SalMar ASA

Investor Presentation • Nov 15, 2017

SalMar ASA

Presentation Q3 2017

CEO Trond Williksen CFO Trond Tuvstein

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Q3 2017 - Strong operations and improving biology

• Strong operations handling of improving biology
• Reduced production cost and high price achievement
• Expected harvest volume Norway increased to 134,000 tons in 2017
• Expect harvest volume Norway of 143,000 tons in 2018
• Ocean Farm 1 according to plan commenced 12 months pilot phase

SalMar - a fully integrated salmon farmer…

TRACEABLE SUPPLY CHAIN

• Essential for the performance in the entire value chain

Genetics Smolt Farming Harvesting & VAP Sales

• Rauma strain 100 wholly owned licenses in Norway

• 112 including R&D and partnerships

• InnovaMar on Frøya

• Vikenco at Aukra

• SalMar AS

• Japan, Vietnam and Korea
• Global span

…with North Atlantic production and global reach

SalMar in front – Passion for Salmon

Farming Central Norway

21,05

	Q3 2017	Q3 2016	FY 2016
Operating income (NOKm)	1 358.2	1 424.9	4 343.5
Operational EBIT (NOKm)	488.5	545.8	1 770.2
Operational EBIT %	36.0 %	38.3 %	40.8 %
Harvested volume (tgw)	23.2	23.4	70.5
EBIT/kg	21.05	23.35	25.13

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

• Strong operational performance over time reduce production cost
• Improved biology
• Preparedness, capacity and knowledge to deal with biological challenges
• Organic salmon some 5% of total volume
• Expect stable cost development in Q4
• Expected harvest volume increased to 86 000 tons in 2017

Farming Northern Norway

	Q3 2017	Q3 2016	FY 2016
Operating income (NOKm)	623.1	369.0	2 799.2
Operational EBIT (NOKm)	293.3	181.4	1 480.3
Operational EBIT %	47.1 %	49.2%	52.9%
Harvested volume (tgw)	10.8	6.2	45.2
EBIT/kg	27.29	29.12	32.78

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

• Strong operational performance
• Good biological situation contribute to higher average weights and strong price achievement
• Expect stable cost development in Q4
• Expect harvest volume of 48 000 tons in 2017

Sales & Processing

	Q3 2017	Q3 2016	FY 2016
Operating income (NOKm)	2 763.4	2 697.1	9 035.8
Operational EBIT (NOKm)	46.2	-118.8	-685.8
Operational EBIT %	1.7 %	-4.4%	-7.6%

Operating income (NOKm) EBIT-margin (%)

• Overall improvements enhance results for Sales & Processing
• High activity and good underlying operations
• Contract share of 45% in Q3 with positive contribution
• Expect 40% contract share for 4q17. Prices at same levels as 1H17

Norskott Havbruk

	Q3 2017	Q3 2016	FY 2016
Operating income (NOKm)	631.9	511.9	1 720.6
Operational EBIT (NOKm)	183.5	151.5	473.9
Operational EBIT %	29.0 %	29.6%	27.5%
Value adjustments biomass	-86.4	26.4	127.8
Profit before tax	95.1	175.0	581.8
SalMar's share after tax	42.1	68.9	236.6
Harvested volume (tgw)	9.4	8.1	28.0
EBIT/kg	19.46	18.59	16.90
Harvest volume (1,000 tons)		EBIT/kg (NOK)
9,4		26,91
8,4 8,1		24,39 24,22
5,9 5,8	18,59		19,46
Q3 16 Q4 16 Q1 17 Q2 17 Q3 17	Q3 16	Q4 16 Q1 17 Q2 17	Q3 17

• Strong operational results in the quarter
• Normal biological performance on the majority of sites with good harvest weights
• Results negatively impacted by biological challenge with Gill health at a small number of sites in mainland Scotland and Shetland
• Accelerated harvesting increases cost/kg
• Biological challenge on these sites continues into Q4
• Will impact harvest volumes for 2018
• Contract share 41%
• Harvest guidance increased to 32,000 tons for 2017. Guidance for 2018 at 27,000 tons

