Leroy Seafood Group — Earnings Release 2018

Aug 22, 2018

Q2 2018

AUGUST 22TH 2018

Highlights

Q2 2018

• EBIT before FV adj. NOK 1,000 million
• Harvest volume 37 822 GWT
• EBIT/kg all incl. (excl. EBIT Havfisk & LNWS) of NOK 23.4
• Contract share of 23%
• NIBD NOK 3 013 million
• Harvest guidance 166 000 GWT for 2018
• Expected catch volume around 65,000 tons for 2018

*before biomass adjustment **before biomass adjustment excl. EBIT contribution from Wild Catch

Q2 2018: Farming Highlights

• Spot prices above last year
• NSI Q2/18 NOK 68.5 vs NOK 67.4 in Q2/17 (+2%)
• Up NOK 9/kg q-o-q, and down NOK 1/kg y-o-y
• Trout price achievement well below salmon
• Contract prices well below spot prices
• Cost (RFS) increase from Q1/18, driven by Lerøy Sjøtroll
• Biomass at sea
• End Q2/18 at 90,697 LWT vs 96,258 LWT end Q2/17 (-6%)

Farming volumes
	2012 GWT	2013 GWT	2014 GWT	2015 GWT	2016 GWT	2017 GWT	2018E GWT
Lerøy Aurora AS*	20 000	24 200	26 800	29 200	30 000	39 200	36 000
Lerøy Midt AS	61 900	58 900	68 300	71 400	52 200	64 500	72 000
		61 700	63 200	57 100	68 000	54 000	58 000
Lerøy Sjøtroll	71 600
Total Norway	153 400	144 800	158 300	157 700	150 200	157 800	166 000
Villa Organic AS**			6 000
Norskott Havbruk (UK)***	13 600	13 400	13 800	13 500	14 000	15 500	13 000

Q2 2018: Wild Catch

• Q2/18 harvest volume at 18,190 tons, with significant increase y-o-y in particularly shrimp catches
• Average prices up 8% y-o-y. Y-o-y prices for cod up 15%, haddock 48% while saithe down 6%.
• Entered agreement for delivery of a new combination trawler
• As it takes time to adjust prices to end-market, increase in raw material prices is a challenge within processing

Remaining quotas Havfisk/Wild Catch

Remaining quotas Havfisk/Wild Catch
	Catch volume Q2/18	Catch volume Q2/17	Catch volume YTD 2018	Catch volume YTD 2017	Remaining quota 2018	Remaining quota 2017
			13 091	13 492	11 189	16 149
Cod	3 817	4 067
Haddock*	441	2 050	6 987	9 430	1 939	2 497
Saithe	5 401	6 585	9 084	9 426	10 414	6 413
Shrimps	3 279	996	4 604	996
Other	5 252	3 070	6 692	4 010

Q2 2018: VAP, Sales and Distribution

• Extremely volatile prices in first half and Q2/18 has been a challenge, with negative impact on profitability
• Start up of new facilities also impact profit, but improvements are expected particularly from Q4/18
• EBIT in Q2/18 of NOK 62m compared to NOK 115m in Q2/17

Key Financial figures

– Q2 2018 Q2 2018 Q2 2017 ▲% 5 042 4 224 19 % 35 8 1 161 948 22 %	Key financial figures (NOKm) Revenue Other gains and losses EBITDA Depreciation & amortisation 161 147 EBIT 1 000 801 25 % Income from associates 70 100	Net finance -50 -61	Pre-tax profit* 1 021 840 22 %	EPS (NOK)* 1,28 1,05 21 %		Harvested Volume (GWT) 37 822 26 156 45 %	EBIT* all incl. excl. Wildcatch 23,4 27,3 -14 %
							ROCE* (%) 24,9 % 23,6 % 5 %

Key financial figures – YTD 2018
(NOKm)	YTD 2018	YTD 2017	▲%
Revenue	10 042	9 684	4 %
	35	8
Other gains and losses
EBITDA	2 275	2 371	-4 %
Depreciation & amortisation	315	293
EBIT*	1 960	2 078	-6 %
Income from associates*	154	163
Net finance	-76	-107
Pre-tax profit*	2 038	2 134	-4 %
EPS (NOK)*	2,59	2,64	-2 %
Harvested Volume (GWT)	75 398	69 463	9 %
EBIT* all incl. excl. Wildcatch	22,1	26,4	-16 %

