HBC Q1 Financial update

Transcription

1 HBC Q1 Financial update Oslo, 28 May 2014

2 Headlights Headlights in the first quarter After Q3 and Q4 of 2013 HBC has turned the focus from production optimization to sales prospecting HBC represented at trade shows in the U.S. in the first quarter with positive feedback and many new prospects The installation of the second centrifuge has been finalized in January and production results is promising The interest from Asia has resulted in an order for test sale in Tokyo, Japan on salmon oil capsules and calcium tablets. The test sale will be made mid 2014 There are final discussions ongoing with a global customers on both salmon oil and protein Events after the first quarter Finalized a private placement of MNOK 90 for future growth Salmon protein patent granted in Japan on anaemia

3 From waste to value Optimal locations makes it possible to deliver the freshest salmon products there is using the whole fish With our traceability system and cooperation with our main suppliers, we are currently able to link the production process from fish eggs to final products Hofseth buys premium quality salmon from a few selcted producers Hofseth processing plants makes high quality salmon products Off-cuts are iced emediately and transported < 4 hous at 2 deg Celcius 100 % 67 % 33 % HBC processes the off-cuts into premium products for human nutrition Atlantic Salmon (Salmo Salar) is raised in deep clear water fjords PORTIONS HOT- SMOKED FILLETS COLD- SMOKED HEADS BACKBONE SKIN CUTS & TRIM CAPSULES PROTEIN SALMON OIL CALCIUM Sustainability Sustainability is the capacity to endure. In ecology the word describes how biological systems remain diverse and productive over time. Sustainable seafood is seafood from either fished or farmed sources that can maintain or increase production in the future without jeopardizing the ecosystems from which it was acquired. For us it also means that no parts of our precious Norwegian Atlantic Salmon goes to waste.

4 Converting the whole salmon into food for human consumption Fillets are used as a delicious food Offcuts are the raw material used by HBC to produce premium biomarine ingredients for human applications Omega-3 free of contaminants & containing total lipid biofactors Protein that is clean, concentrated & easily digestible with unique bioefficacy Natural Calcium which is more bioavailable and increases bone density 4

5 Differentiating from conventional Omega-3 production Conventional fish meal/fish oil production Standard cooking process based on feed quality Commodities (feed grade) Commodities (human grade) Raw material months of storing for oxidation and autolytic deterioration FM/FO plant Fish meal Crude fish oil Omega 3 refiner Refined omega 3 oil 2-6 months HBC s proprietary enzymatic hydrolysis process Traceable sources Proprietary process, based on food grade quality Value adding products (human grade) Pure Omega 3 oil Raw material Fresh from processing facility HBC plant Soluble fish protein Partly hydrolyzed protein Marine calcium <24hrs

6 Traditional omega-3 vs fresh OmeGo Vs. 4 6 months 24 hours Cooking Dewatering- Prepressing Pressing Press liquor Separation Evaporation Steam cooking ruptures the fat cells, coagulates the protein and releases the oil The cooked fish mass is screened to separate free liquid from the solids Pressing mechanically expresses the free liquid from the solids producing a press liquor (oil and water) and a press cake (semi-moist meat and bones). Decanters separate fine solids, separators split the liquid fraction into fish oil and stickwater, and crude fish oil pumped to storage. Stickwater contains about 8% solids which are concentrated in multiple effect or waste heat evaporators to about 40-50% solids. FRESH RAW MATERIAL WATER HYDROLYSIS ENZYMES SEPARATION OIL STORAGE Drying The solids from the decanter separation and the press cake are mixed and partially dried. The partially dried fishmeal is then mixed with the stickwater. Grinding Cooling and Stabilization Packaging Carbon Treatment Grinding reduces the particle size of the fishmeal. The fishmeal is cooled and antioxidant is added. Generally ethoxyquin is the antioxidant (tocopherols) is used. The fishmeal is packaged in 50 kg bags or 1000 kg totes. The fishmeal can also be stored in bulk piles or in silos. Treated with activated carbon to reduce the levels the presence of dioxins, furans and or polyaromatic hydrocarbons (pah), it can be of these compounds.

