Mowi ASA

Yes, thank you, and good afternoon, everyone. I’m the Investor Relations Officer in Mowi, and I’m here to present the Q4 results.

There will be a Q&A session at the end. So I will refer to the presentation, which has been distributed, disclosed on our website today.

So going into the presentation on Page three, The Highlights. The highlights of the quarter was an operational EBIT of €213 million in the quarter.

We’ve seen high prices in all markets. Prices in Europe were up by 12% year-over-year.

Prices in the Americas were up by about 7% year-over-year. Our Feed division had a seasonal very good set of results, a record high Feed sales for the year.

We also initiated a new global cost-savings program of €30 million, which also includes procurement improvement programs. So this comes on top of the program, which we announced last year and a €61 million we achieved in 2018.

So we’ll do another savings program this year. We also launched the brand strategy as communicated at our Capital Markets Day in November, and the company name changed on the 1st of January from Marine Harvest to Mowi.

The board yesterday resolved a quarterly dividend of NOK 2.6 for the quarter, and that’s to be paid now in the early parts of March. Now moving on to Page six, Key Financials.

Operational revenue reached almost €1.1 billion in the quarter, up 6% year-over-year. For the financial year 2018, revenues rose to €3.8 billion, which was up 4% compared to 2017.

Operational EBIT up 18% year-over-year, despite harvesting volumes down 6% year-over-year, up 105 – sorry, 106,000 tonnes. For 2018, harvest volumes was 375,000 tonnes, which is up by 1% compared to last year.

In the quarter, we made €2.01 per kilo, and you see the breakdown at the bottom parts of the charts, all regions contributing positively to the results. Page five, Salmon Prices.

Salmon prices were good in the quarter, and as mentioned increased in all markets. Here are shown in Norway, in Miami for Chilean salmon and also on both coasts in the U.S.

for Canadian salmon. Page six, Price Achievement.

It was a good quarter for Mowi in terms of price achievements above 100% in Norway, very good in Scotland on the back of good contracts in both of those markets. In Canada, everything is smooth.

Hence, price achievement tends to be just below 100%. So as normal in Canada.

In Chile, it was 106% on the back of a contract share of 19% with a decent superior share. So it’s a good price achievement in the quarter.

And if you move on to Page seven, you see the EBIT bridge versus Q4 last year. Feed contributed positively to the results.

Farming is the main positive contributor, and this is mostly explained by price. So higher price achievement and also higher – both higher spot prices for salmon and also contact prices.

Volumes, as I mentioned, were more or less stable, and costs have also been stable year-over-year. Markets and Consumer Products, in total, are more or less the same, and Other is slightly negative, that’s corporate costs.

Then moving on to Norway, as the key farming region, where we produce and harvest most of our volumes and that generates most of the profits. So in Norway, we delivered a profit of €143 million in the quarter, which is up year-over-year.

And you see the breakdown in the chart, higher prices, slightly lower volumes and costs more or less stable. Good results in Region North.

The biology there is good. In Region Mid, good results, but some biological challenges as was the case last quarter.

And in Region South, we harvested low volumes on the back of a challenging 2017 generation. Going into Q1 2019, we expect the costs should increase somewhat sequentially compared to Q4 2018.

On the contract portfolio on Page nine. In Q4, contracts were as guided about 25,000 tonnes.

In Q1 and Q2 that share will be reduced about 21,000 tonnes, which is more or less the same as in the same period in 2018. So the contract portfolio is stable.

The regional differences, you can see on Page 10. I will not go into the details on that.

Page 11, Scotland. Scotland had a good set of results.

And as you see on the chart, prices increased. High contract share, which contributed to the positive results, despite volumes being down by about 1,000 tonnes.

We see that costs in Scotland were reduced on improved biologies. So last incident-based mortalities and also a slightly better sea lice situation is Scotland.

We’ve had good growth in Scotland. The biomass is sea is substantially higher year-over-year, and we expect to harvest much more in Scotland in 2019 compared to 2018.

In Canada, Page 12. They delivered a result of €17 million compared to €10 million last quarter, so improved results on higher prices and also higher volumes.

And the latter is mostly reflected of the acquisition of Northern Harvest, which was the company we bought on the East Coast of Canada during the summer of 2018. Costs have remained high in Canada, and they also are expected to be higher, to increase in Q1 versus Q4 on slightly lower volumes.

