Salmon price, demand and market trends Kolbjørn Giskeødegård, Director 21 November 2018
Salmon supply growth dramaticly down after 2012 2 500 2013-17: CAGR 2% 2 000 1 500 2003-12: CAGR 8% 1 000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Volume global Source: Kontali and Nordea est 2
Kilo WFE Kilo WFE Average harvesting weights Norway, Chile, Faroes 6 5.8 4.9 5.6 4.8 5.4 4.7 5.2 4.6 5 4.8 4.5 4.6 4.4 4.4 4.3 4.2 4 2012 2013 2014 2015 2016 2017 2018E 4.2 2018 2017 1H 2H Chile Norway Faroes Source: Kontali and Nordea est 3
Change in w eight kilos Norway: Harvesting weights, number harvested, biomass 2H 2018: Volumes: + 18,900 tonnes (4%) Weight 212 grams (-4.5%) Number of fish + 9.3 mill (9%) Biomass: -3.5% y/y (Nordea est.) 0.6 0.4 0.2 0-0.2-0.4-0.6-0.8 Source: Kontali and Nordea est 4
Markets, prices, demand Source: Nordea 5
Index (2006=100) Global markets other up twice as much as EU/USA 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 350 300 250 200 150 100 0 50 EU USA Other Markets 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 EU USA Other Markets Sources: Kontali and Nordea Markets 6
Market shares 2006 and 2020E 2006 2020E EU 51 % EU 40 % Other Markets 18 % Russia 4 % Japan 4 % USA 23 % Other Markets 36 % Russia 3 % Japan 3 % USA 18 % Sources: Kontali and Nordea Markets 7
Salm on price (NOK/kg) Prices in NOK doubles in ten years 70 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 30 ish 40 ish 60 ish Kilde: FishPool og Nordea est 8
When is salmon too expensive and when do low price trigger demand hike? «RED» ZONE (risk for price drop): 2009: NOK 37 2010: NOK 40 2014: NOK 45 2016: NOK 62 2018: NOK 70 Source: Nordea Markets 9
Split in the value chain who takes the biggest chunk? Whole cake = price to consumer (observed) Norwegian part = Export price Difference = «Value add» 10
w1-2015 w7 w13 w19 w25 w31 w37 w43 w49 w3 w9 w15 w21 w27 w33 w39 w45 w51 w5 w11 w17 w23 w29 w35 w41 w47 w1-2018 w7 w13 w19 w25 w31 w37 w43 EUR per kilo HOG w eight Prices to end consumer split by part of the value chain 14,00 12,00 10,00 8,00 6,00 4,00 2,00 - Export price Value add 11
w1-2015 w7 w13 w19 w25 w31 w37 w43 w49 w3 w9 w15 w21 w27 w33 w39 w45 w51 w5 w11 w17 w23 w29 w35 w41 w47 w1-2018 w7 w13 w19 w25 w31 w37 w43 w1-2015 w7 w13 w19 w25 w31 w37 w43 w49 w3 w9 w15 w21 w27 w33 w39 w45 w51 w5 w11 w17 w23 w29 w35 w41 w47 w1-2018 w7 w13 w19 w25 w31 w37 w43 EUR per kilo Value add - EUR per kilo Win-win situation - Value add +30%, spot price +38% 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00-8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Export price Value Axis added Title EUR/kg Linear (Value added EUR/kg) Source: Kontali and Nordea est 12
w1-2015 w7 w13 w19 w25 w31 w37 w43 w49 w3 w9 w15 w21 w27 w33 w39 w45 w51 w5 w11 w17 w23 w29 w35 w41 w47 w1-2018 w7 w13 w19 w25 w31 w37 w43 4 years ago 50/50 distribution of total value, now back to the same 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Spot Value add Source: Kontali and Nordea est 13
The future 14
Walking in the mountains long trend is obvious, but what is the visibility on short and medium term? 15