7 HBC premium products and market approach Salmon oil Among the purest fish oils in the market Calcium Natural levels of EPA and DPA Free of contaminants, with natural salmon taste and odour Science that supports effects of lowering oxidized LDL No burps due to low oxidation Sold as extra virgin oil, compared to standard omega 3 oil which derives from oxidized bulk fish oil Protein Highly digestible Free of contaminants and high in essential amino acids Amino-acid profile complements whey protein Studies indicating that SPH can play an important role in reducing development of obesity Pending patent (PCT) application on SPH s effect on iron uptake HBC Market approach Marine Calcium with a calcium-to-phosphorous ratio similar to the human skeleton Useful in nutraceutical products NIFES study showed that absorption rate of marine calcium was significantly higher than other products on the market Opportunity to differentiate from the commoditized nonorganic sources 7

8 Production Update

9 Production update Raw material processed (MT) HBC produced 1405 tons of raw material in Q1. A new centrifuge was installed resulting in a 3 week production halt Factory now operating as planned with stable yields and producing in accordance with human specifications Full-scale test of new mixing technology and enzymes showing a total process capacity of about 50,000 tons compared to previous 20,000 tons capacity Currently producing at an annual run-rate of 14,200 tons 0 0 Q1 Q2 Q3 Q Accummulated

10 Salmon oil production Finished Salmon oil (MT) During 1Q 2014 HBC produced 233 tons of salmon oil compared to 195 tons in 1Q 2013 Salmon oil stored in storage tanks and filled into barrels for future shipments Q1 Q2 Q3 Q Accummulated

11 Salmon protein production Finished Soluble protein (MT) During 1Q 2014 HBC produced 54 tons of soluble proteins (SPH) compared to 26 tons in 1Q 2013 New proprietary enzyme mix implemented in Q1 for improved organoleptic profiles and future volume increase Technical specifications on protein improved throughout Q1 and all production batches in human spec 0 Q1 Q2 Q3 Q Accummulated

12 Marine calcium production Finished Calcium (MT) In Q1 HBC produced 42 tons of calcium compared to 23 tons in Q After new filter technology installed in 2013, the bone separation process is as designed Still minor adjustments to drying and milling process to be done in 2014 Currently 290 tons in storage for future sales 0 Q1 Q2 Q3 Q Accummulated

13 R&D Update HBC has submitted its new study; Comparison of Nitrogen Bio-accessibility from Salmon and Whey Protein Recently published an OmeGo capsule study showing the intrinsic value in our salmon oil over other oils for cardiovascular health Completed implementation of new enzymes for improved quality, cost and future volumes Patients recruited for our second SPH II clinical trial which is planned for June 2014, measuring RBC, anemia, weight loss and more Protein patent granted in Japan on anemia Summer research program started in Mumbai Phospholipids, for our new product fraction were identified, characterized and quantified in preparation for a commercial recipe to be implement in Q4 13

14 Ongoing project: SPH in the Fermentation Market Microbial growth media is in increasing demand for use in the biochemical fermentation industry and HBC Protein properties are an excellent source for such production Activities: Testing completed on standard fermentation microbes on E.Coli, B. subtilis, S. cerevisiae, A. niger with excellent results Test on microfiltration will be done in May Planned ultrafiltration system at Midsund nessesary for further project development New laboratory ultra filtered samples have been sent to Biocon for transparency and growth rate testing - expect result in Q Average market price for fermented protein is around NOK /kg and increaseing 14

15 Prospecting and Sales Activities

16 Selected customer prospects Customer profile Country/Area Product(s) Status American supplier to retail chains with outlets Global retail chain with 50,500 outlets Largest retail chain with 1,100+ outlets International multi-level marketing company that sells nutrition and weight management products A $700 million producer of proteins with 10 production facilities around the U.S One of Germanys largest producer of whey protein products Large retail distributor to Chinese customers USA, Canada Japan + 15 other countries Salmon oil Protein Salmon oil Calcium Ongoing sales activities to major clients in the U.S. Testsales in Q2 Want s to launch HBCs Fresh Salmon oil in capsules. Test sale approved for summer Sweden Salmon oil Pricing and terms concluded. Launch timing to be discussed. American + 90 other countries USA, Canada and France European Union China, Taiwan, Hong Kong Salmon oil in short term Full product range in the future Salmon Protein inclusion (18-25 %) in current products to 100+ customers Salmon Protein inclusion into current and new products Salmon oil 60+ prospects still to be followed up after shows in California and Boston during Q1. Prospective customers from more than 10 countries and interest in all 3 products. Discussions on how and when to launch HBC s products to 90 countries. Pricing discussions concluded. Test-blends of protein in existing customer products starts in Q2. Terms and pricing concluded. Finished product testing and blending with promising results for the HBC protein Application for import license paperwork finished and submitted To be followed up during Q2 and Q3 2014

