Mowi ASA · OSL:MOWI
Mowi ASA — Marine Harvest — Q4 2016 Earnings Presentation
43 slides from Mowi ASA's earnings presentation, Feb 15, 2017
Slide 1: Marine Harvest Q4 2016 Presentation
Marine Harvest Q4 2016 Presentation 15 February 2017 1
Slide 2: Forward looking statements
Forward looking statements Notes in report2 This presentation may be deemed to include forward-looking statements, such as statements that relate to Marine Harvest’s contracted volumes, goals and strategies, including strategic focus areas, salmon prices, ability to increase or vary harvest volume,
Slide 3: Highlights
Highlights 3 - 2016 a great year with record earnings and cash flow generation - Record high quarterly operational EBIT of EUR 259 million - Strong operational performance in all entities - All-time high salmon prices driven by strong demand and decline in supply - Quarterly dividend of NOK 2.80 per
Slide 4: Key financials
Key financials Notes in report4 Marine Harvest Group - main figures Unaudited EUR million Operational revenue and other income 1,018.1 17% 866.7 3,509.8 12% 3,121.1 Operational EBIT 1) 259.4 189% 89.7 700.2 102% 346.8 Cash flow from operations 163.2 22.9 693.2 233.3 Net interest-bearing debt (NIBD)
Slide 5: Salmon prices – weekly reference prices
Salmon prices – weekly reference prices Prices up to week 5 in 20175 - Record high prices in Europe, Americas and Asia in Q4 2016 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7 8 9 10 2012 2013 2014 2015 2016 2017 U S D p e r l b s ( M i a m i a n d S e a t t l e ) E U R p e r k g ( O s l o ) Reference price Norwa
Slide 6: Price achievement, contract & superior share
Price achievement, contract & superior share 6 103% 111% 98% 105% 90% 91% 101% 99% 0% 20% 40% 60% 80% 100% 120% 140% Norwegian Scottish Canadian Chilean Q4 2015 Q4 2016 Contract share 52% 68% 0% 10% Superior share 94% 94% 87% 94%
Slide 7: Operational EBIT comparison
Operational EBIT comparison 7 259.4 2.8 154.9 8.2 13.2 -9.3 89.7 0 50 100 150 200 250 300 Op EBIT Q4 2015 Feed Farming Markets Consumer Products Other Op EBIT Q4 2016 E U R m i l l i o n
Slide 8: Norway
Norway 8 - Record quarterly results due to all-time high prices - Contract share of 52% negatively impacted price achievement - Biological issues persist - Expect costs to increase in the first half of 2017 on low volumes Operational EBIT Salmon of Norwegian Origin Q4 2016 vs Q4 2015 SALMON OF NORWE
Slide 9: Norway: Sales contract portfolio
Norway: Sales contract portfolio Note: Marine Harvest Norway’s fixed price/fixed volume contracts with third party customers and MH’s processing entities. MH’s processing entities cover a large proportion of their sales exposure through third party end product contracts. 9 0 5 000 10 000 15 000 20 0
Slide 10: Norway: Operational EBIT/kg per region
Norway: Operational EBIT/kg per region Note: Including contribution from Sales and Marketing10 1.09 1.93 0.62 1.76 1.47 2.51 2.91 2.33 2.79 2.70 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 South West Mid North Total E U R p e r k g Q4 2015 Q4 2016
Slide 11: Scotland
Scotland 11 - Very good spot price development - Reduced volumes due to prior biological challenges - High contract share - Turnaround process on track - Expect costs to further decrease in 2017 Operational EBIT Salmon of Scottish Origin Q4 2016 vs Q4 2015 SALMON OF SCOTTISH ORIGIN EUR million Q4 20
Slide 12: Canada
Canada 12 - Very good operations and financial results - Continued favorable price developments - Good harvest volumes - Harvested larger sized fish - Expect stable costs going forward Operational EBIT Salmon of Canadian Origin Q4 2016 vs Q4 2015 0 5 10 15 20 25 30 35 40 Op EBIT Q4 2015 Price Volume
Slide 13: Chile
Chile 13 - Record high prices on reduced supply - Significant volume reduction due to the algal bloom in March 2016 - Improved cost level in quarter - Harvesting from good sites - Full cost in box USD 4.74 per kg (GWE) in the quarter - Costs expected to increase substantially in the first quarter on
Slide 14: Ireland and Faroes
Ireland and Faroes 14 - Good contribution from Marine Harvest Ireland - Very good contribution from Marine Harvest Faroes in the quarter - No harvesting from February to September 2017 due to lack of sites SALMON OF IRISH ORIGIN EUR million Q4 2016 Q4 2015 Operational EBIT 3.0 0.1 Harvest volume (GW
Slide 15: Consumer Products
