Foroya Banki · OMXCOP:FOBANK

Foroya Banki — Bakkafrost — Investor Presentation (March 2023)

65 slides from Foroya Banki's investor presentation, Mar 1, 2023

  1. Slide 1: Bakkafrost presentation: A world-class company in the salmon industry

    Bakkafrost presentation A world-class company in the salmon industry EIN BURÐARDYGG FRAMTÍÐ FYRI FØROYSKA BÚSKAPIN 1. Mars 2023 Regin Jacobsen, CEO 1

  2. Slide 2: Disclaimer

    HEALTHY LIVING DISCLAIMER This presentation includes statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied

  3. Slide 3: Faroe Islands

    FAROE ISLANDS Headquarters, Sales Fishmeal, Fish oil & Fish feed Broodstock, Hatcheries & Farming Dee samy Harvest & Processing aut (0) Farming Service Vessels, Packaging & Biogas e ——~ AND eo & Sales | DENMARK | 2s © RaeEmEeRatS & Ses es snr Harvest & Processing sammy Processing. ‘aut Farming Servi

  4. Slide 4: 71% of the earth's surface is ocean

    71% OF THE EARTH’S SURFACE IS OCEAN • The ocean is a huge body of saltwater that covers about 71 percent of Earth's surface. The planet has one global ocean, though oceanographers and the countries of the world have traditionally divided it into four distinct regions: the Pacific, Atlantic, Indian,

  5. Slide 5: Food from the sea accounts only for 17% of global production of edible meat

    BUT FOOD FROM THE SEA ACCOUNTS ONLY FOR 17% OF THE GLOBAL PRODUCTION OF EDIBLE MEAT Growth in world fish supply since the 1990s has come from aquaculture. Aquaculture production would need to more than double between 2010 and 2050 to meet projected fish demand in our baseline Source: World Resources

  6. Slide 6: We offer healthy, tasty high quality products to the market

    WE OFFER - HEALTHY, TASTY HIGH QUALITY PRODUCTS TO THE MARKET

  7. Slide 7: We focus on

    WE FOCUS ON • Sustainably supply • High quality food products • High fishwelfare healthy and nutritious food • To create long lasting values to customers, shareholders and society

  8. Slide 8: Bakkafrost – a competitive business model

    BAKKAFROST – A COMPETITIVE BUSINESS MODEL THREE FOLDS MARINE EDIBLE YIELD FCR Employees ~1,800 ~1.06 Converting low food value proteins into high volume & value healthy protein in the Faroes Revenue 2022 (DKK) 7.1bn 100% ASC certified in the Faroes 750 tonnes (edible yield) Op.EBIT 2022 (DKK) ~1.7bn

  9. Slide 9: Highlights 2023

    HØVUÐSTØL 2023  Met árlig søla í 2022 DKK 7.130 mió og besta árliga rakstrarúrslit DKK 1.705 mió Søla og avlop  Fjóðra kvartalssøla DKK 1.940 mió og rakstrarúrslit DKK 376 mió  Tøka í Føroyum: 19.276 tons í Q4 2022 (20.694 tons í Q4 2021)  Tøka í Skotland: 5.198 tons í Q4 2022 (5.122 tons í Q4 2

  10. Slide 10: Fishmeal, oil and feed (FOF)

    FISHMEAL, OIL AND FEED (FOF) HIGHER EBITDA AND HIGHER SALES OF FISHMEAL AND FISH OIL Q4 2021 Q4 2022 (DKK million) Q4 22 Q4 21 YTD 22 YTD 21 Operating revenue 791 433 2,433 1,659 EBITDA (mDKK) EBITDA 110 89 436 306 89 24% 110 EBITDA margin 14% 21% 18% 18% Feed sold (tonnes)* 32,600 32,527 127,840 12

  11. Slide 11: Value added products (VAP)

    VALUE ADDED PRODUCTS (VAP) HIGHER VOLUMES AND HIGHER COST OF RAW MATERIAL Q4 2021 Q4 2022 (DKK million) Q4 22 Q4 21 YTD 22 YTD 21 Volumes (tonnes) Operating revenue 483 359 1,704 1,185 6,603 10% 7,231 Operational EBIT 86 28 -51 120 Operational EBIT margin 18% 8% -3% 10% Revenue (mDKK) Farming FO tra

