Grieg Seafood — Earnings Release 2016

Feb 16, 2017

Grieg Seafood ASA

Andreas Kvame | CEO

Atle Harald Sandtorv | CFO

16 February 2017

Agenda

• Highlights
• Business Units (Regions)
• Financials
• Outlook

HIGHLIGHTS Q4 2016

Highlights Q4 2016

• GSF's best quarter ever with EBIT of MNOK 456 (EBIT per kg: NOK 21.80).
• High harvest volume (20 917 tons) in a strong market.
• The Board proposes a dividend of NOK 3 per share.
• EBIT per kg: NOK 27.9 in Norway.
• Fixed price contracts account for 32% of turnover.
• ISA outbreak in Finnmark, otherwise stable production.
• Stable and good production in Rogaland.
• EBIT per kg: NOK 7.0 in BC.
• EBIT reflects challenges presented by algae in previous quarters.
• Improved production throughout Q4.
• EBIT per kg: NOK 8.8 in Shetland.
• Final harvesting from weak locations.
• The transition to 18-month production plan progressing as planned.
• Expected harvest volume in 2017: 70 000 tons.

Financial highlights Q4 2016

	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Total operating income (TNOK)	2 069 178	1 189 313	6 603 591	4 638 370
EBITDA (TNOK)	502 039	86 907	1 341 661	261 311
EBIT before fair value adj. (TNOK)	456 115	43 118	1 167 745	47 742
EBIT / kg (NOK)	21,81	2,82	18,04	0,73
Harvest volume (tons gwe)	20 917	15 279	64 726	65 398

BUSINESS UNITS (REGIONS)

Business units performance – Q4 2016

EBIT before FV adjustment/KG gwt

Business units performance – YTD 2016

EBIT before FV adjustment/KG gwt

GSF Rogaland

• Harvesting volume up compared to Q3.
• Cost moving down to a normalised level.
• Stable and good production throughout Q4.
• Good control on sea lice situation.
• Cost expected to be stable in Q1.
• Expansion of smolt plant moving forward as planned.

	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Harvest (gwt)	5 766	3 713	18 367	15 236
Sales revenues	371 113	183 904	1 140 398	666 074
EBIT	177 054	37 854	466 756	83 516
EBIT/kg	30,7	10,2	25,4	5,5

GSF Finnmark

• to Q3.
• Cost, excluding ISA, moving down to a normalised level.
• ISA in Hammerfest.
• Increasing cost by MNOK 25 in Q4 (NOK 2.7 per kg).
• Harvest guiding down 3 000 tons in 2017.
• Biomass culled, new input spring/summer.
• EBIT/kg, excluding ISA, of NOK 28.9.
• Stable production throughout Q4.
• Harvest volume moving down in Q1 resulting in higher cost.
• Expansion of smolt plant decided.

•	Harvesting volume up compared
	to Q3.		Q4 2016	Q4 2015	YTD 2016	YTD 2015
•	Cost, excluding ISA, moving	Harvest (gwt)	9 336	5 348	22 104	19 481
	down to a normalised level.	Sales revenues	580 942	240 521	1 244 255	799 824
•	ISA in Hammerfest.	EBIT	244 317	57 721	447 131	124 004
	– Increasing cost by MNOK 25 in Q4	EBIT/kg	26,2	10,8	20,2	6,4

GSF BC (Canada)

• Algae in 2016.
• Causing high cost in Q4 2016.
• Cost expected also to be high in Q1 2017.
• Reduced fish quality and lower realised prices.
• Good sea production in Q4, harvest guiding 2017 up 1 000 tons.
• Smolt production stable in Q4.
• Water intake improved.
• Focus on finding location for a new smolt plant.
• Important for new management in BC.
• Feeding efficiency.
• Better approach to the challenges presented by algae and low oxygen levels.

	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Harvest (gwt)	1 917	2 245	10 715	14 311
Sales revenues	119 013	112 750	615 438	573 900
EBIT	13 367	22 426	80 526	13 310
EBIT/kg	7,0	10,0	7,5	0,9

GSF Shetland

• Harvesting from high-cost locations in Q4 2016.
• Also harvesting from high-cost sites in Q1 2017.
• Algae and sea lice situation in 2016 moving harvest guiding 2017 down by 1 000 tons.
• Harvesting of the first fish from the new 18 month production cycle will start in Q2 2017.
• Good and stable production on these sites.
• Cost expected to move down.