Now Chile, on Page 13. Very good results from Chile.

The biology has improved in Chile. We’ve reduced the – or sorry, we have utilized the new vaccine, which has had a direct effect on SRS.

SRS is a bacteria in Chile and is the main cause of the usage of antibiotics in recent years in Chile. This new vaccine has proven to be effective as mortality rates are down and average rates are up.

And this has a positive effect on costs. So the results in Chile for the quarter and also for 2018 was encouraging.

Moving on to Page 14, Ireland and Faroes. In Ireland, we made a good profit, despite lower volumes.

The market for organic salmon, this is salmon farmed off the coasts in Ireland. That market continues to be very good.

The prices are good. But also costs for organic salmon is higher than the traditional salmon.

We saw that cost increased in the fourth quarter as previously guided. And Faroes was a mixed bag.

Profits were impacted by higher costs, slightly reduced superior share, which impacts the price achievement and also slightly reduced premium for Faroes salmon. Moving on to Page 15, Consumer Products.

They had record high revenues – record high results. The product weight sold was up by more than 10% year-over-year.

Positive developments in many markets, many of the key big European markets and also the U.S. So we are selling more value-added products from our manufacturers in Europe and the U.S.

and also, Asia. The profits were good in the quarter, and they were also impacted positively by a €10 million insurance income related to the fire we had at Kritsen during the summer last year.

We do see that the competition has tightened in the segment, particularly in the Chilled European segment. Hence, the profit in Q1 will be impacted both by this fierce competition and also the fact that Easter is in Q2 this year compared to Q1 last year, and Easter is very important season for this division.

Hence, Q1 results will be impacted by these two factors. Feed, on Page 16.

Another good operational quarter with record high Feed sales. And also for the year, the feet factory in Norway produced close to 350,000 tonnes, which is a new record.

So very good operational results. The Feed factory in Scotland is nearing completion and is expected to start production in Q2.

At this point, we’re at the point of full utilization, will be self-sufficient with Feed in Europe. Of course, with the new all-time high production in Norway and also our new Feed factory in Norway – sorry, in Scotland coming on stream, we see that there is enough supply of Feed in the market.

Hence, the competition in the Feed market has tightened a lot. So this will continue to put pressure on margins going into 2019.

And then the global cost and procurement improvement program on Page 17. I mentioned the realized savings of €61 million in 2018.

This will gradually filter through our bio – cost to stock in biomass in 2019. So supportive of lower costs.

We’ve also initiated another program, a new program, with the target of €30 million to split in two. The first part is along the same lines.

A cost improvement program of €50 million. And the second part is profession – professionalizing procurement of €50 million.

So standardizing procurement, buying equipment in a more professional and standardized way compared to in the past. So they should also contribute positively to the targeted savings in 2019.

Okay. And that was the operations.

And going into the financial section and market section on Page 19, the P&L. I mentioned, the revenues and EBIT.

If you go down the P&L, we see net fair value adjustments been positive €11.8 million. This is mainly because of higher volumes in sea.

So our biomass year-over-year is up significantly and also from the previous quarter is up. Hence, had a positive fair value adjustment.

Income from associated companies, that’s in Nova Sea, our Norwegian associated company, they delivered also positive result. Hence, the €30 million income on that line.

If you go down the P&L, net financial items being impacted by the market fair value adjustment or fair value effect of the convertible bond of €26 million and also a mark-to-market effect of NOK. The Norwegian kroner depreciated versus the euro towards the year- end causing this negative mark-to-market valuation, which – most of that effect was reversed in January as the NOK strengthened.

In the quarter, we made €0.01, I’ll come back to the cash flow items. EBIT margin of close to 20% in the quarter and a return on capital employed, which is very good at 26.6% for the quarter and almost 25% for the year.

So a very good year for the company. Now the balance sheet on Page 20.

You see that the assets is up significantly year-over-year, and that’s mainly driven by three factors. The biomass in sea is up – increased on increased volumes in sea.

And also the associated market values. So about €350 million higher biomass.

And net CapEx exiting depreciation for the year was about new licenses in Norway – farming licenses in Norway in 2018 contributing about €400 million. And the acquisition of Northern Harvest was about €200 million.

So those were the key factors impacting the increase in the balance sheet. Adjusted equity ratio of 54%.

And with the new leasing standard, IFRS 16, commencing in 2019, that ratio will be impacted by some four percentage points. So dropping by from 54% to 60%, at least that increases by about €350 million.

