Bakkafrost P/f

Earnings Release • Feb 25, 2020

Operational EBIT of DKK 415 Million for the Fourth Quarter of 2019

Operational EBIT of DKK 415 Million for the Fourth Quarter of 2019

The Bakkafrost Group delivered a total operating EBIT of DKK 415.3 million in Q4

2019. Harvested volumes for the Group were 25.9 thousand tonnes gutted weight,

whereof 17.9 thousand tonnes were harvested in the Faroe Islands (FO) and 7.9

thousand tonnes in Scotland (SCO). The combined Farming FO and VAP segments made

an operational EBIT of DKK 374.9 million. The farming segment made an

operational EBIT of DKK 338.3 million in the Faroe Islands (FO) and DKK 18.1

million in Scotland (SCO). Achieved prices and volumes in the Faroese operations

increased and thus had a positive effect on the operational EBIT. The VAP

segment made an operational EBIT of DKK 36.6 million. The EBITDA for the FOF

segment was DKK 57.7 million.

(Figures in parenthesis refer to the same period last year unless otherwise

specified)

On the 8[th] of October 2019, Bakkafrost acquired majority of the Scottish

Salmon Company (SSC). From this date, SSC is a part of the Bakkafrost Group and

is consolidated into Bakkafrost's accounts. Unless otherwise stated, all figures

presented in this press release include SSC from this date on. SSC's figures

prior to this date are not included in the figures for the Group for the full

year 2019 or in other comparative figures prior to this date.

The Group made a profit for Q4 2019 of DKK 219.5 million (DKK -6.6 million). For

2019, the profit was DKK 801.9 million (DKK 960.3 million).

Commenting on the result, CEO Regin Jacobsen said:

"We are satisfied with the result for 2019. The beginning of the fourth quarter

was characterized by high supply of small fish, which caused disruption in the

market. At the end of the quarter supply pressure shifted to demand driven

growth.

Our harvested volumes in the Faroe Islands were the highest ever for a fourth

quarter - with record big fish - the revenue and operational result was also

record high for a fourth quarter. The biological performance has been very good.

The new Strond Hatchery is up-scaling production and contributes from now on

significantly to our operation. We are pleased about the VAP segment's good

results for the quarter.

2019 has been an eventful year for Bakkafrost. We have made a giant leap into a

new geography by the acquisition of The Scottish Salmon Company. This

acquisition has increased the scale of our operation significantly and brought

us new possibilities to exploit for many years ahead. We are very excited about

this but do realize that it will take time before we will really see results of

the investments we will do in the Scottish operation. We are convinced that this

is possible, however, with the committed people we have in the organization in

Scotland and in the Faroe Islands."

The total volumes harvested in Q4 2019 were 25,855 tonnes gutted weight, whereof

17,930 tonnes were harvested in the Faroe Islands (12,234 tgw) and 7,925 tonnes

in Scotland. Total harvested volumes in 2019 were 65,109 tonnes gutted weight:

57,184 tonnes in the Faroe Islands (44,591) and 7,925 tonnes in Scotland.

In total, 10.7 million (3.3 million) smolts were transferred during Q4 2019,

whereof 5.0 million were transferred in FO and 5.7 million were transferred in

SCO. During 2019, 18.3 million (12.5 million) smolts were transferred: 12.7

million in FO and 5.7 million in SCO.

The combined FO farming and VAP segments made an operational EBIT of DKK 374.9

million (DKK 207.7 million) in Q4 2019. The operational EBIT per kg in Q4 2019

was DKK 20.91 (DKK 16.98), which corresponds to NOK 28.25 (NOK 21.91) for the

combined FO farming and VAP segments. For 2019, the combined FO farming and VAP

segments made an operational EBIT of DKK 1,166.7 million (DKK 943.2 million).

The FO farming segment made an operational EBIT of DKK 338.3 million (DKK 204.4

million) in Q4 2019. The harvested volumes and the achieved prices were higher

in Q4 2019, compared to Q4 2018. For 2019, the operational EBIT was DKK 1,103.0

million (DKK 965.7 million).

The SCO farming segment made an operational EBIT of DKK 18.1 million in Q4 2019.

The VAP segment made an operational EBIT of DKK 36.6 million (DKK 3.3 million)

for Q4 2019. For 2019, the operational EBIT was DKK 63.7 million (DKK -22.4

million).

