Company Presentation - 26 March 2010
This Presentation of P/f Bakkafrost (the “Company”) has been prepared for a press meeting on 26 March 2010 in connection with the listing of the Company’s shares on Oslo Børs. The Presentation has been prepared solely for information purposes. Information contained will not be updated. The Presentation should be read and considered in connection with the information given orally during the meeting. The Presentation may not be distributed, reproduced or otherwise used without the consent of the Company.
The information contained herein does not purport to contain all information concerning the Company. No party has made any kind of independent verification of any of the information set forth herein, including any statements with respect to projections or prospects of the business or the
assumptions on which such statements are based. The Company nor any of its subsidiaries, directors, officers or employees, make any representations or warranty, express or implied, as to the accuracy, reliability or completeness of this Presentation or of the information contained herein and shall have no liability for the information contained in, or any omissions from, this Presentation.
Included in this Presentation are various “forward-looking statements”, including statements regarding the intent, opinion, belief or current expectations of the Company or its management. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance and outcomes to be materially different from any future results,
performance or outcomes expressed or implied by such forward-looking statements, including, among others, risks or uncertainties associated with the Company’s business, segments, development, growth management, financing, market acceptance and relations with customers, and, more generally, general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing
environments, fluctuations in currency exchange rates and interest rates and other factors. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document. No information contained herein constitutes, or shall be relied upon as constituting, any advice relating to the future performance of the Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements included in this Presentation.
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COMPANY OVERVIEW
Bakkafrost – The largest fish farming company on the Faroe Islands
Fish farms Hatcheries Slaughteries HQ/VAP
~75km
~110km
Largest salmon farming company on the Faroe Islands
~60 % of harvest volumes
~44 % of existing licenses
The result of the merger of Bakkafrost and Vestlax in 2010
Produced a total of c. 30,650 tonnes gwt in 2009
Revenues and EBIT* in 2009 of DKK 922 and 205 million (22%)
Controlling the value chain from smolt to VAP (value added products)
C. 450 employees
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Excellent conditions for cost effective farming
4 6 8 10 12 14 16
ºC
Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan
Faroe Islands Norway (Trøndelag)
Average water temperatures 2002-2008
Source: Company material, Havforskningsinstituttet
Geography
Water
Location
Biomass
Faroese fjords provide separation between locations
Improves biological control and area management
Short distances between farming- and processing facilities
Biological sustainability setting the biomass target per license
No maximum allowed biomass per license as in Norway
Limited water temperature variation throughout the year between 6-12 degrees Celsius
Excellent water quality and circulation conditions
Efficient distribution to both the European- and US markets
A pure play salmon producer covering the entire value chain
8 licenses
5 operative hatcheries
15 wholly owned licenses
Produced 30,650 tonnes gwt in 2009
Two slaughteries with capacities of 100 and 120 tonnes lwe per day with the current shift structure
Current production 44 tonnes gwt/day
Capacity of 60 tonnes gwt/day
Smolt Farming Slaughter VAP
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Increased focus on the highly profitable VAP operations
Fresh and frozen 4%
gutted trout*
19%
By-products
Fresh and frozen gutted salmon 42%
VAP 35%
Sales split 2009 by product
Note: Split by DKK
*Trout to be phased out during 2010
Ideally located between Europe and the US
(% of revenue 2009)
USA:
Mostly fresh and frozen gutted fish of high slaughter weight (strong demand from sushi market) No import toll on whole fish to the US market
Europe:
Mostly frozen portions to large supermarket chains such as Lidl and Carrefour
US 20%
3%
7%
9% 8%
15%
4%
20%
Ukraine
Russia
Other Europe
Denmark
Faroesetraders
France
Germany
1%
3%
5%
Other far east
Taiwan
Japan
C. 2-3 days of transport 2 times a week
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During the period 2001-2004 the Faroe Islands were severely struck by ISA outbreaks
New legislation and regulation was introduced ultimo 2003 known as “The Faroese Veterinary Model”:
Fallow periods between generations in farming and hatcheries
Immunisation and vaccination programs
Restricting movement of equipment
Restricting movement of fish
Density limits introduced
Brood stock facilities allowed on land only
Minimum distances between farms, hatcheries etc introduced
The model has resulted in one of the most predictable fish production environments in the world with low mortality levels
New legislation
An excellent regulatory farming environment
0 3 6 9 12
0%
10%
20%
30%
ISA outbreaks Mortality
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Mortality ISA outbreaks
Disease leading to a back to square one for Faroe salmon industry
Source: Company material
Faroe Islands with a very competitive cost level
14 16 18 20 22 24 26 28
NOK
2005 2006 2003 2004
2001 2002 2007 2008 2009E 2010E
Faroes Norway Chile
Source: Kontali, Nordea Markets
Cost/Kg gwt (NOK)
Very positive development in production cost - especially after the introduction of the Faroese Veterinary Model
The Faroe Islands currently have very low production
costs for Atlantic Salmon
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Bakkafrost with superior operational track record compared with industry peers
Mortality
0%
10%
20%
30%
40%
1994 1996 1998 2000 2002 2004 2006 2008
Norway avg.
