Mowi ASA

Yes. Good morning, everyone and welcome to the Third Quarter Results Presentation of it.

With me today, I have our CFO, Kristian Ellingsen. He will walk through the financial figures and the financials.

And my name is Ivan Vindheim. As usual, we start with the highlights.

EBIT €80 million in line with the trading updates. Q3 was the quarter highly impacted by COVID-19 restrictions and our seasonal high supply, which puts pressure on salmon prices.

The shortfalls and you have seen in the food service markets has not been fully offset by the strong growth we have in retail sales. According to our intelligence, the net effect is approximately 5% to 10% negative.

Despite that, move - operations have been running and all running just normal, despite so that COVID-19 restrictions, we have seen a resurgence of the COVID-19 in many countries off to the third quarter. But again, operations they are running as close to normal as yet on the prevailing circumstances.

We are maintaining strict sanitary measures to secure the health and safety of our employees closer to secure the quality of our products. Following volumes in the third quarter autumn high 126,000 tonnes, 20 volume volumes is maintained at 442,000 tonnes.

Guidance for 2021, 445,000 tonnes, i.e. we take a temporary break in our growth trajectory, excuse me.

But that should not be regarded as something that will be permanently become. So, into details later on in the presentation.

Then the farming costs this time around €4.23 down from €4.33 last year in the third quarter and then down from €4.47in the second quarter this year. So i.e., a costing month, which is satisfactory.

Record high third quarter volumes also in consumer products and feed. Under the prevailing circumstances, the Board considers is of utmost importance to discuss and maintain a strong financial position.

So, the Board has decided not to distribute a dividend after the third quarter either. Then key financial, I will not spent too much time on Keystone and go into detail related on top-line a decline of 6% this time driven by all the mentioned falling prices on the seasonal highest price, so in supply and then COVID-19 restrictions.

Operational EBIT €18 million and harvest volumes I said 126,000 tonnes, up by 8% year-over-year. The margins and the margin spread we will come back to when we address the various entities.

Prices down in the quarter by 11% in Europe in market currency, 20% in America as the COVID-19 pandemic epicenter was in Americas in the third quarter. Although we are seeing a resurgence now in Europe in the fourth quarter so far, which will impact the price achievements for October obviously.

Asia is looking better, they have better COVID-19 situation than what is the case in Europe right now and Americas. Price achievement during the quarter overall took price achievement was stronger 104% compared to the reference price on a good superior share and a contracts.

The EBIT water flow this time, not surprisingly, highly impacted by the default price test, forming reduced cost in the quarter increased volumes to surprise the fact is actually higher than €84 million. You see, today, the price effect was in the range of €560 million.

They all the distance and tests performed well in the quarter. They all improve their earnings.

So operational wise, a good quarter for Mowi, I would say and reasonably in good results taking the situation in which we are into account. But of course, that food service is a very important market for this time and accounting for 35% to 40% of it and with the COVID-19 pandemic.

It goes without saying that will have a hit on prices and results accordingly. Then our biggest entity, first Norway, good growth relative to good biology in the quarter.

However, results again, highly impacted by COVID-19 and COVID-19 resurgence. In addition, they also had an affected in Norway in the quarter, as many of you are already aware of you are a euro company.

We also run movie Norway in euro. That means that you do not benefit from the means and the weakening of the not like the Norwegian farmers do.

This quarter the hit was NOK 3.8 per kilogram. In the second quarter, it was it was 6.5 kilogram.

In steady state it is neutral. If you are running, moving over in Europe or in NOK, but the price effect you get relatively the cost you insure over a few years time cycle so consequently, you have a lag on the price cost effectiveness.

So again instead of state this is neutral. But because of the COVID-19 situation we has seen an unprecedented weakening of the NOK this year which has highly impacted our Norwegian figures with the FX strategy we have.

Costs in the quarter stable area €3.84 equivalent to 38.4 in NOK terms the relevant FX rate [10.01] (Ph) in the quarter. Yes, I will not say more about the FX system and go further into details later on in the presentation.

Then over to the values of regions. Good cost to in the North, €3.61 equivalent to the NOK 36.1 per kilogram, region mid €3.98 or NOK 39.8 a little bit too high, I would argue, but bear in mind that, our region mid is made up of the production area four as if you don’t know production area five [indiscernible] and production area six which is old south [indiscernible].

