Norcod — Interim / Quarterly Report 2022

Jun 1, 2022

Quarterly Report 2022 | Q1

www.norcod.no Quarterly Report 2022 |Q1

Contents

Highlights
Key Events
During & After Q1
Harvest
Third Batch Of Fry In Growth Facilities
Stocking The 2022 Generation
Recertification - GlobalG.A.P.
Environment-friendly production methods
Looking Ahead …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Financial Performance
Income Statement
Balance Sheet
Cash Flow Statement
Notes To The Interim Financial Statments

Highlights

• Harvested 2,027 tonnes WFE
• Higher growth rate than expected during the winter
• Completed successful transfer of third batch of fry to growth facilities
• Implemented waterborne feeding
• This year's GlobalG.A.P audit completed
• Initiated construction of Feed Centre
• Gross Sales of NOK 83.1 million

Productivity both at sea and on land has been high throughout the quarter. Over 2,000 tonnes WFE were harvested in Q1. The harvest pace increased considerably compared to the previous quarter. Norcod achieved a yield of approximately 90 % of finished product, which was sold through the partner company and shareholder Sirena A/S in Denmark. One of our most important production goals to strengthen the sustainability of our operations, is to increase the proportion of residual raw material for human consumption. Our goal is to achieve 98 % utilisation of the fish. Norcod paves the way for a positive future for the industry by achieving commercially viable, biologically superior cod farming.

Through our production by virtue of a pilot project as well as the first full-scale industrial production cycle, we constantly have seen impressive properties in our cod. During the cold winter and low trending sea temperatures, the fish have shown good health and better growth than expected. In addition, our operational technicians daily maintain feeding control thus feed conversion ratio and the environmental load-bearing capacity of our production sites. During the company's relatively short operational period, we have received our first MOM-B report and confirmation of score 1 (best out of a score system 1-4) for the site. It confirms our belief that the wellimplemented feeding strategy, maintained feeding systems and camera as a control tool prevents overfeeding. Norcod's goal is to continue to achieve the best possible

scores on future seabed environmental surveys.

The reception of our second hybrid vessel 'Hilde S' and two barges rigged for waterborne feeding strengthen the

company's sustainability profile. The choices we make regarding equipment addresses a lower climate footprint and lead to reduced local and global impact from our business. The company's focus on sustainability has been on the agenda from the outset and lays the foundations for the upscaling plan. Primo Q1 we implemented waterborne feeding at site Frosvika to address the potential adverse effects of traditional feeding procedures, airborne feeding. Alongside resulting in less energy consumption and a calmer environment for our employees, the cod, and surroundings, it reduces the amount of microplastics released into the ocean. This is due to the fact that waterborne feeding greatly reduces erosion of the feed pipes. As Norcod is growing, it is vital to make sustainable choices in our every-day operations and long-term management approaches.

The company continues to grow. During the first quarter of 2022 Norcod has succeeded in recruiting personnel with relevant expertise and devotion. In addition to our Biological Controller and Quality Coordinator, we have recruited Feed Operators and a team leader regarding establishment of the coming Feed Centre in Trondheim. We will continue to hire the right people to join our team to facilitate the growth strategy. The increased operational activity in Norcod has also led to the employment of Technicians in the first quarter. Skilled Operations Technicians are the key to ensuring fish welfare, handling input factors in production efficiently and in the best possible way safeguarding the surrounding environment.

Key Events During & After Q1

Harvest

The harvest pace increased significantly in the first quarter of 2022. During and after Q1 a total of 2,990 tonnes WFE were harvested. Improvements in the production line at the harvest facility, increased skills of the operators and implementation of measures as a result of customer feedback contributed to higher efficiency and quality assurance of the process. In addition, a second harvest plant was used to a greater extent during the quarter, which contributed to an increased harvest volume compared to the fourth quarter last year.

Third Batch Of Fry In Growth Facilities

In January the transfer of third batch of fry to growth facilities was successfully completed. With the kick off of the third production cycle Norcod reached yet another milestone. Transfer of the 4 million seventh generation cod fry from joint venture partner Havlandet to growth facilities Mørkvedbukta and Arctic Cod. The period in land-based growth facilities forms in many ways the foundation for strong fish performance during the sea phase. Grading and vaccination are important operations aimed at giving the cod best possible conditions to perform. For the seventh generation of farmed cod, we expect further breeding gains in terms of feed conversion ratio and growth compared to the previous generation.