To the next page, 21. Cash flow was more or less as we guided.

Change in working capital slightly higher than guided on increased volumes. Taxes paid in line.

CapEx was lower by €25 million, and that’s – it’s sometimes difficult to time the CapEx expenditure. So as you see in the guiding for 2019, that the underinvestment in Q4 has been brought forward to 2019.

Yes, that concludes that slide. Interest expenses was more or less as guided.

So moving on to cash flow guidance for 20 – on 22, Page 22. Working capital increase of €150 million, that’s related to both an expectation of further biomass build in 2019 and also opening of the new Feed plant in Scotland, which will try some working capital so as to support further organic growth.

The CapEx of €290 million, you see the details on the slide or it’s in the explanation. So it’s really continuing what we’ve been doing in the past few years, continuing to invest in our core assets, both online and also in sea water.

So building new smolt facilities in various countries. And also on the back of new farms being granted in Scotland and also in Canada and Norway, we expect to increase the seawater CapEx in those areas.

Consumer Products, we continue to invest downstream. And tax paid is about the same level as in 2018.

So to financing. I will not go through the details, but we have increased – we exercised the accordion option in December.

So we increased the bank facility by €200 million to partially refinance the last remaining convertible bond, which was converted to equity in the period. So now our financing is very clear.

It consists of the bank financing €1.406 billion and the unsecured bond of €200 million. And the last point, on IFRS 16, the covenant of 35% equity ratio will be adjusted for this leasing effect.

So no change in the underlying equity ratio covenant. The supply development on Page 24.

The supply in the quarter was as expected apart from Chile. Chile harvested more on the back of improved biologies and more fish was harvested than expected and also the average weight was record high.

So Chile had very good volumes throughput in the quarter and the other countries were more or less in line. Prices we talked about on Page 25.

On Page 26, we see that the global demand remains strong, up 5% globally in the quarter on higher prices. So very good development overall.

Europe increased their consumption. The U.S.

continues to increase their consumption of salmon at higher prices. And really the prepacked product category continues to stimulate and drive the growth in the U.S.

market. Asia was a little bit disappointing this quarter.

The lack of available large-sized fish and certain trade restrictions impacted temporarily the consumption in China and Hong Kong. But the underlying growth in Greater China and Asia remains firm.

Going into Page 27, the guidance outlook for the industry. We expect the industry to grow by about 5% and the range that we put out is 3% to 7%, and you see the breakdown.

Slightly higher volumes in Q1. January has started high, we see on the statistics that export volumes blended from the various countries in combination with consumption rates, but countries has continued the year on a high note.

So presumably, harvesting has been high in January and will support the high harvest volumes in Q1. And then it should come down slightly as we go into the remaining three quarters.

Our own volume guidance for Mowi on Page 28, it remains unchanged. We have a record high biomass inventory of salmon as we refer to it in sea 350,000 tonnes, it supports our guidance of 430,000 tonnes gutted weight.

The small increase in Norway for the year, a recovery in Scotland. Scotland is growing by some 20,000 tonnes.

Increase in Canada with the Northern Harvest inbound. Chile, we’re harvesting more, recovering in Chile.

And Ireland and Faroes are fairly stable. So then rounding off the presentation, the outlook on Page 29, we see a strong outlook for salmon supported by modest supply outlook and a fish pool forward price at €6.3.

So a good prices expected for 2019 and the next 12 months. The record biomass in sea, I mentioned, that should support organic growth for Mowi in 2019.

And it closed some of the unutilized production potential that we have in our farming assets globally, so a partial recovery of our potential. Organic growth throughout the value chain in feed, I mentioned Scotland, farming globally and also processing as we continue to invest.

The new cost improvement program I mentioned and also the fierce competition in Consumer Products will impact our Q1 earnings. And then MOWI branding strategy implementation continues as we’ve changed the company name and launched our brand.

So more to come on that in the next quarter and years for that matter. And the quarter dividend to be paid in Q1 in March of NOK 2.6.

So with that, take care. That concludes my – or the presentation.

So if there are any questions, please open up the line.

So I guess, if there are no questions, then it concludes the call. Are there no questions or…

Okay. So I think then it concludes this earnings call.

We’re now going in a roadshow, so I will meet many of you there. So in the meantime, I wish you a great Wednesday, and we speak to you soon.

Bye-bye.