SalMar ASA

Investor Presentation • Feb 14, 2019

SalMar ASA

Presentation Q4 2018

CEO Olav-Andreas Ervik CFO Trond Tuvstein

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Highlights

• Record high harvest volume
• Total operational EBIT 935 MNOK
• Guiding of 145 000 tons for 2019 maintained
• Propose dividend for 2018 of NOK 23,00 per share

SalMar - a fully integrated salmon farmer

TRACEABLE SUPPLY CHAIN

4

Farming Central Norway

	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating income (NOKm)	1 577	1 362	5 962	5 198
Operational EBIT (NOKm)	636	358	2 533	1 891
Operational EBIT %	40,3 %	26,3 %	42,5 %	36,4 %
Harvested volume (tgw)	28,2	26,9	100,1	87,5
EBIT/kg	22,53	13,30	25,31	21,63

• Operations in line with expectations and guiding from Q3 2018
• Autumn 17 generation main contributor to harvest volume
• Slight increase in cost QoQ, but cost improvements YoY
• Harvest of small sized fish at the end of the period low price achievement and higher cost
• Costs expected to be at the same level in Q1 2019

26,45

22,53

29,74

23,82

• Expect harvest volume of 95 000 tons in 2019

Farming Northern Norway

	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating income (NOKm)	701	629	2 645	2 865
Operational EBIT (NOKm)	291	228	1 154	1 376
Operational EBIT %	41,6 %	36,3 %	43,6 %	48,0 %
Harvested volume (tgw)	12,2	13,1	42,4	47,7
EBIT/kg	23,86	17,50	27,24	28,84

• Operational performance in line with expectations with lower costs and higher volume
• Good biological performance in the quarter after lower than expected growth in previous quarters.
• Volume from Spring 2017 generation harvested in the quarter with high average weight and good price achievement
• Costs expected to be at the same level in Q1 2019

• Expect harvest volume of 50 000 tons in 2019

Sales & Processing

	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating income (NOKm)	3 078	2 767	11 432	10 925
Operational EBIT (NOKm)	79	176	-13	48
Operational EBIT %	2,6 %	6,3 %	-0,1 %	0,4 %

• Positive contribution from all business areas
• Large harvest volume in the quarter with high capacity-utilization
• Contract share of 35% with positive contribution
• Expect lower volume in Q1 2019 due to seasonality
• Contract share currently at 30% for Q1 2019 and 20% for FY 2019 with prices slightly up from the level in 2018

2,6 % 2,6 %

Norskott Havbruk

	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating income (NOKm)	512	485	2 057	2 088
Operational EBIT (NOKm)	158	115	661	669
Operational EBIT %	30,8 %	23,8 %	32,1 %	32,1 %
Value adjustments biomass	50	-26	-10	9
Profit before tax	202	87	640	670
SalMar's share after tax	83	38	265	273
Harvested volume (tgw)	6,7	7,2	27,5	31,0
EBIT/kg	23,70	16,00	24,06	21,59

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

• Good operational performance in the quarter with cost improvements QoQ and YoY
• Results positively impacted by good price achievement due to high average weight on volume harvested
• New RAS facility on track, eggs received in November with first release of smolt in Autumn 2019
• Expect harvest volume of 30 000 tons in 2019

Arnarlax HF

	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating income (NOKm)	114	172	400	625
Operational EBIT (NOKm)	-10	4	-79	60
Operational EBIT %	-8,4 %	2,5 %	-19,7 %	9,6 %
Value adjustments biomass	23	-53	83	-186
Profit before tax	0	-58	-40	-165
SalMar's share after tax	-1	-16	-12	-56
Harvested volume (tgw)	2,0	3,2	6,7	9,7
EBIT/kg	-4,82	1,35	-11,82	6,23

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

• Result negatively impacted by high fixed costs
• Started harvesting of 2017 generation better biological performance than previous generations
• Bjørn Hembre appointed as new CEO from January 2019
• Expect harvest volume of 10 000 tons in 2019

Ocean Farm 1 – pilot phase completed

• Pilot phase completed in January 2019
• Strong growth and good quality
• Low lice levels and no delousing treatments
• Operational experiences & learnings implemented
• Plan to release 2nd generation of smolt S0 in August 2019
• The performance and results strengthen our confidence in our Ocean Strategy

Next step– production in open ocean

• Development of Smart Fish Farm next step to utilize open oceans
• Production on the salmons terms, not the limitations of the equipment
• Specifically designed for fish farming in the open ocean
• Capacity to produce 3 million salmon divided in 8 chambers
• Central column make it possible to handle fish in closed-containment systems

Operational EBIT deviation analysis (qoq)

• Average spot prices up NOK 1.07 per kg during the quarter
• Sales & processing at the same level as in previous quarter with continued
• Good price achievement
• High capacity-utilization
• Farming negatively impacted by low harvest weight at the end of the period
• Weaker price achievement
• Increased cost