And so consequently, our cost base is impacted by geography. We see that our cost in production area six is substantially better than in production area four.

These results were NOK39.3 or €3 per kilogram. I would say, I remember that, biology is highly impacted by the marine temperature turf from the longer solves in Norway, the warmer the sea water in the summer and in the challenging third quarter.

So, relatively good cost position in results. These results also a good cost position in the North and in mid we have room for improvements and overall of course there is room for improvement.

You can always do something always better and this is, this is what we try to do every day. We are working along two pillars for Mowi and that is cost, and that is volumes and growth of volumes.

Then over to the safe contract portfolio for Norway, a quite stable into the fourth quarter on the stable price in the North and a substantial changes there. In terms of next year, we are negotiating contracts for next year as we speak.

So we will not go into details in this presentation since it is business sensitive, but most of the contracts for next year, they are to be contracted. So, with I think we move on to Scotland.

And reduce the score for Scotland on lower prices and also challenging biology. This obviously impact our fuel cost in both.

That being said, we expect a substantial cost improvements into the fourth quarter. We are harvesting bigger fish and biology has improved as well from the third quarter.

So, again we have higher expectations for the cost curve in the Scotland in the fourth quarter. Then moving Canada.

Canada I think is the entity that has been hit the most on price in the third quarter. On a positive note, prices have increased into the fourth quarter for Canada.

That bodes well for improvements in results. Stable costs in box year-over-year and third quarter but cost level in general in Canada is higher than what we like.

So, this is something we address going forwards that I do not think you can expect any material improvement in the near future. As most of you are aware of, it takes three years for some role to play in this industry and the sea water facing Canada is close to the two years, so that means it takes time to change the performance.

Biology in 2020 is impacting our volumes for next year. So, we unfortunately, we have a temporary setback in our growth ambitions in Canada.

But that doesn’t change the long-term potential there, we still strongly believes that you have the good conditions and a good basis for increasing volumes in Canada substantially going forward. And then I’m thinking particularly of Canada East or Atlantic Canada.

Again, if prices have increased in Canada or for Canadian pesos into the fourth quarter, so all else being equal and that should indicate improved resource, but still early days. We are in November and December is also yet to be seen.

Down to Chile very good bodes in Chile good cost, I would argue, we do not state it here, but I think we stated in the report US$401 dollars and very impressive the mortality rate. So, in terms of cost in terms of the farming process we do well I would say, but unfortunately it is a very tough market, demand market for Chilean fish is America which has been [indiscernible] pandemic in the third quarter but also so far in the fourth quarter, so the prices in Chile also the Chilean [indiscernible].

They are not trying any frozen inventory in Chile or neither in rest of all Mowi so we have sold all the fish we produced. I also think it is positive to see that we can manage to turn our profit under a decent circumstances that that is the much strong achievement than many tend to believe I think.

So, we are aided by the downstream set that we have in U.S. of course, but also driven by good by good farming and good coast.

Ireland and Faroes two small entities for Mowi but still two important ones, both turned reasonable margin in the quarter, 1.87 in Ireland and 1.27 in the Faroes. So good margins in Ireland and the Faroes.

And again remember that all entities outside Norway they benefit from the weakening of the NOK just the recently farmers do so. So, right now.

The Norwegian farmers they have an advantage to the rest of the farming industry. So, then you are reading these margins you should also put that into perspective.

Again impressive margins, according to myself. Consumer products yet another good quarter, we capitalize on the shift we have seen in demand from food service to retail.

We also expect to benefit first of all from this leg going forward. Feed as I said record high volumes, and I mean record high sold volumes good growth in Norway in the quarter.

A solid operation the ramp up phase we are in Scotland is progressing well. In total this year, we produce 136,000 tonnes in Scotland, but the capacity is 240,000 tonnes and the aim is to utilize this overtime.

So again feed this progressing well and has yet another good quarter. Then Kristian, the floor is all your and you can walk us through the financial markets under the volumes.

Thank you.

Thank you very much, Ivan. And good morning, everybody.

Hope everybody is doing well. As usual, we start with the overview of profit and loss, there the top-line shows a revenue of €968 million, this was down 6% from Q3 2019 and that also corresponds to the decrease in achieved prices in farming.

The significant price reduction is the main driver behind the [46%] (Ph) decrease in operational EBIT. The decrease was €67 million of which price is explained €106 million.

