The Norwegian Aquaculture Analysis - Summary of key findings

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1 The Norwegian Aquaculture Analysis - Summary of key findings Nordområdekonferansen Bodø - November 9 th 217 Eirik Moe Managing Partner EY Seafood

takes a top-down view of the entire value chain The analysis will be performed on an annual basis

2 The EY Aquaculture Analysis Background EY has since 26 issued an annual analysis of the Oilfield Service sector We wanted to do a similar analysis of the Aquaculture industry in Norway The analysis takes a top-down view of the entire value chain The analysis will be performed on an annual basis going forward How Financials based on publically available data The majority of the activity (>5%) in Aquaculture 2

3 Top down perspective on the value chain Technical solutions Biotechnology Production Distribution Processing 3

4 Global megatrends Side 4

5 Revenue, NOKb Revenue (NOKb) Financial development in Norwegian Aquaculture Norway Aquaculture revenue and profitability % 25% 2% 15% 1% 5% % Overall trends Revenues up Increase in salmon price has been the key driver the last years, with volume stagnation Norway Aquaculture segments size and growth Revenues EBITDA margin ROCE 6 7 Technology solutions Biotechnology Distribution Production Processing EBITDA and EBIT down.9 ppt. to 1.9% due to relative cost increase related to biological issues and feed ROCE up.7 ppt to 19.% due to reduction in capital employed 5

6 With the continued high salmon prices record high revenues are being recorded for the listed production companies NOKbn NOKbn EBITDA margin High revenues also seen in High sales price per kg lead to 216 being a record year for the aquaculture industry turnover/profits. This trend seems to continue, as 1H17 has seen a revenue increase of about 16% when compared to 1H16. EBIT/kg for 1H17 was NOK 25.8, a significant increase when compared to the NOK 16.2 as at 1H Key figures 1H16 and 1H17 22% 26% H1 216 H % 25.% 2.% 15.% 1.% 5.%.% Revenues Operating expenses EBITDA EBITDA margin Cost increase in spite of a small decline in harvested volume Even with lower harvest volumes in 1H17 than 1H16. Operating costs increased 1% Increasing biological challenges - sea lice / mortality. Personnel cost have increased with close to 21%, Production per FTE has decreased from 215 to 216. Trend is continuing into % 2.6% Breakdown of operating costs 17.7% H1 216 H1 217 H1 216 H1 217 H1 216 H1 217 Cost of goods sold Personnel expenses Other operating expenses 6

7 Revenue, NOKb Correlation with the salmon price Salmon price per kg (annual average) Revenue, NOKb Salmon price per kg (annual average) Revenue Salmon price EBITDA Salmon price 7

8 Costs index per kg sold fish are increasing Cost per kg sold fish Sold amount of slaughtered fish 7 1,6, % 7.8% % 12.3% % % % % ,4, 1,2, 1,, 8, 6, 4, 2, Technical solutions Biotechnology Production Processing Tonnes slaughtered fish 15% 5% 1% 9% 5% CAGR

9 Revenue (NOKb) Technical solutions Biotechnology Production Distribution Processing Segment composition: 8. 3% % 2% 15% Number of companies Revenue 23 % 24 % % 5% 77 % 76 %. % Small < NOK1m Revenues EBITDA margin ROCE Medium NOK1 NOK1,m Large > NOK1b 9

10 Revenue (NOKb) Revenue (NOKb) Technical solutions Biotechnology Production Distribution Processing Fish health: Feed: 3.5 4% % % 3% 25% 2% 15% 1% 5% % % 1% 8% 6% 4% 2% % Revenues EBITDA margin ROCE Revenues EBITDA margin ROCE 1

11 NOKb EBITDA margin Technical solutions Biotechnology Production Distribution Processing 6, 4, % 5, 35, % 3, % 4, 25, % 3, 2, % 2, 1, 15, % 1, % 5, %, , % Seafarming Smolt production Egg production Seafarming EBITDA margin Smolt production EBITDA margin Egg production EBITDA margin 11

26 27 28 29 21 211 212 213 214 215 Tonnes sold salmon (WFE) NOK/kg (wfe) Technical solutions Biotechnology Production Distribution Processing Volume of sold

12 Tonnes sold salmon (WFE) NOK/kg (wfe) Technical solutions Biotechnology Production Distribution Processing Volume of sold salmon and average value WFE* Percentage of sale from 1 largest companies 1,4, 1,2, 1,, 8, 6, 4, 2, Source: EY, Directorate of Fisheries

13 Revenue (NOKb) Tonnes, round weight Technical solutions Biotechnology Production Distribution Processing Trading Slaughtering Transportation on sea Sold volumes of slaughtered fish (round weight) % 2% 15% 1% 5% % 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Revenues EBITDA margin ROCE 13 Source: EY, Directorate of Fisheries

14 Revenue (NOKb) Tonnes No. of plants Technical solutions Biotechnology Production Distribution Processing Trading Slaughtering Transportation on sea Development in slaughtered volume/no. of plants % 14% 12% 1% 8% 6% 4% 2% % 25, 2, 15, 1, 5, Revenues EBITDA margin ROCE Tonnes slaughtered per slaughtering plant No. of approved slaugthering plants for salmonids 14 Source: EY, The Norwegian Food Safety Authority

15 Revenue (NOKb) Number of well boats Technical solutions Biotechnology Production Distribution Processing Trading Slaugthering Transportation on sea Number of wellboats % 45% 4% 35% 3% 25% 2% 15% 1% 5% % Revenues EBITDA margin ROCE 15 Source: EY, Fraktefartøyenes Rederiforening

16 NOKb EBITDA margin Technology solutions Biotechnology Production Distribution Processing 14, 16, % 12, 14, % 1, 8, 6, 4, 2, 12, % 1, % 8, % 6, % 4, % 2, %, Processing Packaging Processing EBITDA margin Packaging EBITDA margin, % 16

17 NOKb EBITDA margin Trends & conclusions.. Key trends and challenges Solve biological issues to allow for volume increases, lower costs and reputation Big Data initiatives and technology transfer offshore & digitalization Production onshore, fjords and offshore depending on life cycle Further consolidation and industrialization of industry segments Increased vertical integration and know-how in value chain: ingredient traceability feed produce differentiating Can salmon and trout become the future top exports of Norway? Replicate the revenue growth from the 1 previous years, the estimate for 23 are within sight Supported by underlying global megatrends, revenues from the Norwegian aquaculture industry may well be higher than the revenues from the oil industry in 25. Considerable potential for export of technology and knowledge to global aquaculture industry 17 Seafarming figures: Inntekter EBITDA EBITDA margin 4% 35% 3% 25% 2% 15% 1% 5% %

18 EY a global partner in Aquaculture A global company The largest assurance, tax and advisory company in Norway Worldwide revenues (217): USD 31.4 billion 25, professionals worldwide across 7 offices in 15 countries 1,8 professionals in 3 locations in Norway Our dedication to Aquaculture EY Global Center of Excellence for the Aquaculture industry is located in Bergen Our industry team is located in more than 5 offices in key aquaculture cities worldwide and comprises a global network of experts with a range of professional skills EY service offering Assurance Advisory Transaction Advisory Serices Tax 18

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The Norwegian Aquaculture Analysis 2016

The Norwegian Aquaculture Analysis 216 Contents Key findings...5 Introduction...6 Segment analysis...14 Technical solutions...15 Biotechnology...16 Production...19 Distribution...22 Processing...26 Geographical