.0	981.7	5 198.5	4 343.5
Operational EBIT (NOKm)	357.7	335.5	1 891.5	1 770.2
Operational EBIT %	26.3 %	34.2 %	36.4 %	40.8 %
Harvested volume (tgw)	26.9	15.0	87.5	70.5
EBIT/kg	13.30	22.43	21.63	25.13

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

21.2

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

23.2

15.0 16.2

Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

• Continued biological improvement
• Pay back from long term investments in preparedness, capacity and knowledge
• Good workmanship
• Continued high treatment capability will affect costs
• Harvest volume from Spring-16 generation, affecting costs negatively

….. but good biological performance for Autumn-16 generation

• Organic salmon some 6% of total volume
• Cost reduction for the fourth quarter in a row expect same development in Q1 2018
• Expect harvest volume of 96,000 tons in 2018

Farming Northern Norway

	Q4 2017	Q4 2016	FY 2017	FY 2016
Operating income (NOKm)	628.7	790.1	2 864.8	2 799.2
Operational EBIT (NOKm)	228.4	443.6	1 376.1	1 480.3
Operational EBIT %	36.3 %	56.1%	48.0 %	52.9%
Harvested volume (tgw)	13.1	11.6	47.7	45.2
EBIT/kg	17.50	38.28	28.84	32.78

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

• Good performance, but higher sea lice levels in some parts of the region
• Increased treatments on coming generation will affect costs negatively
• Preparedness and capacity to handle the situation is good
• Harvesting related to MAB adjustments affect average weight negatively
• Expect higher costs in Q1 2018
• Harvest volume of 47,000 tons in 2018

Sales & Processing

	Q4 2017	Q4 2016	FY 2017	FY 2016
Operating income (NOKm)	2 766.7	2 395.7	10 924.8	9 035.8
Operational EBIT (NOKm)	175.5	-180.5	47.8	-685.8
Operational EBIT %	6.3 %	-7.5%	0.4 %	-7.6%

Operating income (NOKm) EBIT-margin (%)

• Strong achievement from all business units within the segment
• Contract share of 44 % at prices above average spot
• Expect lower volumes in the coming quarters due to seasonality
• Contract share currently at 48% for 1q18, at 26% for FY 2018

Norskott Havbruk

	Q4 2017	Q4 2016	FY 2017	FY 2016
Operating income (NOKm)	485.0	354.6	2 088.0	1 720.6
Operational EBIT (NOKm)	115.4	140.4	669.3	473.9
Operational EBIT %	23.8 %	39.6%	32.1 %	27.5%
Value adjustments biomass	-26.3	50.3	9.0	127.8
Profit before tax	87.2	185.3	670.3	581.8
SalMar's share after tax	37.7	73.9	272.8	236.6
Harvested volume (tgw)	7.2	5.8	31.0	28.0
EBIT/kg	16.00	24.39	21.59	16.90
Harvest volume (1,000 tons)			EBIT/kg (NOK)
9.4
8.4		24.39 24.22	26.91
	7.2
5.9			19.46
5.8				16.00
Q4 16 Q1 17 Q2 17 Q3 17	Q4 17	Q4 16 Q1 17	Q2 17 Q3 17	Q4 17

• Satisfactory operational results in the quarter
• Good biological performance on the majority of sites harvested
• Contract share 44%
• Results still negatively impacted by biological challenge with Gill health at a small number of sites in Shetland and Scotland region
• Accelerated harvesting increases cost/kg
• Affected fish harvested out in the quarter
• Harvest guidance at 26,000 tons for 2018

Arnarlax HF

-2.91

1.35

	Q4 2017	Q3 2017	FY 2017	FY 2016
Operating income (NOKm)	171.7	113.8	625.4	247.4
Operational EBIT (NOKm)	4.3	-4.8	60.2	-1.7
Operational EBIT %	2.5 %	-4.2%	9.6 %	-0.7%
Value adjustments biomass	-52.8	-7.3	-186.0	183.5
Profit before tax	-58.4	-18.4	-165.2	205.4
SalMar's share after tax	-16.0	-9.8	-55.7	52.2
Harvested volume (tgw)	3.2	1.7	9.7	4.0
EBIT/kg	1.35	-2.91	6.23	-0.41
Harvest volume (1,000 tons)			EBIT/kg (NOK)

