Quarterly presentation

Q2•2014
Quarterly presentation
Oslo, 18 July 2014
Agenda
 Highlights
 Results by region
 Group financials
 Outlook
Page 2
Highlights – Cermaq Q2’14
(NOKm)*
Q2 14
Q2 13
Operating revenues
EBIT pre fv and non-rec. items
1 107
123
1 131
137
(NOKm, NOK per kg)
Q2 14
Q2 13
26.5
5.2
28.6
5.9
(NOKm )
Q2 14
Q1 14
Equity ratio
53.1 %
54.9 %
2 092
1 930
Volumes sold (kt, gwe)
EBIT per kg**
NIBD
Operating cash flow
137

EBIT Group NOK 123 million pre fair value

Sales volume 6 thousand tons lower than estimate,
full year estimate at same level

Continued high cost for Atlantics and trout in Chile

First ASC certification in Chile received

One green license in category C awarded

Sale of grain silo, NOK 44 million gain not included
in EBIT pre fair value
289
EBIT throughout this document is EBIT pre fair value adjustments on
biological assets and non-recurring items
*Q2’13 numbers are pro forma excluding EWOS
**EBIT per kg is based on EBIT pre fair value and non-recurring
items excluding HQ/Other cost
Page 3
Chile
Total Chile
Q2 14
Q2 13
Volumes (kt, gw e)
14.0
15.0
Revenues (NOKm)
547.2
523.8
EBIT (NOKm)
4.6
(6.4)
EBIT per Kg (NOK)
0.3
(0.4)

EBIT negatively impacted by:
-

EBIT Q2 14 vs Q2 13
Continued high cost for Atlantics and
challenging biology for trout
Lower sales volume for Atlantics
Sales volume decreased by 7% vs.
Q2’13
-
NOKm
5 kt below estimate
50

-6
Sanitary situation largely unchanged
-
30
46
-35
10
-6
-1
5
Other
Q2 14
0
-10
Q2 13 Volume Price
Cost
Page 4
Stable sea lice levels
SRS remains a concern for Atlantics and
trout
Chile – Atlantics
Atlantic salm on
Q2 14
Q2 13
Fresh
4.7
4.3
Frozen
6.2
5.5
10.9
9.8
416.3
368.1

Volumes (kt, gw e)
Total
Revenues (NOKm)
EBIT (NOKm)
(7.1)
(4.6)
EBIT per Kg (NOK)
(0.6)
(0.5)
Sales volume 5 kt below estimate due
to market timing
-
Harvest in line with production plans

11% increase in sales volume vs. Q2’13
despite inventory build

Strong Atlantic prices
Chile Atlantic fillet, FOB Miami, 3-4 lb, C-trim
USD/lb
6
5
-
High imports from Europe negatively
impacted US market in Q2
-
Achieved price USD 6.01/kg, 3% above
Q2’13, in line with Q1’14
-
Frozen prices on par with fresh
4

3
Feb
March
April
May
June
Dec
Jan '14
Sept
Oct
Nov
June
July
Aug
April
May
Jan '13
Feb
March
2
Page 5
Increased production cost from
harvesting underperforming sites
-
5% increase from Q2’13
-
6% increase from Q1’14
Target 2015; Ex-cage Cost Atlantics Chile
Ex-cage cost Atlantics, USD/kg

Ex-cage cost target of USD 3.8/kg for
Atlantics in 2015 reflecting improved
fish health

Higher share of superior grade to
provide USD 0.2/kg stronger achieved
price in 2015