  12. Slide 12: Bakkafrost Scotland exceptional mortality

    BAKKAFROST SCOTLAND EXEPTIONAL MORTALITY POSITIVE EFFECT FROM INCREASED FRESHWATER TREATMENT CAPACITY • New capabilities for efficient and gentle dual-treatment for gill health and sea lice • Now permanently two Farming Service Vessels in service all year around to clear gills and sea-lice Weekly ex

  13. Slide 13: Bakkafrost Scotland biological development

    BAKKAFROST SCOTLAND BIOLOGICAL DEVELOPMENT Average harvest weight 2020-2023 Week 1-6: 2022 vs 2023 No. of harvested fish Harvest volume Avg. harvest weight Sales value (1,000) (tonnes) (g) (mNOK) 700 3500 6000 350 600 3000 5000 300 500 2500 250 4000 400 2000 200 3000 300 1500 150 2000 200 1000 100 1

  14. Slide 14: Large high quality smolt = game changer

    LARGE HIGH QUALITY SMOLT = GAME CHANGER Large Smolt Strategy Allowing for - Reduced biological risk - Increased production efficiency ”ONE SUMMER” - Enables growth cycles FRESHWATER MARINE Summer/Autumn Risk

  15. Slide 15: Our roadmap to larger smolt in Scotland

    OUR ROADMAP TO LARGER SMOLT IN SCOTLAND RAPIDLY REDUCING THE GAP BETWEEN FAROE ISLANDS AND SCOTLAND Ónavík new Hatchery 3 new Glyvradal expansion Norðtoftir expansion Viðareiði expansion 500 500 Large hatchery 2 new 2y GAP 400 400 350 350 Strond 332 Applecross 5 & 6 expansion 250 205 205 5y GAP 180

  16. Slide 16: Sustainable growth

    HEALTHY LIVING BURÐARDYGGUR VØKSTUR 4th Annual Sustainability Report is available on our website 16

  17. Slide 17: Strong biological performance: sea lice

    STRONG BIOLOGICAL PERFORMENCE BAKKAFROST FARMING FAROE ISLANDS • Sea lice numbers all time low  Average count of sealice Adult Female 2015 - • Dropped to 0.28 in 2022 from 0.45 in 2021 2022 1,2 • With new FSV Bakkafossur 1,0 Miðal tal kynsbúnar laksalýs laks-1 Fresh water and FLS dual combat system

  18. Slide 18: Strong biological performance: growth and FCR

    STRONG BIOLOGICAL PERFORMENCE BAKKAFROST FARMING FAROE ISLANDS Growth 2018 – 2023 – [TGC] Good growth rate  3,5 • Very strong development in 3,25 growth • Indication of good fish welfare 3 and strong biology 2,75 2,5 Low Feed Conversation Rate FCR  2,25 • Impressive development 2018-Q1 2018-Q2 201

  19. Slide 19: Strong biological performance: survival rate

    STRONG BIOLOGICAL PERFORMENCE BAKKAFROST FARMING FAROE ISLANDS High survival rate  Bakkafrost Faroes – Survivability 2018 - 2023 • Survival rate ~95% in 2022 100 improved from 91.76% survival rate in 2021 • Our goal is: above 95% survival to harvest 95 90 85 2017 2018 2019 2020 2021 2022

  20. Slide 20: Listed salmon companies – margin op. EBIT/kg

    LISTED SALMON COMPANIES – MARGIN OP.EBIT /KG Margin per kg [op.ebit dkk per kg] • As relative improvers, Bakkafrost and Mowi have been the best companies for the past two years (measured as Q4 2022 margin relative to its own last two years average), while Grieg Seafood and SalMar were the worst perf

  21. Slide 21: Faroese farming – financial return

    FØROYSK ALIVINNA - FÍGGJARLIGT AVLOP HEALTHY LIVING Margin per kg [op.ebit DKK per kg] Rekord høgur vinningur 35 dkk 17.58 per kg í miðal frá 30 2014 - 2021 25 • Bakka dkk 20,52 /kg 20 • Luna dkk 15,12 /kg 15 • Mowi dkk 14,54 /kg 10 5 0 2014 2015 2016 2017 2018 2019 2020 2021 Bakka 18,95 19,8 24,5 2

  22. Slide 22: Trendshift: Norwegian average production cost

    Trendshift Norwegian average production cost [NOK/kg, HOG], (Source DNB)  Cost expected to rise from NORWAY - Farming total cost [NOK/kg GWT] – per year NOK 45/kg in 2020 to NOK57/kg in 2023