	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Harvest (gwt)	3 897	3 974	13 541	16 370
Sales revenues	240 039	192 469	859 815	773 525
EBIT	34 336	-68 191	176 558	-164 833
EBIT/kg	8,8	-17,2	13,0	-10,1

Financials

Profit and Loss

All figures in NOK 1,000	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Total operating income	2 069 178	1 189 313	6 603 591	4 638 370
EBITDA	502 039	86 907	1 341 661	261 311
Depreciation and amortisation	-45 925	-43 789	-173 916	-213 569
EBIT before biomass adj	456 115	43 118	1 167 745	47 742
Fair value adj biological assets	227 036	161 252	515 741	33 209
EBIT after biomass adj.	683 151	204 370	1 683 486	80 951
Share of profit from ass. companies	-	997	12 083	3 142
Net financial	472	-38 585	-134 734	-93 301
Profit before tax	683 623	166 782	1 560 835	-9 208
Estimated taxation	-135 212	-11 024	-342 547	13 574
Net profit in the period	548 411	155 759	1 218 288	4 366

Net financial

All figures in NOK 1,000	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Changes in fair value from hedging instruments	1 802	5 081	9 287	6 608
Net financial interest	-7 568	-39 030	-72 720	-120 925
Net currency gain (losses)	6 991	-2 027	-69 926	26 001
Dividends	0	0	0	0
Net other financial expenses/-income	-754	-2 608	-1 375	-4 985
Net financial item	472	-38 584	-134 734	-93 301

Investments

• Maintenance MNOK 200.
• Expansion smolt plant Rogaland MNOK 100.
• Expansion smolt plant Finnmark MNOK 100.
• New sites MNOK 200.

Cash Flow

	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Cash - opening balance	199 468	309 339	392 020	181 498
EBITDA	502 039	86 907	1 341 661	261 311
Inventory, trade payables and trade receivables	-109 824	-87 395	-404 850	72 095
Other adjustments	113 160	-19 161	16 302	33 876
Cash flow from operations	505 375	-19 649	953 113	367 282
Capital expenditure (fixed assets)	-88 051	-81 089	-237 653	-320 076
Investments in associated companies/shares	15 593	0	39 592	8 419
Change in other non-current receiveables	-1 519	-25	-1 519	-2 507
Cash flow from investments	-73 977	-81 114	-199 580	-314 164
Changes in interest-bearing debt	-54	227 624	-375 103	331 939
Paid dividends	-110 412	0	-165 618	-55 206
Paid dividends to non-controlling interests	0	0	-12 929	0
Net interest and financial items	-17 731	-44 510	-91 184	-118 464
Cash flow from financing	-128 197	183 114	-644 834	158 269
Currency effect on cash - opening balance	944	330	2 894	-865
Changes in cash (incl currency effect on cash)	304 145	82 681	111 593	210 522
Cash - closing balance	503 613	392 020	503 613	392 020

Net Interest Bearing Debt/EBITDA

NIBD (excl. factoring)

NIBD/EBITDA (according to covenants)

NIBD

MNOK	Q4 2016	Q4 2015
Term Loan	1 075	1 165
Revolving Credit	0	450
Bond	0	0
Leasing	317	334
Other interest bearing debt	17	12
Cash - closing balance	-504	-392
NIBD excl factoring	906	1 569

Factoring 503 338

Balance sheet 1

ASSETS	31.12.16	31.12.15
Goodw ill	108 595	110 647
Licenses	1 060 622	1 093 338
Other intangible assets	17 598	16 993
Property, plant and equipment	1 510 379	1 534 770
Investments in associated and joint venture companies	0	25 947
Other non-current assets	7 169	14 410
Total non-current assets	2 704 363	2 796 104
Inventories	89 164	90 867
Biological assets	1 635 138	1 616 636
Fair value biological assets	824 487	312 479
Accounts receivable	826 947	581 904
Other current receivables	136 573	145 767
Derivates and other financial instruments	43 232	0
Cash and cash equivalents	503 613	392 020
Total current assets	4 059 155	3 139 673
Total assets	6 763 517	5 935 777

Balance sheet 2

EQUITY AND LIABILITIES	31.12.16	31.12.15
Share capital	446 648	446 648
Treasury Shares	-5 000	-5 000
Retained earnings and other equity	2 762 101	1 795 863
Total equity	3 203 749	2 237 511
Deferred tax liabilities	669 083	539 040
Pension- and other obligations	11 360	4 498
Subordinated loans	15 963	21 425
Borrow ings and leasing	1 230 327	1 791 229
Total non-current liabilities	1 926 732	2 356 192
Short-term loan facilities	165 446	162 930
Factoring	502 535	338 231
Accounts payable	500 881	653 083
Accrued salary expense and public tax payable	0	0
Tax payable	182 416	24 545
Derivates and other financial instruments	18 245	27 104
Other current liabilities	263 512	136 179
Total current liabilities	1 633 035	1 342 072
Total liabilities	3 559 768	3 698 264
Total equity and liabilities	6 763 517	5 935 777

Key financial indicators

	Q4 2016	Q4 2015	YTD 2016	YTD 2015
EBITDA-margin before adj FV	24 %	7 %	20 %	6 %
EBIT-margin before adj FV	22 %	4 %	18 %	1 %
NIBD/EBITDA before adj FV	0,7	6,3	0,7	6,3
ROCE before adj FV	52 %	5 %	33 %	1 %
Equity ratio	47 %	38 %	47 %	38 %

Equity ratio excluding OQ (bank covenants): 52%

OUTLOOK

Harvest estimate

Guiding 2017 (1,000 tons gw e)	Rogaland	Finnmark	BC	Shetland	GSF Group
Q1	3,8	1,5	1,3	1,8	8,4
Growth %	0 %	-76 %	-5 %	-18 %	-39 %
Q2-Q4	16,2	23,5	7,7	14,2	61,6
Growth %	11 %	49 %	-18 %	25 %	21 %
Total	20,0	25,0	9,0	16,0	70,0
Growth %	9 %	13 %	-16 %	18 %	8 %

Supply outlook

Low expected global supply growth 2017.

