SalMar ASA

Quarterly Report • Aug 25, 2017

SalMar ASA

Presentation Q2 2017

CEO Trond Williksen CFO Trond Tuvstein

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Q2 2017- Strong quarter

• Solid operational performance and high prices gave a strong result
• Strengthened capacity and improved preparedness to handle biological challenges
• Good biological development and solid results in Northern Norway
• Planned harvest 2017 at 131 000 tons

Harvest volume (1,000 tons) Operating income (NOKm) EBIT/kg (NOK) 32,2 29,6 26,5 26,3 35,0 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 2 288 2 262 2 476 2 430 2 930 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 22,74 19,46 20,98 25,50 28,12 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17

Operational update

Farming Central Norway

	Q2 2017	Q2 2016	FY 2016
Operating income (NOKm)	1 435,6	1 092,5	4 343,5
Operational EBIT (NOKm)	633,3	537,8	1 770,2
Operational EBIT %	44,1 %	49,2 %	40,8 %
Harvested volume (tgw)	21,2	17,7	70,5
EBIT/kg	29,89	30,33	25,13

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

• Solid operational performance and reduced production cost
• The biological situation remains a challenge
• Organic salmon 6% of total harvested volume
• Expect harvest volume of 83 000 tons in 2017

Farming Northern Norway

	Q2 2017	Q2 2016	FY 2016
Operating income (NOKm)	932,1	901,0	2 799,2
Operational EBIT (NOKm)	492,1	483,8	1 480,3
Operational EBIT %	52,8%	53,7%	52,9%
Harvested volume (tgw)	13,8	14,5	45,2
EBIT/kg	35,73	33,46	32,78

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

• Good operational performance with satisfactory biological results
• The biological situation remains good. No need for de-licing activities during springseason
• Proven ISA at one site in Troms
• Increased logistic and handling cost
• No suspicion of additional incidents
• Expect harvest volume of 48 000 tons in 2017

Sales & Processing

	Q2 2017	Q2 2016	FY 2016
Operating income (NOKm)	2 996,4	2 140,1	8 231,4
Operational EBIT (NOKm)	-112,5	-253,2	-685,8
Operational EBIT %	-3,8%	-11,8%	-8,3%

• Improved prices in contract portfolio yoy
• Still below spot and results negatively impacted by 40% contract-share
• Biological situation within farming impacts efficiency and results in the segment
• Expect 50% contract share for 2H17 at the same price levels as in 1H17

Norskott Havbruk

	Q2 2017	Q2 2016	FY 2016
Operating income (NOKm)	598,7	432,5	1 720,6
Operational EBIT (NOKm)	227,1	101,3	473,9
Operational EBIT %	37,9%	23,4%	27,5%
Value adjustments biomass	27,3	-2,7	127,8
Profit before tax	252,6	89,1	581,7
SalMar's share after tax	98,3	35,5	236,6
Harvested volume (tgw)	8,4	7,2	28,0
EBIT/kg	26,91	14,15	16,90
Harvest volume (1,000 tons)		EBIT/kg (NOK)
8,4 8,1			26,91
7,2		24,39 24,22
5,9 5,8	18,59
	14,15
Q2 16 Q3 16 Q4 16 Q1 17 Q2 17	Q2 16 Q3 16	Q4 16 Q1 17	Q2 17

• Strong performance
• The biological situation on The Scottish mainland and on The Orkney Islands remains good
• Operations on Shetland; still fish health issues
• Strengthened treatment preparedness to handle biological situation
• Results positively affected by higher contract prices than spot. 34% contract share
• Expect harvest volumes of 30 000 tons in 2017

