Norcod — Interim / Quarterly Report 2023

Aug 24, 2023

Norcod Q2 and first half year 2023 Financial report

Q2 2023 Highlights

• 39 MNOK in revenues, up 39% from Q2-22 driven by increased harvesting
• 47 MNOK in operating loss, compared to 41 MNOK in Q2-22
• -131 MNOK in cash flows from operations, down from -88 MNOK in Q2-22
• 1 038 tons WFE harvested, up from 963 tons WFE in Q2-22
• Entering agreement on acquisition of Kråkøy Slakteri AS
• First cycle initiated at site Labukta 2.6 mill fish set into sea
• Executed measures to improve financial robustness and focus our business

H1 2023 Highlights

• 165 MNOK in revenues, up 41% YoY
• 75 MNOK in operating loss, compared to 86 MNOK in H1-22
• -123 MNOK in cash flows from operations, down from -99 MNOK in H1-22
• 4 400 tons WFE harvested, up from 2 990 tons WFE in H1-22

Operational update

The second quarter of 2023 Norcod harvested the remainder of the stock that was subject to accelerated harvesting imposed by the Directorate of Fisheries in the first quarter. Despite the challenges related to reduced sales prices and increased harvesting costs, Norcod has achieved a YoY revenue growth of 41 per cent by selling all its harvested fish in the market. Total harvest volume ended on 1 038 tons WFE, up 8 % from Q2 previous year, driven by the accelerated harvest pace. Good cooperation with available facilities made it possible for all harvest capacity to be used. The situation led to a challenging market situation, but the fish reached the end user.

By the end of April our fifth production site, Labukta, kicked off its first production cycle. This well-equipped location is configurated with the most energy efficient technology seen in Norwegian aquaculture industry and is Norcod's third site supplied with onshore power.

In the second quarter, Norcod entered into an agreement to purchase 100 percent of the shares in harvest facility Kråkøy Slakteri AS. The vertical integration of Kråkøy is an important step to create a robust and streamlined business model. Numerous benefits accrue from this acquisition, such as priority facility access, cost reduction and operational efficiency, enhanced process control and exploration of value-added services. This move aligns with a long-term vision of higher customer satisfaction, cost savings, market expansion and cost savings.

Operational update

During the quarter, Norcod carried through several efforts to improve financial capacity and establish a robust equity base to enable further growth. In April, the company successfully received 190 MNOK in gross proceeds in a private placement. In May, Norcod divested its assets in Havlandet Norcod AS, with net proceeds of 75 MNOK, convertible to cash during Q2 and Q3. Moreover, the company improved the equity situation by securing appx. 88 million NOK in debt-to equity conversion, efficient from Q3-23 onwards. Simultanously, Norcod extended its credit line with the main bank for more than one year, utterly securing 75 million NOK in liquid funds. In June, Norcod was granted 50 million NOK in additional credit from Export Finance Norway.

Alongside these operational and strategic initiatives, Norcod has continued its diligent work on measures to reduce risk and meet biological challenges during the quarter. Norcod continues to lead the development of Norwegian cod farming and recognizes the responsibility it entails.

Last, but not least, Norcod received the good news of achieved GlobalG.A.P. recertification. It is of great importance for Norcod to adhere to transparency and be able to refer to a third-party assessment.

Market conditions

During the second the quarter, the accelerated harvest plan continued to put pressure on the market and sales situation. Our already established relations with several European retailers prooved valuable. Norcod's sales and distribution partner Sirena managed to do several promotions during the quarter, materializing in a price premium on farmed compared to shiny cod, thus minimizing the volume that had to be sold on spot level. The market absorbed the volumes of farmed cod that came from Norcod and other farmers during the quarter.

Norcod has positive expectations on the market outlook. In the short term perspective, we know that customers are looking forward to having Norcod back during the next quarters as especially the retailers keep appreciating having Norcod in their stores due to predictability on the supply side.

In the longer term perspective, significant quota cuts for the Barents Sea cod expected from 2024 and beyond implies bottlenecks on the supply side of Atlantic Cod. We are also looking towards overseas markets such as US, Japan and China, which is still considered to hold great potential as for volume and price as they value the high quality and freshness of the farmed cod.

Both Norcod and our customers are having a common view. Farmed cod is a sustainable and viable alternative for the customers – securing year round supply and helping reduce the pressure on the wild stocks – positioning farmed cod as a reliable and sustainable future protein source.