17 Consolidated interim financial statement (figures in NOK 1 000, except earnings per share) Q Q1 2013* * Notes Gross operating revenue Cost of sales Salaries and other payroll costs Other operating expenses EBITDA Depreciation and Write-down ,6 Operating profit/loss (EBIT) Financial income Financial expenses Net financial items Profit/loss before taxes Tax expense Profit for the period Other comprehensive income/expenses Total comprehensive income Revenues in Q1/14 of MNOK 1.5 in line with Q1/13 EBITDA MNOK (-21.2) Net financials of MNOK 2.0 (- 2.2) Cost-control program started in June 2013 has strong effects Total comprehensive income for the period attributable to: Non-controlling interests Shareholders in Hofseth Biocare ASA (majority) Total

18 Consolidated condensed statement of financial position (figures in NOK 1 000) Q Q1 2013* 2013* Notes Recearch and development Patents, rights etc Goodwill Property, plant and equipment Financial fixed assets Total non-current assets Inventories Trade receivables Other current assets Cash and cash equivalents Total current assest Total assets ,2 Share capital Share premium account and other equity deposits Other Paid in equity (+) Uncovered losses (-) Non-controlling interests Total equity Non-current liabilites interest bearing Provisions Total non-current liabilites Factoring liabilities Other Interest bearing loans, leasing and borrowings Trade payables Other current liabilities Total current liabilities Total assets of MNOK in Q (MNOK 203.4). Total equity of MNOK 48.4 (MNOK 67.3) giving an equity ratio of 22.9 % (33.1 %) Completed private placement of MNOK 90 on 2 May Total equity and liabilities

19 Consolidated condensed cash flow statement NOK 1000 Q Q1 2013* 2013* Cash flow from operational activities Profit before taxes Depreciation Changes in Inventory Changes in trade debitors Changes in rights to raw materials Changes in trade creditors Changes in other current balance sheet items Net cash flow from operational activities Cash flow from investing activities Investments in non-current tangible assets Investments in non-current intangible assets Other investments Net cash flow from investing activities Cash flow from financing activities Issuance of share capital Payment of premium Borrowings Other financial activities inc. Government grants Net cash flow from financing activities Cash flow from operations of MNOK 3.2 (MNOK -15.1) Net cash flow from investment activities was negative by MNOK 7.4 (MNOK -21.4) Cash flow from financing activities of MNOK 1.1 (MNOK 32.2) Cash and cash equivalents decreased by MNOK 3.1 Net change in cash and cash equivalents Cash and cashequivalents at the beginning of the period Cash and cashequivalents at the end of the period

20 Outlook The interest for our sustainable and traceable products has accelerated throughout the last quarter. Sales and market activities has to be ramped up and the HBC organization will develop into a more global sales team within the few next months. A strong growing customer prospect list after sales activities needs attention and increasing focus on building an international sales organization Main focus going forward: Building global sales Secure long-term global contracts on all products Continue building a lean and effective business model Continue to secure stable raw material supply Take advantage of the production method which increases production capacity Commercialize on findings in our clinical trials The outlook for 2014 and onwards is very attractive as HBC is entering the commercialisation phase 20

