RUSSIA – A "SUMMER ROMANCE" OR A LONG TERM RELATIONSHIP?
BAKKAFROST GROUP Oslo 26TH November 2014 Odd Eliasen, COO Havsbrún
- This presentation includes statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements.
- No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly, none of the Company, or any of its principal shareholders or subsidiary undertakings or any of such person's officers or employees or advisors accept any liability whatsoever arising directly or indirectly from the use of this document.
SUMMARY OF Q3 2014
BAKKAFROST / Q3 PRESENTATION 2014 Page 4 *) Including internal sale of 23,587 tonnes in Q3 2014 (23,681 tonnes in Q3 2013)
All segments contributing to the good result
- Combination of contracts and spot sale boosted earnings
- Farming/VAP division increased margin from 15.76 to 19.73 NOK/kg
- VAP margin increased significantly from -4.96 to 6.77 NOK/kg
- Farming margins decreased due to lower spot prices
- Group Operational EBIT increased by 12%
| (DKK million) |
Q3
2014 |
Q3
2013 |
M9
2014 |
M9
2013 |
| Operating revenues |
584.1 |
741.1 |
1,926.0 |
1,824.4 |
| Operational EBITDA |
232.9 |
208.4 |
676.4 |
525.0 |
| Operational EBIT |
208.7 |
186.8 |
606.3 |
461.1 |
| Profit for the period |
211.3 |
199.6 |
424.7 |
451.4 |
|
|
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|
|
| Operational EBITDA margin |
39.9% |
28.1% |
35.1% |
28.8% |
| Operational EBIT margin |
35.7% |
25.2% |
31.5% |
25.3% |
|
|
|
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|
| Operational EBIT/Kg (Farming) (NOK) |
17.02 |
17.59 |
18.15 |
17.02 |
| Operational EBIT/Kg (Farming and VAP) (NOK) |
19.73 |
15.76 |
19.48 |
14.21 |
| Operational EBIT/Kg (VAP) (NOK) |
6.77 |
-4.96 |
2.58 |
-6.38 |
| EBITDA margin (Fishmeal, oil and feed) |
21.46% |
11.55% |
18.88% |
12.57% |
- Sale of fishmeal normalised in Q3 2014 compared to Q3 2013
- EBITDA margin increased due to favourable market development
- Sale in 2014 in line with expectations
- Raw material intake YTD is 171,313 tonnes, of which 120,000 is sufficient for Havsbrún's high quality salmon feed production
Fishmeal, Oil and Feed
| (DKK million) |
Q3
2014 |
Q3
2013 |
M9
2014 |
M9
2013 |
| Operating revenues |
287 |
422 |
746 |
831 |
| EBITDA |
62 |
48 |
141 |
104 |
| EBITDA Margin |
21.5% |
12% |
18.9% |
13% |
| Sale of feed (tonnes)* |
29,808 |
31,961 |
62,591 |
65,063 |
* Including sale to Bakkafrost corresponding to ~79% of feed volumes in Q3 2014 (Q3 2013: 74%)
MARINE RAW MATERIALS
Increased costs on marine raw materials
- Raw material prices increased during 2014
- All time high fish meal price
- increased from around 1,300 USD to 2,200 USD
- Fish Oil price increased from around 1,800 USD to around 2,300 USD
3 HOUR'S FROM RAW FISH TO FEEDING THE SALMON
Short distant from fishing ground to feeding the salmon
- Blue whiting concentrated south of Faroe Island
- New Pelagic fleet with super cooling system
- A unique 3 hour's process step
- A marine based recipe
- Advantages in key factors
- Consumers are able to taste the different
CLEANING FISH OIL
Bakkafrost salmon becomes even healthier
- In Q1-2015 Havsbrún will start cleaning all relevant fish oil used for Bakkafrost salmon
- Cleaning of fish oils removes environmental pollutants
- This sort of cleaning is not currently being carried in production of salmon and will be a differentiator for Bakkafrost
- From time to time this topic about limitation of salmon meals arises in media. By cleaning these pollutants we expect to remove doubts regarding salmon intake
- Consumer confidence
- Should make intake limitations for salmon redundant
Fish Oil without any environmental pollutants
SUMMARY OF Q3 2014
STATUS ON INVESTMENT
RUSSIA – A "SUMMER ROMANCE" OR A LONG TERM RELATIONSHIP?
INVESTMENTS – PROGRAMME 2014 - 2017
The investments will be made step by step in the relevant parts in the value chain to secure:
- Efficiency
- Biological risk
- Organic growth
Status on main investments
Hans á Bakka
- Wellboat under construction in Yalova in Turkey
- Construction progressing according to plans
- Delivery planned to be 25th April 2015
2014 2015 2016 2017 Faming Harvest/Harvest Smolt Feed Wellboat FarmingHarvest/VAP
BAKKAFROST / Q3 PRESENTATION 2014 Page 12
- SUMMARY OF Q3 2014
- STATUS ON INVESTMENT
- RUSSIA – A "SUMMER ROMANCE"
- OR A LONG TERM RELATIONSHIP?