Green visions for a blue future

Norcod in a sustainable global food system

• Zero use of antibiotics
• Certified feed ingredients
• Best possible score regarding seabed surveys
• Hybrid-electric vessels and feed barges
• Highly nutritious and flavourful product good for everyone and the planet – Cod above the rest
• 90 % utilization of the cod for human consumption

Looking ahead

• Aiming to increase the survival rate to 90 % within 2030
• Targeting for 98 % utilization of the cod for human consumption
• 30 % reduction in carbon footprint by 2030 (Scope 1, 2, 3)
• Zero escape incidents
• Available tools not only to prevent and detect, but fully control maturation

Devoted to

Cod	Nature	Innovation & Profit
Fish Welfare	The ocean	Research and development
Production environment	Local and global environment
Product quality	Biodiversity	Year-round harvest
Increase yield	Responsible producer
Food safety	Fish feed	Market development
	Climate action

Outlook

Both internally and in collaboration with industry colleagues and other stakeholders, we work on strategy and plans to prevent and eliminate risk. In order to postpone and reduce gonad development in our cod, new light regimes are set up on a large scale. Furthermore, measures such as sorting of fish during the cycle will be carried out. Further development of ultrasound monitoring with regard to gonad development and for possible gender sorting will be a measure which it is realistic to assume can contribute to a long-term solution. The possibility of producing sterile cod is also being looked at and is a measure that is placed somewhat in the future. The main goal is to establish best practices in cod farming to safeguard a predictable and holistic context for everyone involved.

Site Frosvika kicks off its second production cycle during Q3 and constitute Norcod's second stocking in 2023. Site Labukta and Frosvika will provide harvest volumes from July 2024.

Next harvest period will be initiated in September. We look forward to being able to offer the market more of our high-quality sustainably produced cod. Our employees in operations and newly acquired slaughterhouse, Kråkøy Norcod, are ready to handle the fish gently throughout the entire process.

Norcod is continuously investing in its resources to optimize production skills and production capacity. During the next years, Norcod's ambition is to increase production and harvest volume at a pace that is beneficial for the environment, our customers, and our shareholders.

Our vision is clear – and we are standing firm on it. Farmed cod is a sustainable and viable alternative for the customers – securing year round supply and helping reduce the pressure on the wild stocks – positioning farmed cod as a reliable and sustainable future protein source. The world is looking for pure and sustainable sources of food to serve increased human demand. Our product clearly demonstrates its market potential and naturally fits in.

Financial Update - Highlights

Revenues (MNOK) Available credit and cash at hand

Financial Update - Highlights

Financial review

Profit and loss second quarter 2023

Norcod achieved Gross Sales of 39 MNOK in Q2-23, up from 28 MNOK in Q2-22 amid increased harvest compared to the corresponding quarter last year. Operating expenses for the period ended on 111 MNOK, up from 78 MNOK in Q2-22. Operating loss ended on 47 MNOK, up from 41 MNOK in the corresponding quarter last year. The increase is mainly explained by increased operating expenses, offset by increased revenues and fair value adjustment of biomass. Net loss for the period ended on 52 MNOK, up from 49 MNOK in Q2-22.

Profit and loss first half year 2023

Norcod achieved Gross Sales of 165 MNOK in H1-23, up from 117 MNOK in H1-22 amid increased harvest compared to the corresponding period last year. Operating expenses for the period ended on 324 MNOK, up from 205 MNOK in H1-22. Operating loss ended on 75 MNOK, down from 86 MNOK in the corresponding period last year. The decrease is mainly explained by higher operating revenue and fair value adjustment of biomass, offset by increased operating expenses. Net loss for the period ended on 95 MNOK, on the same level as in H1-22.

Balance Sheet

Total assets ended on 633 MNOK in Q2-23, up from 592 MNOK in Q2-22. The change from last year is mainly explained by reduction in biological assets, offset by increased property, plant and equipment, right-of-use assets and short-term receivables.

Total equity ended on 261 MNOK, down from 381 MNOK in Q2-22. The main reason for the decrease in equity is the inreased operating expenses from accelerated harvesting during the period. During 2023, the company has initiated countermeasures to improve the financial situation.

Total non-current liabilities ended on 163 MNOK in Q2-23, up from 148 MNOK in Q2-22. Total current liabilities ended on 209 MNOK in Q2-23, up from 63 MNOK in Q2-22. Current interest bearing debt ended on 104 MNOK in Q2-23, up from 0 in Q2-22. The increase was driven by the Artha loan due in Q3-23. During the quarter, Norcod and Artha came to a restructuring agreement of the loan from Artha.