So lower costs, higher volumes and increased earnings and sales and sales and marketing and feed partially offset this effect. As usual, the largest item between operational EBIT and financial EBIT, it is not fair value adjustment of biomass.

This time €37 million mainly due to increased biomass and improved the process in Canada. At the end of the quarter versus the end of the second quarter.

Income from associated companies, this is mainly related to our 48% share of [Norway sea] (Ph) and this was reference into an operational earning of €1.49 per kilo on 11,500 tonnes in the quarter. Costs were at the same level as for Norway with the North and Norway sea has benefited from the NOK weakening.

So another strong result from another feed which is very good. That is financial items minus the €10 million approximately, so in line with the Q3 2019.

As we see the P&L key figures are impacted by the reduction in operational EBIT, so about 60% reduction. So underlying earnings per share down from €0.20 to €0.10 per share.

Operational EBIT margin down to 8.4%. But, although earnings are reduced and we are below target levels, the return on capital employed is still over 9% in a quarter with very challenging market conditions.

Also this quarter it is necessary to consider aspects effects to just fully understand or performance even commented also upon this, but I will go a little bit further into detail. Mowi and more in Norway as I stated here, they have a functional currency the euro.

The cash flow is managed in euro, which is the main market currency for salmon, and as a euro company we eliminate currency fluctuations. And our euro financing means that we have a lower financing cost.

But it also means that Mowi Norway does not benefit from the immediate positive effect of the NOK weakening. In 2020 as we see here in the chart, the weakening of the NOK has been unprecedented, this is driven by COVID-19 and the turmoils in the financial markets.

And the effect was particularly high as we see in the second quarter, but it is also significant in the third quarter. And to illustrate the - spot salmon price in Q3 2020 verses Q3 2019, that was stoned 11% in euro terms, but it was the lower, the reduction was lower as [indiscernible] 3% and NOK terms and the difference is the weakening of the NOK in the period.

The difference between the salmon price in euro and NOK is illustrated in the graph below here. And for a NOK farmer a Norwegian NOK farmer this FX effect on prices that comes immediately.

So that gray area there is a benefit you get immediately. When it comes to farming costs, they are accumulated over the three year production cycles for [indiscernible].

So, consequently, it takes a long time before cost exposed FX are impacted by this weakening that we have seen. So consequently a NOK farmer benefit from this price cost lag effect in the current environment.

But the effect is a lag it is neutral instead of state this is very important. And NOK former has also cost exposed to the FX such as heat, and it has NOK economic cost.

So over time the FX exposed to cost, they will drive cost and inventory upwards. Over time, even if the rates stay as they are today, we will reach a steady state where the lag effect is utilized.

And the lag effect will of course be utilized sooner if the NOK starts to strengthen because you don’t get an immediate effect, but an opposite sign on prices. And this is partly what we are seeing now in the third quarter, because the FX is lower in the third quarter than it was in the second quarter.

The FX loss which is baked into the margin of more in Norway is NOK3.8 in the third quarter while it was as much as 6.5 in the second quarter. As the FX gives an immediate boost on prices, but costs have been aggregated on the lower FX The FX loss from the NOK weakening in Q3 that should be attributed to price per kilo and not cost per kilo.

Cost are aggregated, as I said over the production cycle. In our accounting system, we track, we have double records in both euro and NOK and so we are able to track the NOK costs for Mowi Norway under relevant euro, NOK rate is.01 in the third quarter.

That is as much lower as you know it on the spot rate. And that gives NOK costs, which are listed here and has even already commented upon when they talked about the new region, as farming operations.

So much for currency. We move on to balance sheet, which is relatively stable from 2019.

The financial position is a solid with an equity ratio of 61.6%. Net interest bearing debt slightly above the long-term target of €1.4 billion.

Yes, and then we have the cash flow and then net interest bearing debt. We started at the period with a limit of EUR1380 million another good one for 45.9 million and that translates into a cash flow share negative €15.

There was a seasonable tie up for working capital €69 million in a quarter of which €48 million related to farming, mainly due to increase the biomass in sea. And biomass in sea at the period end is record high 322,000 tons live weight.

We tied up €14 million working capital in sales and marketing, most of which is explained by higher accounts receivable on the €48 million increased sales, compared to the second quarter. Paid taxes as we see relatively high in the third quarter.

This was said due to the fact that we delayed some payments from the second quarter due to the COVID-19 aid packages as from the authorities in Norway. When it comes to CapEx, this is a number which includes the effects of the MEB auction payment.

