SalMar ASA

Investor Presentation • Mar 6, 2014

North Atlantic Seafood Conference SalMar ASA

CEO Leif Inge Nordhammer March 6, 2014, Bergen

Agenda

This is SalMar

• Q4 and preliminary 2013
• Production cost in salmon farming

SalMar ASA

Northern Norway : harvest 43 000 tgw (2014) +50,4% in 16 licenses in Finnmark (Villa Organic)

Central Norway : harvest 90 000 tgw (2014)

Total harvest 2014: 133 000 tgw (+ 16 %)

50% of Scottish Sea Farms Ltd. – harvest 2014 25 000 tgw

SalMar Japan KK – sales

SalMar Korea

• Founded in 1991, Frøya, Norway, listed on Oslo Stock Exchange May 8th 2007
• Revenues 2013: NOK 6,2 billion
• EBIT: NOK 1,26 billion, pre tax 2,3 billion. Approx. 960 employees
• 83 wholly owned farming licenses in Norway. (95 including all partnerships)

SalMar has been built brick by brick …

21 % annual growth in volumes

26 % annual growth in EBIT

…to become an fully integrated salmon farmer…

• Brood stock • Roe • Rauma genetics •83 owned licenses •95 including all partnerships • High quality sites • InnovaMar facility • Vikenco • Harvesting • VAP • Scale, quality and cost •7 production facilities •Essential for the performance in the entire value chain
• SalMar Sales AS
• SalMar Japan KK
• SalMar Korea
• Long time partners

…with a strong foothold in three regions…

SalMar's current license situation

Segment	Wholly owned	R&D/partners	Total
Central Norway Trøndelag & Nordmøre	44 (MAB 780 tonns) - Trøndelag: 29 - Nordmøre: 15	9 - Sintef /Veso: 5 - STFK / Frøya VGS: 1 - Other : 3	53
Northern Norway Troms & Finnmark	23 (MAB 945 tonns) -SalMar Nord	1	24
Rauma Møre & Romsdal	16 (MAB 780 tonns) - SalMar Rauma	2 - Villa Miljølaks: 1 - Villa Miljølaks / Ålesund University College: 1	18
Total	83	12	95

• 50,4% in 16 licenses from Villa Organic (Northern Norway)

…and is now one of the leading salmon producers in the world

The fourth largest salmon producer in the world

The third largest salmon producer in Norway

The world`s largest producer of organic salmon

Agenda

This is SalMar

Q4 and preliminary 2013

Production cost in salmon farming

Financial overview: Group P&L 2013

million NOK	2013 FY	2012 FY
Operating income	6 245 9 ,	4 204 8 ,
of goods sold Cost	3 051 2 ,	2 324 8 ,
Payroll expenses	623 1 ,	483 2 ,
Other operating expenses	1 086 3 ,	886 0 ,
EBITDA	1 485 3 ,	510 8 ,
Depreciations	225 8 ,	170 2 ,
Operational EBIT	1 259 5 ,	340 7 ,
value adjustment Fair	528 2 ,	290 4 ,
Particular biological events		-54 6 ,
Non-recurring gains aquisition on	161 8 ,	62 4 ,
Operational profit	949 1 4 ,	638 9 ,
from Income investments in associates	158 0 ,	93 9 ,
Other financial items	214 7 ,	-124 3 ,
Profit before tax	2 322 1 ,	608 5 ,
Tax	426 9 ,	127 1 ,
profit for the period Net	1 895 2 ,	481 4 ,

2013 profits highest in the company's 
history.

• High salmon prices

• Record high volumes

• BoD will propose a DPS of NOK 8.0

• Central Norway more challenging - PD - Sea lice
• Northern Norway delivering highest margins FY 2013 - EBIT/KG (gw) NOK 13,45
• Operational EBIT: MNOK 1 259,5 Pre tax 2,3 billion

Segments 4Q13 – Mixed bag

Q4	Q4	FY	FY
13	12	2013	2012
546 7 ,	463 5 ,	2 702 0 ,	1 727 7 ,
148	61	924	202
4	5	2	6
,	,	,	,
27	13	34	11
2%	3%	2%	7%
,	,	,	,
14	16	70	65
0	9	2	3
,	,	,	,
10	3	13	3
58	64	17	10
,	,	,	,
Q4	Q4	FY	FY
13	12	2013	2012
429	320	912	692
0	3	7	0
,	,	,	,
164	49	320	83
1	6	2	4
,	,	,	,
38	15	35	12
3%	5%	1%	0%
,	,	,	,
10	9	23	22
7	2	8	4
,	,	,	,
15	5	13	3
32	36	45	73
,	,	,	,

Farming Central Norway

-Somewhat disappointing EBIT margin

• PD-handling, increased cost
• Increased number of lice treatments
• Harvest volume skewed towards first half of the quarter
• Earnings lifted by higher prices