21-08-2018 23-08-2018 27-08-2018 29-08-2018 31-08-2018 04-09-2018 06-09-2018 10-09-2018 12-09-2018 14-09-2018 18-09-2018 20-09-2018 24-09-2018 26-09-2018 28-09-2018 02-10-2018 04-10-2018 08-10-2018 10-10-2018 12-10-2018 16-10-2018 18-10-2018 22-10-2018 24-10-2018 26-10-2018 30-10-2018 01-11-2018 05-11-2018 07-11-2018 09-11-2018 13-11-2018 15-11-2018 19-11-2018 NOK per kilo NOK per kilo Short term down (November 2018 as in 2017) 70.00 70 65.00 60.00 60 55.00 50 50.00 45.00 40.00 35.00 30.00 40 30 20 10 63.5 53 47.1 2018 2017 0 2018 fwd oct 2018 "Actual" 2017 Source: Fishpool 16
21-08-2018 23-08-2018 27-08-2018 29-08-2018 31-08-2018 04-09-2018 06-09-2018 10-09-2018 12-09-2018 14-09-2018 18-09-2018 20-09-2018 24-09-2018 26-09-2018 28-09-2018 02-10-2018 04-10-2018 08-10-2018 10-10-2018 12-10-2018 16-10-2018 18-10-2018 22-10-2018 24-10-2018 26-10-2018 30-10-2018 01-11-2018 05-11-2018 07-11-2018 09-11-2018 13-11-2018 15-11-2018 19-11-2018 Short /medium term: Flattish although 2019 contract trending slightly down 70 68 66 64 62 60 58 56 54 52 50 FY 2019 Source: Fishpool 17
Long term: Up - the market potential is unlimited, supply the issue Share of global middle class per region 2010 Growth global middle class, mill persons North America 18 % Europe 36 % Asia Pacific 28 % Africa/M.E 8 % Central & South America 10 % 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Europe 14 % North America 7 % 2030 0-200 Change 2010-20 Change 2020-30 Asia Pacific Africa/M.E Central & South America Europe North America Central & South America 6 % Africa/M.E 7 % Asia Pacific 66 % Source: World Bank 18
Price change How much supply growth can the market absorb at stable prices? 60% 2016 50% y = -1.7964x + 0.1788 R² = 0.5992 40% 30% 20% 2014 10% 2018 2015 0% 2014-10% -5% 0% 5% 2017 10% 15% 20% -10% -20% -30% Supply change % Source: Nordea estimates 19
The 2019 price If the market is like average 2014-18 NOK 64, EBIT NOK 27 If the market is in «2015 or 2017 mode», NOK 60, EBIT NOK 23 If use the 2011 scheme, a 4% supply growth => 9% price decline NOK 55, EBIT NOK 18 If we use 2016, extreme shift, supply +4%, price + 37% NOK 83, EBIT NOK 56 Regardless of scenario, fish farmers EBIT margin will be 3.5 to 11 times average historical earnings in the period 1985 to 2010 And the current price level offers very good business opportunities also for the customers processing and selling the farmed Atlantic Salmon Which is the perfect introduction to wish us all a 20
Thanks! Kolbjørn Giskeødegård, Director kg@nordea.com Nordea Bank Abp, filial i Norge, Essendrops gate 7, PO box 1166 Sentrum, 0107 Oslo, Norway, 920058817 MVA (Norwegian Register of Business Enterprises) Nordea Bank Abp, Helsinki, Finland, 2858394-9 (Finnish Patent and Registration Office) Nordea Markets is the name of the Markets departments of Nordea Bank Abp. The information provided herein is intended for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. The views have been provided solely based on the information made available to Nordea Markets and for the purposes of presenting the services made available by Nordea Markets. This notice does not substitute the judgement of the recipient. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. Relevant professional advice should always be obtained before making any investment or credit decision. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.. Web: For disclosures and disclaimers, please click this link