Stocking The 2022 Generation

Already in May we initiated stocking of Norcod's 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 is sent to the location Forså, which Norcod is operating in cooperation with Kime Akva. The fish group will contribute to provide a share of the estimated harvest volume of 11,000 tons WFE from the 2022 stocking. Harvest volumes from the 2022 batch are expected to be market ready in 2023/24 following the sea growth phase.

Recertification – GlobalG.A.P.

Norcod is proud to have achieved this year's GlobalG.A.P. recertification. GlobalG.A.P. approval renewed after our four production sites were audited in March, and

now the certificate has been updated. Norcod is the first company within the Cod industry to obtain this certification. It demonstrates the company's clear operational focus on sustainability. The GlobalG.A.P. standard covers the entire production chain from broodstock , seedlings and feed suppliers to farming, harvesting and processing or 'feed to fork'. It lays down strict criteria for legal compliance, employee occupational health and safety, animal welfare, food safety and environmental and ecological care.

As in the previous audit round, Norcod also underwent the GlobalG.A.P. Risk Assessment on Social Practice (GRASP), a voluntary part of the certification process applied to assess social risks in primary production and to provide additional transparency to supply chain partners.

Environmentfriendly production methods

In April Norcod received its second hybridelectric service vessel, 'Hilde S'. The vessel is one of the key components in the company's sustainability strategy to enhance operational efficiency and lower emissions in the production cycle. This strengthening of Norcod's sustainability profile is an important contribution to the configuration of Norway's most sustainable fish farm. In addition to the service vessel, site Frosvika is taking advantages from latest environment-friendly production methods by virtue of a hybridelectric feed barge which is equipped with water borne feeding technology. Norcod is capitalising on both biological advances and new technology to succeed in cod farming, investing in the latest environment-friendly production methods. Besides contributing to a lower CO2 footprint by being far more energy efficient, waterborne feeding technology allows feeding at desired depth and avoids the impact of wind and surface currents and provides the possibility for more intensive feeding (kg/min), less breakage, larger pellet-size and not least, minimal wear on the feed hoses regarding microplastic emissions.

The new investments are equipped with new technology to reduce fuel consumption, admissions, and generator maintenance. This benefits not only the fish, but also Norcod's employees and the local surroundings. To further support this choice of technical solution at our fish farms, we are establishing wired onshore power to our first site in 2022. The agreement with the electricity supplier ensures us a source guarantee for the electricity which origins from hydropower. This package of configuration measures provides Norcod with the most emission reducing equipment setup seen in Norwegian aquaculture industry. This strategic approach to equipment procurement will be a priority for Norcod.

Looking Ahead

Commercial harvesting of Norcod's second batch of high-quality cod will start in September current year. For this harvesting period, the biomass will be supplied from our operations in both Frøya and Meløy municipality. Throughout the winter, with low sea temperatures, the fish have shown better growth than expected. The total volume in the coming harvest period is estimated to approximately 8,500 tonnes WFE.

Norcod has taken the strategic decision to extend the sea phase to deliver an average of 4+ kg fresh cod to the market. Consequently, the company has increased its expected harvested volume for 2025 by 10 % to 27,500 tonnes WFE. We expect to achieve higher prices in the market by delivering larger fish that are even better suited for filet production.

The aquaculture industry has experienced an increase in raw material- and transportation costs due to the turmoil in Europe, high demand, commodity shortages and inflation. As a direct result, Norcod anticipates a 15 % increase in Capex going forward representing an increase of less than 0.20 NOK/kg production costs. To be conservative, we are adjusting our Capex to reflect higher prices on farming equipment. Additionally, the circumstances have had a negative effect on our operation costs for our packaging and processing, and all related activities. We continue to be on track to execute our longterm strategy to become the world's premier supplier of high-quality, responsibly farmed cod on a year-round basis. Buyers are eager for our product, and we expect the market to grow as Norcod grows.