Bakkafrost Faroes
Slaughter weight
4.0 4.5 5.0 5.5 6.0 6.5
1994 1996 1998 2000 2002 2004 2006 2008 kg wfe
Norway Bakkafrost Faroes
Economic feed conversion rate
1.0 1.1 1.2 1.3 1.4
1994 1996 1998 2000 2002 2004 2006 2008 Bakkafrost Norway
Faroes
Productivity
2 3 4 5 6
1994 1996 1998 2000 2002 2004 2006 2008 kg wfe per smolt
Norway Bakkafrost Faroes
Source: Company material, Fiskeridirektoratet, Kontali
20 12 31
49 64
108 109
327
0 50 100 150 200 250 300 350
‘000 tonnes gwt
Marine Farms Lighth.
Caledonia Bakkafrost
Grieg Seafood SalMar
Cermaq Leroy
Seafood Marine
Harvest
Strong fundamentals result in ‘best in class’ profitability
Volumes 2009
Source: Companies’ Q4 2009 reports
EBIT/kg gwt Q4 2009 (NOK)
14.2
11.5 10.5 8.68.9
5.96.1 5.55.9 4.95.1 4.8 4.44.8 4.34.3 3.9 3.83.9 3.0 1.7 1.0
Bakkafrost (North)
Bakkafrost post merger
Salmar Central Norway
Lerøy Seafood Group ASA
Vestlax
Norskott Havbruk
Lighthouse Caledonia ASA
GSF Shetland
Cermaq Mainstream Norwa
Marine Harvest Scotland
Marine Harvest ASA
Cermaq Mainstream Scotland
GSF Finnmark
Marine Harvest Canada
GSF Rogaland
Marine Harvest Norway
Grieg Seafood ASA
Marine Farms Lakeland
Cermaq Mainstream
Cermaq Mainstream Chile
Cermaq Mainstream Canada
Salmar Northern Norway
GSF BC (Canada)
-1.6
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Strong expected volume growth in existing licenses
1.4 1.4
3.2 0.7
2007 5.5
3.3 0.8
7.5
2011E 4.5 3.0
2010E 7.0
3.6 3.4
2009PF 6.3
3.9 2.1 0.3
2008 5.3
+42%
Bakkafrost Vestlax
Vestlax trout
Expects to release 42% more smolt in 2011 than 2008
No absolute biomass restrictions
Vestlax trout to be phased out
Smolt release (million)
Attractive synergy potential from integrating the operations of Bakkafrost and Vestlax
1. Streamlining Vestlax operations to achieve Bakkafrost efficiency
Feed prices
Financing (not affecting EBIT)
Slaughteries
Manpower
14.2
8.9
6.2
10.5
8.6
2.4 2.6
8.4
0 5 10 15
Q409 Q309
Q209 Q109*
NOK
+5.6 Vestlax
Bakkafrost
EBIT/Kg gwt
2. Improving utilisation of the Group’s very profitable VAP facilities
27%
Unused capacity
Utilisation of current VAP facilities
*Excludes net non-operational losses of DKK 16.9m in Vestlax
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INDUSTRY OUTLOOK
Global supply shortage combined with increasing demand for salmon yields a positive market short term
2002
2001
million tonnes wfe
0.9
0.6
0.3 1.5
1.2
0.0
-8%
Norway Chile UK Canada Other Faroe Islands
2011
2010
2009
2008
2007
2006
2005
2004
2003
Source: Kontali, Nordea Markets
Global supply of Atlantic salmon
0 1 2 3 4
Kg
CAGR +9%
EU US Russia Japan
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Per capita consumption of Atlantic Salmon
Source: Kontali
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FINANCIALS
Profit and Loss - Pro Forma 2009
Years ended 31 December Bakkafrost Pro Forma
Adjustments Bakkafrost IFRS