The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 57.7 million (DKK

60.4 million) for Q4 2019, and the EBITDA margin was 17.1% (21.0%). The EBITDA

was DKK 275.8 million for 2019 (DKK 254.3 million), corresponding to an EBITDA

margin of 19.9% (20.0%).

During Q4 2019, Havsbrún sourced 35,180 tonnes (46,478 tonnes) of raw material,

and for 2019, Havsbrún sourced 278,664 tonnes (302,465 tonnes) of raw material.

On 25 September 2019, Bakkafrost signed a Share Purchase Agreement to acquire

68.6% of the outstanding shares in the Scottish Salmon Company (SSC) from

Northern Link Ltd. The closing date was 8 October 2019. Further acquirements in

Q4 2019 resulted in Bakkafrost holding 95.6% of the shares at year end.

SSC is an integrated salmon farming business, operating exclusively in Scotland

with 60 sites across the West Coast and Hebridean Islands. The company is

engaged in nearly all stages of the value chain ensuring full traceability and

total supply chain integrity. The current annual production capacity is 50,000

tonnes. SSC produced 33,799 tonnes gutted weight in 2019 and exported to 21

countries with a focus on North America and the Far East. SSC has developed a

range of strong flagship brands, including Native Hebridean Salmon, Tartan

Salmon Label Rouge and Lochlander Salmon. The company has 651 employees.

Bakkafrost chose to increase the company's share capital for the acquisition of

SSC. The acquisition was therefore carried out without substantial increase in

Bakkafrost's external financing.

Bakkafrost aims at giving the shareholders a competitive return on their

investment, both through payments of dividends and by value growth of the equity

through positive operations.

The long-term goal of the Board of Directors is that 30-50% of earnings per

share shall be paid out as dividend. Bakkafrost's financial position is strong

with a solid balance sheet, a competitive operation and available credit

facilities. The Board of Directors proposes to the Annual General Meeting that

DKK 8.31 (NOK 11.23*) per share shall be paid out as dividend. The Annual

General Meeting will be convened on Friday the 3[rd] of April 2020.

The net interest-bearing debt amounted to DKK 1,018.7 million at the end of 2019

(DKK 495.5 million). Undrawn credit facilities amounted to DKK 2,470.0 million

at the end of Q4 2019.

*The dividend per share in NOK is subject to changes depending on the exchange

rate between NOK and DKK, which will be announced after the Annual General

Meeting.

OUTLOOK

Market

The global supply of Atlantic salmon increased around 3% in Q4 2019, compared to

Q4 2018, according to the latest estimate from Kontali Analyse.

In Q1 2020, the global harvest of Atlantic salmon is expected to increase around

1%, compared to Q1 2019. The estimated global harvest of Atlantic salmon for

2020 is an increase of around 4%, compared to 2019.

Bakkafrost operates in the main salmon markets, Europe, USA, the Far East and

Russia. During 2019, variation in sales distribution between the different

markets is driven by the change in demand from quarter to quarter in the

different regions. Bakkafrost, however, aims to have a balanced market

diversification to reduce market risk.

Farming

The outlook for the farming segment in the Faroe Islands is good, and the

overall operational performance is very good. There are many possibilities in

the Scottish operation, it will however take time to transform its operational

performance. The estimates for harvest volumes and smolt releases in both

geographies are dependent on the biological development.

Bakkafrost focuses on reducing biological risk continuously and has made several

new investments and procedures to diminish this risk. Bakkafrost focuses on

using non-medical methods in treatments against sea lice and has invested in new

technology to follow this strategy, including farming supply vessels for

mechanical delousing and mechanical cleaning of nets in the pens. During 2019,

Bakkafrost's specialized crews onboard these vessels have further refined their

skills and methods resulting in improved fish welfare.

The quality and performance of the smolts have also increased significantly and

there are clear signs that the large smolt and non-medical delousing strategies

are working successfully in the Faroe Islands. Looking ahead, Bakkafrost will

extend these strategies into the farming operation in The Scottish Salmon

Company.

Overall, the biological performance in the Faroese operation has been strong

during 2019 with good growth and low mortality rates.

In 2020, Bakkafrost expects to harvest 57,000 tonnes gutted weight in the Faroe

Islands and 35,000 tonnes gutted weight in Scotland.

Farming SCO has signed contracts for around 32% of the expected harvest volumes

in Farming SCO in 2020. These contracts usually last for 12 months.

