Norcod — Interim / Quarterly Report 2022

Nov 10, 2022

Quarterly Report 2022 | Q3

Quarterly Report 2022 |Q3

Highlights3
Production Sites4
Market Analysis and Outlook6
Events In or Subsequent To The Quarter8
Preparing New Production Site 8
Harvest8
Climate Action8
Havlandet Norcod8
Recruitment9
Environment-Friendly Production9
Looking Ahead10
Financial Performance	11
Income Statement	11
Balance Sheet12
Cash Flow Statement12
DNB 12
Stock Market Report12
Notes To The Interim Financial Statments 15

Highlights

• Finalized stocking of the 2022 generation
• Second harvest period coming up
• Preparing new production site
• Financing deal with DNB negotiated in Q3, finalised in October
• No sales in Q3.
• NOK 96 million production of biomass

Already in May Norcod initiated stocking of its third production cycle at sea. The largest grade of fry was ready to leave the growth facility and enter its fish farm at sea. This first group was sent to the location Forså, which Norcod is operating in cooperation with Kime Akva. During Q3 we finalized stocking of 3 million cod distributed on production site Forså and Jamnungen. The 2022 generation is expected to provide an estimated harvest volume of 11,000 tons WFE market ready in 2023/24

Norcod's production sites are located in central Norway and in Nordland County. The cooperation production with Kime Akva is located in Ibestad, southern part of Troms and Finnmark County.

Production Sites

1 Jamnungen 2 Forså 3 Frosvika 4 Skogsøya 5 Pålskjæra 6 Labukta Total MAB 17,250 t (including cooperation partner)

1

Jamnungen ID 26535 MTB 3600 t Start of sea phase 2022 Harvest cycle 2023/24

2

Forså ID 45098 (cooperation with Kime Akva) MTB 3600 Start of sea phase 2022 Harvest cycle 2023/24

3

Frosvika ID 45073 MTB 3600 t Start of sea phase 2021 Harvest cycle 2022/23

4

Skogsøya ID 25315 MTB 1560 t Start of sea phase 2021 Harvest cycle 2022/23

5

Pålskjæra ID 26835 MTB 1560 t Start of sea phase 2021 Harvest cycle 2022/23

6

Labukta ID 45136 MTB 3600 t Licence granted in June 2022. The site will be stocked for the first time in Q2 2023.

Site Frosvika: Standard Norcod equipment configuration. Feed barge, service vessel and eight fish cages.

In 2020, our pilot project and first production cycle at Jamnungen constituted the company's biomass. If we compare the volume year-on-year at the end of the third quarter, we saw a status corresponding to approximately six times the volume at the end of Q3 in 2021 vs. 2020. Furthermore, the status regarding standing biomass at sea ultimo third quarter has changed from 4,300 in 2021 to 6,200 in 2022. This corresponds to an increase of over 44 %.

To increase the focus on feed and feeding strategy, Norcod has established an operational Feed Center which provides the company's fish farms remote feeding. The Feed Center commenced operations in June. During the third quarter all our production sites have been incorporated, regarding feeding, into

the Feed Center. This enables us to develop a strong professional team of feed operators. In close cooperation with our production sites, the team of operators will further develop the way we feed cod.

Market Analysis and Outlook

The global cod market is seeing great change with dwindling quotas. Agreements to reduce cod stocks in the Northern Atlantic by some 20% for 2023 has recently been agreed to. While such changes are regrettable they do highlight the importance of farmed cod to help ensure fresh cod in the market, that comes with no cost to the wild stocks. This both underlines the business model rationale and environmental considerations that were made when founding Norcod. On the environmental side, Norcod also very much aligns with the goals of many customers who seek to source more sustainable products to help them make their own business more green.

The demand from the market and consumers for cod remain strong with cod being a stable item in many household and culinary kitchens.

Sirena group, responsible for the sales at Norcod, have successfully positioned Norcod as a premium product that taps into this demand for a delicious high-quality natural whitefish. Promotional activities have been made to help build this position such as a site visit trips with some of the worlds leading chefs. Likewise, tastings have been made in Tokyo and other potential markets where new applications for cod can be made, such as for sushi. These activities, paired with the exclusive brand material and great storytelling has established a strong position in the global markets for Norcod.