Furthermore, the industry is now facing a significant increase in feed prices. The exact amount is uncertain as commodity values continue rising, but the effect will be significant and will reflect future value of Biomass and our production costs. We continue to monitor the developments and will report on possible consequences in subsequent reports.

Through the Covid-19 pandemic, Norcod has followed the Norwegian authorities' guidelines, and made adjustments to approach the situation on an ongoing basis. It has been a top priority for us to protect Norcod's employees at all times in order to avoid operational challenges. Norcod has experienced the effects of the pandemic by virtue of increased raw material prices and delays in equipment deliveries. To ensure that planned operations are affected to a limited extent, the management has sought temporary solutions that, under the circumstances, have worked well.

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 Q1 financial report, includes commercial activities from all 3 entities, and is compiled and consolidated according to IFRS regulations.

The quarter saw the continued harvest from the company's Jamnungen location, producing over 2.000 tons WFE, and achieving close to 90% utilisation of the fish. Norcod also successfully and consistently delivered on our contractual obligations achieving net prices of up to NOK/kg 55 HOG.

Norcod has faced many challenges during the quarter. In addition to constantly increasing fuel and commodity prices, we have continuing challenges with one of our processing facilities. The slow progress in relevant departments issuing permits has meant that we have had to compromise and deliver directly from well boats at our processing facility at Kråkøy, due to delay in approval of cod holding nets license, resulting in unnecessarily high cost in use of well boats. Fuel costs have also been considerably higher than budgeted.

Havlandet Norcod AS continues construction of the new cod fry facility at Florø, expecting completion late in Q3 2022, and will unfortunately be above budgeted expectations due to inflationary increase in almost all materials and fuels. Norcod expects to inject more capital into the project during Q2 2022.

Income Statement

Norcod achieved Gross Sales of NOK 83.1 million for the quarter, which represents a significant increase over previous quarters.

Operating loss for the period totaled NOK 45 million, as Norcod invests in increasing volumes and setting up a structure to manage that growth. Additionally, there have been significant increases in transport, packaging, and other processing related costs, where the company is continues its efforts to manage.

Havlandet Norcod AS, is owned 50% by Norcod AS. The company is expected to begin operational activities in the 3rd quarter 2022 and is included in the Group consolidated accounts.

Balance Sheet

Norcod Group nears the end of the harvest of the first cycle resulting in a reduction of Assets value to NOK 499.4 million from NOK 556.5 million as at year end 2021. There is a nett reduction in biomass and equivalent biological asset values of NOK 25.7 million, to NOK 215 million, again reflecting the harvesting of over 2,000 tons WFE during the quarter.

Norcod remains financially sound, and carries lease liabilities of NOK 70.5 million, as well as a long-term interest-bearing debt of NOK 74.7 million, which is not due until 2023.

Cash Flow Statement

Norcod reports a negative cashflow of NOK 18.1 million for the quarter. There was a net gain in biological assets of NOK 24.8 million, with the remaining difference coming from changes in accounts payables and receivables, and leasing repayments.

Norcod receives 70% av farmed cod sales proceeds at the time of sale, with the remaining amount due within 30 days.

The Group's cash and cash equivalents at the end of the quarter totaled NOK 11.3 million, which was supplemented at the beginning av Q2 with an equity release amounting to NOK 175 million.

	Consolidated statement of comprehensive income
		YTD	YTD
		Q1	01	Full year
	Note	2022	2021	2021
(Amounts in NOK '000)		Unaudited	Audited	Audited
Gross sales		83 050	11 812	80 908
Freight, Insurtance, commissions		-9 676	0	-8 275
Operating revenue		73 374	11 812	72 633
Cost of materials		57 447	24 615	186 508
Change in inventory value at historical cost		41 350	-22 236	-129 587
Salaries and personnel expenses		8 189	6 076	26 878
Depreciation and amortization		2 731	1 919	8 741
Other operating expenses		7 725	2 743	28 037
Operating expenses		117 441	13 117	120 577
Operating profit before fair value adjustment of biomass		-44 067	-1 305	-47 944
Fair value adjustment biomass	1	-943	2 846	-17 446
Operating profit/loss		-45 009	1 541	-65 390
Income from associates		-462	0	-418
Net financial items	4	-954	-13	-9 348
Profit/loss before tax		-46 425	1 528	-75 156
Income tax expences		O	O	O
Net profit/loss for the period		-46 425	1 528	-75 156
Other comperhensive income		0	O	O
Total comperhensive income for the period		-46 425	1 528	-75 156