  23. Slide 23: Investments 2005–2022

    ÍLØGUR 2005 – 2022 HEALTHY SALMON DKK 6,1 SAMANLAGDAR ÍLØGUR, HARAV DKK 5,1 MIA SEINASTU 8 ÁRINI Íløgur í Føroyum • Smoltstøðir 99%+ vatn endurnýtsla – økt framleiðsla 900.000.000 • Aliútgerð Harbælin aliøki, tung útgerð 800.000.000 • Skip Avlúsing uttan nýtslu av heilivági Flutningur, skiljing, ali

  24. Slide 24: Planned investments ensure significant uplift in capacity

    PLANNED INVESTMENTS ENSURE SIGNIFICANT UPLIFT IN CAPACITY HEALTHY LIVING VALUE CHAIN SYNCHRONISED AT 180KT HOG HARVEST CAPACITY IN 2026 • Value chain syncronised at 180kt capacity in 2026 Development in capacity constraints 2018 2022 2026 • Extra capacity as “insurance”, flexibility and for growth:

  25. Slide 25: Price expectations coming years – low supply

    PRÍSMETINGAR KOMANDI ÁRINI – LÁGT ÚTBOÐ • Komandi 2 árini væntast lágt útboð av laksi • Inflatión saman við lágum útboði viðførur væntandi hægri prísir • Rekord øking í kostprísi væntast at ala laks, serliga vegna dýrar fóður rávørur Kelda SpareBank1 SECTOR Update 02-02-2023 25

  26. Slide 26: New players such as land-based farming increase competition

    NÝGGIR AKTØRAR SOSUM LANDALING TAKA KAPPINGINA UPP Kostnaður hjá landaling liggur ájavnt og kanska nakað hægri enn “vanlig” sjógv aling • Kostnaðirnir á talvuni er meting fyri 2028 • Metingin er gjørd av SpareBank1, og ikki feløgunum sjálvum • Kostnaðirnir hjá landaling væntast støðugir • Landaling

  27. Slide 27: Supply growth from land-based and offshore farming

    ÚTBOÐSØKING FRÁ LAND ALING OG OFFSHORE ALING KOMANDI ÁRINI Økingin av útboði frá nýggjum alihættum væntast komandi árini at vaksa munandi • Helst verður talan um munandi økta aling nærri marknaðinum • USA • Kina • Suður Evropa • Miðeystur • Eftirspurningurin eftir laksi øktist 5-8% árliga seinastu 1

  28. Slide 28: Proposed adjustments to the Faroese revenue tax

    PROPOSED ADJUSTMENTS TO THE FAROESE REVENUE TAX Proposed revenue tax adjustments from 2023 Main changes • Current tax introduced in 2014 12,0% • Reduced tax with low salmon prices 97 NOK • Increased tax with higher salmon 10,0% prices with 2 new tax levels (7.5% and Proposed tax 10.0%) 76 NOK 8,0% C

  29. Slide 29: Shared value generation

    SHARED VALUE GENERATION Use of profit • Taxes • Dividends Investments Dividend • Investments in future growth in growth Tax

  30. Slide 30: Taxes – what is the right balance?

    SKATTUR - HVAT ER RÆTTA LÍKAVEKTIN ELLA JAVNVÁGIN? 30

  31. Slide 31: The big misunderstanding

    TANN STÓRA MISSKILJINGIN

  32. Slide 32: Farming is not a resource industry

    HEALTHY LIVING ALIVINNAN ER IKKI EIN TILFEINGISVINNA Framleiðsluvinna Tilfeingisvinna

  33. Slide 33: Farming is a production industry

    HEALTHY LIVING ALIVINNAN ER EIN FRAMLEIÐSLUVINNA Smolt Laksur Framleiðsla Fóður

  34. Slide 34: Farming is the Faroes' largest export industry

    HEALTHY LIVING ALIVINNAN ER FØROYA STØRSTA ÚTFLUTNINGSVINNA 34

  35. Slide 35: 2022-2026: Large growth in tax from farming

    2022-2026: STÓRUR VØKSUR Í SKATTI FRÁ ALIVINNUNI HEALTHY LIVING TØKUGJALD, PARTAFELAGSSKATTUR & KAPITALVINNINGSSKATTUR

  36. Slide 36: Dynamic effects and our footprint in the Faroese economy

    DYNAMIC EFFECTS & OUR FOOTPRINT IN THE FAROESE ECONOMY HEALTHY LIVING SIGNIFICANT JOB OPPORTUNITIES, LOCAL PURCHASES AND VALUE CREATION Since 2016, Bakkafrost has: Purchased 13.3bn DKK from Paid 2.9bn DKK in salaries to Faroese suppliers employeese in the Faroes Bakkafrost Faroe Islands – Purchase f

