Understanding the wildfish harvesting business Webjørn Barstad CEO HAVFISK ASA
HAVFISK ASA Agenda The Global Picture Supply side Markets From science to individual vessel quotas Norwegian fisheries and HAVFISK Outlook
The Global Picture Supply side
World capture production stable at «maximum potential»
The most important white fish species from the fisheries White fish catch - 2015 E (1000 tonnes) 345 1.216 280 494 260 3.543 Alaska Pollock Hakes Atlantic Cod Haddock Saithe Source: Kontali Analyse 1.050 Pacific Cod Hoki
Catch by nations and species (mt) Nation Alaska Pollock Catch by nation and species 2014 Atlantic cod Hake Saithe Haddock SBW Pacific cod Hoki TOTAL Chile - - 40 000 - - 14 000-40 000 94 000 88 000 Argentine - - 270 000 - - 9 000-45 000 324 000 328 000 USA 1 405 000-250 000 8 000 3 000-330 000-1 996 000 1 984 000 Canada 10 000 18 000 50 000 5 000 8 000-5 000-96 000 88 000 Russia 1 670 000 448 000 2 000 1 000 77 000-80 000-2 278 000 2 212 000 Norway - 475 000 2 000 156 000 94 000 - - - 727 000 659 000 Iceland - 239 000-53 000 36 000 - - - 328 000 329 000 Faroe Islands - 17 000-17 000 3 000 - - - 37 000 51 000 EU - 160 000 68 000 54 000 50 000 - - - 332 000 318 000 Namibia - - 140 000 - - - - - 140 000 140 000 South Africa - - 150 000 - - - - - 150 000 145 000 Japan/S-Korea 280 000 - - - - 3 000 65 000-348 000 343 000 New Zealand - - - - - 35 000-150 000 185 000 195 000 Others - 10 000 96 000 14 000 1 000 2 000 2 000 4 000 129 000 118 000 Total 3 365 000 1 367 000 1 068 000 308 000 272 000 63 000 482 000 239 000 7 164 000 6 998 000 Source; National statistics/ka-est. E 2015
The Global Picture Markets
1000 NOK 18.000.000 16.000.000 14.000.000 12.000.000 10.000.000 8.000.000 6.000.000 4.000.000 2.000.000 0 Source: Kontali Analyse Main whitefish fisheries by first hand value - 2014 E Alaska Pollock Atlantic cod Hake Haddock Saithe Pacific cod Hoki SBW
The world market of whitefish The global volume of groundfish - Where is it consumed? (2014 E) 50 % 45 % 47 % 40 % 35 % 30 % 25 % 20 % 15 % 10 % 5 % 0 % 14 % 12 % 9 % 8 % 7 % 5 % 2 % EU North America Asia Russia South America Japan Africa Others Source: Kontali Analyse
EU country split - whitefish consumption 2014 1000 tonnes R.W. White Fish Cod Alaska Pollock Haddock Saithe Hakes Hoki Total Germany 547 70 411 3 23 36 4 UK 474 250 101 86 15 20 2 Spain 473 190 32 0 6 245 0 France 359 60 183 13 26 55 22 Scandinavia (SE, DK, FI) 245 134 26 23 40 10 12 Poland 243 97 109 7 6 13 11 Be/Ne/Lux 237 89 71 17 32 26 2 Portugal 162 98 5 0 0 59 0 Italy 158 44 30 0 0 84 0 Others 115 45 57 3 5 3 2 3013 1077 1025 152 153 551 55 Top 3 Markets 1 Germany UK Germany UK Scandinavia Spain France 2 UK Spain France Scandinavia Be/Ne/Lux Italy Scandinavia 3 Spain Scandinavia Poland Be/Ne/Lux France Portugal Poland Source: Kontali Analyse
Vessel quotas From science to individual vessel quotas
How is the vessels quota decided? Annual quota advice from the relevant scientific institution Interna<onal Council for the Explora<on of the Sea Species by species scien<fic advice Problem: Fish don t care about borders in the sea Solution: Agreement on total allowable catches (TAC) and quota sharing between nations through annual bi- or multilateral negotiations Based on scien<fic advice End result: na<onal TACs for various species
How is the vessels quota decided? Bi-lateral fisheries agreements involving Norway: Russia / Norway EU / Norway Greenland / Norway Faroe Islands / Norway Iceland / Norway Multi-lateral fisheries agreements where Norway is part (and participate in fisheries): NEAFC NAFO CCAMLR
How is the vessels quota decided? National TAC from agreements - Allocations for science, political purposes etc = TAC available to commercial fishing fleet Divided between variety of vessel groups according to long term quotasharing agreement within the Norwegian Fishermens Association - Different agreed shares from species to species
How is the vessels quota decided? Trawler groups quota share (eg. Cod 33%) allocated with an equal quota size per individual vessel quota Total of ~88 individual vessel quotas in trawl group (Cod) One vessel can hold up to 4 quotas
Norwegian fisheries and HAVFISK
Ocean area > 6 x land area
Norway as a fishing nation Modern, efficient, well managed, sustainable World fishing nation no. 10 by volume (largest in Europe) World fishing nation no. 2 by export value The worlds largest Cod stock EU 31 mt pr fisherman Norway 255 mt pr fisherman Vessels 140 120 100 80 60 40 20 Positioned for profitability Number of cod trawl vessels Norway 1980-2014 1980 1985 1990 1995 2000 2005 2010 2014 Source: Fiskeridirektoratet
Company overview Key facts Norway s largest harvesting company and quota holder 11% of the Norwegian whitefish quota (cod, saithe, haddock) 7 Barents Sea shrimp licenses + 1 Greenland 10 operational trawlers Three new vessels delivered in 2013 and 2014