Balance sheet

30.06.2018	30.06.2017	▲%
8 192	8 059	2 %
5 996	4 504	33 %
1 001	1 030	-3 %
15 189	13 592	12 %
3 397	3 527	-4 %
2 211	2 265	-2 %
1115	873	28 %
2 479	2 382	4 %
3 010	2 492	21 %
12 212	11 539	6 %
27 401	25 131	9 %
16 188	14 213	14 %
59,1 %	56,6 %	4 %
	3 190	-6 %

Funding

NOK million	2018	2019	2020	2021	2022	Later	Total
To be paid	337	812	636	1 740	470	1 889	5 884
Total	704	812	636	1 740	470	1 889	6 250
	Covenants		Q2 2018
NIBD/EBITDA	<5	0.72
Adj. Equity ratio	>30 %	67.7 %

	Covenants	Q2 2018
NIBD/EBITDA	<5	0.72
Adj. Equity ratio	>30%	67.7%

Cash flow

	Q2 2018	Q2 2017	YTD 2018	YTD 2017	FY 2017
EBITDA before fair value adjustment on biological assets	1 161	948	2 275	2 371	4 300
Paid tax	-588	-281	-822	-478	-494
Change in working capital	-50	-286	-49	-124	-97
Other	-23	-22	-35	-8	-21
Cash from operating activities	499	359	1 369	1 761	3 688
Business combinations and redemption of non-controlling interests *	0	-1	-127	-1	-6
Net investments in capex and intangibles	-391	-366	-1 222	-562	-1 484
Dividends received	162	110	162	110	164
Other changes in non-current assets	0	-66	56	-83	-104
Cash from investing activities *	-229	-322	-1 131	-536	-1 430
Net financial cost	-53	-50	-86	-93	-188
New equity	0	0	0	0	0
Dividends distributed	-945	-832	-945	-834	-834
Cash from financing activities	-997	-882	-1 030	-927	-1 023
Other changes (incl.currency effects)	7	-17	21	-54	-64
Net cash flow / change in NIBD	-720	-863	-751	244	1 171
		2 327	2 262	3 433	3 433
NIBD at beginning	2 293
Change in NIBD NIBD at end	720 3 013	863 3 190	751 3 013	-244 3 190	-1 171 2 262

EBIT per segment

EBIT* Q2 2017

Lerøy Aurora

Lerøy Aurora
	Q2 2018	Q2 2017	YTD 2018	YTD 2017
Revenue (NOKm)	501	561	1 089	977
EBIT* (NOKm)	218	247	474	426
Harvested volume (GWT)	6 807	8 017	15 786	14 031
EBIT/kg* (NOK)	32.1	30.8	30.0	30.4

• Strong profitability in quarter
• RFS (Release-from-stock) cost remains at low level
• Some negative impact on growth from low temperatures in the quarter
• As of today, expectations are continued low costs in 2018

Lerøy Midt

Lerøy Midt
	Q2 2018	Q2 2017	YTD 2018	YTD 2017
Revenue (NOKm)	1 031	353	1 767	1 744
EBIT* (NOKm)	424	99	687	628
Harvested volume (GWT)	16 047	5 341	28 139	27 273
EBIT/kg* (NOK)	26.4	18.5	24.4	23.0
	EBIT*/kg

• Positive development continues
• New industry facility in start-up in Q2
• Price realisation impacted ~50% of quarterly volume harvested in June
• Forth quarter in a row with decline in RFS (release from stock) costs
• As of today, expectations are for further cost reductions q-o-q through 2018

Lerøy Sjøtroll

Lerøy Sjøtroll
Revenue (NOKm)	Q2 2018 908	Q2 2017 832	YTD 2018 1 834	YTD 2017 1 799
EBIT* (NOKm)	190	265	408	604
Harvested volume (GWT)	14 968	12 798	31 473	28 159
EBIT/kg* (NOK)	12.7	20.7	13.0	21.5

^* Before biomass adjustment

• Another challenging quarter
• ~40% of quarterly harvest volume trout. Price achievement for the Group NOK 5/kg lower for trout than for salmon
• Price realisation for salmon impacted negatively of size and downgrades, with price realisation for salmon well below NSI price.
• Cost increase q-o-q, as of today expectations for lower RFS cost in H2
• New smolt facility progressing according to plan. First release of smolt from new facility in 2019. Significant potential in both volume and costs.