Arnarlax HF

9,32

-2,91

	Q3 2017	Q2 2017	FY 2016
Operating income (NOKm)	113.8	193.8	247.4
Operational EBIT (NOKm)	-4.8	26.0	-1.7
Operational EBIT %	-4.2%	13.4%	-0.7%
Value adjustments biomass	-7.3	-52.7	183.5
Profit before tax	-18.4	-48.8	205.4
SalMar's share after tax	-9.8	-16.7	52.2
Harvested volume (tgw)	1.7	2.8	4.0
EBIT/kg	-2.91	9.32	-0.41
Harvest volume (1,000 tons) 2,8		EBIT/kg (NOK)

2,0 1,7 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 16,95 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17

• Operational setup affect costs negatively early phase in development
• Earnings impacted by biological challenges
• Expect harvest volumes of 9,500 tons in 2017, guidance 2018 at 11,000 tons

Ocean Farm in operational pilot phase

Ocean Farm 1 arrived 5.sep 2017 | Installation and stocking of fish according to plan | First harvest 2H 2018

Operational EBIT deviation analysis (qoq)

• Spot price significantly down during the quarter
• Overall improvements enhance results for Sales & Processing. Contracts with positive contribution
• Continued cost reductions improve financial performance in farming
• Total EBIT/kg Q3 2017 NOK 23.60, down NOK 4.52 from Q2 2017

Group profit and loss

NOK million	Q3 2017	Q3 2016	YTD 2017	YTD 2016	FY 2016
Operating income	2 676,6	2 262,1	8 036,6	6 553,5	9 029,8
Cost of goods sold	1 155,8	1 022,9	3 459,4	2 780,3	4 000,8
Payroll expenses	219,2	217,9	687,5	622,6	861,5
Other operating expenses	398,1	354,7	1 137,1	1 012,3	1 377,8
EBITDA	903,5	666,5	2 752,6	2 138,3	2 789,7
Depreciations	102,1	90,2	297,6	263,6	358,0
Operational EBIT	801,3	576,3	2 455,0	1 874,7	2 431,6
Fair value adjustment	469,5	173,3	0,6	117,6	654,0
Operational profit	1 270,9	749,6	2 455,6	1 992,3	3 085,6
Income from investments in associates	32,9	67,5	190,0	159,5	286,8
Net interst costs	-24,4	-27,0	-69,2	-74,8	-101,3
Other financial items	15,9	26,4	-14,9	46,9	70,9
Profit before tax	1 295,3	816,5	2 561,5	2 123,9	3 342,1
Tax	305,5	189,1	564,9	489,6	691,1
Net profit for the period	989,8	627,3	1 996,5	1 634,3	2 651,0
Items to be reclassified to profit and loss in subsequent periods:
Change in translation diff. associates, net tax	-14,8	-36,9	8,0	-107,6	-105,3
Change in translation diff. Subsidaries, net tax	-4,3	-0,4	-2,9	1,6	-1,8
Cash flow hedge	-2,1	-0,6	-11,5	-0,6	11,5
Change in fair value of currency instruments	-	-	-	-	-0,3
Total comprehensive income	968,5	589,5	1 990,1	1 527,7	2 555,1

• Revenues driven by high volumes
• Average salmon price (NASDAQ) NOK 56.55/kg (NOK 60.47) – high price achievement
• Cost improvements in farming
• EBIT/kg at NOK 23.60 vs NOK 19.46 in Q3 16