Bakkafrost expects to release 15.0 million smolts in 2020 in the Faroe Islands,

compared to 12.7 million smolts in 2019 and 12.6 million smolts in 2018. The

smolt release in Scotland is expected to be 10.7 million smolts in 2020,

compared to 12.4 million smolts in 2019 and 8.6 million smolts in 2018.

The number of smolts released is a key element of predicting Bakkafrost's future

production.

VAP (Value Added Products)

Bakkafrost has signed contracts covering around 40% of the expected Faroese

harvest volumes in Q1 2020 and 30% of the harvest volume for 2020. Bakkafrost's

long-term strategy is to sell around 40-50% of the Faroese harvested volumes of

salmon as VAP products at fixed price contracts.

The VAP contracts are at fixed prices, based on the salmon forward prices at the

time they are agreed and the expectations for the salmon spot price for the

contract period. The contracts last for 6 to 12 months.

FOF (Fishmeal, Oil and Feed)

The outlook for the production of fishmeal and fish oil is dependent on the

availability of raw material.

The ICES 2020 recommendation for blue whiting is 1,162 thousand tonnes, which

corresponds to an increase of 2%, compared to ICES's recommendation for 2019.

Bakkafrost expects a decrease in production volumes of fishmeal and fish oil in

2020, compared to 2019.

Havsbrún has increased the expectation for sales of fish feed in 2020 to be at

110,000 tonnes, depending on external sales.

The major market for Havsbrún´s fish feed is the local Faroese market including

Bakkafrost FO's internal use of fish feed.

Investments

Bakkafrost's investment programme for the period from 2020 to 2022, excluding

investments in The Scottish Salmon Company, will amount to around DKK 1.8

billion, including maintenance capex, and will reinforce Bakkafrost's integrated

business model and ensure a capacity across the value chain to be able to

produce 100,000 tonnes gutted weight of salmon in the Faroe Islands. The aim of

the investment programme is to minimize the biological risk, increase efficiency

and create sustainable organic growth. Bakkafrost's focus on producing larger

smolts plays a key role in achieving this goal.

In addition to the planned investments in the value chain in the Faroe Islands,

Bakkafrost expects to make investments of around 350 mDKK per year for 2020-2024

in The Scottish Salmon Company.

Financial

Favourable market balances in the world market for salmon products and cost

-conscious production will likely maintain the financial flexibility going

forward.

During Q4 2019, Bakkafrost refinanced its bank facilities amounting to 352 mEUR

with a further accordion option of 150 mEUR. In addition, bank facilities

amounting to 100 mGBP were ensured to refinance The Scottish Salmon Company.

Bakkafrost also issued shares in Q3 and Q4 2019 amounting to 5,142 mNOK to

finance the acquisition of The Scottish Salmon Company.

A high equity ratio together with Bakkafrost's bank financing, makes

Bakkafrost's financial situation strong. This enables Bakkafrost to carry out

its investment plans in the Faroe Islands as well as in Scotland, hereby

strengthening the Group, enabling M&A's and organic growth opportunities as well

as to fulfil its unchanged dividend policy in the future.

Please find the Company's Q4 2019 report and the Q4 2019 presentation enclosed.

Contacts:

· Regin Jacobsen, CEO of P/F Bakkafrost: +298 235001 (mobile)

· Høgni Dahl Jakobsen, CFO of P/F Bakkafrost: +298 235060 (mobile)

This information is subject of the disclosure requirements pursuant to section 5

-12 of the Norwegian Securities Trading Act.

About Bakkafrost:

Bakkafrost is the largest salmon farmer in the Faroe Islands and the second

largest salmon farmer in Scotland. The Group is fully integrated from feed

production to smolt, farming, VAP and sales. The Group has production of

fishmeal, fish oil and salmon feed in Fuglafjørður (Faroe Islands). The Group

has primary processing in Glyvrar and Vágur (Faroe Islands), and secondary

processing (VAP) in Glyvrar (Faroe Islands). The Group operates sea farming in

Norðoyggjar, Eysturoy, Streymoy and Suðuroy (Faroe Islands) and in Scotland. The

Group has broodstock operations in Streymoy and Sandoy (Faroe Islands) and in

Scotland. The Group is also building a biogas plant in Streymoy (Faroe Islands)

which will begin operation in Q1 2020. The headquarter is located in Glyvrar

(Faroe Islands) and has sales and administration offices in Grimsby (UK),

Edinburgh (Scotland) and in New Jersey (US). The Bakkafrost Group has 1,510

employees (full-time equivalents).

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