Wild Catch (Havfisk/LNWS)

Wild Catch (Havfisk/LNWS)
EBITDA (NOKm)	Q2 2018 149	Q2 2017 115	YTD 2018 358	YTD 2017 301
EBIT (NOKm)	116	86	294	244
Havfisk, catch volume	Q2 2018	Q2 2017	YTD 2018	YTD 2017
Cod	3 817	4 067	13 091	13 492
Haddock	441	2 050	6 987	9 430
	5 401	6 585	9 084	9 426
Saithe			4 604	996
Shrimps	3 279	996
Other	5 252	3 070	6 692	4 010
Total	18 190	16 769	40 458	37 355
					market reach
Havfisk, prices	Q2 2018	Q2 2017	YTD 2018	2017
Cod	31.4	27.4	30.4	26.7
Haddock	24.4	16.5	23.4	18.9
Saithe	10.5	11.2	11.4	11.6

Havfisk, prices	Q2 2018	Q 2 2017	YTD 2018	2017
Cod	31.4	27.4	30.4	26.7
Haddock	24.4	16.5	23.4	18.9
Saithe	10.5	11.2	11.4	11.6

• Lower quotas on cod and haddock, and positive development in demand, gives lift in prices for cod and haddock
• Investments in fleet gives capacity for more shrimp catches
• Trawler Kongsfjord sold in Q2/18 with positive impact on profitability of NOK 35m
• Development of the white fish processing industry in Norway is challenging. The solution is higher efficiency in operations, and broader market reach
• The solution will require time, and investments. Lerøy is expecting stability in framework conditions to make necessary steps possible for a turn-around of this industry in Norway

Norskott Havbruk (associate, 50% owned by Lerøy Seafood Group)

Revenue (NOKm)	Q2 2018 479	Q2 2017 599	YTD 2018 998	YTD 2017 971
EBIT* (NOKm)	174	227	348	370
Harvested volume (GWT)	6 225	8 437	12 725	14 355
EBIT/kg* (NOK)	28.0	26.9	27.3	25.8
	EBIT*/kg

^* Before biomass adjustment

** Figures based on 100% basis

• Satisfactory result, with good biological performance in all regions
• However, harvested volume in 2018 is impacted by accelerated harvest at some sites in 2017
• Contract share in the quarter of 45%
• New RAS facility being built with first eggs in Q4 2018 and first release of smolt in 2019
• Potential for sustainable, organic growth in coming years

VAP&D –				VAP, Sales and Distribution
	Q2 2018	Q2 2017	YTD 2018	YTD 2017
Revenue (NOKm)	4 807	4 043	9 497	9 035
EBIT (NOKm)	62	115	127	201
EBIT margin	1.3 %	2.9 %	1.3 %	2.2 %	profitability

Revenue and EBIT margin (line graph)

• Extremely volatile prices in the quarter, and so far in 2018, creates a challenging operational environment with negative impact on profitability
• New facilities in start up in both Netherlands and Spain impact profitability level

