SalMar ASA

Quarterly Report • Aug 25, 2016

SalMar ASA

Presentation Q2 2016

CEO Leif Inge Nordhammer CFO Trond Tuvstein

Agenda

• Highlights
• Operational update
• Financial update
• Outlook

Second quarter 2016 highlights

• Prices driving revenues and results
• Record-high operational EBIT of NOK 732 million, up from NOK 335 million in Q2 2015
• Biological challenges in Central Norway driving costs
• 45% of sales under contracts with prices well below average spot

Operational update

ISA situation per week 33

• ISA-suspicion 2 locations
• Some 1,3 million individuals
• No clinical issues, mortality due to ISA
• Sites surveyed and is harvested out according to plans
• Production and harvest weights minimally affected
• Entire zone planned cleared 2H 2016 due to operational plan

Farming Central Norway

	Q2 2016	Q2 2015	FY 2015
Operating income (NOKm)	1 093	901	3 942
Operational EBIT (NOKm)	538	184	948
Operational EBIT %	49 %	20%	24%
Harvested volume (tgw)	17,7	24,3	96,9
EBIT/kg	30,33	7,54	9,78

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

• Still challenging biological situation
• Still issue with Sea lice
• Suspicion ISA on 2 sites not confirmed in July
• Good operational performance
• Reduced overall costs
• Unfavourable harvest distribution affecting prices achieved negatively
• High spot-prices squeeze premium on organic salmon
• Expect harvest volumes of 77 000 tons in 2016

Farming Northern Norway

	Q2 2016	Q2 2015	FY 2015
Operating income (NOKm)	901	387	1 647
Operational EBIT (NOKm)	484	95	506
Operational EBIT %	54%	25%	31%
Harvested volume (tgw)	14,5	10,5	39,5
EBIT/kg	33,46	9,07	12,81

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

• Good operational performance with satisfactory biological results
• Zone regulations influence harvest distribution, negative effect on prices achieved
• Will also effect costs in 3q-16 negatively
• Biological situation remains sound
• Investments in mechanical treatment
• Improved preparedness
• Expect harvest volume of 49 000 tons in 2016 – volumes moved to 2017

Sales & Processing

-7,4 %

-11,8 %

	Q2 2016	Q2 2015	FY 2015
Operating income (NOKm)	2 140	1 734	7 295
Operational EBIT (NOKm)	-253	72	73
Operational EBIT %	-12%	4%	1%

• 45% of sales under contract at prices well below average spot
• Sanitary situation affecting operational efficiency through increased handling and more complex logistics
• Downgrades and suboptimal sizes affect prices achieved
• Improved capacity utilisation within processing, but still affected by high raw material prices
• Expect 40% contract share for 2H 2016 at higher price levels than in 1H.

Norskott Havbruk

	Q2 2016	Q2 2015	FY 2015
Operating income (NOKm)	433	344	1 498
Operational EBIT (NOKm)	101	37 122
Operational EBIT %	23%	11%
Value adjustments biomass	-3	-21
Profit before tax	89	15
SalMars share after tax	35	6	41
Harvested volume (tgw)	7,2	27,0
EBIT/kg	14,15	4,50
Harvest volume (1,000 tons)		EBIT/kg (NOK)
8,6			14,15
7,2 7,0 6,6 6,3		11,57

• Contract share of some 49% during the quarter
• The biological situation is good in Scottish Mainland and Orkney
• Sea lice still a challenge on Shetland
• Accelerated harvesting
• Mechanical treatment capacity arrived
• Expect harvest volumes of 26 000 tons in 2016

Q2 15 Q3 15 Q4 15 Q1 16 Q2 16

Status on Ocean Farming

• Construction has commenced
• Working close with sub-contractors with equipment and systems to be fitted on Ocean Farm 1
• Technical solution based on "the best" Norwegian industry has to offer from the fields of aquaculture and offshore oil and gas
• Working towards first fish in sea 3q 2017

Financial update

Operational EBIT deviation analysis (yoy)

• Record high prices
• Average price up NOK 26,22/kg yoy
• 45% of sales on contracts with significant negative effect
• Farming costs driven by biological challenges
• EBIT/kg Q2 2016 NOK 22.74, up from NOK 9.62 in Q2 2015

Group profit and loss

NOK million	2Q 16	2Q 15	YTD 2016	YTD 2015	FY 2015
Operating income	2 288,1	1 799,3	4 291,5		3 414,3 7 326,2
Cost of goods sold	910,8	890,9	1 757,3		1 614,0 3 562,8
Payroll expenses	211,3	190,2	404,8		367,8 765,9
Other operating expenses	345,8	305,9	657,6		585,8 1 272,2
EBITDA	820,2	412,3	1 471,8		846,8 1 725,3
Depreciations	88,4	77,2	173,4		151,0 321,4
Operational EBIT	731,8	335,1	1 298,4		695,9 1 403,9
Fair value adjustment	-223,7	-60,2	-55,7	-119,7	39,9
Operational profit	508,1	274,9	1 242,6		576,2 1 443,8
Income from investments in associates	34,2	5,8	92,0	22,0	40,2
Net interest costs	-22,3	-22,0	-47,7	-45,4	-95,3
Other financial items	7,2	-1,5	20,5	-0,3	-5,1
Profit before tax	527,2	257,2	1 307,4		552,4 1 383,7
Tax	124,8	69,6	300,4		146,7 254,9
Net profit for the period	402,4	187,6	1 007,0		405,8 1 128,8