Arnarlax HF

	Q2 2017	Q1 2017	FY 2016
Operating income (NOKm)	193,8	146,2	247,4
Operational EBIT (NOKm)	26,0	34,7	-1,7
Operational EBIT %	13,4%	23,8%	-0,7%
Value adjustments biomass	-52,7	-73,3	183,5
Profit before tax	-48,8	-39,6	205,4
SalMar's share after tax	-16,7	-13,2	52,2
Harvested volume (tgw)	2,8	2,0	4,0
EBIT/kg	9,32	16,95	-0,41
Harvest volume (1,000 tons) 2,8 2,0		EBIT/kg (NOK)	16,95
			9,32

Q2 16 Q3 16 Q4 16 Q1 17 Q2 17

Q2 16 Q3 16 Q4 16 Q1 17 Q2 17

• Company in an early stage of operational optimization affecting costs negatively
• Operations impacted by biological challenges
• Expect harvest volumes of 10 000 tons in 2017

SalMar in front – Ocean Farm entering operational pilot phase

Financial update

Operational EBIT deviation analysis (qoq)

• Spot prices going up during the quarter
• Sales & Processing result reduced due to contract implications from higher spot prices
• Solid operational performance in the farming segments
• Total EBIT/kg Q2 2017 NOK 28.12, up NOK 2.62 from Q1 2017

Group profit and loss

NOK million	2Q 2017	2Q 2016	YTD 2017	YTD 2016	FY 2016
Operating income	2 929,9	2 288,1	5 360,0		4 291,5 9 029,8
Cost of goods sold	1 223,4	910,8	2 303,6		1 757,3 4 000,8
Payroll expenses	238,2	211,3	468,3		404,8 861,5
Other operating expenses	384,1	345,8	739,0		657,6 1 377,8
EBITDA	1 084,3	820,2	1 849,1		1 471,8 2 789,7
Depreciations and write-downs	101,3	88,4	195,5		173,4 358,0
Operational EBIT	983,0	731,8	1 653,7		1 298,4 2 431,6
Fair value adjustment	-286,8	-223,7	-469,0		-55,7 654,0
Operational profit	696,1	508,1	1 184,7		1 242,6 3 085,6
Income from investments in associates	74,9	34,2	157,1		92,0 286,8
Net interest costs	-20,3	-22,3	-44,8		-47,7 -101,3
Other financial items	-33,1	7,2	-30,8	20,5	70,9
Profit before tax	717,6	527,2	1 266,2		1 307,4 3 342,1
Tax	154,0	124,8	259,4		300,4 691,1
Net profit for the period	563,6	402,4	1 006,8		1 007,0 2 651,0

• Revenues driven by higher prices and increased volumes
• Average salmon price (NASDAQ) NOK 67.83/kg (NOK 64.22)
• 40% contract share affecting results negatively
• Continued strong biological performance in the North. Improved performance in Central Norway
• Record high EBIT/kg at NOK 28.12 vs NOK 22.74 in Q2 16

Group balance sheet

NOK million	30.06.2017	31.03.2017	31.12.2016	30.06.2016
ASSETS
Intangible fixed assets	2 929,9	2 928,2	2 910,8	2 913,0
Tangible fixed assets	3 420,7	3 239,4	3 137,5	2 866,5
Financial fixed assets	1 060,3	990,9	960,0	851,3
Total fixed assets	7 410,9	7 158,5	7 008,3	6 630,8
Inventory	4 350,4	4 750,4	5 221,8	3 637,7
Accounts receivables	546,6	553,0	595,8	774,1
Other short-term receivables	298,2	277,9	302,1	328,5
Cash and cash equivalents	224,2	218,4	273,7	198,9
Total current assets	5 419,4	5 799,7	6 393,4	4 939,3
TOTAL ASSETS	12 830,3	12 958,2	13 401,7	11 570,0
EQUITY AND LIABILITIES
Paid-in equity	551,2	541,1	529,0	515,7
Reserves	5 725,9	6 499,4	6 069,4	4 455,5
Minority interests	87,3	91,6	82,4	76,3
Total equity	6 364,4	7 132,1	6 680,8	5 047,6
Provisions for liabilities	1 332,2	1 406,7	1 495,3	1 189,3
Int. bearing long-term liabilities	2 320,3	1 883,9	2 439,6	2 488,6
Total long-term liabilities	3 652,4	3 290,6	3 934,9	3 677,9
Int. bearing short-term liabilities	216,1	162,6	198,6	320,6
Other short-term liabilities	2 597,4	2 372,9	2 587,4	2524,0
Total short-term liabilities	2 813,5	2 535,5	2 786,0	2 844,6
TOTAL EQUITY AND LIABILITIES	12 830,3	12 958,2	13 401,7	11 570,0
Net interest bearing debt	2 312,2	1 828,0	2 364,5	2 610,3
Equity share	49,6 %	55,0 %	49,9 %	43,6 %