The MEB auction in Norway where we acquired that two 25 licenses in Norway at €28 million in payment. Then we can cash flow guidance, we maintained the cash flow guidance from the previous quarter.

Our working capital tie up year-to-date is €60 million, and we expect the seasonal tie up in the fourth quarter in farming and also in sales and marketing. Core CapEx guidance is still €265 million.

This is excluding the MEB growth this year in Norway the payments related to that in the six price parts of the scheme and auction part. Some of the projects this year are somewhat delayed and the risk is still somewhat on the downside i.e.

lower spend this year. But as it looks now, this affects will not be material.

Interest payments approximately €45 million and tax payments approximately €140 million. And, under the prevailing circumstances, the Board considered it is very important to maintain a strong financial position and preserve cash.

And thus has decided those who have decided not to distribute dividends for the third quarter. Financing, we have approximately €475 million in cash and on grown right, we are comfortably within the boundaries struck by the equity covenants of 35%.

As the ratio is currently 61.6%. Mowi have no earnings covenant.

And this overview describes our financing whether backbone is the bank facility €1.4 billion, the bank facility with the DMV and Nordea, ABN AMRO, Noble Bank, Danske Bank and SAB, all of which we have a close and good relationship with. And we have no debt, maturing until the summer of 2022.

Then we move on to markets fundamentals in the quarter. To start with the supply development.

Supply was -- supply grew by 5% as a [indiscernible], this was in line with expectations. somewhat lower growth in Norway but higher in Chile.

In Norway, there were lower harvest rates than expected a troublesome late summer with early harvesting while Chile super growth as much as 16%. higher than expected on proceeding rates with record high harvest rates.

However, small stepping stone 2% year-to-date September all this are expected to decline in 2021. We will come a little back to that.

Yes, and I also want to comment on Scotland where volumes were very lower than, than expected due to impact from [indiscernible] and our environmental challenges in the quarter. If you look at the volume by market then we have the situation during the quarter that food service demand increased at the beginning of Q3.

However, as you know restrictions were tightened over the course of the quarter retail demand have been strong in the quarter. This was partly compensated for the lost food service demand.

But the net effect is still negative between 5% to 10% compared to the situation before COVID-19. We see that in Europe, there was a good growth in EU plus 7%.

We have continued to see very strong retail sales in Europe in Q3. The quarter started a bit slow on holiday season barbecue season but then improved and the promotions have increased penetration.

Frequency of consumption has increased in all key European markets and retail volumes have increased by 15% to 25% in key European markets such as Germany, UK, France, and promotions have fueled demand. And the current price level is supportive for the long-term development towards more elaborated products which I believe Mowi is in the right position to benefit from.

Food service in Europe, both improving in July and August as locked measures were [indiscernible], but then we started on the second COVID-19 wave which we are still in and which is still affecting or key markets. In Americas, we see that there was strong growth in the U.S., 14%, retail sales have continued strong, low prices in combination with increased home consumption as a result of the lockdown measures, they have boosted the demand and the preferred sales are very strong, very positive.

Also home deliveries e-commerce in store pickup are continuing to grow. At the COVID-19 situation in America is still of course difficult, but whose service improves from what from Q2 outdoor serving at the source of the quarter.

But this is no of course reduced as we are approaching. A colder time of the year and COVID-19 figures are also difficult.

In Asia, there was a bit of a mixed picture, we see all-in-all Asia down 10%, but then several markets. The one has been relatively good, as illustrated by the figures there.

We see very good figures in the Japan, Korea, Taiwan an increased versus Q4 ‘19. The COVID-19 situation in Asia is better than in Europe and Americas.

They are ahead of the curve, so to say with the outbreak starting in Asia. So fewer lockdown measures are in place in Asia.

Also Air Cargo rates continue to grow in the third quarter, although at a slower pace than in the second quarter. And they are of course still higher than before, COVID-19.

And then we have China, as we see significant reduction from Q3 last year. It has however picked somewhat after the second way with these COVID-19 incidents in China.

But weekly volumes are still only 30% of what they were before this second wave. That is at least an improvement from the second quarter at the same time last quarter were up only 20%.

So we have seen an improvement nevertheless. Oaky then we have prices and of course with the increased supply 5% on the negative COVID-19 effect on demand of 5% to 10%, there has been a hit on spot prices in the quarter and your terms prices are down 11% as we see here.