Key drivers for reaching targets
6,0
4,8
5,0
4,5
4,8
4,9
4,5
3,9
4,0
3,8
3,3
3,0
2,0
1,0
-
Maintain a low caligus level
-
Reduce chemical caligus treatment
-
Reduce effect of SRS – minimize stress
-
Improve feed conversion
FY15e
FY14e
Q214
Q114
Q413
Q313
Q213
Q113
Q412
0,0
Based on the development of the fish in the sea and the improvements
in key parameters the 2015 cost target is maintained
Page 6
Atlantics – cost drivers and components
Economic Feed Conversion Ratio
EX-CAGE COST (USD/KG GWE)
1,51
1,48
4,7
4,5
0,5
4,2
0,6
3,9
Smolt
0,5
1,41
1,29
1,28
4,3
0,5
0,6
2010
3,5
2011
2012
2013
2014YTD
0,5
Mortality (per closed cycle)
2,5
2,2
2,4
Feed
19%
2,4
2,0
21%
21%
22%
2012
2013
2014YTD
12%
2,0
2010
Other cost
1,5
1,4
1,0
1,6
2011
Productivity Kg/smolt
1,2
4,50
1.2
2010
1,6
2011
2012
2013
2014 ytd
1.2
3,40
4,41
3,65
3,56
2012
2013
2014 ytd
feed price
adjusted*
2010
*feed price at 2013 level
Page 7
2011
2014YTD
Cermaq Chile sanitary situation
Caligus per Atlantic salmon
Average harvest weight, Atlantic salmon
(Adult females + mobile)

Stable Caligus level

Stable mortality
kg RWE
12
7
10
6
5
6
4
Kg RWE
8
4
- SRS and Caligus
main challenge
3
2
2
Mortality Atlantic salmon
monthly
jan.14
aug.13
mar.13
okt.12
mai.12
Dec-11
jun.14

Harvest weight highest
in the company’s
history

Decline in antibiotics vs
Q1 due to less severe
SRS outbreaks and
more effective
treatment
Antibiotics usage Gr/t LWE, Atlantics
800
600
2%
400
1%
200
0%
jul.11
feb.11
sep.10
Apr-10
nov.09
jun.09
Jan-09
0
0
3%
- Seasonal decline vs.
recent months
1
0
All data are for Cermaq Chile.
Page 8
Chile – Coho
Coho
Q2 14
Q2 13
Volumes (kt, gw e)
1.8
2.4
Revenues (NOKm)
64.0
57.4
EBIT (NOKm)
13.1
(6.7)
7.5
(2.8)
EBIT per Kg (NOK)
Japan - Chile, Tsukiji wholesale market
Yen/kg and USD price rebased to Yen price, Coho

-
Production cost up 2% vs. Q2’13,
up 3% vs. Q1’14

Good biological situation
-
800
600
400
Jan '12
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan '13
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan '14
Feb
March
April
May
June
200
Yen price
Strong demand from Japan

1000
0
Achieved price USD 5.91/kg, up
44% vs. Q2’13, up 5% vs.Q1’14
USD price rebased to Yen
Page 9
Low sea lice levels and mortality
Chile – Trout
Trout
Q2 14
Q2 13
Volumes (kt, gw e)
1.4
2.7
Revenues (NOKm)
66.9
98.4
EBIT (NOKm)
(1.3)
4.8
EBIT per Kg (NOK)
(1.0)
1.8

Volume down by 48% vs. Q2’13 in
line with stocking strategy of
reducing trout production

Achieved price USD 7.07/kg, up
18% vs. Q2’13, 5% vs. Q1’14
-
Japan - Chile, Tsukiji wholesale market
Yen/kg and USD price rebased to Yen price, trout
1200

1000
800
Production cost up by 25% vs.
Q2’13, up 15% vs. Q1’14
-
Higher cost y-o-y due to sanitary
challenges
-
SRS continues to be main issue
600
400
0
Jan '12
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan '13
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan '14
Feb
March
April
May
June
200
Yen price
USD price rebased to Yen

Page 10
Strong demand from Japan
Trout stocked in region XII
develops well
Norway
Total Norw ay
Q2 14
Q2 13
Volumes (kt, gw e)
8.1
9.7
Revenues (NOKm)
EBIT (NOKm)
343.2
80.7
414.3
121.5
EBIT per Kg (NOK)
10.0
12.6
EBIT Q2 14 vs Q2 13

Volume in line with estimate

Strong prices

-
Achieved price NOK 39.2/kg, down 3%
vs. Q2’13 and 13% vs. Q1’14
-
9% of volume in the quarter was on fixed
price contracts at NOK 39.2/kg
Higher production cost
NOKm
-
7% above Q2’13 and 6% higher than
Q1’14
-
Impacted by two challenging sites and
low volume in Finnmark, as planned
120
-20
100
-4
-17
80
60
122
81
40
20
0
Q2 13
Volume
Price
Cost
Q2 14