Group profit and loss

NOK million	Q4 2018	Q4 2017	FY 2018	FY 2017
Operating income	3 101,1	2 780,6	11 342,6	10 817,2
Cost of goods sold	1 257,0	1 263,0	4 585,5	4 722,5
Payroll expenses	279,1	241,6	1 040,4	929,1
Other operating expenses	507,8	447,7	1 768,0	1 584,8
EBITDA	1 057,2	828,2	3 948,6	3 580,8
Depreciations and write-downs	122,3	121,0	487,8	418,6
Operational EBIT	934,9	707,2	3 460,8	3 162,2
Fair value adjustment	413,7	-370,6	845,8	-370,0
Operational profit	1 348,6	336,6	4 306,6	2 792,2
Income from investments in associates	82,3	19,0	252,9	208,9
Net interest costs	-27,7	-26,6	-105,1	-95,9
Other financial items	-36,8	-34,2	-1,9	-49,1
Profit before tax	1 366,3	294,7	4 452,6	2 856,2
Tax	207,7	-6,5	873,3	558,4
Net profit for the period	1 158,7	301,3	3 579,2	2 297,8
Items to be reclassified to profit and loss in subsequent periods:
Change in translation diff. associates	41,6	33,7	-5,6	41,7
Change in translation diff. subsidaries	8,5	6,4	4,9	3,5
Cash flow hedge, net tax	0,0	0,0	0,0	-11,5
Total comprehensive income	1 208,8	341,4	3 578,5	2 331,6
Allocation of the periods net profit:
Non-controlling interests	-8,8	2,2	10,8	23,8
Shareholders in SalMar ASA	1 167,5	299,1	3 568,4	2 274,0
Earnings per share (NOK)	10,36	2,66	31,70	20,24
Earnings per share - diluted 15	10,34	2,66	31,60	20,18

• Revenue driven by higher prices
• Cost improvements in farming YoY
• Positive contribution from Sales & Processing
• EBIT/kg at NOK 23.11 vs 17.70 in Q4 17
• FY 2018 improvements in operational EBIT
• Higher volume
• Lower cost

Group balance sheet

NOK million	31.12.2018	30.09.2018	31.12.2017
ASSETS
Intangible fixed assets	3 404,0	3 388,9	2 925,0
Tangible fixed assets	3 591,5	3 590,7	3 604,8
Financial fixed assets	1 215,5	1 085,9	1 080,9
Total fixed assets	8 210,9	8 065,5	7 610,6
Inventory	5 765,5	5 027,3	4 394,6
Accounts receivables	630,1	528,5	501,1
Other short-term receivables	289,4	203,7	242,9
Cash and cash equivalents	239,6	489,4	177,1
Total current assets	6 924,6	6 249,0	5 315,6
TOTAL ASSETS	15 135,6	14 314,4	12 926,2
EQUITY AND LIABILITIES
Paid-in equity	597,4	589,1	557,6
Reserves	8 450,7	7 230,1	7 022,4
Minority interests	91,7	100,5	88,1
Total equity	9 139,8	7 919,7	7 668,1
Provisions for liabilities	1 533,3	1 460,1	1 362,2
Int. bearing long-term liabilities	1 019,1	1 081,6	1 156,0
Total long-term liabilities	2 552,4	2 541,7	2 518,2
Int. bearing short-term liabilities	748,2	734,9	243,6
Other short-term liabilities	2 695,1	3 118,1	2 496,3
Total short-term liabilities	3 443,3	3 853,0	2 739,9
TOTAL EQUITY AND LIABILITIES	15 135,6	14 314,4	12 926,2
Net interest bearing debt	1 527,7	1 327,1	1 222,5
Equity share	60,4 %	55,3 %	59,3 %

• Investments in line with ongoing investment programs
• Fair value of biomass increased by NOK 478.2 million
• Interest-bearing debt reduced by NOK 49.2 million during the quarter
• NIBD at NOK 1 527.7 million at the end of the quarter
• Financial position remains strong, equity ratio increased to 60.4%

Group cash flow

NOK million	Q4 2018	Q4 2017	FY 2018	FY 2017
Profit before tax	1 366,3	294,7	4 452,6	2 856,2
Tax paid in period	-658,7	-403,4	-672,8	-423,2
Depreciation	122,3	121,0	487,8	418,6
Share of profit/loss from associates	-82,3	-19,0	-252,9	-208,9
Realized and unrealized gains on financial assets	0,0	0,0	0,0	0,0
Gains exit subsidiaries	0,0	0,7	0,0	-10,2
Change in fair value adjustments	-413,7	370,6	-845,8	370,0
Change in working capital	-403,6	132,0	-500,5	196,6
Other changes	32,5	29,5	113,4	175,4
Net cash flow from operating activities	-37,1	526,2	2 781,6	3 374,4
Net cash flow from investing activities	-144,2	-112,9	-833,8	-758,0
Change in interest-bearing debt	-49,2	-409,7	367,1	-1 250,9
Dividend paid out	0,0	0,0	-2 147,2	-1 366,0
Interest paid	-27,7	-26,6	-105,1	-95,9
Other changes	0,0	0,2	-5,0	-3,8
Net cash flow from financing activities	-76,9	-436,2	-1 890,2	-2 716,6
Net change in cash for the period	-258,3	-22,9	57,7	-100,2
Foreign exchange effects	8,5	6,4	4,8	3,5
Cash in the beginning of the period	489,4	193,6	177,1	273,7
Cash at the end of the period	239,6	177,1	239,6	177,1

• Cash flow from operations impacted by taxes paid and increase of working capital
• Net cash flow from investments at NOK -144.2 million
• Operating assets NOK 119 million
• MariCulture NOK 20 million
• Other NOK 5,2 million
• Cash holding reduced with NOK 249.8 million during the quarter

Outlook

• Costs expected to be at the same level in Q1 2019
• Contract share for Q1 2019 currently around 30% with prices slightly up from level in 2018
• Ocean Strategy continues according to plan
• Guiding of 145 000 tons maintained for 2019
• Total CAPEX in 2019 currently estimated to NOK 896 million
• Maintenance CAPEX NOK 272 million
• Investments for further growth within Smolt and Hatchery NOK 90 million, Farming NOK 167 million, Sales & Processing NOK 327 million and MariCulture NOK 40 million
• Expect continued good demand in core markets and moderate increase in global supply

THANK YOU FOR YOUR ATTENTION

www.salmar.no