For Mowi the reduction and achieved prices were lower than this. So we benefited on contracts in the quarter.

All-in-all, the salmon market has managed decently during this very special situation and in Q3 volumes were reasonably high, volumes are expected to be reduced in November and December. If we look ahead, we believe in our recovery in 2021.

We believe that the supply and demand balance will consequently be tighter than this year. And the shift from foodservice to retail increased penetration and new customers will be beneficial going forward.

The supply outlook, no significant use with regards to 2020. And as we only have a couple of months left of this year, it is time to start focusing on 2021.

We expect total supply to go by minus 1% to 3%. This is in line with Kontali estimates.

So this means that in 2021 we will see the biggest reduction in supply year-over-year since 2016 under Chilean household. In Norway, we expect the growth of 2% to 5%, in Chile we expect a reduction of between 5% and 10%, mainly due to less individuals from lower small stocking.

Than we have our own volume guidance. We have grown volumes considerably since 2017.

We were at 370,000 tonnes, we maintain or guiding for this year of 442,000 tonnes. The group doesn’t change but there are some minor differences between regions between Canada, Chile and Orlando versus the previous recording, but the total is the same.

For 2021 our volume guidance is 445,000 tonnes, Norway stable, some growth in Scotland and Chile. However, in Canada, volumes are reduced by 5000 tonnes as from 2020 to 40,000 tonnes next year.

This is due to high marine temperatures, resulted difficult environmental conditions, which has taken its toll on the biomass available for harvesting next year. However, the long-term potential for Mowi in Canada is still good remains unchanged.

So while we are a bit delayed, due to a challenging and 2019 and 2020, we believe the potential is still there. This is a temporary hold in our growth trends in Canada.

And Ivan I will hand over the back to you if you can please to go through the outlook.

Thank you, Kristian. And the outlook.

So to wrap up and as increased under such notwithstanding the current COVID-19 resurgence, you see now in October, we still believe in a market recovery next year. You see that current low price level attracts new customers and new segments and fuse the long-term development towards more elaborated products.

And we strongly believe that Norway’s extensive downstream business will continue to capitalize on this shift as we are seen in the second and the third quarter. And Mowi feed is expected to continue growing in the years to come driven by new [indiscernible] has got to sit down drop spare mind that you are producing 136,000 tonnes this year as against a capacity of 240,000 tonnes.

Following substantial growth in farming volumes from 370,000 tonnes in 2017 we are unfortunately guiding on stable volumes next year, over 445,000 tonnes that as the Kristian said here two, three minutes ago. This must be regarded as a temporary break.

Mowi farming is working along two pillars. One is volumes and volume growth.

The other one is cost. We see that there is a great demand for more salmon in the markets under normal circumstances.

We think there will be growth in harvest volumes from the industry going forward. And we contemplate to take at least ours share of it.

This will address in depth in the coming Capital Markets Day on March the 17th next year. Hopefully in Oslo if things are under a controlled with regard to their hygiene measures.

In the near-term we believe in a tighter market balance next year supported by supply growth as low as 1%. We haven’t seen such a figures since the algebra and Chile since 2016.

So, under normal circumstances this would have indicated very good price next year. So, whatever happens with the COVID-19 situation, we think we will have a tighter market balance next year.

We believe in stronger prices next year. We see that the our building markets in return we see that we are getting new customers, buying more elaborated products.

So, if get to the food service market back again, the accounting for 35%, 40% of the total market, then this could be interesting. But we think that the recovery will happen.

The question is just at which pace. So, with this, I think we can start from the Q&A session.

So if Kristian comes back on the podium and our IRO Kim can facilitate.

Then the first question here comes from [indiscernible] is asking, can you say something about, or can you say something more about the volume guiding in Canada? What is the split between the two regions East and West?

And what can we expect longer-term as you have previously harvested 40,000 tons on the West Coast alone and East Coast Northern harvest has been about 15,000 tons plus significant growth potential.

A good question. So, we are not reporting to Canada separately, but I think you can address it separate lessons there since we have the question.

Canada West has been through challenging year biological wise So, Canada West we are down to approximately 31,000, 32,000 tons next year. And if you go back in time, you would see that we had temporary setback in China West 18, 14, we were down to 31.

If I remember correctly, 14 and we are down to 28. So from time-to-time we have been unfortunately the biological setbacks in Canada West.