Vestlax IFRS
(DKK million) 2009 2009 2009
Operating income 922 -43 597 368
Operating expenses -689 43 -417 -314
Operating profit before deprec. and fair
value adjustments of biological assets 233 0 179 54
-margin 25.3% 30.0% 14.6%
Other income 10 0 0 10
Depreciation and amortisation -38 0 -21 -17
Operating profit before fair value
adjustments of biological assets 205 0 159 46
-margin 22.2% 26.6% 12.5%
Fair value adjustments of biological assets 34 0 34 1
Operating profit 239 0 192 47
-margin 26.0% 32.2% 12.8%
Financial income 3 -2 3 2
Financial cost -42 0 -14 -28
Profit before income tax 201 -1 181 21
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Balance Sheet - Pro Forma 2009
Years ended 31 December Bakkafrost Pro Forma
Adjustments Bakkafrost IFRS
Vestlax IFRS
(DKK million) 2009 2009 2009 2009
Assets
Intangible assets 136 68 0 69
Tangible non current assets 331 0 231 100
Financial non current assets 16 -16 26 6
Long term receivables 0 0 0 0
Total non-current assets 484 52 258 175
Biological assets 330 0 227 102
Inventories 25 0 21 4
Accounts receivables 114 -5 67 53
Other current receivables 15 0 13 2
Cash and cash equivalents 36 0 35 0
Total current assets 520 -5 363 162
Total Assets 1,004 46 621 337
Liabilities and shareholders’ equity
Share capital and share premium 91 -124 90 125
Retained earnings 483 152 299 32
Total shareholders' equity 573 28 389 157
Long term interest bearing debt 66 -5 34 37
Deferred taxes 76 24 57 -5
Total long-term liabilities 142 19 91 32
Short term interest bearing debt 215 0 98 117
Other short term liabilities 73 0 42 31
Total short-term liabilities 289 0 141 148
Total liabilities 431 19 232 180
Total shareholders' equity and 1,004 46 621 337
Equity ratio 57.1%
Net debt / EBITDA 1.1x
Interest coverage (EBITDA / financial cost) 5.6x
Source: Annual report 2009
Cash Flow – Pro Forma 2009
Years ended 31 December Bakkafrost
Pro Forma
Adjustments Bakkafrost IFRS
Vestlax IFRS
(DKK million) 2009 2009 2009
Cash Flow from Operations
Operating profit for the period 239 0 192 47
Depreciation 38 0 21 17
Adjustment for fair Value adjustment on biomass -34 0 -34 -1
Taxes paid 0 0 0 0
Change in inventories 106 0 33 73
Change in other current assets -28 5 -23 -10
Change in current debt -92 1 -1 -93
Net cash flow from operations 229 7 189 33
Cash Flow from investment activities
Proceeds from sale of fixed assets 0 0 0 0
Purchase of fixed assets -37 0 -21 -16
Purchase of shares -9 3 -12 0
Change in long term receivables 7 0 7 0
Net cash flow from investment activities -40 3 -27 -16
Cash Flow from financing activities
Repayments of borrowings -122 -5 -111 -6
Received interests 3 -2 3 2
Paid interests -42 -3 -14 -25
Payment of dividend -5 0 -5 0
Net cash flow from financing activities -165 -10 -127 -28
Net change in cash and cash equivalents 24 0 35 -11
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