NOKm	Q4 13	Q4 12	2013 FY	2012 FY	Farming Northern Norway
(mill ) Operating income	429 0 ,	320 3 ,	912 7 ,	692 0 ,	-Good performance
Operational (mill ) EBIT	164 1 ,	49 6 ,	320 2 ,	83 4 ,	– Strong EBIT margin in the quarter – Harvest volume evenly distributed
Operational % EBIT	38 3% ,	15 5% ,	35 1% ,	12 0% ,	throughout the quarter
Harvested volume (1 tgw) 000 ,	10 7 ,	9 2 ,	23 8 ,	22 4 ,	– Good biological development improving underlying cost for
EBIT/ kg (NOK) gw	15 32 ,	36 5 ,	13 45 ,	3 73 ,	standing biomass

Segments 4Q13 – Mixed bag

NOKm	Q4 13	Q4 12	FY 2013	FY 2012
(mill ) Operating income	187 0 ,	97 0 ,	595 4 ,	419 4 ,
Operational (mill ) EBIT	44 4 ,	7 5 - ,	161 9 ,	0 8 ,
Operational EBIT %	23 7% ,	7 7% - ,	27 2% ,	0 2% ,
Harvested volume (1 tgw) 000 ,	4 4 ,	3 5 ,	14 9 ,	14 9 ,
EBIT/ kg (NOK) gw	10 02 ,	2 16 - ,	10 88 ,	0 06 ,
NOKm		Q4 13	Q3 13	FY 2013
(mill ) Operating income		232 1 ,	82 4 ,	314 5 ,
Operational (mill ) EBIT		60 5 ,	6 0 - ,	54 4 ,
Operational EBIT %		26 0% ,	7 3% - ,	17 3% ,
Harvested volume (1 tgw) 000 ,		5 0 ,	1 1 ,	6 1 ,
EBIT/ kg (NOK) gw		12 18 ,	5 37 - ,	8 95 ,
NOKm	Q4 13	Q4 12	2013 FY	2012 FY
(mill ) Operating income	1 622 8 ,	1 296 8 ,	6 047 4 ,	4 231 3 ,
Operational (mill ) EBIT	37 6 - ,	16 2 ,	160 9 - ,	0 55 ,
Operational % EBIT	3% 2 - ,	2% 1 ,	7% 2 - ,	3% 1 ,

Farming Rauma

• Operational challenges related to PD
• Organic salmon 45% of volumes
• Earnings-improvements from higher volumes and higher prices

Villa Organic

• Improved operational efficiency

• The process of splitting the company progresses as planned

• Sales and Processing

• Challenges related to handling of PD fish
  • 25% of volume on fixed price contracts with average price below spot

-

Agenda

• This is SalMar
• Q4 and preliminary 2013

Production cost in salmon farming

Disturbing cost development

Cost of feed far from everything – but contributed most …..

Best performing SalMar site 2005G

NOK/KG
0,06
0,08
0,11
0,14
0,17
0,24
0,28
0,35
0,49
0,63
1,52
6,47
10,55
12,71
2,67
15,38

Production cost (live fish)10,55

– Equal to 15,38 gutted in box

EFCR 1,00

Salary costs NOK 0,63 pr. kg

Administration costs NOK 0,35 pr. kg

Other operating costs NOK 0,28 pr. kg

Health & veterinarian cost NOK 0,06 pr. kg

Marked difference from best performing 2005G to 2013 production cost levels

• Estimated average production cost listed companies 2013 NOK 26,63 per kg gutted weight
• Comparison:

	Top performer 2005 G	Sample 2010 harvest	Sample 2013 harvest	∆ 05G – 2013 harvest
Cost live weight	10,55	15,94	19,32	+ 8,77
Cost gutted in sea	12,71	19,20	23,28	+10,57
Harvest, well boat & packaging	2,67	2,80	3,35	+ 0,68
Cost gutted weight	15,38	22,00	26,63	+11,25

Source: SalMar estimates, SSB, Fishpool, data listed companies

17

Source: SalMar estimates of development for the industry in general

Success factors to combat the cost development for the industry

Cost component	Focus areas and actions to mitigate cost increase (examples)
Feed Costs	EFCR, selection of feed (feed composition), raw material, commodity prices
Health & veterinarian	Sea lice treatment: Wrasse, mechanical, less use of chemicals
Administration	"Rightsizing" the organisation, streamline IT & communication platforms, effective business support
Smolt	Genetics, Size, timing, mortality rate, vaccines (PD)
Harvesting & VAP	Economies of scale, high capacity utilization, automation, flexibility
Reduce production time in sea	Size of smolt, fewer and effective treatments of sea lice
Other operating costs	Centralized purchasing arrangements, efficient working practices, high utilization of fixed assets, pre rigor fillets
	How much of the cost increase can be addressed ?

Salmon farming is «all» about details

* Act fast – be patient !

Costs: Battling the issues of to day while planning for tomorrow

• Reduce current production cost

• Direct focus on cost components and operational actions to mitigate cost increases.

• Gain access to new semi-offshore farming sites.

• New farming technology
• Reduce biological pressure
• Reduced biological risk and farming on the salmons conditions.

Thank you for your attention See: www.salmar.no for more information