Norcod is currently being sold at national retailers, leading high-end foodservice companies and processors. A great hype surrounds the product as the product proves itself to be of a high consistent quality, able to be delivered with great freshness. The fact that customers are looking at a 10 month harvest period in 2023, also means that Norcod for the first time can be in the market for a long period outside the wild-season. This is something customers highly value due to

their ability to have fixed volumes and quality in this period, which has been difficult in previous times.

For the coming harvest cycle, Norcod is in position to continue the great entry that was experienced in the first harvest cycle e.g. in the Southern European markets; meaning large quantities being sold to the largest retailers in Spain.

We see that the retail segment values the cod and all the benefits that comes with it; super fresh quality, great appearance, stable supplies, etc.

Similar attention is seen from other markets like France, Italy and UK where premium retailers and food service companies want to tap into the market with farmed cod. This is truly a benefit from all the sales activities and distribution of Norcod in the first harvest cycle.

Norcod is also being sold at high-end restaurants in Norway and Denmark to ensure its place on the Nordic cuisine scene. UK and Ireland have also taken Norcod onboard; two countries with a strong tradition and preference for cod. Furthermore, Norcod is also sold in France – the worlds largest fresh cod market through retail.

In addition to the existing customer base, several prominent retail chains are in scope to receive Norcod on their counters once harvest volumes increase. At the moment the scope of the demand for Norcod much exceeds the readily available volumes. It is therefore a matter of mapping out customers to ensure Norcod is sold with those that has the best strategic fit that aligns with the ambitions for Norcod's future market position.

Over 50% of the volume for our second cycle is already presold on fixed contracts all the way through to our harvesting period at the end of June.

Norcod is looking at some of the worlds major markets where buying power is high. In addition to extending it sales in key markets in Europe such as France, UK, Germany, Switzerland, Austria and more, overseas markets such as the US, China and Japan are very much in scope. Great interest is being seen in such markets from the leading retailers and seafood distributors.

All in all, Norcod is optimally placed to take the most optimal positions in the most optimal markets, while continuing to build the brand is of high importance.

Events In or Subsequent To The Quarter

Preparing New Production Site

By the end of June Norcod, was granted permission to establish a new production site in Nesna municipality with a total maximum allowed biomass (MAB) of 3,600 tonnes. Concrete planning and arrangements are ongoing regarding site configuration and infrastructure. The new site will be equipped with state-of-the-art aquaculture technology and is planned to go into production in the first half of 2023. Including Labukta, Norcod now has a total of five cod-farming sites encompassing 20 licenses with MAB of 14,700 tonnes . Norcod commits to responsible farming of premium product. Our ambition is to contribute not only to the industrial base of the coastal municipalities in which we are active, but also to support employment opportunities and ensure sustainable operations with minimal impact to the environment.

Harvest

As previously announced, Norcod and Myrebased Vesterålen Havbruk have entered a partnership for harvesting cod from our Frosvika production site. On October 10th, Norcod's second harvest period was kicked off at Vesterålen's harvest facility in Bø. A run-in phase is expected and that the daily slaughter volume will increase until the

forecasted volume is achieved. Quality tests show very good results for the cod regarding both sensory and texture.

Climate Action

To further support the choice of technical solution at our fish farms, we have introduced onshore power to our production site Frosvika. The supplier ensures us electricity originating from hydropower. The fish farm's vessel and feed barge are equipped with hybrid technology basically to reduce fuel consumption, admissions, and generator maintenance. This benefits not only the fish, but also Norcod's employees and the local surroundings. Now connected to onshore power this package of configuration provides Norcod with the most emission reducing equipment setup seen in Norwegian aquaculture industry. To Norcod this strategic approach to equipment procurement and use of green energy sources will be a priority.