Norcod - Financial Report Q2 and first half year 2023 10

Financial review

Main terms in the agreement implies a conversion of 86 percent of the nominal loan amount to share capital and a repayment extension of 14 percent of the nominal loan amount till August 2025. The conversion is expected to take place during Q3-23. Moreover, during the quarter, DNB agreed to extend the repayment of the overdraft by more than one year to September 2024. Other main terms and conditions are unchanged.

Cash Flows

Net cash flows from operating activities was -131 MNOK in Q2-23 compared to -88 MNOK in Q2-22. The decrease is explained by working capital changes. Net cash flows from investing activities was 59 MNOK in Q2-23 compared to -34 MNOK in Q2-22. During the quarter, Norcod divested its investment in Havlandet, which had a positive impact on cash flows from investments with 40 MNOK. Moreover, Norcod sold equipment of MNOK 25 during the quarter, also impacting investment cash flows positively. Cash flows from financing activities ended on 120 MNOK in Q2-23, compared to 164 MNOK during Q2-22. The decrease is mainly explained by proceeds from issuance of shares, offset by payments on the bank overdraft.

Interim condensed consolidated statement of comprehensive income

	Consolidated statement of comprehensive income
Note	Q2 2023	YTD 2023	Q2 2022	YTD 2022	FY 2022
	39 429	164 536	34 444	117 494	170 541
	69 489	233 976	53 748	152 544	168 730
	11 429	24 928	6 573	14 762	43 031
	5 226	10 224	3 677	6 407	16 032
	24 690	54 844	14 200	31 601	65 833
	110 835	323 972	78 198	205 315	293 626
	-71 406	-159 436	-43 754	-87 820	-123 085
1	24 104	84 331	3 022	2 079	-157 808
	-47 302	-75 105	-40 732	-85 741	-280 892
2	3 690 -8 598	1 489 -21 360	-581 -7 576	-1 043 -8 530	1 798 -18 123
	-52 209	-94 976	-48 889	-95 314	-297 217
	0	0	0	0	0
	-52 209	-94 976	-48 889	-95 314	-297 217
	0	0	0	0	0 -297 217
		-52 209	-94 976	-48 889	-95 314

Interim condensed consolidated statement of financial position

Consolidated statement of financial position

(Amounts in NOK '000)	Note	Q2 - 2023	Q2 - 2022	2022
ASSETS
Non-current assets
Concessions, patents, licenses, trademarks and similar rights	3	2 000	8 814	2 000
Property, plant & equipment		86 288	70 143	76 678
Right-of-use assets		195 346	127 943	123 846
Investment in associated companies	4	0	33 539	33 511
Other investments	4	502	1 003	502
Other non-current receivables	4	0	40 000	40 000
Deferred tax assets		0	0	0
Total non-current assets		284 135	281 442	276 536
Current assets
Inventories	1	7 847	3 736	8 712
Biological assets	1	207 213	221 618	206 758
Short-term receivables		81 827	31 731	46 427
Cash and cash equivalents		51 770	53 265	3 412
Total current assets		348 657	310 350	265 310
TOTAL ASSETS		632 792	591 792	541 846

Interim condensed consolidated statement of financial position

Consolidated statement of financial position

(Amounts in NOK '000)	Note	Q2 - 2023	Q2 - 2022	2022
EQUITY AND LIABILITIES
Equity
Share capital		12 784	9 609	9 609
Treasury Shares		-3 706	-3 706	-3 706
Share premium		729 108	553 019	553 043
Retained earnings		-477 243	-177 472	-382 267
Total equity		260 942	381 450	176 679
Liabilities
Non-current interest-bearing debt	5	38 424	81 943	0
Lease liabilities	5	124 445	65 635	60 939
Total non-current liabilities		162 868	147 578	60 939
Current leasing liabilities		30 667	15 971	16 275
Current interest-bearing debt		103 683	0	158 151
Trade payables		70 992	43 220	114 263
Other current liabilities		3 640	3 573	15 540
Total current liabilities		208 981	62 764	304 228
TOTAL EQUITY AND LIABILITIES		632 792	591 792	541 846

Interim condensed consolidated statement of changes in equity

Interim condensed consolidated statement of changes in equity
---------------------------------------------------------------	--

(Amounts in NOK '000)		Paid-in equity		Other equity
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 05.04.2022	1 094		166 455		167 549
Net profit/loss for the year				-297 217	-297 217
Other changes				-2 891	-2 891
Equity as of 31 Dec 2022	9 609	-3 706	553 043	-382 267	176 679

2023	Share capital	Treasury shares	Share premium	Retained earnings	Total equity
Equity as of 1 Jan 2023	9 609	-3 706	553 043	-382 267	176 679
Issue of shares 10.05.2023	3 175		176 065		179 240
Net profit/loss for the year				-94 976	-94 976
Equity as of 30 Jun 2023	12 784	-3 706	729 108	-477 243	260 942