2.0 2.8 1.7 3.2 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 16.95 9.32 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

• Earnings impacted by biological challenges at one site and one-offs (non-recurring costs) in the quarter
• Ongoing structuring continue to affect costs company still in early phase
• Expect harvest volumes of 11,000 tons in 2018
• SalMar holds a long term view robust development in focus

Ocean Farm with continued strong performance

Equipment and fish deliver according to plan| Strong ongrowth| R&D programs initiated

Operational EBIT deviation analysis (qoq)

• Spot price significantly down during the quarter
• Earnings contributions from Sales & Processing driven by strong operations and favourable contract-prices
• Earnings from farming affected by less favourable timing of harvest qoq
• Total EBIT/kg Q4 2017 NOK 17.70 down from NOK 23.60 in Q3 2017

Group profit and loss

NOK million	4Q 2017	Q4 2016	FY 2017	FY 2016
Operating income	2 780,6	2 476,3	10 817,2	9 029,8
Cost of goods sold	1 263,0	1 220,6	4 722,5	4 000,8
Payroll expenses	241,6	238,9	929,1	861,5
Other operating expenses	447,7	365,4	1 584,8	1 377,8
EBITDA	828,2	651,4	3 580,8	2 789,7
Depreciations and write-downs	121,0	94,4	418,6	358,0
Operational EBIT	707,2	557,0	3 162,2	2 431,6
Fair value adjustment	-370,6	536,4	-370,0	654,0
Operational profit	336,6	1 093,3	2 792,2	3 085,6
Income from investments in associates	19,0	127,4	208,9	286,8
Net interest costs	-26,6	-26,5	-95,9	-101,3
Other financial items	-34,2	24,1	-49,1	70,9
Profit before tax	294,7	1 218,2	2 856,2	3 342,1
Tax	-6,5	201,5	558,4	691,1
Net profit for the period	301,3	1 016,7	2 297,8	2 651,0
Items to be reclassified to
profit and loss in subsequent periods:
Change in translation diff. associates	33,7	2,3	41,7	-105,3
Change in translation diff. subsidaries	2,6	-3,3	-0,3	-1,8
Cash flow hedge, net tax	-	12,1	-11,5	11,5
Change in fair value of currency instruments	3,9	-0,3	3,9	-0,3
Total comprehensive income	341,4	1 027,4	2 331,6	2 555,1

• Revenues and earnings driven by higher volumes
• EBIT/kg at NOK 17.70 vs NOK 20.98 in Q4 16, impacted by lower prices

Average salmon price (NASDAQ) NOK 49.42 /kg vs NOK 67.17 in Q4 2016

• Stable cost development in farming
• Positive earnings contribution from Sales & Processing
• Reported EBIT impacted by negative value adjustments of NOK 370.6 million in the quarter

Group balance sheet

	NOK million	31.12.2017	30.09.2017	31.12.2016
	ASSETS
	Intangible fixed assets	2 925,0	2 929,2	2 910,8
	Tangible fixed assets	3 604,8	3 578,9	3 137,5
	Financial fixed assets	1 080,9	1 052,5	960,0
	Total fixed assets	7 610,6	7 560,6	7 008,3
	Inventory	4 394,6	4 904,8	5 221,8
	Accounts receivables	501,1	551,6	595,8
	Other short-term receivables	242,9	227,4	302,1
	Cash and cash equivalents	177,1	193,6	273,7
	Total current assets	5 315,6	5 877,4	6 393,4
	TOTAL ASSETS	12 926,2	13 438,0	13 401,7
	EQUITY AND LIABILITIES
	Paid-in equity	557,6	561,9	529,0
	Reserves	7 022,4	6 686,0	6 069,4
	Minority interests	88,1	85,9	82,4
	Total equity	7 668,1	7 333,8	6 680,8
	Provisions for liabilities	1 353,9	1 421,9	1 495,3
	Int. bearing long-term liabilities	1 156,0	1 463,8	2 439,6
	Total long-term liabilities	2 509,9	2 885,7	3 934,9
	Int. bearing short-term liabilities	243,6	344,8	198,6
	Other short-term liabilities	2 504,6	2 873,7	2 587,4
	Total short-term liabilities	2 748,2	3 218,5	2 786,0
	TOTAL EQUITY AND LIABILITIES	12 926,2	13 438,0	13 401,7
	Net interest bearing debt	1 222,5	1 615,0	2 364,5
16	Equity share	59,3 %	54,6 %	49,9 %