Havlandet Norcod

Norcod's joint venture, Havlandet Norcod, has during Q3 initiated production in the world's largest hatchery and juvenile facility for cod. The brand-new site at Fjord Base in Florø had its first input of cod roe in august. The transition to this new facility has been a success, by virtue of increased survival rate of larvae after hatching compared to previous roe batches. The facility in Florø will produce 24 million 1-2 gram fry a year.

Recruitment

The company continues to grow. During Q3 of 2022 Norcod has succeeded in recruiting personnel with relevant expertise and devotion. We have taken on board a strong three-clover to cover the positions, Technical Coordinator, Quality Coordinator and Administration Coordinator. Norcod will continue to hire the right people to join our team to facilitate the growth strategy.

Environment-Friendly Production

The authorities have strict guidelines and requiremenst on the environmental impact of the production of farmed fish. To monitor and limit the effects, its is a legal obligation of Norcod, and all within seafarming industry in Norway, to conduct environmental surveys of the impact on the seabed at the production site at sea.

Throughout the production cycle, Norcod conduct s environmental surveys of the impact on the seabed under the site cages (B-survey).

After harvesting, the farming area will be left fallow for a period of two months, during which time also the surrounding area farther away from the site itself is mapped (Csurvey).

As reported in Q1 Norcod farm site Jamnungen acheived the top score regarding the B-survey, and as expected the C-survey ticked in with the best possible result. Consequently, the environmental conditions for the newly stocked cod at this production site are optimal.

www.norcod.no

Looking Ahead

By December Norcod will transport its next batch of quality fry from tanks at the Havlandet Norcod juvenile facility in Florø to land-based growth facilities. This kicks off our fourth production cycle and constitutes the starting point for next year's sea phase, which will be initiated in the second quarter of 2023.

The total volume in current harvest period is estimated to approximately 8,000 tonnes WFE. Commercial harvesting of Norcod's second batch of high-quality cod started in October. For this harvest period, the biomass will be supplied from our operations in both Frøya and Meløy municipality.

The conflict in Ukraine will continue to affect the markets in several ways going forward. Potential consequences for Norcod are difficult to specify, but we have seen higher prices on raw materials and transportation, resulting in higher production costs as well as higher logistics costs to clients. Norcod expects this situation to persist. The company is monitoring the development closely to be able to implement corrective measures when needed. Possible consequences will be addressed in subsequent reports.

Financial Performance

The Norcod Group includes the parent company Norcod AS and its subsidiary Norcod Equipment AS, as well as a 50% stake in Havlandet Norcod AS.

The consolidated 2022 Q3 financial report, includes commercial activities from all 3 entities, and is compiled and consolidated according to IFRS regulations.

During 3rd quarter 2022 Norcod continued to increase biomass and prepared for the harvesting to start at the beginning of Q4. Expected harvest volume for Q4 is 1600 tons WFE.

Price inflation for feed and fuel/energy costs continue to present challenges to Norcod and the fish farming industry in general. Continued decline in NOK values has put even ore pressure on the pricing of imported feed ingredients.

As expected, Norcod has not had any income from sale of products in the quarter, which clearly has a negative effect on cashflow during the period.

Income Statement

Operating revenue for the quarter was 0. All production activity is capitalised during the period.

Operating loss for the period totaled NOK 4.9 million which equals currency losses and interest on long term debt for the period. Total loss for the year stands at NOK 100.2 million.

Havlandet Norcod AS, is owned 50% by Norcod AS. The company has begun operational activities in Q4 2022 and is included in the Group consolidated accounts.

Balance Sheet

Biomass value increased to NOK 321.6 million during the period, compared to NOK 230.3 million as at Q3 2021, indicating an increase of NOK 91.3 million. There has also been a significant increase in plant and equipment, as well as Right of use assets, moving from NOK 161.4 million to NOK 200.7 million Q3 2021 vs Q3 2022. Norcod operates more licenses that pervious year, with more fish at sea, and increased biomass.

Norcod remains financially sound, and carries lease liabilities of NOK 78.5 million, as well as a long-term interest-bearing debt of NOK 86.2 million, which is not due until 2023. The debt is denominated in DKK, is at fixed interest rate, however carries forex risk.