21

22 Disclaimer THIS PRESENTATION HAS BEEN PRODUCED BY HOFSETH BIOCARE ASA (THE COMPANY OR HOFSETH BIOCARE ) SOLELY FOR INFORMATION AND DISCUSSION PURPOSES. THE PRESENTATION DOES NOT CONSTITUTE, AND SHOULD NOT BE CONTRUED AS, ANY OFFER OR INVITATION OR RECOMMENDATION TO BUY OR SELL ANY OF THE SECURITIES MENTIONED OR DESCRIBED HEREIN. RECIPIENTS OF THIS PRESENTATION MAY NOT REPRODUCE, REDISTRIBUTE OR PASS ON, IN WHOLE OR IN PART, THE PRESENTATION TO ANY OTHER PERSON. THE PRESENTATION IS ONLY BEING COMMUNICATED TO PERSONS WHO HAVE PROFESSIONAL EXPERIENCE, KNOWLEDGE AND EXPERTISE IN MATTERS RELATING TO INVESTMENTS. THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. THE CONTENTS OF THIS PRESENTATION ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS, INVESTMENT OR TAX ADVICE. EACH RECIPIENT SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, INVESTMENT AND TAX ADVISER AS TO LEGAL, BUSINESS, INVESTMENT AND TAX ADVICE. THIS PRESENTATION HAS NOT BEEN APPROVED, REVIEWED OR REGISTERED WITH ANY PUBLIC AUTHORITY OR STOCK EXCHANGE. THE DISTRIBUTION OF THIS PRESENTATION MAY IN CERTAIN JURISDICTIONS BE RESTRICTED BY LAW. PERSONS INTO WHOSE POSSESSION THIS PRESENTATION MAY COME ARE REQUIRED BY THE COMPANY TO INFORM THEMSELVES ABOUT AND TO COMPLY WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION IN OR FROM WHICH IT INVESTS IN SECURITIES ISSUED BY THE COMPANY OR RECEIVES OR POSSESSES THIS PRESENTATION AND MUST OBTAIN ANY CONSENT, APPROVAL OR PERMISSION REQUIRED UNDER THE LAWS AND REGULATIONS IN FORCE IN SUCH JURISDICTION. NO REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, ANY INFORMATION, INCLUDING PROJECTIONS, ESTIMATES, TARGETS AND OPINIONS, CONTAINED HEREIN, AND NO LIABILITY WHATSOEVER IS ACCEPTED AS TO ANY ERRORS, OMISSIONS OR MISSTATEMENTS CONTAINED HEREIN, AND, ACCORDINGLY, THE COMPANY OR THE COMPANY S OFFICERS OR EMPLOYEES ACCEPTS ANY LIABILITY WHATSOEVER ARISING DIRECTLY OR INDIRECTLY FROM THE USE OF THIS PRESENTATION. THIS PRESENTATION INCLUDES, AND IS BASED ON, AMONG OTHER THINGS, FORWARD-LOOKING INFORMATION AND STATEMENTS. SUCH FORWARD-LOOKING INFORMATION AND STATEMENTS ARE BASED ON THE CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS OF THE COMPANY OR ASSUMPTIONS BASED ON INFORMATION AVAILABLE TO THE COMPANY. SUCH FORWARD-LOOKING INFORMATION AND STATEMENTS REFLECT CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO MATERIAL RISKS, UNCERTAINTIES AND ASSUMPTIONS. THE COMPANY CANNOT GIVE ANY ASSURANCE AS TO THE CORRECTNESS OF SUCH FORWARD-LOOKING INFORMATION AND STATEMENTS. AN INVESTMENT IN THE COMPANY INVOLVES MATERIAL RISKS, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE, DEVELOPMENT OR ACHIEVEMENTS OF THE COMPANY AND ITS SUBSIDIARIES TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, DEVELOPMENT OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION. A NON-EXHAUSTIVE OVERVIEW OF RELEVANT RISK FACTORS THAT SHOULD BE TAKEN INTO ACCOUNT WHEN CONSIDERING AN INVESTMENT IN THE SECURITIES ISSUED BY THE COMPANY IS GIVEN IN THE APPENDIX TO THIS PRESENTATION. THE RECIPIENT ACKNOWLEDGE TO BE SOLELY RESPONSIBLE FOR ITS OWN ASSESSMENT OF THE MARKET AND THE MARKET POSITION OF THE COMPANY AND THE RELEVANT SECURITIES AND TO CONDUCT ITS OWN ANALYSIS AND BE SOLELY RESPONSIBLE FOR FORMING ITS OWN VIEW OF THE POTENTIAL FUTURE PERFORMANCE OF ANY RELEVANT INVESTMENTS. THE COMPANY MAKES NO UNTERTAKING, REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIES) AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION (WHETHER WRITTEN OR ORAL AND WHETHER OR NOT INCLUDED IN THIS PRESENTATION) CONCERNING THE MATTERS DESCRIBED HEREIN. THE COMPANY DOES NOT ACCEPT ANY LIABILITY WHATSOEVER AS TO ANY ERRORS, OMISSIONS OR MISSTATEMENTS CONTAINED HEREIN AND, ACCORDINGLY, NEITHER THE COMPANY NOR ANY OF ITS ASSOCIATED COMPANIES OR ANY SUCH PERSON S AFFILIATES, OFFICERS AND EMPLOYEES ACCEPTS ANY LIABILITY WHATSOEVER ARISING DIRECTLY OR INDIRECTLY FROM THE USE OF THIS PRESENTATION OR THE INFORMATION INCLUDED HEREIN. THIS PRESENTATION IS SUBJECT TO NORWEGIAN LAW, AND ANY DISPUTE ARISING IN RESPECT OF THIS PRESENTATION IS SUBJECT TO THE EXCLUSIVE JURISDICTION OF NORWEGIAN COURTS WITH BERGEN AS LEGAL VENUE. THIS PRESENTATION SPEAKS AS OF 21 NOVEMBER IT MAY BE SUBJECT TO CORRECTIONS OR CHANGE AT ANY TIME WITHOUT NOTICE. THE COMPANY DOES NOT INTEND TO, AND NEITHER THE DELIVERY OF THIS PRESENTATION NOR ANY FURTHER DISCUSSIONS BY THE COMPANY WITH ANY OF THE RECIPIENTS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES SINCE SUCH DATE. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT ANY INFORMATION INCLUDED IN THIS PRESENTATION.