• Norway
• 2016: -5%
• 2017: 0% (1,055' MT)
• Chile
• 2016: -15%
• 2017: +4% (473' MT)
• North America
• 2016: +6%
• 2017: -3% (143' MT)
• UK
• 2016: -4%
• 2017: +7% (155' MT)

Global supply growth farmed salmon (YoY):

NASDAQ (Norway) price development :

Outlook summary/actions GSF

• Strong market expected ahead.
• Dividend of NOK 3 per share.
• Cost level down to the industry average, or lower.
• 10% annual increase in production 2018-2020.
• Harvest volume 2017 of 70,000 tons (+8% vs 2016).
• Expected fixed price contracts of 60% in Q1 2017.
• GSF's smolt programme increasing number and size of smolt.
• o Increasing smolt input, especially in Finnmark.
• o Extending the smolt plant in Rogaland and Finnmark.
• o Shorten the production time in the sea. 18 months plan implemented in Shetland by the end of 2017.
• o Considering a new smolt plant in BC.

Thank you !

APPENDIX

griegseafood.com 28

Share info

• − Number of shares
• 111.7 million (after full conversion of bonds in August 2009).
• − Last issues: Q2 2009
• 139 MNOK new share issue.
• − Subordinated convertible bond issue: Q1 2009
• 100 mill. convertible at NOK 4.00 per share within 31.12.2010.
• 85% converted in Q2 2009.
• 15% converted in Q3 2009.
• − EPS
• 4.90 NOK/share Q4 2016.
• 1.37 NOK/share Q4 2015.
• − Shareholder structure
• Largest 20 have 73.51% of total no. of shares.

Shareholders

	No. shares	%
GRIEG HOLDINGS AS	55 801 409	49,97 %
FOLKETRYGDFONDET	3 390 000	3,04 %
OM HOLDING AS	3 105 000	2,78 %
YSTHOLMEN AS	2 928 197	2,62 %
MORGAN STANLEY AND CO INTL PLC	2 067 749	1,85 %
STATE STREET BANK AND TRUST COMP	1 814 836	1,63 %
VERDIPAPIRFONDET PARETO INVESTMENT	1 711 000	1,53 %
ARTIC FUNDS PLC	1 397 000	1,25 %
GRIEG SEAFOOD ASA	1 250 000	1,12 %
THE BANK OF NEW YORK MELLON SA/NV	1 241 277	1,11 %
VERDIPAPIRFONDET PARETO NORDIC	1 036 000	0,93 %
CLEARSTREAM BANKING S.A.	1 017 577	0,91 %
VERDIPAPIRFONDET ALFRED BERG GAMBA	986 273	0,88 %
THE NORTHERN TRUST CO., LONDON BR	786 177	0,70 %
DANSKE BANK AS	784 914	0,70 %
STATOIL PENSJON	584 101	0,52 %
NORDNET BANK AB	556 800	0,50 %
UBS SWITZERLAND AG	550 645	0,49 %
STATE STREET BANK AND TRUST COMP	539 274	0,48 %
UBS EUROPE SE	533 432	0,48 %
Total 20 largest shareholders	82 081 661	73,51 %
Total other	29 580 339	26,49 %
Total numbers of shares	111 662 000	100,00 %

Profit and Loss

All figures in NOK 1,000	Q4 2016	Q4 2015	YTD 2016	YTD 2015
Total operating income	2 069 178	1 189 313	6 603 591	4 638 370
Share of profit from joint venture	989	-237	569	6 994
Change in inventories	1 521	157 315	338 449	132 503
Raw materials and consumables used	-1 048 193	-888 043	-3 660 262	-2 871 429
Salaries and personnel expenses	-132 980	-117 805	-483 473	-409 432
Other operating expenses	-388 475	-253 635	-1 457 214	-1 235 695
EBITDA	502 039	86 907	1 341 661	261 311
Depreciation and amortisation	-44 810	-47 112	-175 352	-164 547
Depreciation and amortisation of licenses	-1 363	-481	-5 036	-2 827
Impairment adjustments on assets	249	3 805	6 472	-46 195
EBIT before biomass adj	456 115	43 118	1 167 745	47 742
Fair value adj biological assets	227 036	161 252	515 741	33 209
EBIT after biomass adj.	683 151	204 370	1 683 486	80 951
Share of profit from ass. companies	0	997	12 083	3 142
Net financial	472	-38 585	-134 734	-93 301
Profit before tax and biomass adj	456 587	5 530	1 045 094	-42 417
Profit before tax	683 623	166 782	1 560 835	-9 208
Estimated taxation	-135 212	-11 024	-342 547	13 574
Net profit in the period	548 411	155 759	1 218 288	4 366