Consumer Products 15 - 14% volume growth and impressive demand response in 2016 - Good quarterly results in a challenging raw material price environment - Operational improvements and sales price adjustments - Building a new value added products plant in Canada CONSUMER PRODUCTS EUR million Q4 2016
Slide 16: Feed
Feed 16 - Very good operational and financial results - 86% feed self-sufficiency rate in Norway - Increased plant capacity to 330,000 tonnes (approx 310,000 tonnes in 2016) FEED EUR million Q4 2016 Q4 2015 Operating revenues 107.2 102.4 Operational EBIT 10.8 8.0 Operational EBIT % 10.1% 7.9% Feed s
Slide 17: Fourth Quarter 2016 Financials, Markets and Harvest Volumes
Fourth Quarter 2016 Financials, Markets and Harvest Volumes 17
Slide 18: Profit and Loss
Profit and Loss Notes in report18 Marine Harvest Group EUR million Operational revenue and other income 1 018.1 17% 866.7 3 509.8 12% 3 121.1 Operational EBIT 1) 259.4 189% 89.7 700.2 102% 346.8 Change in unrealized internal margin -18.7 -1.4 -35.6 -2.2 Gain/loss from derivatives 7.1 -6.3 8.3 -12.5
Slide 19: Financial position
Financial position 19 Marine Harvest Group EUR million Non-current assets 2 248.9 2 201.8 2 134.9 Current assets 2 554.5 2 241.5 2 061.2 Total assets 4 803.5 4 443.3 4 196.1 Equity 2 062.4 1 968.4 1 895.6 Non-current liabilities 1 898.0 1 765.5 1 684.7 Current liabilities 843.1 709.5 615.9 Total equ
Slide 20: Cash Flow and Net Interest Bearing Debt
Cash Flow and Net Interest Bearing Debt 20 Marine Harvest Group EUR million NIBD beginning of period - 876.7 - 917.9 -999.7 -1 032.6 Operational EBITDA 296.0 124.4 842.7 486.6 Change in working capital -105.1 -79.5 -14.9 -146.2 Taxes paid -10.3 -10.9 -92.6 -68.3 Other adjustments -17.4 -11.0 -42.0 -
Slide 21: 2017 Cash Flow Guidance
2017 Cash Flow Guidance 21 - Working capital buildup EUR ~120m - Support further organic growth - Capital expenditures EUR ~240m - Freshwater expansion projects EUR ~50m - New feed plant in Scotland EUR ~35m (in total EUR ~ 110m) - Consumer Products expansion initiatives EUR ~25m - Interest paid EUR
Slide 22: Overview financing
Overview financing Coupon paid semi-annual22 - EUR 805m Facility Agreement - Maturity – Q4 2019 - Covenants: - 35% equity ratio - Accordion option EUR 45m - Lenders: DNB, Nordea, Rabobank and ABN Amro - EUR 340m issued in November 2015 - Tenor 5 years, annual coupon 0.125%(1), conversion price EUR 1
Slide 23: Estimated volumes: Supply development
Estimated volumes Compared to Q4 2015 Est. volumes Suppliers Q4 2016 Q4 2015 Volume % Q3 2016 Norway 289 500 309 900 -20 400 -6.6% 271 800 Scotland 38 700 40 800 -2 100 -5.1% 36 600 Faroe Islands 20 100 21 700 -1 600 -7.4% 14 900 Ireland 3 800 4 100 -300 -7.3% 3 900 Total Europe 352 100 376 500 -24
Slide 24: Development in reference prices
Development in reference prices Prices up to week 5 in 201724 Notes: (1) NASDAQ average superior GWE/kg (gutted weight equivalent) (2) Urner Barry average D trim 3-4 lbs FOB Miami (3) Reference price converted back-to-plant equivalent in GWE/kg (4) Urner Barry average GWE 10-12 lbs FOB Seattle Refer
Slide 25: Estimated volumes by market
Estimated volumes Compared to Q4 2015 Est. volumes 12 month comparison Markets Q4 2016 Q4 2015 Volume % Q3 2016 LTM PTM % EU 253 200 273 300 -20 100 -7.4% 246 600 949 200 979 100 -3.1% Russia 19 800 24 500 -4 700 -19.2% 16 800 67 500 95 700 -29.5% Other Europe 20 200 22 300 -2 100 -9.4% 16 900 71 10
Slide 26: Industry supply outlook
Actual harvest volumes will be affected by e.g. water temperatures, development in biological growth, biological challenges such as diseases, algal blooms etc. and market developments. 26 Industry supply outlook Guidance of low growth in 2017 from -1% to +4% 2014 2015 2016 2017 GWE tonnes (thousands
Slide 27: MHG 2017 volume guidance
MHG 2017 volume guidance Actual harvest volumes will be affected by e.g. water temperatures, development in biological growth, biological challenges such as diseases, algal blooms etc. and market developments. 27 - 2017 volume guidance unchanged of 403,000 tonnes GWE - Norway reduced by 2,000 tonnes
Slide 28: Outlook
Outlook 28 - Market balance expected to remain tight in 2017 (low supply growth) - Future prices (NASDAQ) next twelve months are EUR 7.2 per kg (NOK 65 per kg) - Sea lice the number one industry challenge - Non-medicinal treatment strategy continues - Acquisition of Gray Aqua farming assets in East
Slide 29: Appendix