• CAPEX in line with ongoing investment programs
• Fair value of biomass decreased NOK 229.1 million
• Dividend pay out reduce equity and increase net interest bearing debt
• Solid financial position

Group cash flow

NOK million	Q2 2017	Q2 2016	YTD 2017	YTD 2016	FY 2016
Profit before tax	717,6	527,2	1 266,2	1 307,4	3 342,1
Tax paid in period	-5,7	-9,8	-19,8	-17,6	-291,0
Depreciation	101,3	88,4	195,5	173,4	358,0
Share of profit/loss from associates Realized and unrealized gains on financial assets	-74,9 -	-34,2 -	-157,1 -	-92,0 -	-286,8 -
Gains exit subsidiaries	-11,0	-	-11,0	-28,4	-26,6
Change in fair value adjustments	286,8	223,7	469,0	55,7	-654,0
Change in working capital	73,8	197,7	38,0	552,9	364,2
Other changes	56,7	34,4	97,3	76,6	-81,2
Net cash flow from operating activities	1 144,6	1 027,5	1 877,9	2 028,1	2 724,6
Net cash flow from investing activities	-242,4	-566,6	-410,5	-843,4	-1 231,3
Change in interest-bearing debt	479,6	669,6	-113,4	-92,6	-264,0
Dividend paid out	-1 356,2	-1 121,2		-1 356,2 -1 121,2	-1 125,9
Interest paid	-20,3	-22,3	-44,8	-47,7	-101,3
Other changes	-	-	-4,0	-	-
Net cash flow from financing activities	-896,9	-473,9		-1 518,4 -1 261,5	-1 491,2
Net change in cash for the period	5,3	-13,0	-51,0	-76,7	2,1
Foreign exchange effects	0,4	1,8	1,4	2,0	-2,1
Cash in the beginning of the period	218,4	210,0	273,7	273,7	273,7
Cash at the end of the period	224,2	198,9	224,2	198,9	273,7

• Strong cash flow from operations
• Net cash flow from investments at NOK -242.4 million
• Ocean Farming NOK 159.5 million
• Smolt and hatchery 57.7 million
• Other operating assets 98.4 million
• Received dividend of NOK 53.5 million
• Interest-bearing debt increased by NOK 480 million during the quarter due to dividend payout

Outlook

• Biological situation improved YoY
• Still challenging in Central Norway, will impact cost in coming quarters
• Strengthened capacity and improved preparedness
• Target cost reduction cost program initiated
• Expect harvest volume of 131 000 tons (Norway) in 2017
• Current contract share for 2H 2017 approx. 50%
• Same price levels as in 1H17
• Global supply set to increase in 2H17 compared to 2H16

DETTE ER SALMAR THIS IS SALMAR

• The world's 4th largest salmon producer
• 110 licenses for production of salmon in Norway, including R&D and partnerships
• 8 development licenses
• Significant operations in Scotland and Iceland
• The world's largest producer of organic salmon
• Sales to + 40 countries sales offices in Korea, Japan and Vietnam

Key info

• Founded: 1991
• FTEs: 1 357
• Business: 35 municipalities
• Revenues 2016: 9.0 bn NOK • OPR. EBIT 2016: 2.4 bn NOK

Thank you for your attention!

www.salmar.no