SalMar ASA — Investor Presentation 2016

May 11, 2016

SalMar ASA

Presentation Q1 2016

CEO Leif Inge Nordhammer CFO Trond Tuvstein

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

First quarter 2016 highlights

• Record result driven by high prices
• Biological situation in Central Norway still a challenge
• Sales & Processing negatively affected by 55% contract share
• Improved capacity for handling of sea-lice

Operational update

Farming Central Norway

	Q1 2016	Q1 2015	FY 2015
Operating income (NOKm)	844	821
Operational EBIT (NOKm)	351	244
Operational EBIT %	42%	30%	24%
Harvested volume (tgw) EBIT/kg	14,4 24,41	20,3 12,02
Harvest volume (1,000 tons) 28,3		EBIT/kg (NOK)
24,3 24,0			24,41
20,3

14,4 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 12,02 7,54 10,05 9,83 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

• Challenging situation
• Control the sea lice situation
• Outbreak of ISA (April)
• Driving costs and affects overall efficiency
• Some accelerated harvesting
• Better growth
• Stable cost levels going forward
• High spot-prices squeeze premium on organic salmon
• Expect harvest volumes of 81 000 tons in 2016

Farming Northern Norway

	Q1 2016	Q1 2015	FY 2015
Operating income (NOKm)	739	306	1 647
Operational EBIT (NOKm)	372	90	506
Operational EBIT %	50%	29%	31%
Harvested volume (tgw)	12,9	7,8	39,5
EBIT/kg	28,85	11,55	12,81

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

17,84

28,85

• Sound biological situation

• Good performance in sea
• Positive development in underlying operations
• Stable cost levels going forward
• Approx. 10 % of volume from jointly operated facilities
• Expect harvest volume of 50 000 tons in 2016

Sales & Processing

	Q1 2016	Q1 2015	FY 2015
Operating income (NOKm)	1 803	1 605	7 295
Operational EBIT (NOKm)	-133	46	73
Operational EBIT %	-7%	3%	1%
Operating income (NOKm) 2 032 1 925 1 803 1 734 1 605	4,2% 2,8%	EBIT-margin (%) 0,0% -2,2%
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16	Q1 15 Q2 15	Q3 15 Q4 15	-7,4% Q1 16

• Sales negatively affected by 55% contractshare
• Somewhat lower capacity utilisation for slaughtering and processing due to seasonality
• Increased handling and more complex logistics continue to affect overall operational efficiency
• Expect 50 % contract share for the second quarter of 2016

Norskott Havbruk

11,57

	Q1 2016	Q1 2015	FY 2015
Operating income (NOKm)	422	325	1 498
Operational EBIT (NOKm)	81	43	122
Operational EBIT %	19%	13%	8%
Value adjustments biomass	54	1	-24
Profit before tax	132	42	90
SalMars share after tax	58	16	41
Harvested volume (tgw)	7,0	5,6	27,0
EBIT/kg	11,57	7,72	4,50
Harvest volume (1,000 tons)	EBIT/kg (NOK)

• Sea lice still a challenge on Shetland
• Improved overall biological situation and performance
• Investing in mechanical treatment capacity
• New sites increased capacity approved
• Expect harvest volumes of 26 000 tons in 2016

Status on Ocean Farming

• On 28 February 2016 the Norwegian Directorate of Fisheries awarded the first eight development licences to Ocean Farming AS (91 % owned by SalMar)
• The development licences have been granted for a period of seven years
• May be converted into ordinary production licences before that time if their objectives and the criteria on which they were granted have been met
• Area for location granted
• Working towards first fish in sea 2017

Financial update

Operational EBIT deviation analysis (yoy)

• Extremly strong 1Q16 prices
• Negative impact from 55% contract sales
• Farming affected by higher feed cost and biological challenges
• Total EBIT/kg Q1 2016 NOK 20.78, up NOK 7.94 from Q1 2015

Group profit and loss

NOK Million	Q1 2016	Q1 2015	FY 2015
Operating income	2 003,3	1 615,0	7 326,2
Cost of goods sold	846,6	723,1	3 562,8
Payroll expenses	193,4	177,6	765,9
Other operating expenses	311,8	279,8	1 272,2
EBITDA	651,5	434,5	1 725,3
Depreciations	85,0	73,7	321,4
Operational EBIT	566,5	360,8	1 403,9
Fair value adjustment	168,0	-59,5	39,9
Operational profit	734,5	301,3	1 443,8
Income from investments in associates	57,8	16,1	40,2
Net interst costs	-25,4	-23,4	-95,3
Other financial items	13,3	1,3	-5,1
Profit before tax	780,2	295,3	1 383,7
Tax	175,6	77,1	254,9
Net profit for the period	604,6	218,2	1 128,8