• CAPEX in line with ongoing investment programs
• Fair value of biomass reduced by NOK 472 million in the quarter
• Interest-bearing debt reduced by NOK 408.9 million during the quarter
• NIBD at NOK 1.22 billion
• Financial position strong, equityratio increased to 59.3%

Group cash flow

NOK million	Q4 2017	Q4 2016	FY 2017	FY 2016
Profit before tax	294,7	1 218,2	2 856,2	3 342,1
Tax paid in period	-403,4	-273,5	-423,2	-291,0
Depreciation	121,0	94,4	418,6	358,0
Share of profit/loss from associates Realized and unrealized gains on financial assets	-19,0 -	-127,4 -	-208,9 -	-286,8 -
Gains exit subsidiaries	0,7	-	-10,2	-26,6
Change in fair value adjustments	370,6	-536,4	370,0	-654,0
Change in working capital	132,0	-491,4	196,6	364,2
Other changes	29,5	-93,6	175,4	-81,2
Net cash flow from operating activities	526,2	-209,6	3 374,4	2 724,6
Net cash flow from investing activities	-112,9	-173,2	-758,0	-1 231,3
Change in interest-bearing debt	-409,7	266,8	-1 250,9	-264,0
Dividend paid out	-	-	-1 366,0	-1 125,9
Interest paid	-26,6	-26,5	-95,9	-101,3
Other changes	0,2	-	-3,8	-
Net cash flow from financing activities	-436,2	240,4	-2 716,6	-1 491,2
Net change in cash for the period	-22,9	-142,4	-100,2	2,1
Foreign exchange effects	6,4	-3,7	3,5	-2,1
Cash in the beginning of the period	193,6	419,8	273,7	273,7
Cash at the end of the period	177,1	273,7	177,1	273,7

• Cash flow from operations driven by strong earnings and working capital release
• Net cash flow from investments at NOK -112.9 million
• Ocean Farming NOK 24.1 million
• Smolt and hatchery NOK 42.0 million
• Other operating assets NOK 74.3 million
• Received dividends of NOK 27.5 million
• Cash reduced by NOK 22.9 million during the period
• 2018 CAPEX estimated to NOK 356 million
• Maintenance NOK 276 million
• Smolt and hatchery NOK 80 million

Agreement on refinancing of credit facilities

• SalMar ASA has entered into a new loan agreement with DNB, Nordea and Danske Bank, which extend the existing credit facilities
• The agreement is for a period of 3 year with the option for an extension for another two years
• Secures credit facilities totaling NOK 4,650 million
• The credit facilities comprise of:
• Term loan facility of NOK 650 million
  • Maturity date fist of July 2019
• Investment/acquisition facility of NOK 2,000 million
• Revolving credit facility of NOK 1,500 million

• Overdraft facility of up to NOK 500 million, renewable annually.

• The financial covenants:

• Equity should not be less than 35%
• Interest cover ratio (EBITDA/net interest) shall not fall below 4.0

Outlook

• Overall stable cost development in short horizon
• Slight capacity growth "traffic light" regime
• Ocean Farm volumes to reach the market in 2H 2018
• Contract share for 2018 currently at 26%
• Global supply expected to increase by 6% in 2018
• Experiencing continued good demand in core markets

THANK YOU FOR YOUR ATTENTION!

salmar.no