SalMar ASA

Earnings Release • Aug 23, 2019

SalMar ASA

Presentation Q2 2019

CEO Olav-Andreas Ervik CFO & COO Trine Sæther Romuld

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Highlights

• Total operational EBIT 990 MNOK
• Harvest volume 41,400 tons
• Strong operational performance in Central Norway, somewhat weaker than expected in Northern Norway
• Sales and Processing profitability impacted by earlier harvest of volume from Northern Norway
• Guiding of 145,000 tons in Norway and 10,000 tons on Iceland for 2019 maintained

SalMar - a fully integrated salmon farmer

• Global span

• Vikenco at Aukra

Farming Central Norway

	Q2 2019	Q2 2018	YTD 2019	YTD 2018
Operating income (NOKm)	1,580	1,092	2,757	2,469
Operational EBIT (NOKm)	730	496	1,203	1,026
Operational EBIT %	46.2 %	45.4 %	43.6 %	41.6 %
Harvested volume (tgw)	24.6	16.7	42.8	38.9
EBIT/kg	29.73	29.74	28.10	26.35

• Results in the period as expected with lower costs
• Strong biological performance from spring 18 generation
  • Resulting in lower costs and higher price achievement due to larger average weights
  • Autumn 2017 generation finished harvested in the quarter
• Expect a slight increase in volume and costs at same level in Q3 2019
  • Continue harvesting of spring 2018 generation in Q3
• Full year guiding increased to 97,000 tons

Farming Northern Norway

	Q2 2019	Q2 2018	YTD 2019	YTD 2018
Operating income (NOKm)	867	1,208	1,767	1,770
Operational EBIT (NOKm)	307	581	655	812
Operational EBIT %	35.4 %	48.1 %	37.1 %	45.9 %
Harvested volume (tgw)	14.1	17.4	29.2	27.0
EBIT/kg	21.80	33.40	22.45	30.06

Harvest volume (1 000 tons) EBIT/kg (NOK)

• Result in the period weaker than expected

• Earlier harvest of the end of Autumn 2017 as a preventive measure due to algae bloom and earlier harvest of parts of spring 2018 due to biological performance
• Impacting both costs and price achievement negatively
• Autumn 2017 generation finished harvested in the period will continue harvesting of spring 2018 in Q3 2019
• Expect significant lower volume in Q3 2019 and an increase in cost
  • Higher volume and lower costs expected from Q4 2019
• Full year guiding decreased to 48,000 tons

Sales & Processing

	Q2 2019	Q2 2018	YTD 2019	YTD 2018
Operating income (NOKm)	3,152	3,002	5,972	5,526
Operational EBIT (NOKm)	0.4	-150	15	-165
Operational EBIT %	0.0 %	-5.0 %	0.2 %	-3.0 %

• Results somewhat weaker than expected
  • Profitability negatively affected by earlier harvest of volume from Northern Norway
  • Good results from harvesting and processing activities
• Contract share at 21 % in the period with positive contribution
• Contract share currently at 27% for Q3 2019 and 20% for FY 2019 with prices slightly up from the level in 2018

• Groundwork for InnovaNor finished during this summer, start of construction in September

Arnarlax (Iceland)

	Q2 2019	Q2 2018	YTD 20191	YTD 2018
Operating income (NOKm)	177	78	310	218
Operational EBIT (NOKm)	26	3	51	-38
Operational EBIT %	14.8 %	3.3 %	16.6 %	-17.2 %
Harvested volume (tgw)	2.8	1.0	4.9	3.5
EBIT/kg	9.43	2.70	10.45	-10.65
1) Consolidated results from February 2019

• Positive contribution in the period

• Results negatively affected by no harvest in June, increasing fixed costs per kg
• Harvested from 17 generation in the quarter
  • Improved biological performance YoY
  • Will continue harvesting of this generation in Q3 2019
• Expect somewhat lower volume in Q3 and costs at the same level

Harvest volume (1 000 tons) EBIT/kg (NOK)

Norskott Havbruk

	Q2 2019	Q2 2018	YTD 2019	YTD 2018
Operating income (NOKm)	407	479	813	998
Operational EBIT (NOKm)	106	174	216	348
Operational EBIT %	26.1%	36.3 %	26.6%	34.8 %
Value adjustments biomass	21	16	-32	23
Profit before tax	124	190	180	368
SalMar's share after tax	49	76	74	152
Harvested volume (tgw)	5.8	6.2	10.6	12.7
EBIT/kg	18.37	27.98	20.36	27.31