RUSSIA FRESH SALMON SALES, TOP 10 CITIES
RUSSIA SALES GEOGRAPHY
Federal regions in Russia
Population density in Russia
Sales break down of fresh salmon in Russia 3Q 2014
The Russian ruble is down against major currencies
- RUB to USD down 35% since July and RUB to DKK down 20%
- Resulting in significantly higher domestic prices which has a negative impact on demand for imported products
- Demand from high-end segments less affected
USD/RUB Development
DKK/RUB Development
Limited supply availability from Faroe Islands
- Russia imported 160.000 tonnes of Atlantic Salmon in 2013
- Salmon from the Faroe Islands only had 2% market share in 2013
- Salmon from the Faroe Islands targeting high-end segments worldwide
- Salmon from the Faroe Islands is today used to supply Russian customers who demand top quality salmon
Market share for salmon supply to Russia - 2013
Total Atlantic salmon supply to Russia, tonnes
Market transforamtion during the last five years
- EU was main market, now only one of four main market areas
- Geographical diversification
- Exports to the US and Asia increased
- Exports to Russia increased in 2014
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Export from the Faroe Islands to key markets |
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BAKKAFROST SALES
Bakkafrost benefits of the global salmon market
- Strong position on all growth markets
- Increased sale to Eastern Europe due to higher harvest and changed market balance
- Q3 2012: 20%
- Q3 2013: 4%
- Q3 2014: 24%
- VAP/contract share 39% of total volume in Q3 2014
- Estimate for the year 45% VAP of total harvest
- VAP share will decrease in Q4 as harvested volumes will increase
Total sales of salmon
by markets |
Q3
2014 |
Q3
2013 |
M9
2014 |
M9
2013 |
| EU |
35% |
47% |
46% |
50% |
| USA |
21% |
24% |
22% |
21% |
| Asia |
20% |
25% |
22% |
26% |
| Eastern Europe |
24% |
4% |
10% |
3% |
Fresh salmon only
by markets |
Q3
2014 |
Q3
2013 |
M9
2014 |
M9
2013 |
| EU |
9% |
20% |
11% |
24% |
| USA |
29% |
34% |
36% |
34% |
| Asia |
29% |
36% |
37% |
37% |
| Eastern Europe |
33% |
10% |
16% |
5% |
INCREASED SUPPLY TO THE RUSSIAN MARKET IN Q3 2014
Sales to Russia increased in 2014 compared with 2013
- Updated figures shows Supply increase in Q3-2014 by 1,400 tonnes compared with Q3- 2013
- Increased Chilean supply of frozen Atlantic Salmon – offsetting some of the Russian demand
- Increased supply from 3rd countries
- Bakkafrost's sale to Russia was only 60% of the volume in 2012, but 2.5 times higher than in 2013
All figures above are in tonnes hog-equivalents, and are rounded to the nearest 100 tonnes.
Others include re-export from 3rd contries & domestic supply.
Figures in italics are current supply estimates.
Source: Kontali
Russia has not banned imports from Faroe Islands
- The import ban is on Norwegian and EU fish
- Demand from the Faroe Islands has increased strongly, as Faroe Islands can supply fresh salmon
- Prices have increased
EXPORT OF FAROE ISLANDS SALMON TO RUSSIA, US, CHINA (TONS)
Russian market share increased
- The export from Faroe Islands to USA, China and Russia has increased from a level around 43% to 53% in 2014
- We predict that Faroe Island can at a maximum supply the Russian marked with 15.000-18000.
STRATEGY OF TARGETING TOP SEGMENTS ALL OVER THE WORLD
Building a global brand based on a good product and a good story
The Faroe Islands Origin
Unique natural conditions for salmon
Natural growing grounds for salmon, pristine waters, strong currents, cool and steady sea temperature
World´s most stringent vetrinarian legislation
All in all out, mandatory fallowing of fjords, no antibiotics, non GMO feed, industry´s lowest smolt yield
Boutique origin for salmon
Top quality feed, world leader in 6 kg+, in demand from discerning buyers in high-end segment around the globe, limited availability.
Average monthly sea temperature in Faroe Islands, Scotland and Norway
- Better understanding of the Russian market
- The Russian have a better understanding of Faroe Islands, and our salmon.
- We have succeed with the logistic challenges
- Russian company are confident with the way we are doing business
In a normal market we aim to obtain these advantages:
- The Bakkafrost brand is well known and Bakkafrost is a reliable partner
- Salmon from Bakkafrost is the most exclusive salmon on the Russian marked
- You can taste the different
- Salmon from Bakkafrost is the preferred salmon in high end & Sushi restaurant
- If you seek health food, Salmon from Bakkafrost is a good natural choice
SUMMER ROMANCE OR LONG LASTING RELATIONSHIP?
Long lasting relationship:
- History has proven the staying power of Faroe Islands salmon e.g. China and USA
- Top segments appreciate the high quality Faroe Salmon from Bakkafrost and our stable and reliable supply
- Brand awareness for Faroe Salmon from Bakkafrost in Russia is increasing month by month
Summer Romance:
- Geographical challenges compaired with Norway
- Limited supply of Faroe Island salmon
- Growing demand from well paying established markets for Faroe Salmon from Bakkafrost.
Long lasting relationship
- Faroe Salmon from Bakkafrost will continue to have a powerful presence in top segments in the Russian market, also in the future
- Quantities to Russia will decrease when trade is normalized
thank you
TOP QUALITY SALMON FROM BAKKAFROST – TASTE OF THE FAROE ISLANDS