Financial targets and investments in sustainable growth Atle Harald Sandtorv, CFO 79
Financial targets Growth Target 100 000 tonnes in 2020 2017 62 598 tonnes Cost At or below industry average NOK 37.9/kg in 2020 NOK 43.4/kg Financial NIBD/EBITDA < 4.5 Equity ratio > 35% NIBD/EBITDA 1.2 Equity ratio 47% Profitability Return on Capital Employed of 12% ROCE 24% Capital structure NIBD/harvest volume: NOK 20/kg NIBD/harvest volume: NOK 20.5/kg Dividend 25%-35% of the Group's net profit after tax adjusted for fair value appraisals Dividend NOK 2.0/share Pay-out ratio: 34% 80
Ambition to grow - targeting 100 000 tonnes in 2020 Smolt release 26 million in 2017 26 million in 2018 Increasing smolt size from 142 grams in 2018 to 230 grams in 2020 Increase survival Smolt quality Smolt size Reduced time in sea Biosecurity 81
Aiming for cost at or below industry average Regional cost development 2010-2020E NOK/kg Finnmark NOK/kg Rogaland 26.0 26.3 26.2 28.2 29.1 33.9 36.0 39.8 37.0 37.0 36.0 25.3 24.7 23.6 27.6 33.8 35.1 33.5 38.6 41.0 37.0 36.0 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E NOK/kg Shetland NOK/kg British Columbia 32.9 41.3 46.0 45.6 38.7 43.7 47.5 55.0 54.0 48.0 43.0 35.9 34.5 37.4 45.9 53.3 38.8 47.9 46.5 44.0 40.0 39.0 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 82
Targeting Group cost of NOK 37.90/kg in 2020 Increased survival NOK 3/kg 38.0 - Robust smolt - Reduced time in sea - Biosecurity Harvest cost NOK 1/kg 43.41 42.37 37.70 39.67 39.40 37.90 29.78 31.35 32.47 34.04 35.19 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E GSF cost excl. HQ (NOK/kg) Estimated industry average NOK 38/kg GSF Rogaland and Finnmark (NOK/kg) - Increased efficiency from higher volumes Miscellaneous NOK 1/kg - Precision farming - Procurement Weighted industry average cost in of NOK 38/kg* in 2020 *based on industry and analysts forecasts 83
Investments Total investments of NOK 650 million in 2018 Post-smolt strategy Digitalization in salmon farming Biosecurity and fish welfare Expansion opportunities NOK 100 million Expansion at Adamselv in Finnmark NOK 50 million Expansion at Trosnavåg in Rogaland NOK 20 million Central feeding operations Sensors and cameras Big data analytics IT infrastructure NOK 40 million Aeration systems Algal monitoring Lice skirts NOK 57 million New licence under traffic light system in Finnmark NOK 133 million New locations Maintenance investments NOK 250 million 84
Capacity expansion opportunities Improve utilization of current capacity in existing regions Acquisitions and joint ventures in existing regions New regions and new concepts 85
Investment opportunities assumptions Smolt facility Post-smolt facility Farming sites Biomass Primary processing facility Investment: NOK 250m Average capital employed: NOK 125m Annual capacity: 1 000 tonnes Number of units: 10 million Capital employed/smolt: NOK 13 Smolt-yield: 4 kg Investment/kg NOK 6 Investment: NOK 750m Average capital employed: NOK 375m Annual capacity: 10 000 tonnes Investment/kg: NOK 75 Investment: NOK 60m Average capital employed: NOK 30m Smolt input per generation: 1million units Smolt-yield: 4 kg Harvest per generation: 4 000 tonnes Annual harvest: 2 000 tonnes Investment/kg: NOK 30 Average biomass recent 6 quarters: NOK 2bn Harvest potential on current biomass: 80 000 tonnes Investment: NOK 450m Average capital employed: NOK 225m Annual capacity: 50 000 tonnes Investment/kg: NOK 9 Capital employed/kg: NOK 3 Capital employed/kg: NOK 38 Capital employed/kg: NOK 15 Capital employed/kg: NOK 25 Capital employed/kg: NOK 5 86
Implied targets for various investment opportunities Capital employed per kilo (NOK/kg HOG) Expanding current MAB Onshore expansion New licences License - - 122* Smolt phase 3 3 3 Post-smolt and farming phase 15 38 15 Biomass 25 25 25 Primary processing 5 5 5 Total capital employed 48 70 170 ROCE target 12% 12% 12% Investment per kilo (NOK/kg HOG) Expanding current MAB Onshore expansion New licences License - - 122* Smolt phase 6 6 6 Post smolt and farming phase 30 75 30 Primary processing 9 9 9 Total investments 45 90 167 Biomass/Working Capital 25 25 25 Total funding need 70 115 192 Implied EBIT target 6 8 20 Cost target 38 38 38 Implied break-even price 44 46 58 * assuming average auction price per licence of NOK 195/kg MAB and annual harvest volume per MAB: 1.6 87
Funding secured through 2022 All figures in NOK 1 000 Q2 2018 YE 2017 Term loan 1 170 690 985 000 Revolving credit 190 000 300 000 Leasing 354 001 260 251 Other interest-bearing debt 11 024-10 727 Cash- closing balance -198 536-271 715 NIBD excl. factoring 1 527 179 1 262 810 Syndicated bank loans and credit facilities through 2022 - Total credit framework ~NOK 2 300 million - Revolving credit facility NOK 1 000 million - Overdraft facilities NOK 100 million - Long-term loans NOK 600 + EUR 60 million Available cash NOK 1 089 million as at 30.06.2018 - Unused credit facilities NOK 891 million - Cash holdings NOK 198 million Strengthened cash flow from improved earnings Lower costs reduce working capital requirements 88
Creating shareholder value Maximize return through dividend and share value appreciation Dividend payout dependent on - Earnings/cash flow - Investments - Financial structure NIBD/harvest volume: NOK 20/kg Dividend an average of 25%-35% of the Group's net profit after tax adjusted for fair value appraisals 10.7 Earnings per share Dividends per share 5.0 3.9 4.0 2.0 1.3 1.5 0.5 0.0 0.0 2013 2014 2015 2016 2017 89
Strong performance most recent 3 years Outperforming market and sector Three-year performance rebased 120.00 100.00 80.00 60.00 40.00 20.00 0.00 01.09.2015 01.12.2015 01.03.2016 01.06.2016 01.09.2016 01.12.2016 01.03.2017 01.06.2017 01.09.2017 01.12.2017 01.03.2018 01.06.2018 Grieg Seafood OSE Seafood Index OSE Benchmark Index 90
Creating value for all stakeholders Shareholders Employees Society Environment Competitive return through dividend payments and share value appreciation Provide job opportunities for current and new employees Generate means to support the development of a better world Safeguard ability to operate sustainably 91
Summary
Photo: Eilert Munch