  37. Slide 37: Faroese neighbours

    1.096 FØROYSKI VETARIR (2021)

  38. Slide 38: Bakkafrost is in international competition

    HEALTHY LIVING BAKKAFROST ER Í ALTJÓÐAÐ KAPPING Altjóðað søla Kappast við

  39. Slide 39: Debt has grown significantly

    SKULDIN ER VAKSIN MUNANDI HEALTHY LIVING FER AT VEKSA ENN MEIRA KOMANDI ÁRINI Netto-rentuberandi skuld 3.000 2.500 2.000 mDKK 1.500 1.000 500 - 2017 2018 2019 2020 2021 Q3 2022

  40. Slide 40: Future growth = increased risk and more capital needed

    HEALTHY LIVING FUTURE GROWTH = INCREASED RISK AND SIGNIFICANTLY MORE CAPITAL NEEDED Four main routes to growth - Conventional - Closed/Semi-closed - Offshore - Land-based Source:

  41. Slide 41: New technology = increased competition

    HEALTHY LIVING NEW TECHNOLOGY = INCREASE COMPETITION Source:

  42. Slide 42: 3.2 billion in biomass

    3,2 MILLIARDIR Í VÁÐA (BIOMASSIN)

  43. Slide 43: 1.3 billion in storage

    1,3 MILLIARDIR Á GOYMSLU (FÓÐUR & LIÐUGVØRU)

  44. Slide 44: Secure framework?

    HEALTHY LIVING TRYGGAR KARMAR?

  45. Slide 45: Dividend is the interest we pay investors for their capital

    HEALTHY LIVING VINNINGSBÝTI ER ”RENTAN” VIT GJALDA ÍLEGGJARUM FYRI TEIRRA KAPITAL 5y average Dividend Yield 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 1,0% 0,0% SalMar Austevoll Lerøy Mowi Grieg Camanchaca Bakkafrost NTS BankNordik

  46. Slide 46: Where are the Faroese pension funds?

    HEALTHY LIVING HVAR ERU FØROYSKU PENSIÓNSPENGARNIR? Betri Pension: 100% uttanlanda Lív: 72% uttanlanda (kelda: almennir roknskapir)

  47. Slide 47: Profit, investments, tax/debt and dividends

    VINNINGUR, ÍLØGUR, SKATT/GJØLD OG VINNINGSBÝTI HEALTHY LIVING NEGATIV JAVNVÁG -3,8 mia 4,9 mia -1,4 mia -1,4 mia

  48. Slide 48: Bakkafrost – Superior salmon from the Faroe Islands

    \Wi/ BAKKAFROST a SE005 HEALTHY LIVING A aHY COMMYy, _ yer Nes \W/ BAKKAFROST 48 Superior satnon from the ROE ISLANDS:

  49. Slide 49: Growing in the Faroe Islands and Scotland

    GROWING IN THE FAROE ISLANDS AND SCOTLAND HEALTHY LIVING ENABLED BY LARGE SMOLT – LATER BY NEW TECHNOLOGY Large Smolt Strategy - Reduced biological risk - Increased production efficiency - Enables growth

  50. Slide 50: Hatchery expansions - Faroe Islands

    HATCHERY EXPANSIONS - FAROE ISLANDS INCREASING HATCHERY CAPACITY FROM 15 TO 23 MILLION AT 500G • The Strond hatchery has significantly increased smolt capacity • Large smolts grow strongly after release Ónavík (2025) 2.4m smolt @500g • Very low feed conversion rate Glyvradal expansion (2024) 0,3 =>

  51. Slide 51: Large smolt – Strond, Faroe Islands

    LARGE SMOLT – STROND, FAROE ISLANDS HEALTHY BUSINESS EXPANSION 2015 2016 - 2019 2020 - 2021 2022 - Planning Construction Scaling up Full scale production Expansion: • Volume 29.000 m3 Total Capacity: • 9 mio smolt á 500g 51