Interim condensed consolidated statement of cash flows

Interim condensed consolidated statement of cash flows

	Q2 2023	YTD 2023	Q2 2022	FY 2022
Note (Amounts in NOK '000)				Audited
Profit/loss before tax	-52 209	-94 976	-50 293	-297 217
Cash flow from operating activities
Depreciation and amortization	5 226	10 224	3 677	16 032
Change in inventory and biological assets 1	-31 942	410	-9 383	-132 554
Fair value adjustment				157 808
Share of profit/ loss(-) from associates	-3 690	-1 489	1 043	-1 798
Change in accounts receivable	10 820	-3 611	19 929	929
Change in accounts payable	-48 133	-43 271	-25 557	26 037
Change in other current receivables and other current liabilities	-11 530	9 855	-26 974	28 987
Net cash flow from operating activities	-131 459	-122 858	-87 558	-201 777
Cash flows from investing activities Payments for purchase of property, plant & equipment Proceeds from sale of property, plant & equipment Payments for licences Change in loans associates and others Net cash flow from investing activities	-6 548 25 491 40 000 58 943	-13 930 25 491 40 000 51 561	-23 517 -514 -10 000 -34 031	-36 978 -10 000 -46 978
Cash flows from financing activities
Net change in bank overdraft	-36 018	-31 720		70 144
Repayment of lease liability	-21 061	-24 997	-3 689	-12 523
Interest paid 2	-2 160	-2 868	-301	-2 421
Proceeds from issues of shares	179 240	179 240	167 549	167 549
Net cash flow from financing activities	120 001	119 655	163 559	222 749
Net (decrease)/increase in cash and cash equivalents	47 485	48 358	41 970	-26 006
Cash and cash equivalents at the beginning of the period	4 284	3 412	11 295	29 418
Cash and cash equivalents at close of the period	51 770	51 770	53 265	3 412

General information and accounting principles

Norcod (the Group) consists of Norcod AS and Norcod Equipment AS (subsidiary). 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 condensed, consolidated interim financial statements have been drawn up in accordance with International Financial Reporting Standards (IFRS), including the International Accounting Standards 34 (IAS34) for interim financial reporting and are authorized for issue by the board of directors on 31 May 2023. The Group's accounting principles and calculation methods used in the most recent annual accounts are described in the annual report for 2022. No accounting principles have been changed or other standards have been adopted during the period. The annual report is published on www.norcod.no.

The condensed consolidated interim financial statements have not been audited. As a result of rounding differences, numbers or percentages may not add up to the total.

All figures in the notes are in NOK 1 000, unless otherwise specified.

	30.06.2023	30.06.2022	31.12.2022
Book value of inventories
Feed and other materials	7 847	3 736	8 712
Total inventories	7 847	3 736	8 712
Book value of biological assets
Roe and cod fry at cost	3 558	51 851	23 284
Biological assets held at sea farms at cost	280 177	170 733	344 327
Total Biological assets before fair value adjustment	283 735	222 584	367 611
Fair value adjustment of biological assets	-76 522	-966	-160 853
Total biological assets	207 213	221 618	206 758

		Q2 - 2023	Q2 - 2022	FY 2022
Reconciliation of changes in carrying amount of biological assets	Statement of comprehensive income post
Opening balance biological assets		173 029	209 732	235 919
Increase resulting from production in the period	Cost of materials	90 382	60 646	303 259
Reduction resulting from incident-based mortality		0	0	0
Fair value adjustment of biomass	Fair value adjustment biomass	24 104	3 022	-157 808
Reduction due to harvesting in the period		-80 302	-51 782	-174 612
Closing balance biological assets		207 213	221 618	206 758
Volumes of biological assets in sea (1 000 kg)
Opening balance biological assets in sea		3 851	4 413	5 377

Closing balance biological assets in sea	3 973	3 884	6 777

Notes Note 1 Inventories and biological assets

The group had no uninvoiced finished goods in Q2 2023.

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 date of reporting. The expected biomass at harvest is calculated on the basis of the number of individuals held at sea farms on date of reporting, 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 %.

Estimated remaining production costs are estimated costs that a market participant would presume necessary for the farming of fish up until they reach a harvestable weight. In the model, instead of being a separate cost element in the calculation, compensation for estimated license fees and site leasing costs is included in the discount factor, and thereby reduces the fair value of the biomass.