Consolidated statement of financial position

		YTD	LYTD	Full year
	Note	Q1 - 2022	Q1 - 2021	2021
(Amounts in NOK '000)		Unaudited	Audited	Audited
ASSETS
Non-current assets
Concessions, patents, licences, trademarks and similar rights	2	8 298	6 290	8 039
Property, plant & equipment		52 194	28 658	50 721
Right-of-use assets		111 252	115 335	112 620
Investment in subsidiaries		O	0	0
Investment in associated companies	3	34 120	15 000	34 582
Other investments	3	1 003	1 003	1 003
Other non-current receivables		29 998	0	30 000
Deferred tax assets		O	0	0
Total non-current assets		236 865	166 287	236 965
Current assets
Inventory and biological assets	1	215 028	165 480	240 724
Short-term receivables		36 259	33 903	49 411
Cash and cash equivalents		11 295	178 922	29 418
Total current assets		262 582	378 305	319 554
TOTAL ASSETS		499 446	544 592	556 519
EQUITY AND LIABILITIES
Equity
Share capital		8 516	8 516	8 516
Treasury Shares		-3 707	0	-3 707
Share premium		386 564	386 269	386 286
Retained earnings		-128 584	-5 474	-82 158
Total equity		262 789	389 610	309 237
Liabilities
Non-current interest-bearing debt		74 736	67 536	74 655
Lease liabilities	4	57 549	83 025	57 549
Total non-current liabilities		132 285	150 562	132 204
Current leasing Liabilities		12 946	0	15 952
Current interest-bearing debt	4	O	0	0
Trade payables		68 777	-0	88 226
Other current liabilities		22 649	4 421	10 901
Total current liabilities		104 372	4 421	115 079
TOTAL EQUITY AND LIABILITIES		499 446	544 592	556 519

Consolidated statement of cash flow
		YID
		Q1 2022	2021
(Amounts in NOK '000)	Note	Unaudited	Audited
Profit/loss before tax		-45 021	-64 780
Cash flow from operating activities
Depreciation and amortization		2 731	8 825
Change in inventory and biological assets	1	24 753	-119 679
Change in accounts receivable		609	-31 319
Change in accounts payable		-19 449	74 723
Change in other receivables and other changes		25 042	47 025
Net cash flow from operating activities		-11 335	-85-205
Cash flows from investing activities
Payments for purchase of property, plant & equipment		-2 836	-58 195
Payments for licences	2	-259	-2 137
Payment for acquisition of subsidiary and associated companies	3	0	-20 000
Other investments		0	893
Loan to associated company	3	0	-30 000
Net cash flow from investing activities		-3 095	-109 439
Cash flows from financing activities
New interest-bearing debt	4	0	0
Repayment of interest-bearing debt	4	0	O
Proceeds from sale-leaseback transaction		0	25 549
Repayment of lease liability		-3 005	-13 331
Purchase of own shares		O	-3 707
Interest paid	4	-688	-2 723
Proceeds from issues of shares		0	O
Net cash flow from financing activities		-3 693	5 789
Net (decrease)/increase in cash and cash equivalents		-18 123	-188 855
Cash and cash equivalents at the beginning of the period		29 418	218 273
Cash and cash equivalents at close of the period		11 295	29 418

Statement of change in equity
(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		386 290	-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		-1	0
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
Net profit/loss for the year				-46 425	-46 425
Other changes				-23	-23
Equity as of 31 March 2022	8 516	-3 706	386 587	-128 607	262 789

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 31 March 2022. It is authorised for issue by the board of directors on 1st June 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 Norocd owns 50 % of the shares, the other 50 % is owned by Havlandet Havbruk AS. The associated company had no operations so far in 2022 and is expected to commence activity in late Q3 2022.