• Revenues boosted by record high prices
• Average salmon price (NASDAQ) NOK 58.85/kg (NOK 41.12)
• 55% contract share affecting results negatively
• Production costs affected by sanitary conditions
• EBIT/kg NOK 20.78 vs NOK 12.85 in Q1 15

Group balance sheet

NOK Million	31.03.2016	31.03.2015	31.12.2015
ASSETS
Intangible fixed assets	2 911,5	2 905,8	2 913,5
Tangible fixed assets	2 584,3	2 046,2	2 412,0
Financial fixed assets	650,1	569,3	636,2
Total fixed assets	6 145,9	5 521,3	5 961,7
Inventory	3 714,1	3 143,4	3 634,3
Accounts receivables	734,0	780,3	815,5
Other short-term receivables	314,0	147,4	258,3
Cash and cash equivalents	210,0	86,1	273,7
Total current assets	4 972,1	4 157,2	4 981,8
TOTAL ASSETS	11 118,0	9 678,5	10 943,5
EQUITY AND LIABILITIES
Paid-in equity	509,4	476,6	501,1
Reserves	5 191,7	4 839,6	4 646,3
Minority interests	88,4	60,3	79,7
Total equity	5 789,5	5 376,4	5 227,0
Provisions for liabilities	1 241,0	1 215,3	1 230,8
Int. bearing long-term liabilities	1 999,2	1 528,4	2 761,4
Total long-term liabilities	3 240,2	2 743,6	3 992,5
Int. bearing short-term liabilities	140,4	315,2	140,4
Other short-term liabilities	1 947,9	1 243,2	1 583,9
Total short-term liabilities	2 088,3	1 558,5	1 723,9
TOTAL EQUITY AND LIABILITIES	11 118,0	9 678,5	10 943,5
Net interest bearing debt	1 929,6	1 757,5	2 628,1
Equity share	52,1 %	55,6 %	47,8 %

• Investments in line with ongoing investment program
• Strengthened sea lice handling capacity
• Strengthened financial position
• Equity buildup
• Increased biological assets
• Increased fair value of NOK 150.6 million
• Increased cost base of NOK 17.6 million
• Net interest bearing debt reduced to NOK 1 930 million
• Strong financial position, equity ratio at 52.1%

Group cash flow

NOK million	Q1 2016	Q1 2015	FY 2015
Profit before tax	780,2	295,3	1 383,7
Tax paid in period	-7,7	-4,1	-315,1
Depreciation	85,0	73,7	321,4
Share of profit/loss from associates Realized and unrealized gains on financial assets	-57,8 -	-16,1 -	-40,2 -
Gains exit subsidiaries	-28,4	-	-
Change in fair value adjustments	-168,0	59,5	-39,9
Change in working capital	355,2	259,9	279,2
Other changes	42,2	7,8	33,3
Net cash flow from operating activities	1 000,7	676,0	1 622,3
Net cash flow from investing activities	-276,8	-109,6	-724,7
Change in interest-bearing debt	-762,2	-624,6	424,8
Dividend paid out	-	-	-1 124,9
Interest paid	-25,4	-23,4	-95,3
Other changes	-	-0,1	-0,1
Net cash flow from financing activities	-787,6	-648,1	-795,5
Net change in cash for the period	-63,7	-81,7	102,0
Foreign exchange effects	-0,1	0,8	4,7
Cash in the beginning of the period	273,7	167,0	167,0
Cash at the end of the period	210,0	86,1	273,7

• Strong cash flow from operations
• Strong operational earnings
• Working capital release
• Net cash flow from investments at NOK 276.8 million
• Investments in operational assets and smolt capacity
• Ocean Farming
• Sea lice handling equipment
• Significant debt reductions
• Cash and cash equivalents decreased by NOK 63.7 million to NOK 210 million

Outlook

ISA

• Outbreaks in Norway every year since 2004
• ISA has been proven on SalMars site Ørnøya S1 2015 generation, located outside of Frøya, Sør-Trøndelag
• No clear cause of infection
• Average weight of the fish approx. 4.4 kg.
• SalMar has already started harvesting out the fish
• A farming zone with good cooperation between farmers and good capacity to deal with the situation

Outlook

• Still challenging biological situation, improved capacity for handling of sea lice
• Current contract share for Q2 2016 approx. 50%
• FY 2016 approx. 35%
• Expect to harvest approx. 45 % of the total volume of 131 000 tons in 1H 2016
• Icelandic operations continue as planned
• Tight market expected to support strong prices going forward
• Global supply expected to drop 7% in 2016
• Norwegian supply expected down 4%
• AGM to be held on 7 June 2016 on Frøya
• BoD will propose a DPS of NOK 10.0

Thank you for your attention!

www.salmar.no