Cash Flow Statement

Q3 2022 has been cash negative for Norcod, with cash and cash equivalents falling to NOK 9.4 million at the end of the period. Renewed harvesting will ease the cash flow squeeze in the coming months, in addition to a new credit facility provided by DNB.

DNB

Early in Q4, Norcod has signed an agreement with Norway's largest bank, DNB, providing a credit facility of NOK 75 million facility to further invest in the cod production at sea and building up biomass.

Q4 also sees the start of harvesting the 2nd cycle of production at Norcod which will have a positive cashflow effect going forward.

Stock Market Report

Statement of shareholders as at 30 September 2022

Name	Holding	Stake	Rank
Artha-Norcod III A/S	3 872 500	20,15 %	1
Artha Norcod A/S	3 287 712	17,11 %	2
SIRENA GROUP AS	3 122 708	16,25 %	3
The Bank of New York Mellon
SA/NV	2 177 919	11,33 %	র্ব
RONJA CAPITAL II AS	1 421 428	7,40 %	5
Danske Bank A/S	696 189	3,62 %	6
Nordnet Bank AB	520 219	2,71%	7
FARVATN PRIVATE EQUITY AS	469 915	2,45 %	8
GH HOLDING AS	403 734	2,10 %	ਰੇ
Kinondo Invest ApS	311 578	1,62 %	10
Others	2 934 730	15,27 %
Total number of shares	19 218 632	100 %
Number of investors: 689

	Consolidated statement of comprehensive income
		TP Q3	YTD Q3	TP Q3	YTD Q3	Full year
	Note	2022	2022	2021	2021	2021
(Amounts in NOK '000)		Unaudited	Unaudited	Unaudited	Audited	Audited
Operating revenue		1,562	102,875	18,844	33,083	72,633
Cost of materials		119,165	218,880	55,556	130,772	186,508
Change in inventory value at historical cost		-141,545	-88,715	-40,329	-124,912	-129,587
Salaries and personnel expenses		15,598	30,360	7,659	19,328	26,878
Depreciation and amortization		4,391	10,798	4,127	8,606	8,741
Other operating expenses		6,931	22,351	8,350	17,358	28,037
Operating expenses		4,541	193,674	35,363	51,151	120,577
Operating profit before fair value adjustment of biomass		-2,979	-90,799	-16,519	-18,068	-47,944
Fair value adjustment biomass	1	3,841	5,920	11,193	-6,309	-17,446
Operating profit/loss		862	-84,879	-5,326	-24,377	-65,390
Income from associates		-639	-1,682	-270	-270	-418
Net financial items	র্ব	-5,150	-13,680	-3,037	-9,186	-9,348
Profit/loss before tax		-4,926	-100,241	-8,632	-33,833	-75,156
Income tax expences		0	0	0	0	O
Net profit/loss for the period		-4,926	-100,241	-8,632	-33,833	-75,156
Other comperhensive income		O	0	0	0	0
Total comperhensive income for the period		-4,926	-100,241	-8,632	-33,833	-75,156

		YTD	LYTD	Full year
	Note	Q3 - 2022	Q3 - 2021	2021
(Amounts in NOK '000)		Unaudited	Audited	Audited
ASSETS
Non-current assets
Concessions, patents, licences, trademarks and similar rights	2	9 277	7 819	8 039
Property, plant & equipment		76 518	46 061	50 721
Right-of-use assets		124 194	115 332	112 620
Investment in subsidiaries		O	O	O
Investment in associated companies	3	32 900	34 730	34 582
Other investments	3	1 003	1 003	1 003
Other non-current receivables		40 000	5 000	30 000
Deferred tax assets		O	0	O
Total non-current assets		283 891	209 946	236 965
Current assets
Inventory and biological assets	1	321 586	230 274	240 724
Short-term receivables		19 416	49 231	49 411
Cash and cash equivalents		ਰੇ 433	69 962	29 418
Total current assets		350 435	349 466	319 554
TOTAL ASSETS		634 326	559 412	556 519
EQUITY AND LIABILITIES
Equity
Share capital		9 609	8 516	8 516
Treasury Shares		-3 707	-3 707	-3 707
Share premium		553 019	386 564	386 286
Retained earnings		-182 399	-40 835	-82 158
Total equity		376 523	350 537	309 237
Liabilities
Non-current interest-bearing debt		86 226	73 685	74 655
Lease liabilities	4	62 546	60 493	57 549
Total non-current liabilities		148 772	134 178	132 203
Current leasing Liabilities	4	15 951	15 952	15 952
Current interest-bearing debt	4	O	0	0
Trade payables		75 301	54 704	88 226
Other current liabilities		17 778	4 042	10 901
Total current liabilities		109 030	74 697	115 079
TOTAL FOLUTY AND HARILITIES		621 276	CEO 117	EEC E10