Harvest volume (1 000 tons) EBIT/kg (NOK)

• Scotland region main contributor to harvest volume
• Results negatively impacted by high mortality costs and harvest of smaller fish to minimise biological challenges
• Guiding of 30,000 tons harvest volume in 2019 maintained

Offshore fish farming a new era in aquaculture

OCEAN FARM 1

2 nd generation of smolt released august 2019 Expect harvest of this generation in autumn 2020

SMART FISH FARM

Awarded 8 development licenses in February 2019 Specifically designed for fish farming in the open ocean Planning continues according to plan

Trine Sæther Romuld New CFO & COO in SalMar from 1st of July 2019

• Extensive experience from management positions at Norwegian and international companies in the seafood, oil service, consultancy and auditing sectors
• State-authorised public accountant from the Norwegian School of Economics and Business Administration

Tel: +47 991 63 632

Email: trine.romuld@salmar.no

Operational EBIT deviation analysis (qoq)

Group profit and loss

NOK million	Q2 2019	Q2 2018	Δ%	YTD 2019	YTD 2018	Δ%
Operating income	3 296,3	2 944,0	12 %	6 259,7	5 475,0	14 %
EBITDA	1 153,9	1 000,0	15 %	2 124,1	1 829,4	16 %
Depreciations and write-downs	164,2	121,4		328,2	242,7
Operational EBIT	989,8	878,6	13 %	1 795,9	1 586,8	13 %
Fair value adjustment	175,8	25,5		2,9	177,1
EBIT	1 165,6	904,1	29 %	1 798,9	1 763,9	2 %
Income from investments in associates	51,2	78,8		79,9	136,3
Net financial items	-64,4	-15,3		125,1	-19,2
Net interest costs	-35,0	-25,1		-72,1	-48,1
Other financial items	-29,3	9,8		197,2	28,9
Profit before tax	1 152,5	967,6	19 %	2 003,9	1 881,0	7 %
Tax	235,9	204,6		375,1	396,4
Net profit for the period	916,5	763,0	20 %	1 628,9	1 484,6	10 %
Earnings per share (NOK)	7,96	6,80	17 %	14,34	13,14	9 %
Harvested volume (tgw)	41,4	34,0	22 %	76,9	65,9	17 %
EBIT per kg (NOK)	23,90	25,80	-7 %	23,35	24,07	-3 %

• Revenue driven by higher volume
• Positive contribution from Sales & Processing in Q2 2019 vs Q2 2018
• Positive fair value adjustment due to higher biomass
• Net financial items increased YoY due to implementation of IFRS16 and agio effects
• EBIT/kg decreased with NOK 1.90 / -7% YoY
  • Impacted by consolidation of Arnarlax
  • Norwegian operations EBIT/kg decreased with NOK 0.87 / -3% YoY

Group balance sheet

• Investments in line with ongoing investment programs
• Stable standing biomass YoY
• Net Interest-bearing debt increased following dividend pay-out of NOK 2,617 million
• New financing of term loan completed in June 2019 at NOK 1,000 million
• Solid financial position with equity ratio of 50.9% and NIBD/EBITDA at 0.7

1) NIBD does not include IFRS 16 leasing liabilities

Movement in net interest bearing debt

• Release of working capital positively impacting cash flow from operations
• Net cash flow from investments at NOK -343 million
  • Increase of ownership in Arnarlax NOK 112 million
  • Farming NOK 93 million
  • Smolt and hatchery NOK 27 million
  • Sales & Processing NOK 69 million
  • R&D and Ocean Farm 1 NOK 39 million
  • Capex Iceland NOK 39 million
  • Received dividend from associated companies NOK 44 million
• Dividends paid out in June at 23 NOK per share totaling NOK 2,617 million
• Net interest-bearing debt increased with NOK 1,709 million

Outlook

• Slight decrease in volume and a slight increase in costs expected to in Q3 2019
• Contract share for Q3 2019 currently around 27% with prices slightly up from level in 2018
• Investments continues according to plan
• Guiding of 145,000 tons in Norway and 10,000 tons on Iceland for 2019 maintained
• Expect continued good demand in core markets and moderate increase in global supply

THANK YOU FOR YOUR ATTENTION

www.salmar.no