Outlook

Atlantic salmon – Supply in tons WFE

in tons WFE
	2013	Change 12-13	2014	Change 13-14	2015	Change 14-15	2016	Change 15-16	2017	Change 16-17	2018	Change 17-18	2019	Change 18-19
Norway	1 143 600	-3,3 %	1 199 000	4,8 %	1 234 200	2,9 %	1 171 100	-5,1 %	1 207 800	3,1 %	1 297 900	7,5 %	1 354 900	4,4 %
United Kingdom	157 800	-1,0 %	170 500	8,0 %	166 300	-2,5 %	157 400	-5,4 %	174 300	10,7 %	157 000	-9,9 %	176 600	12,5 %
	72 600	3,3 %	82 700	13,9 %	75 600	-8,6 %	77 300	2,2 %	80 300	3,9 %	68 800	-14,3 %	78 700	14,4 %
Faroe Islands		-32,1 %	12 300	16,0 %	15 700	27,6 %	15 800	0,6 %	17 000	7,6 %	14 300	-15,9 %	17 000	18,9 %
Ireland	10 600				3 600	-18,2 %	8 100	125,0 %	11 500	42,0 %	14 000	21,7 %	19 000	35,7 %
Iceland	3 350	3,1 %	4 400	31,3 %
Total Europe	1 387 950		-3,1 % 1 468 900		5,8 % 1 495 400		1,8 % 1 429 700		-4,4 % 1 490 900		4,3 % 1 552 000		4,1 % 1 646 200	6,1 %
Chile	468 100	28,6 %	582 900	24,5 %	598 200	2,6 %	504 400	-15,7 %	564 200	11,9 %	632 900	12,2 %	645 700	2,0 %
Canada	115 100	-15,7 %	95 000	-17,5 %	135 200	42,3 %	146 000	8,0 %	140 000	-4,1 %	148 400	6,0 %	152 000
USA Australia	20 300 39 000	3,6 % -2,5 %	24 000 42 000	18,2 % 7,7 %	20 200 54 400	-15,8 % 29,5 %	22 500 50 900	11,4 % -6,4 %	21 700 61 800	-3,6 % 21,4 %	18 000 60 700	-17,1 % -1,8 %	17 500 61 800	2,4 % -2,8 % 1,8 %
Others	11 200	38,3 %	15 200	35,7 %	13 700	-9,9 %	12 500	-8,8 %	12 100	-3,2 %	13 600	12,4 %	16 000
Total Others	653 700	15,0 %	759 100	16,1 %	821 700	8,2 %	736 300	-10,4 %	799 800	8,6 %	873 600	9,2 %	893 000	17,6 % 2,2 %
Total World-wide	2 041 650		2,1 % 2 228 000		9,1 % 2 317 100		4,0 % 2 166 000		-6,5 % 2 290 700		5,8 % 2 425 600		5,9 % 2 539 200	4,7 %

SPOT prices, fresh Atlantic salmon cross-section, FCA Oslo as of week 32-2018 (Superior quality).

Atlantic salmon - Harvest Quantities Norway in tons WFE

Harvest qty, YTD July: 676 100 +7,9% (626 400)

Harvest qty, YTD July: 816 100 +3,4% (789 500)

Atlantic salmon - Harvest Quantities Europe in tons WFE

18% 4% -8% -3% -2% 5% 13% 5% 2% 5% 4% 8% -20% -10% 0% 10% 20% 30% 0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 200 000 January February March April May June July August September October November December 2015 2016 2017 2018 Chng 17-18 0-line

Atlantic salmon - Harvest Quantities Chile in tons WFE

in tons WFE

Harvest qty, YTD July: 1 323 400 +8,4% (1 221 300)

Atlantic Salmon Consumption 2018 Q2

Source: Kontali / Nasdaq

Atlantic Salmon Consumption 2018 YTD Q2

Source: Kontali / Nasdaq

NOK/KG (NSI 3-6) YTD Q2:

65,52 -3,6 % (67,98)

Atlantic Salmon Consumption (Other markets) 2018 YTD Q2

Figures as per 17.08.2018 Source: Kontali / Nasdaq

Outlook

• Demand for seafood remains strong, outlook remains positive
• Harvest guidance for salmon and trout including associates 179.000 GWT for 2018, with lower release from stock cost in H2/18
• Expected contract share for salmon and trout in Q3/18 ~25%
• Significant potential in whitefish. Expected catch volume around 65,000 tonnes in 2018, with a y-o-y increase in catch volume of shrimps

CONTACT – Henning Beltestad, hb@leroy.no CONTACT – Sjur Malm, sjur.malm@leroy.no