(Amounts in NOK '000)		Paid-in equity			Other equity
2021	Share capital	Treasury shares		Share premium Retained earnings	Total equity
Equity as of 1 jan 2021	8 516		386 590	-7 002	388 104
Net profit/loss for the year				-75 156	-75 156
Purchase Treasury shares		-3 707			-3 707
Distribution of treasury shares				-1	O
Other changes			-3		-3
Equity as of 31 Dec 2021	8 516	-3 706	386 587	-82 159	309 238

2022	Share capital	Treasury shares		Share premium Retained earnings	Total equity
Equity as of 1 jan 2022	8 516	-3 706	386 587	-82 159	309 238
Issue of shares	1 094		173 906		175 000
Share issue expenses			-7 451		-7 451
Net profit/loss for the year				-100 241	-100 241
Other changes			-23		-23
Equity as of 30 June 2022	9 609	-3 706	553 020	-182 399	376 523

Consolidated statement of cash flow
		YTD	YTD
		03-2022	Q3 2021	2021
(Amounts in NOK '000)	Note	Unaudited	Unaudited	Audited
Profit/loss before tax		-100 241	-33 833	-64 780
Cash flow from operating activities
Depreciation and amortization		10 798	6 246	8 825
Share of profits of associated company		1 682
Change in inventory and biological assets		-80 862	-130 118	-119 679
Change in accounts receivable		28 647	6 237	-31 319
Change in accounts payable		-12 925	-40 941	74 723
Change in other current receivables and other current iabilities		21 509	14 968	47 025
Net cash flow from operating activities		-131 392	-177 442	-85 205
Cash flows from investing activities
Payments for purchase of property, plant & equipment		-33 394	-24 489	-58 195
Payments for licences		-1 238	-1 917	-2 137
Payment for acquisition of subsidiary and associated companies			-19 730	-20 000
Other investments			-4 107	893
Loan to associated company		-10 000		-30 000
Net cash flow from investing activities		-44 632	-50 244	-109 439
Cash flows from financing activities
New interest-bearing debt			81 372
Proceeds from sale-leaseback transaction				25 549
Repayment of lease liability		-9 803		-13 331
Purchase of own shares				-3 707
Interest paid		-1 707	-1 998	-2 723
Proceeds from issues of shares		167 549
Net cash flow from financing activities		156 039	79 374	5 789
Net (decrease)/increase in cash and cash equivalents		-19 985	-148 312	-188 855
Cash and cash equivalents at the beginning of the period		29 418	218 273	218 273
Cash and cash equivalents at close of the period		ਰੇ 433	69 962	29 418

Notes To The Interim Financial Statments

Accounting principles

Norcod AS is the parent company in the Norcod Group. The Group includes the parent company Norcod AS and its wholly owned subsidiary Norcod Equipment AS. The Groups head office is located at Thomas Angells gate 22 in Trondheim, Norway. Norcod AS is listed on the Oslo Stock Exchange Euronext Growth under the ticker NCOD.

The consolidated condensed interim financial statements comprise the financial statements of the Parent company and its subsidiary as at 30 September 2022. It is authorised for issue by the board of directors on 9th November 2022.

These interim consolidated financial statements have been prepared in accordance with International Accounting Standards 34 Interim Financial Reporting.