B marineharvest Appendix
Slide 30: Dividend policy
Dividend policy 30 - The quarterly dividend level shall reflect the present and expected future cash flow generation of the Company - To this end, a target level for net interest bearing debt is determined, reviewed and updated on a regular basis - When the target is met, at least 75% of the annual
Slide 31: Contract coverage and sales contract policy
Contract coverage and sales contract policy 31 - Q1 2017 contract shares (% of guided volume): - Norway 53% - Scotland 47% - Canada 0% - Chile 34% - Contracts typically have a duration of 3-12 months - Contracts are entered into on a regular basis - Policy opens for contracts of up to 48 month durat
Slide 32: Quarterly segment overview
Quarterly segment overview 32 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 128.5 15.8 28.5 17.8 2.5 14.6 207.7 SALES AND MARKETING Markets 12.6 3.8 4.0 2.0 0.0 0.5 0.0 23.0 Consumer Products 19.9 2.1 0.0 0.0 0.5 0.0 0.5 22.9 SUBTOTAL 160.9 21.7 32.6
Slide 33: YTD segment overview
YTD segment overview 33 EUR million Norway Scotland Canada Chile Ireland Faroes Other 1) Group OPERATIONAL EBIT FARMING 419.7 36.1 99.6 -8.0 5.8 32.6 585.9 SALES AND MARKETING Markets 41.0 13.3 10.2 12.2 0.1 1.1 0.0 77.9 Consumer Products 26.1 -8.4 0.0 0.0 0.4 0.0 1.6 19.7 SUBTOTAL 486.8 41.1 109.8
Slide 34: Quarterly segment overview MH Operating Units
Quarterly segment overview 34 MH Operating Units EUR million Norway Scotland Canada Chile Ireland Faroes Markets Consumer Products MH Feed Revenues and other income 395.2 74.1 69.7 50.0 21.5 30.0 783.7 427.8 107.2 Operating EBITDA 142.3 19.9 31.6 22.4 3.3 15.1 24.1 28.7 12.6 Operating EBIT 128.5 15.
Slide 35: Development in harvest volumes
Development in harvest volumes 35 2012 2014 Total Total Total Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1E Q2-Q4E Total Norway 217.5 255.3 222.5 258.0 65.2 64.0 58.9 66.6 254.8 54.0 53.7 64.6 63.6 236.0 49.0 201.0 250.0 Chile 26.0 40.2 28.3 67.5 16.1 13.2 18.4 14.8 62.5 15.4 7.1 6.9 7.6 36.9 6.0 39
Slide 36: Net capital expenditure guidance
0 50 100 150 200 250 300 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E E U R m i l l i o n Net capital expenditure guidance 36 Maintenance level
Slide 37: Net working capital guidance
Net working capital guidance 37 -100 -50 0 50 100 150 200 250 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E W o r k i n g c a p i t a l t i e - u p ( E U R m i l l i o n )
Slide 38: Guidance on financial commitments and cost of debt
Guidance on financial commitments and cost of debt 38 0 20 40 60 80 100 120 2011 2012 2013 2014 2015 2016 2017E E U R m i l l i o n Contractual repayments Net interest and financial items paid
Slide 39: Nova Sea
Nova Sea 39 - Leading integrated salmon producer in Northern Norway - 33.33 wholly owned licenses - 4 partly owned licenses - Marine Harvest has an ownership in Nova Sea of ~48% through direct and indirect shareholdings - 2015 dividends of NOK 200m (paid in Q2-16) - Marine Harvest’s direct share NOK
Slide 40: Debt distribution and interest rate hedging
Debt distribution and interest rate hedging 40 - External interest bearing debt is distributed as follows: EUR 70%, USD 13%, GBP 4%, other currencies 13%. - Policy: Marine Harvest ASA shall hedge 70%-100% of the Group’s long-term interest-bearing debt by currency with fixed interest or interest rate
Slide 41: Hedging and long term currency exposure
Hedging and long term currency exposure 41 POLICY - EUR/NOK - Marine Harvest shall hedge between 0% and 30% of its assumed annual expenses in NOK against the EUR with a horizon of two years. The annual hedging shall be evenly distributed across the months of the year. - USD/CAD - Marine Harvest shal
Slide 42: Strategic currency hedging
Strategic currency hedging 42 STRATEGIC CURRENCY HEDGING MEUR Rate MUSD Rate 2017 199.2 9.40 28.8 1.32 2018 199.2 9.54 26.4 1.32 P/L effect of contracts maturing in Q4 -1.2 (MEUR) MEUR Market value 30/09/2016 13.1 Change (1) -4.3 Market value 30/12/2016 8.8 DESIGNATED MARKET CURRENCIES Norway Chile
Slide 43: Tax losses carried forward (YE 2016)
Tax losses carried forward (YE 2016) 43 - Most of the deferred tax assets have not been recognised on the statement of financial position - The NOL’s will be used to offset taxable profit in the countries going forward - The utilisation of the deferred tax asset on NOL’s gives rise to a tax expense