One new green license in category C

Generally good biological situation in
both regions
Page 11
ISA incident contained
Nordland
Nordland region
Q2 14
Q2 13
Volumes (kt, gw e)
4.4
5.1
Revenues (NOKm)
195.4
231.8
EBIT (NOKm)
48.6
69.8
EBIT per Kg (NOK)
11.0
13.7

Achieved price NOK 38.2/kg

Production cost NOK 25.1/kg

Generally good sanitary situation

Detection of virulent ISA in one
pen at Langøyhovden

Page 12
-
The fish has been culled with
limited financial impact
-
No detection of virulent ISA in the
other pens at the site
Harvest per license 1 305 tons last
12 months
Finnmark
Finnmark region
Q2 14
Q2 13
Volumes (kt, gw e)
3.7
4.5
Revenues (NOKm)
147.8
182.5
EBIT (NOKm)
EBIT per Kg (NOK)
32.1
8.8
51.8
11.4

Achieved price NOK 40.4/kg
-

Production cost NOK 29.5/kg
-

Low volume and two underperforming
sites harvested
Generally good biology
-

Mainly sold early in the quarter
2013G performing better than 2012G
Harvest per license 956 tons last 12
months
-
Page 13
Reflects 3 depopulated PD sites
New smolt facility in Nordland

Investment will fulfill the strategic
objective of becoming self sufficient with
smolt, also in Norway

Location in Forsan in Steigen, north of the
«Bodø firegate»

Capex estimated at NOK ~400m, mostly
in 2015 and 2016

The investment will reduce smolt cost,
give better biological control and flexibility
in smolt size
Forsan
Nordfold
«Bodø
firegate»
Bodø
Page 14
Canada
Q2 14
Q2 13
Volumes (kt, gw e)
4.4
4.0
Revenues (NOKm)
202.5
185.3
EBIT (NOKm)
51.9
54.0
EBIT per Kg (NOK)
11.8
13.4

-
Weak appetite causing slow
growth negatively impacted
volume and production cost

Production cost up 10% vs. Q2’13,
stable vs. Q1’14

Volume 0.6 kt below estimate due
to slower growth and postponed
harvest due to market conditions

Stable biological situation

Weak appetite remains a concern
NOKm
5
5
-11
-1
40
52
54
Achieved price CAD 8.16/kg, up
3% vs. Q2’13 and down 11% vs.
Q1’14

EBIT Q2 14 vs Q2 13
60
Strong prices
20
0
Q2 13 Volume Price
Cost
Other Q2 14
Page 15
Financials
Cash flow and Capex
Operating cash flow (NOKm)
Capex (NOKm)
incl EWOS prior to Q1 14
incl EWOS prior to Q1 14
250
300
246
289
200
250
246
200
|
150
150
120
100
137
109
98
100
83
100
50
50
44
-
Q2 13

Q4 13
Q1 14
Q2 13
Q2 14
Q3 13
Q4 13
Q1 14
Q2 14
Operating cash flow NOK 137 million vs. NOK 289 million in Q1’14
-

Q3 13
EBITDA NOK 191m, working capital build up NOK 26m, paid taxes NOK 28m
Capital expenditure NOK 98 million
Page 17
NIBD, equity ratio, ROCE
NIBD development (NOKm)
2 000
162
ROCE - combined operations
(12-month rolling avg.)
65
13.9 %
14.0 %
Q1 14
Q2 14
73
-137
1 500
1 000
10.3 %
1930
6.3 %
7.1 %
Q2 13
Q3 13
2092
500
Q4 13
NIBD Q2
Other/FX
Dividend paid
Investment CF
Operating CF
NIBD Q1
-

Unsecured NOK 750 million bond issue

NIBD up by NOK 162 million vs. Q1’14 due to dividend payment

Equity ratio 53%

ROCE 14% (12m rolling) driven by stronger salmon prices
Page 18
Unsecured NOK 750 million bond issue

3M NIBOR +2.75%

Committed long term headroom
increased from NOK 3 000 million
to NOK 3 750 million