All significant accounting principles and calculation methods used in the most recent annual accounts are described in the annual report for 2021.

No other accounting principles have been changed or other standards have been adopted during the period. The annual report is published on www.norcod.no.

The company also has investments in the associated company Havlandet Norcod AS where Norcod owns 50 % of the shares, the other 50 % is owned by Havlandet Havbruk AS.

The interim financial statements are unaudited.

All figures in the notes are in NOK 1000, unless otherwise specified.

NOTE 1 - Inventory and Biological Assets
	As at	As at
Book value of inventory and biological assets	30.09.2022	31.12.2021
Feed and other materials	6 433	4 805
Roe and cod fry at cost	O	15 470
Biological assets held at sea farms at cost	312 278	223 495
Total Biological assets before fair value adjustment	318 711	243 770

The group had no uninvoiced finished goods in Q3 2022.

Biological Assets

Biological assets are, in accordance with IAS 41 Agriculture, measured at fair value in accordance with IFRS 13. Biomass measured at fair value, is categorized at Level 3 in the fair value hierarchy, as the input is mostly unobservable. All cod at sea are subject to a fair value calculation, while roe and cod fry are measured at cost as cost is deemed a reasonable approximation for fair value as there is little biological transformation. The technical model used to calculate the fair value of biomass is a present value model. Present value is calculated on the basis of estimated revenues less production costs remaining until the cod is harvestable at the individual site. The cod is harvestable when it has reached the estimated weight required for harvesting specified in the company's budgets and plans. The estimated value is discounted to present value on the balance sheet date. The expected biomass at harvest is calculated on the basis of the number of individuals held at sea farms on the balance sheet date, adjusted for expected mortality up until the point of harvest and multiplied by the fish's estimated weight at harvest. The price is calculated using the Group's best estimate of future prices and are not observable. The price includes the Group's best estimate of the future prices of cod liver and other products of the cod that will be sold. Prices are adjusted for expected costs related to harvesting, sales and carriage costs. The Group applies a monthly discount rate of 4 %.

	YID	YID
Change in the book value of biological assets for the period - Full Year	Q3 2022	Q4 2021
Biological assets at the beginning of the period	240 724	132 045
Increase resulting from production/purchase	211 068	194 884
Reduction resulting from sale/harvesting	-137 755	-68 488
Reduction resulting from incident-based mortality	O	-3 572
Change in feed stocks	1 628	3 302
Net fair value adjustment	5 920	-17 446
Biological assets at the end of the period	321 586	240 724

Non-Current interest-bearing liabilities		30.09.2022 31.12.2021
Non current liabilities for right-of-use assets *	62 546	57 549
Non-current debt to shareholders and other long-term debt**	86 226	74 654
Non-current leasing liabilities	148 772	132 203
Current interest bearing debt:
Current Leasing Liabities	15 951	15 952
Total current interest bearing debt	15 951	15 952
Total interest bearing debt	164 723	148 155
Cash and bank deposits	ਰੇ 433	29 418
Net interest bearing debt	155 290	118 737

Cashflow Current interest-bearing liabilities				Non-cash generating effects
		Receipts from		New leasing	Dissemination	Accrued interest	Foreign exchange	Reclasification short/
Financing activities - Changes in Liabilities	31 Dec 2021		new debt Instalments	contracts	commission	this year	adjustments	long term & other 30.09.2022
Non-current debt to shareholders**	74 654					7 057	4 515		86 226
Total liabilities to financial institutions and shareholders	74 654	O		0	0	7 057	4 515		86 226
Non current liabilities for right-of-use assets	57 549			4 997					62 546
First year's instalment for right-of-use assets	15 952		-9 803					9 802	15 951
Total liabilities for right-of-use-assets	73 501	O	-9 803	4 997	0	0	0	9 802	78 497
Total interest bearing debt	148 155	O	-9 803	4 997	O	7 057	4 515	9 802	164 723

Book value Fair Value Adjustment	31 Dec 2021	2072	30 June 2022
Fair Value adjustment Biomass IFRS	-3,045	2,274	-771
Total value adjustment	-3,045	2,274	-7741