Norwegian fishing companies The 35 largest fishing companies in 2014 (gross catch value in mill. NOK) MNOK
Company overview Key facts 390 employees Ownership to fish industry facilities in northern Norway Facilities are operated by sister company Norway Seafoods Listed on Oslo Stock Exchange Aker ASA 73,25 %
Financials Results 2014 & Q2 2015 Year 2014 Operating Revenues: 1 049 MNOK EBITDA: 299 MNOK (28 %) EBITDA per kilo: 5,0 NOK Equity ratio: 35 % Q2-2015 Operating Revenues: 257 MNOK EBITDA: 84 MNOK (34 %) EBITDA per kilo: 6,1 NOK Equity ratio: 36,2 % Volume 2014: 59 295 mt (~83 000 mt live weight) Q3 figures 6 November
Key value drivers HFISK
Value drivers Historic price trend - Cod Strong supply growth and financial downturn in key markets have negative impact on cod prices. Cod-prices appears to have bottomed out in Q1/2013 Export prices for frozen cod h/g in NOK. Source: Norwegian Seafood Council
Value drivers Cost breakdown (based on 2014 figures) % of revenue Cost (MNOK) 250 316 200 Cost 150 100 50 31% 101 10% 159 16% 32 3% 57 6% 61 6% Personnel Freight/ packaging Fuel Fishing gear Maintenance Administration Drivers Low fixed sum per day Main personnel cost is in % of catch value Percentage of catch value Cost per kilo Cost per day in operation Average consumption for a freezing trawlers = 10 000 litres/ day Cost per day in operation Average of NOK/day 10 000 Cost per day in operation Fixed cost : yearly maintenance in ship yards Fixed cost Overhead cost, administration, insurance 28
Value drivers Catch efficiency Significant increase in catch efficiency Change in fleet Availability of fish New vessels: improvement in catch efficiency flexibility to par<cipate in alterna<ve fisheries
Value drivers Sensitivities price and catch efficiency main factors Catch efficiency EBITDA at different catch rates Price NOK 1.0 EBITDA / kg 0.3 0.1 0.6 0 5,000 10,000 15,000 20,000 25,000 Catch rate per day (Kg) Price Increase Personnel cost Other costs Increased EBITDA Catch rates above 10,000 kg / day yield margin of around 60% Price increase of 1.0 NOK/kg will give additional EBITDA of around 0.6 NOK/kg
«Virtual tour» at Gadus Neptun http://invisual.no/havfisk/
Outlook HFISK
HAVFISK Outlook Quotas 2016 Cod - same level as in 2015 Haddock + 9 % Saithe + 7 % Q3 presenta<on 6 November 2015 9 am Hotel Con<nental Oslo Industry Handbook www.havfisk.no/investor rela<ons/reports and presenta<ons
Outlook Long term mega trends Health, convenience, environment and ethics Fish is an important source of protein, vitamins and minerals The Norwegian fishing for cod, haddock and saithe is certified by MSC standard for sustainable fisheries Fish is an environmentally friendly source of protein Source: Prof Ray Hilborn, University of Washington Growing focus on fish in retail customer demands drives convenience Aker Seafoods invests in the future!
Outlook Long term mega trends The Food Gap Challenge towards 2050 69% increase in food production will be necessary The world needs more seafood - less than 10 percent of food consumption is sea-based HAVFISK ca 200 mill meals per year
Disclaimer This Presenta<on includes and is based, inter alia, on forward- looking informa<on and statements that are subject to risks and uncertain<es that could cause actual results to differ. These statements and this Presenta<on are based on current expecta<ons, es<mates and projec<ons about global economic condi<ons, the economic condi<ons of the regions and industries that are major markets for HAVFISK ASA including subsidiaries and affiliates. These expecta<ons, es<mates and projec<ons are generally iden<fiable by statements containing words such as expects, believes, es<mates or similar expressions. Important factors that could cause actual results to differ materially from those expecta<ons include, among others, economic and market condi<ons in the geographic areas and industries that are or will be major markets for HAVFISK`s businesses, fish prices, market acceptance of new products and services, changes in governmental regula<ons, interest rates, fluctua<ons in currency exchange rates and such other factors as may be discussed from <me to <me in the Presenta<on. Although HAVFISK ASA believes that its expecta<ons and the Presenta<on are based upon reasonable assump<ons, it can give no assurance that those expecta<ons will be achieved or that the actual results will be as set out in the Presenta<on. HAVFISK ASA is making no representa<on or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presenta<on, and neither HAVFISK ASA nor any of its directors, officers or employees will have any liability to you or any other persons resul<ng from your use.