  52. Slide 52: Large smolt – Norðtoftir expansion

    LARGE SMOLT – FAROE ISLANDS HEALTHY LIVING NORÐTOFTIR EXPANSION 2021 2022 2023 2024 2025 Construction Scaling up Full scale production Expansion: • Volume 12.000 m3 Add. Capacity: • 3 mio smolt á 500g Total Capacity: • 5,3 mio smolt á 500g 52

  53. Slide 53: Large smolt – Glyvradal expansion

    LARGE SMOLT – FAROE ISLANDS HEALTHY LIVING GLYVRADAL EXPANSION 2021 2022 2023 2024 2025 Construction Scaling up Full scale production • Building 8.500 m2 • Volume 14.000 m3 • Capacity: 3,8 mio smolt á 500g 53

  54. Slide 54: Large smolt – Ónavík hatchery

    LARGE SMOLT – FAROE ISLANDS ÓNAVÍK HATCHERY 2021 2022 2023 2024 2025 Planning Construction Scaling up Full production • Building 8.500 m2 • Volume 10.000 m3 • Capacity: 2,4 mio smolt á 500g 54

  55. Slide 55: Our routemap to larger smolt in Scotland

    OUR ROUTEMAP TO LARGER SMOLT IN SCOTLAND HEALTHY BUSINESS GROWTH; TRANSFORM 2019 - 2020 2021 2022 2023 - 2024 2025 - Planning Construction Scaling up Full scale production THREE NEW FACILITIES GROWTH - TRANSFORM  Applecross, under construction 36,000 m3 Current 5 Yrs  Potential site no 2, identifi

  56. Slide 56: Large smolt – Applecross, Scotland

    LARGE SMOLT – APPLECROSS, SCOTLAND HEALTHY BUSINESS EXPANSION 2019 - 2020 2021 2022 2023 - 2024 2025 - Planning Construction Scaling up Full scale production Expansion: • Volume 29.000 m3 Total Capacity: • 9 mio smolt á 500g 56

  57. Slide 57: New broodstock facility in Skálavík

    NEW BROODSTOCK FACILITY IN SKÁLAVÍK  Still waiting for authority final approvals to start building proces  Hope to start building proces in 2023  Production capacity: 70 – 100 million eggs of own strain eggs

  58. Slide 58: Fish meal, oil and salmon feed

    FISH MEAL, OIL AND SALMON FEED HEALTHY LIVING ILLUSTRATION OF PLANT DEVELOPMENT TO MEET REQUIREMENT 58

  59. Slide 59: Fish meal, oil and salmon feed

    FISH MEAL, OIL AND SALMON FEED HEALTHY LIVING ILLUSTRATION OF PLANT DEVELOPMENT TO MEET REQUIREMENT 59

  60. Slide 60: Dynamic effects and our footprint in the Faroese economy

    DYNAMIC EFFECTS & OUR FOOTPRINT IN THE FAROESE ECONOMY HEALTHY COMMUNITIES SIGNIFICANT JOB OPPORTUNITIES, LOCAL PURCHASES AND VALUE CREATION Since 2016, Bakkafrost has: Provided employment Purchased 8.5bn DKK from Paid 2.2bn DKK in salaries corresponding to 4,900 full Faroese suppliers to employeese

  61. Slide 61: Our footprint in the Faroese economy: jobs in rural areas

    OUR FOOTPRINT IN THE FAROESE ECONOMY HEALTHY COMMUNITIES JOBS IN RURAL AREAS Locations with activity Employees’ residential municipality 61

  62. Slide 62: We produced million meals in 2022

    WE PRODUCED 725 MILLION MEALS IN 2022

  63. Slide 63: We generated DKK million in tax in 2022

    WE GENERATED DKK 740 MILLION IN TAX = 16 NOK/KG IN 2022 (FAROE ISLANDS IN DKK)

  64. Slide 64: Returns are the result of large investments

    HEALTHY LIVING AVKASTIÐ ER EITT ÚRSLIT AV STÓRUM ÍLØGUM Margin per kg [op.ebit dkk per kg] Bakkafrost investments 2013-2021 1.800 16,00 1.600 14,00 1.400 12,00 Investments per kg (DKK) 1.200 10,00 DKK million 1.000 8,00 800 6,00 600 4,00 400 200 2,00 0 0,00 2013 2014 2015 2016 2017 2018 2019 2020 20

  65. Slide 65: Questions?

    HEALTHY LIVING COMPETITIVE POSITION AND BRANDING SPURNINGAR?

Bakkafrost — Investor Presentation (March 2023) on 6ix