SalMar ASA
OSE:SALM
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SalMar ASA
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Welcome to the SalMar Presentation of Q1 2018. I'm Olav-Andreas Ervik, and with me today are the CFO, Trond Tuvstein. First, I'm Olav-Andreas Ervik from the island of Frøya. I have been within the fish farming industry mostly since the age of 18. And I'm very fascinating of fish farming and the challenges, the biology brings us. Worked in SalMar since 2012 and been Director in farming since 2014. That about me. Agenda today, highlights, strategic priorities, operational updates, financial updates and outlook. Satisfying performance in Q1, strong price achievement in the quarter. Stable biologic -- biological and cost development in Central Norway. Operational EBIT in Northern Norway impacted by increased cost on harvest volume. And total operational EBIT, NOK 708.1 million, up from NOK 670.7 million the same period last year. For those of you who are new, SalMar, a fully integrated salmon farmer from genetics to the sales division. News from first quarter. The Farming division has bought 2% growth in area 7, 10, 11, 12 and 13, which gave us a volume of 754 tonnes. We also bought 51% of the shares in the company MariCulture. This will develop a new fish -- offer a fish farm that can take us further into the ocean. We applied for 16 licenses to develop this concept. Our strategic focus are and will be to be the coast leader through operational excellence and innovative leadership. And operational updates starting with Central Norway. We see a stable cost development, expect reducing costs going forward. Harvest volume, mainly from Autumn-'16 generation, some accelerated harvesting due to fish welfare of this generation. We harvested 22,000 tonnes this quarter against 16,000 tonnes in Q1 '17. On this volume, we delivered operational EBIT on NOK 23.80, at 13% organic salmon in this quarter. And we expect harvest volume of 96,000 tonnes in 2018 from mid-Norway. Farming Northern Norway. Satisfactory performance in the quarter. We harvested 9,600 tonnes against 10,000 tonnes in Q1 '17. On this volume, we delivered an EBIT of NOK 24. Sea lice treatments negatively affected cost and profitability on [ S0s ] 2016. Also unfavorable distribution of harvest volumes compared to price development in the period. Expect higher costs on harvested biomass going forward, as this will be the end of the production of [ S0s ] 2016. Harvest volume of 47,000 tonnes in 2018 from Norway. Sales & Processing. Strong price achievement in the quarter. Contract share of 39% at prices below average spot. Profitability negatively impacted by seasonal lower volumes. Higher fixed cost per kilo. This gives us for Q1 '18 an operational EBIT on minus NOK 15 million against 60 -- minus NOK 61 million in Q1 '17. Contract share currently around 50% for second quarter 2018 and 36% for remaining volume 2018. Scottish Sea Farms, Norskott Havbruk. A historical strong result in the quarter. Solid operational performance in all divisions. Positive biological development in all farming sites. Contract share of 32%, and a harvest guidance at 26,000 tonnes for 2018. And on Iceland, on Arnarlax. Earnings impacted by increased level of mortality due to the damaged cage, which, again, caused transportation of fish between sites and handling of fish at very cold sea temperatures. All the cost related to the increased level of mortality is booked in the quarter. Ongoing structuring continue to affect costs. The company are still in the early phase. And a revised guiding now expect harvest volumes of 8,000 tonnes in 2018. The Ocean Farm 1 continue to show us good performance, both in terms of biology and technology. We had, so far, experienced low mortalities and good growth. We expect first harvest in second half this year. Then financial update. Trond?
Thank you, and good morning, everyone. I will take you through the overall financial figures for the first quarter 2018. As usual, we begin with an overall waterfall analysis, building a bridge from last quarter's EBIT per kilo over to this quarter. Last quarter, we achieved an EBIT per kilo of 17.7. During the first quarter, the spot prices has moved upward significantly from NOK 49.40 in the fourth quarter to NOK 60.40 per kilo in this quarter, an increase of just close to NOK 11 per kilo. Higher spot prices means higher purchasing cost for the Sales and Industry segments. This has led to negative profit on sales on the fixed price contracts. This, combined with higher fixed cost per kilo due to seasonality in the industry activities, explains why this segment has decreased EBIT per kilo by NOK 4.90 from the previous quarter. For the Farming segments, the cost of harvested biomass in this quarter has been higher than in the previous quarter. Overall, this segment has decreased EBIT per kilo by NOK 1.74 compared to the fourth quarter. In total, this builds up an EBIT per kilo of NOK 22.20 for the first quarter of 2018. And then over to the profit and loss statements. Operating revenues in the first quarter amounted to NOK 2.5 billion, an increase of just over 4% from the corresponding quarter in 2017. The growth is driven by higher volumes, 31,900 tonnes in this quarter versus 26,300 tonnes in 2017. 39% of the volume is sold on fixed-price contracts with price achievements below the spot market. Operational EBIT for the quarter ended at NOK 708 million, corresponding to an operational margin of 28%. This is approximately NOK 38 million higher than in the first quarter of 2017. In the first quarter, we can see we have recorded a positive fair value adjustment of NOK 151 million. This is mainly explained by higher price expectations going forward. EBIT for the period ended close to NOK 860 million. This is NOK 371 million higher than the corresponding quarter last year. Income from associated companies totaled to NOK 57.5 million and is mainly related to the share of profits from Norskott and Arnarlax. Interest expense in the period amounted to NOK 23 million, in addition to a positive foreign exchange effect of NOK 19 million. Profit before tax, NOK 913 million. Calculated tax cost for the period is NOK 192 million, leaving us with a net profit for the first quarter of NOK 721 million. And then the balance sheet. During the quarter, we have increased our total assets by NOK 536 million, up to NOK 13.4 billion. In this quarter, we can see that our fixed assets has decreased with NOK 27 million. In the long term, this is temporary as new projects are expected to be added to our investment portfolio. During the quarter, the current asset has increased by NOK 500 million, mainly explained by higher account receivables and more cash at hand. The value of biomass in sea is, more or less, stable when we include the fair value adjustment, which has increased by NOK 172 million, meaning that the value measured at cost is at a lower level. The increased cash holdings of NOK 312 million will be explained in the cash flow statement.During the quarter, we have an equity buildup of NOK 708 million due to retained earnings. We have reduced net interest-bearing debt by NOK 487 million. SalMar have a solid financial position with an equity ratio close to 62%, a net interest-bearing debt of NOK 753 million and NOK 4.3 billion in available credit facilities. Then at last, the cash flow statement. Another quarter with strong operational cash flow, a total of NOK 632 million. We have a negative change in working capital mainly due to reduction in account payable related to feeds. As mentioned, our investments programs are running on schedule with a total outflow of NOK 201 million in the quarter. In addition, we have received the dividend from our operations in Scottish Sea Farms and Norskott with NOK 82 million, altogether a net outflow from investment activities of NOK 119 million in the quarter. We have reduced interest-bearing debt by NOK 175 million. In addition, we have paid interests of NOK 23 million to our financial creditors. Altogether, this leaves us with a positive change in cash of NOK 350 million in the first quarter. Thank you, and back to you, Olav.
Thank you, Trond. Then, a brief summary and outlook. Guiding of 143,000 tonnes for 2018 are maintained. We expect overall stable cost development in second quarter 2018. The Ocean Farm volumes, we expect them to reach the market in the second half 2018. We continue to explore opportunities for capacity growth. The contract share for remaining 2018 volumes currently at 36%. The global supply expected to increase by 4% in 2018. And we expect continued good demand in core markets. Thank you.