The interim financial statements are unaudited.

All figures in the notes are in NOK 1000, unless otherwise specified. 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 as at 31/12/2021			31.03.2022	31.12.2021
Feed and other materials			5 296	4 805
Roe and cod fry at cost			31 507	15 470
Biological assets held at sea farms at cost			182 213	223 495
Total Biological assets before fair value adjustment			219 016	243 770
Fair value adjustment of biological assets	See note 5		-3 988	-3 045
Total biological assets			215 028	240 724

The group had no uninvoiced finished goods in Q1 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 %.

	YTD	YTD
Change in the book value of biological assets for the period - Full Year	Q1 2022	Q4 2021
Biological assets at the beginning of the period	240 724	132 045
Increase resulting from production/purchase	54 615	194 884
Reduction resulting from sale/harvesting	-79 859	-68 488
Reduction resulting from incident-based mortality		-3 572
Change in feed stocks	491	3 302
Net fair value adjustment	-943	-17 446
Biological assets at the end of the period	215 028	240 724

NOTE 2 - Licences

The company captalize accrued expenses due to work of licenses and site surveys of locations. Expenses are depreciated over 10 years from activation of locations.

NOTE 3 - Investements in subsidiaries, associated companies and joint ventures

The Group has an investment of total NOK 65 millions with Havlandet Havbruk AS, whereby Norcod AS Company No. 821 489 969, is a shareholder with 50 % shares in Havlandet Norcod AS Company No. 925 237 809. Norcod AS has in total invested and paid NOK 65 millions to Havlandet Norcod AS, NOK 30 million in the form of a long term loan.

The company has access to the biological rights that Havbruk AS currently has for the production of cod fry. The company has started a project of a new facility of fish farms (RAS) for the production of fry on land. This will give Norcod access to fry that supports and is in line with Norcod's future prospects of growth .

Havlandet Norcod AS is included in Norcod AS financial accounts from Q3 2021 onwards, in the appropriate ownership percentage.

In other investments, Norcod AS owns 1 700 shares in Arctic Cod AS, Corporation No. 918 275 649, at a cost of NOK 1 003 000, 16.3% of the company

NOTE 4 - Interest-bearing liabilities

Non-Current interest-bearing liabilities	31.03.2022	31.12.2021
Non current liabilities for right-of-use assets*		57 549
Non-current debt to shareholders and other long-term debt**		74 654
Non-current leasing liabilities	O	132 203
Current interest bearing debt:
Current Leasing Liabities		15 952
Total current interest bearing debt	O	15 952
Total interest bearing debt		148 155
Cash and bank deposits		29 418
Net interest bearing debt		118 737

*All of the long-term leasing liabilities are due within the next 5 years.

** Debt is originaly issued in DKK 49 623 836. Exchange currency rate used is NOK 130,6. The loan from Artha Holding A/S is due in Aug 2023.

Current interest-bearing liabilities			Cashflow	Non-cash generating effects
		Receipts
		from new		New leasing	Dissemination	Accrued interest	Foreign exchange	Reclasification short/
Financing activities - Changes in Liabilities	31 Dec 2021	debt	Instalments	contracts	commission	this year	adjustments	long term & other	31.03.2022
Non-current debt to shareholders**	74 654				O	-2 181	2 262		74 736
Total liabilities to financial institutions and
shareholders	74 654			O	0	-2 181	2 262		74 736
Non current liabilities for right-of-use assets	57 549								57 549
First year's instalment for right-of-use assets	15 952		-3 006						12 946
Total liabilities for right-of-use-assets	73 501	O	-3 006	O	0	0			70 495
Total interest bearing debt	148 155	O	-3 006	O	O	-2 181	2 262	O	145 231

NOTE 5 - Fair value adjustment biomass

Book value Fair Value Adiustment	31 Dec 2021	Change 2022	31 March 2022
Fair Value adjustment Biomass IFRS	-3 045	-943	-3 988
Total value adjustment	-3 045	-943	-3 988

NOTE 6 - Events after the balance sheet date

The interim financial statements were approved by the board of directors on 1 June 2022.