Further flexibility is provided by the
possibility for tap issues up to NOK
750 million

Secure funding of projected organic
growth and strategic projects over
the next 2-3 years

Most of the funds raised were used
to repay existing loans under the
Group’s revolving credit facilities
Maturity profile of Cermaq committed funds
Page 19
Outlook 2014
Outlook
Annual sales, kt gwe
120 kt
109 kt
142 kt
+18%
160
+10%
Canada; 15
120
kt, gwe
Canada; 19
Estimated sales in 2014 of 158 kt

Development of new licenses and
Nordland smolt facility

Outlook for limited global supply
growth indicates strong markets
during 2014 and 2015
Norway; 57
Norway; 51
Canada; 21
80

Canada; 20
140
100
Cost reduction for Atlantics and
trout in Chile
158 kt
+11%
180

Norway; 51
Norway; 38
60
40
20
Chile; 76
Chile; 49
Chile; 80
Chile; 50
0
ACT
ACT
ACT
EST
FY 11
FY 12
FY 13
FY 14
Page 21
Appendix
Selling price, cost and EBIT/kg
*Total cost include all cost, and are not comparable to production cost mentioned elsewhere in the presentation
Page 23
Quarterly sales volumes
Cermaq group sales
volumes (kt, gwe)
Chile
Atlantic
Coho
Trout
Norway
Nordland
Finnmark
Canada
TOTAL
Q1 13
ACT
25
11
10
3
15
3
12
4
43
Q2 13
ACT
15
10
2
3
10
5
5
4
29
Q3 13
ACT
11
7
1
2
13
7
6
4
28
Q4 13
ACT
26
13
9
4
14
7
7
3
43
Page 24
FY 13
ACT
76
41
23
12
51
22
29
15
142
Q1 14
ACT
19
8
8
3
13
4
9
2
35
Q2 14
ACT
14
11
2
1
8
4
4
4
27
Q3 14
EST
19
16
3
17
8
9
6
41
Q4 14
EST
28
16
9
3
19
9
9
8
54
FY 14
EST
80
51
19
10
57
26
31
20
158
Harvest and supply
Global harvest of Atlantic salmon
World wide harvest of farmed salmonids
kTonnes WFE
3 000
Q2 13
Q2 14
FY 13
(kTonnes WFE)
FY 14E
2 750
REGION
Canada
29
29
115
117
Chile
107
129
468
523
Norw ay
256
295
1 144
1 216
UK
37
40
158
164
Other
39
42
158
172
467
535
2 043
2 191
EST, HARVEST
Source: Kontali
2 500
2 250
2 000
1 750
1 500
1 250
1 000
750
500
Global sales per region of Atlantic
salmon
250
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Atlantic s almon
kTonnes WFE
Q2 13
Q2 14
FY 13
FY 14E
Source: Kontali Analyse
REGION
EU
214
241
905
963
USA
95
100
371
403
Japan
13
17
59
64
Russia
34
34
160
160
China / Hong Kong
15
23
69
80
Brazil
20
26
86
100
88
104
388
426
479
544
2 038
2 196
Other
EST, SUPPLY
Source: Kontali
Page 25
Large trout
Coho
Market prices farmed salmonids
Europe - Norway (FCA Oslo)
USA - Chile / Canada
(NOK/kg)
(USD/lb)
7
60
6
50
5
40
4
30
3
20
2
10
1
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2014
Chilean Atlantic fillet fresh, FOB Miami, 3-4 lb, C-Trim
Source: Kontali
Source: NOS, Kontali
Japan - Chile (wholesale Tsukiji market)
Canada (Wes t coas t) whole fish fresh, FOB Seattle, 8-10 lb
Japan - Chile, Tsukiji wholesale market
(USD/kg)
(JPY/kg)
10
9
8
7
6
5
4
3
2
1
0
1000
900
800
700
600
500
400
300
Jan '12
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan '13
Feb
March
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan '14
Feb
March
April
May
June
200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Japan - Chile frozen coho 4-6lb JPY/kg
Coho
Japan - Chile frozen trout 4-6lb JPY/kg
Source: Urner Barry
Source: Urner Berry
Page 26
trout

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