• Revenues and results driven by record high prices
• Average salmon price (NASDAQ) NOK 64.22/kg (NOK 38.00)
• 45% contract share with significant effect on prices achieved
• Costs affected by biological conditions
• EBIT/kg NOK 22.74 vs NOK 9.62 in Q2 15

Group balance sheet

NOK Million	30.06.2016	31.03.2016	31.12.2015	30.06.2015
ASSETS
Intangible fixed assets	2 913,0	2 911,5	2 913,5	2 921,6
Tangible fixed assets	2 866,5	2 584,3	2 412,0	2 144,1
Financial fixed assets	851,3	650,1	636,2	595,4
Total fixed assets	6 630,8	6 145,9	5 961,7	5 661,1
Inventory	3 637,7	3 714,1	3 634,3	3 031,9
Accounts receivables	774,1	734,0	815,5	841,8
Other short-term receivables	328,5	314,0	258,3	219,6
Cash and cash equivalents	198,9	210,0	273,7	109,0
Total current assets	4 939,3	4 972,1	4 981,8	4 202,3
TOTAL ASSETS	11 570,0	11 118,0	10 943,5	9 863,5
EQUITY AND LIABILITIES
Paid-in equity	515,7	509,4	501,1	476,6
Reserves	4 455,5	5 191,7	4 646,3	3 923,7
Minority interests	76,3	88,4	79,7	68,5
Total equity	5 047,6	5 789,5	5 227,0	4 468,7
Provisions for liabilities	1 189,3	1 241,0	1 230,8	1 201,5
Int. bearing long-term liabilities	2 488,6	1 999,2	2 761,4	2 516,1
Total long-term liabilities	3 677,9	3 240,2	3 992,5	3 717,6
Int. bearing short-term liabilities	320,6	140,4	140,4	325,0
Other short-term liabilities	2 524,0	1 947,9	1 583,9	1 352,1
Total short-term liabilities	2 844,6	2 088,3	1 723,9	1 677,1
TOTAL EQUITY AND LIABILITIES	11 570,0	11 118,0	10 943,5	9 863,5
Net interest bearing debt	2 610,3	1 929,6	2 628,1	2 732,2
Equity share	43,6 %	52,1 %	47,8 %	45,3 %

• Investments in line with ongoing investment programs
• Increased biological assets
• Reduced fair value of NOK 76.4 million
• Increased cost base of NOK 46.0 million
• Other short-term liabilities up NOK 576 million
• Net interest bearing debt increased to NOK 2 610 million
• Equity ratio down to 43.6% after dividend pay out

16

Group cash flow

NOK million	Q2 16	Q2 15	YTD 2016	YTD 2015	FY 2015
Profit before tax	527,2	257,2	1 307,4	552,4	1 383,7
Tax paid in period	-9,8	-1,1	-17,6	-5,2	-315,1
Depreciation	88,4	77,2	173,4	151,0	321,4
Share of profit/loss from associates Realized and unrealized gains on financial assets	-34,2 -	-5,8 -	-92,0 -	-22,0 -	-40,2 -
Gains exit subsidiaries	-	-	-28,4	-	-
Change in fair value adjustments	223,7	60,2	55,7	119,7	-39,9
Change in working capital	197,7	-49,8	552,9	210,1	279,2
Other changes	34,4	21,0	76,6	28,8	33,3
Net cash flow from operating activities	1 027,5	358,8	2 028,1	1 034,8	1 622,3
				-	-
Net cash flow from investing activities	-566,6	-190,9	-843,4	-300,5	-724,7
				-	-
Change in interest-bearing debt	669,6	997,6	-92,6	372,9	424,8
Dividend paid out	-1 121,2	-1 120,0	-1 121,2	-1 120,0	-1 124,9
Interest paid	-22,3	-22,0	-47,7	-45,4	-95,3
Other changes	-	0,2	-	0,2	-0,1
Net cash flow from financing activities	-473,9	-144,2	-1 261,5	-792,3	-795,5
Net change in cash for the period	-13,0	23,7	-76,7	-58,0	102,0
Foreign exchange effects	1,8	-0,8	2,0	-	4,7
Cash in the beginning of the period	210,0	86,1	273,7	167,0	167,0
				-	-
Cash at the end of the period	198,9	109,0	198,9	109,0	273,7

• Strong cash flow from operations
• Strong operational earnings
• Working capital release
• Net cash flow from investments at NOK 566,6 million
• NOK 370 million related investments in operational assets
  • NOK 103 million in Ocean Farming
  • NOK 143 million in existing and new smolt capacity
• Loan of NOK 242 million financing of share issue in Arnarlax HF
• Dividend from Norskott NOK 47,5 million
• Cash and cash equivalents decreased by NOK 13 million to NOK 199 million

Outlook

• Still challenging biological situation in Central Norway
• Improved capacity and preparedness for handling of sea lice
• Both North and Central Norway
• New guiding: Expect harvest volume of 126 000 tons (Norway) in 2016
• Current contract share for 2H 2016 around 40%
• Contracts in 2H16 on a higher price level then in 1H16
• Icelandic operations continue as planned
• Tight market support strong prices going forward, but somewhat down in 2H compared to 1H.
• Global supply expected down 6% in 2016
• Norwegian supply expected down 3%

Thank you for your attention!