It is a challenging area to farm the salmon, because of high marine temperatures in the third quarter because also because of lower deals. At some farms, the DO saturation is as low as in the 60s.

And for those of you who are familiar with [indiscernible] then you know that you are at the critical level for which the salmon summer campaign. This is not something you can change.

So, the nature is as nature is, but obviously we can always improve. And we think we will do that going forward, one measure to take is to is to change the stocking pattern, so carry less biomass biomass into the third quarter.

So, what you do is that you stock more or [indiscernible] at the expense of zeros. We will also tried to change the form structures.

So, it is so the structure applying fewer, but larger is tight. And in that way utilizing more of the good sites, as I did this has a cost of effect, it also has an effect on mortality, so there are difference between sites.

And trust me, we take a lot of other measures. So, long story short, we think Canada rest will come back to the previous level, at around 40,000 tons we have the managed that in the past and we will manage that again, then over to Atlantic Canada, or Canada East where we have a big growth potential in Canada.

So, we bought this back in 2018, and in 2019 we had unfortunately, or a lot mass mortality incidents we lost 2.7 million fish, which took volumes down to record low 4,000 to 5,000 tons this year. It takes time to come back on track, we are aiming up to 10, 11 next year, but the capacity the potential in Canada East is obviously much higher.

So, what Kristian said here previously, the growth potential in Canada is unchanged and we still have the same target. So, but unfortunately we have had a current setback here which will delay us in reaching to those targets.

It was a very long answer. So, hopefully, I touch base upon the question too.

Yes, I think that covers it very well. The next question comes from [indiscernible] in ABG.

He has also got a question about volume guidance and more in general, if you can share some thoughts about the different regions for 2021 in Norway, Scotland and Chile in particular?

So, to start to Norway 260 that is in line with this year so no growth. That doesn’t mean that we do not have the growth potential in Norway, but we are on industry average when you measure license utilization or MOB utilization to honor reaching peers.

And but the license utilization is the better as for the North we get so obviously we have the highest potentials in Region south and region. This is something we’ll address going forward as we go further into details on this on their own on again the Capital Markets Day that is coming up on 17th of March.

We are growing in Scotland next year and somewhat that being said, go back few years and have a look at the Scottish numbers, if you have to turn Mowi Scotland run from a 40,000 tonnes farmers to 60,000 tonnes farmer and a good yes 60,000 tonnes plus, I think that is unprecedented if you compare it to our peers. So, in Scotland, I think you have been quite successful on our growth strategy is so far.

That doesn’t mean that it is over and you still have potential to grow this further. And again, this will become more introducers on the capital markets next quarter or March in the fourth quarter.

And I also think you asked Chile, we are aiming at 70,000 tonnes next year. We haven’t seen 70,000 tonnes in Chile after the ICER crisis in 2007 or 2008, so that 30-years back.

Biology in Chile is good, we have good biomass number there supporting this target. So, we are recently confident in that number, but I guess his question is more about a going forward, so 2022 onwards.

And we do have guide on 2022 onwards but Chile we will also address on the Capital Market Day. But I assume most of the audience is aware of - that there is so called traffic like - Chile as well.

So, in order to grow, we have to meet some biological indicators. And still if you meet it, your growth potential is limited.

So all the numbers of licenses that you can read about that doesn’t carry much value, I’m afraid under this regime. So, Chile is different, they also have restrictions on growth, which impacts our business down there.

So, you utilize the capital capacity that we can. But they will not stop can take a big posted in order to prioritize the volume or the cost.

Because remember that the Chilean salmon has the disadvantage to price, Chile far from one markets, high transportation cost means that you achieve a lower price overtime. So although Chile is competitive of course that doesn’t help much from when you get a pure price.

So we are fine with this, we will not look into our big years significant growth for our Chilean operation. We think the size we have today is fine, when we take into account risk, but if there are cheap growth opportunities i.e.

meeting their biological figures then we will utilize it. But the Chile is not on the top of the list, when it comes to prioritization of our capital allocation in farming going forward.

And then another question on the biomass from Alexander Aukner and DNB. He is asking about the record high biomass in sea being a 322,000 tonnes of 7% year-over-year.

About the 2021 harvest guidance in line with the 2020 harvest volumes. So how does this match up?

So the rate, the average rate to this pharmacy is higher year-over-year due to that we will harvest a record high volume also in the fourth quarter. So you have to adjust for that.