The fair value of the biomass is calculated using a monthly discounting of the cash flow based on an expected harvesting month according to the harvesting plan. The discount factor is intended to reflect three main components:

• 1. The risk of incidents that affect the cash flow.
• 1. The time value of money.
• 1. Synthetic license fees and site leasing costs.

The discount factor is set on the basis of an average for all the Group's sites and which, in the Group's assessment, provides a sensible growth curve for the fish – from cod fry to harvestable fish.

The risk adjustment must take account of the risk involved in investing in live fish. Currently the Group expects a cod to spend on average 16-18 months at a sea farm, and the risk will be higher the longer the time until harvest. Biological risk, the risk of increased costs and price risk will be the most important elements to be recognized. The present value model includes a theoretical compensation for license fees and site leasing costs as a surplus to the discount factor in the model, instead of being a cost-reducing factor in the calculation.

Note 2 Financial items Q2 2023 YTD 2023 Q2 2022 YTD 2022 FY 2022 Financial income Currency gains Other financial income 661 661 584 584 592 Total financial income 661 661 584 584 592 Financial expenses Impairment of financial assets 502 Interest expenses to related companies 2 625 5 250 2 344 4 687 9 400 Interest expenses leasing 2 160 2 868 301 989 2 421 Currency loss 2 753 10 479 4 838 2 576 3 915 Other financial expenses 1 721 3 424 677 862 2 478 Total financial expenses 9 259 22 020 8 160 9 114 18 715 Net financial items -8 598 -21 360 -7 576 -8 530 -18 123

Note 3 Intangible assets - Concessions, patents, licenses, trademarks and similar rights

The Group has previously had an accounting policy that cost incurred, in advance of granted licenses being confirmed, has been capitalized and recognized as intangible assets. The Group has evaluated that to better align with the requirements in IAS 38 all cost related to the application process, prior to licenses being granted, should have been expensed as incurred. Consequently, the Group has changed its accounting policy in this regard from 2022, and expensed capitalized cost as of 31.12.2021 of TNOK 6,039 in the 2022 financial statements as the Group considers the financial statement impact to be immaterial.

Note 4 Associated companies and other investments

Up until May 2023, Norcod AS had a 50 % ownership in Havlandet Norcod AS (associated company), where NOK 35 million where invested in shares. An additional NOK 40 million long-term loan was granted to Havlandet Norcod AS. In MAy 2023, Norcod sold its shares in Havlandet Norcod AS and the long term loan was settled in cash correspondingly. Both transactions were settled at book values.

Norcod AS holds an investment in Arctic Cod AS, book value of TNOK 502. The company offers growth facility capacity for a share of Norcod's juveniles. The contracting arrangement is based on common business terms.

Note 5	Interest-bearing liabilities
		30.06.2023	30.06.2022	31.12.2022
	Non-Current interest-bearing liabilities
	Non-current interest-bearing debt	38 424	81 943	0
	Non current liabilities for right-of-use assets	124 445	65 635	60 939
	Non-current leasing liabilities	162 868	147 578	60 939
	Current interest-bearing debt:
	Current leasing liabilities	30 667	15 971	16 275
	Current interest-bearing debt	103 683	0	158 151
	Total current interest-bearing debt	134 350	15 971	174 426
	Total interest-bearing debt	297 218	163 549	235 365
	Cash and bank deposits	51 770	53 265	3 412
	Net interest-bearing debt	245 449	110 284	231 953

Responsibility statement from the Board of Directors and the CEO

The Board of Directors and the CEO have today considered and approved the condensed financial statements for the first half of 2023 and the financial information in this report that is relevant for 2023.

The report for 2023 has been prepared in accordance with IAS 34 Interim Financial Statements and additional disclosure requirements as stated in the Norwegian Verdipapirhandelloven (Securities Trading Act).

We confirm that, to the best of our knowledge, the condensed set of financial statements for the first half of 2023 gives a true and fair view of Norcod's consolidated assets, liabilities, financial position and results of operations. To the best of our knowledge the report provides a fair review of important events in the period and their effects on the condensed set of financial statements, with a description of the principal risks and uncertainties that Norcod is facing that may have a material effect on the financial position or results for Norcod.

Trondheim, 23 August 2023

The Board of Directors and the CEO

Renate Larsen – Chair Jan Severin Sølbæk – Board member Trine Lotherington Danielsen – Board member Peter Buhl – Board member Boe Spurré – Board member

Christian Riber – CEO

Contact Info:

CFO

Norcod

Email: arne.hoset@norcod.no Contact Info: Arne Kristian Hoset CFO Phone: +47 988 10 282 Email: arne.hoset@norcod.no

Phone: +47 988 10 282

Arne Kristian Hoset

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