Group balance sheet

NOK Million	30.09.2017	30.06.2017	31.12.2016	30.09.2016
ASSETS
Intangible fixed assets	2 929,2	2 929,9	2 910,8	2 911,9
Tangible fixed assets	3 578,9	3 420,7	3 137,5	3 050,1
Financial fixed assets	1 052,5	1 060,3	960,0	857,0
Total fixed assets	7 560,6	7 410,9	7 008,3	6 819,0
Inventory	4 904,8	4 350,4	5 221,8	4 286,6
Accounts receivables	551,6	546,6	595,8	484,5
Other short-term receivables	227,4	298,2	302,1	407,1
Cash and cash equivalents	193,6	224,2	273,7	419,8
Total current assets	5 877,4	5 419,4	6 393,4	5 597,9
TOTAL ASSETS	13 438,0	12 830,3	13 401,7	12 416,9
EQUITY AND LIABILITIES
Paid-in equity	561,9	551,2	529,0	523,3
Reserves	6 686,0	5 725,9	6 069,4	5 060,6
Minority interests	85,9	87,3	82,4	60,7
Total equity	7 333,8	6 364,4	6 680,8	5 644,6
Provisions for liabilities	1 421,9	1 332,2	1 495,3	1 228,9
Int. bearing long-term liabilities	1 463,8	2 320,3	2 439,6	2 230,5
Total long-term liabilities	2 885,7	3 652,4	3 934,9	3 459,5
Int. bearing short-term liabilities	344,8	216,1	198,6	140,4
Other short-term liabilities	2 873,7	2 597,4	2 587,4	3 172,4
Total short-term liabilities	3 218,5	2 813,5	2 786,0	3 312,8
TOTAL EQUITY AND LIABILITIES	13 438,0	12 830,3	13 401,7	12 416,9
Net interest bearing debt	1 615,0	2 312,2	2 364,5	1 951,2
Equity share	54,6 %	49,6 %	49,9 %	45,5 %

• CAPEX in line with ongoing investment programs
• Fair value of biomass increased NOK 316.7 million
• Financial position remains strong, equity-ratio increased to 54.6%

Group cash flow

NOK Million	Q3 2017	Q3 2016	YTD 2017	YTD 2016	FY 2016
Profit before tax	1 295,3	816,5	2 561,5	2 123,9	3 342,1
Tax paid in period	-	-	-19,8	-17,6	-291,0
Depreciation	102,1	90,2	297,6	263,6	358,0
Share of profit/loss from associates	-32,9	-67,5	-190,0	-159,5	-286,8
Dgains on exit of subsidary	-	-	-11,0	-28,4	-26,6
Change in fair value adjustments	-469,5	-173,3	-0,6	-117,6	-654,0
Change in working capital	26,7	302,6	64,7	855,5	364,2
Other changes	48,6	-31,1	145,9	45,5	-81,2
Net cash flow from operating activities	970,3	937,4	2 848,3	2 965,5	2 724,6
Net cash flow from investing activities	-234,6	-246,0	-645,1	-1 089,3	-1 231,3
Change in interest-bearing debt	-727,7	-438,3	-841,2	-530,9	-264,0
Dividend paid out	-9,8	-4,7	-1 366,0	-1 125,9	-1 125,9
Interest paid	-24,4	-27,2	-69,2	-75,0	-101,3
Other changes	-	-	-4,0	-	-
Net cash flow from financing activities	-761,9	-470,2	-2 280,4	-1 731,7	-1 491,2
Net change in cash for the period	-26,3	221,2	-77,2	144,5	2,1
Foreign exchange effects	-4,3	-0,4	-2,9	1,6	-2,1
Cash in the beginning of the period	224,2	198,9	273,7	273,7	273,7
Cash at the end of the period	193,6	419,8	193,6	419,8	273,7

• Strong cash flow from operations
• Net cash flow from investments at NOK -234.6 million
• Ocean Farming NOK 129.2 million
• Smolt and hatchery 62.1 million
• Other operating assets 69.8 million
• Received dividend of NOK 26.5 million
• Interest-bearing debt decreased by NOK 727.7 million during the quarter

Outlook

• Biology improving
• Continued focus on cost reductions
• Expect harvest volume of 134 000 tons (Norway) in 2017, targeting 143,000 tons in 2018
• Contract share for 4q 2017 around 40%, same price levels as 1H17, currently at 25% for 2018
• Expect continued good demand

THANK YOU FOR YOUR ATTENTION!

salmar.no