But at the same time, it is supportive to meeting the guidance next year. So one thing is to guide.

But even more importantly is to, it is to meet the guidance and that is not always the case. So, this is a number we believe in.

And of course, if the next year turn out to be great mortality substantially down, et cetera, then there is upside in this numbers, but we like to assume current level and taking into account the improvements we know, but we do not like to be too aggressive on our guidance. We try to meet it as good as we can.

But again, of course, the mentality in industry in the Norway is far too high. So if we could, particularly out of the Norway.

So if we could manage to take it down days, again, upsetting in these numbers, but this is our best estimate for next year. So, and I think you should, I think we are going to take it for what it is our estimate.

And again, this is a temporary break. It is not on purpose, obviously.

And the answer to that is so we will adjust it. The board will prioritize the growth initiatives going forward because again, the demand for salmon is great.

There is a need for more salmon going forward under normal circumstances and we want to take our fair share of that growth at least another time. We have not - and that is not satisfactory.

Very good. The next question is from Chris Nordby, Kepler Cheuvreux is asking about why Mowi only had 100% price achievement in Chile when you had a contract share of 30% in the quarter?

Yes, we are some downgrading in Chile as far as the source and that impacted processing somewhat like this at least one part of the explanation.

And another part is that the allocate that the other department margin, I think he missed that margin allocate to a consumer for us in the margin is twofold. So overall, we have made money on these contracts and if you include the contribution margin.

The price achievement for the salmon is good, there is also about how you allocate this, what goes to farming and what goes to processors.

That is an important point because if in general, we don’t allocate the sales and marketing and fee margin into that price achievement, part of our operation that does a very important point to know.

So if you had done so, this broader will have looked completely different. So I’d say it was a very good question I must say.

So good spoke to it. So I hope this is clearing the picture of all of us.

Very good. Then the next question comes [indiscernible].

He is asking if you can give some color on the overall biology in Norway during Q3 compared to Q3 last year, and how the costs will develop in the next quarters to come in Norway?

So we do not guide on cost going forward. We normally give a heads up in the next quarter, if you see that is cost will increase and we have no this time around.

So, then I have an indirect answered on cost guidance in the fourth quarter. In general, biology in Norway has been recently good at the end of third quarter.

But we are struggling with the same suspect as last year and as previously. So as everyone knows, third quarter is most challenging quarter, it follows marine temperatures and the life is still there.

There is no silver bullet to available. The struggled with a life induced [indiscernible] and I will not name them there because it is a long list.

So it is not like not like, nothing has particularly changed. But, under the circumstances, I would say that the biology is under control and has been reasonably good in the quarter.

But again not great. So, don’t get me wrong.

But I think we managed reasonably well and into the fourth quarter, Marine temperatures drops and then biology improved. So, then you have a good start for the quarter most likely that quarter end up okay, unless you end up biological wise unless you end up in some surprising incident so okay.

Okay. The next question is from Alexander Jones from Bank of America.

He is asking about costs. How would you expect to close to evolve in Norway and Canada potentially in the fourth quarter?

I guess you already commented on the cost in Norway, so the question is about Canada.

Yes. I mean, I don’t think we have even on a head trip of posts for Canada either in the fourth quarter.

So the same methodology, so nothing that we know that should change this materially. And in general, at least based upon the intelligence we have today the fourth quarter is in line, I’m not talking about the blended cost to for Mowi farming is in-line with the third quarter.

But it is in the beginning of November, but we haven’t closed the books of October yet and also have December and this is biology you start with one life and then you can only go wrong. So the distribution of likelihood of this industry is unfortunately a skew.

So that means that you never know until you have the booked your lost figure. But nothing that we know today that should look and booked when it comes to cost in the fourth quarter.

But again, this can change. We don’t know.

And then your second question is on contract negotiations. Can you comment on how price negotiations are going for the next year, and whether you intend to keep the share of volume of contracts at roughly similar for 2021 compared to 2020.

Well we do not like to go into depth on contracts, since we are in negotiating as we speak and client sales are following this. So, I think, on this question we must ask forgiveness and say that you will revert to it in detail when we are - in rough details, when we go to our fourth quarter results.

This is about the strategy and next year and we like to be transparent, but there are also limitations to our transparency.

And then there is no more questions from the web. Thank you.

Thank you. And stay safe everyone.

And meet again in February.