Mowi ASA

Good morning, everyone, and welcome to the presentation of Mowi's Fourth Quarter Results. My name is Ivan Vindheim, new CEO since last time.

And with me today to present the financial figures, I have our new CFO, Mr. Kristian Ellingsen.

Yes. First highlights.

Operational EBIT of €166 million in the quarter in line with the trading update of the 16th of January. Q4 and full year volumes record high in all business areas.

So it's very nice to start in the new role with presenting and reporting these numbers. If you start with Farming 436,000 tonnes for the year as already said all-time high.

I think you must go back to 2015 to see yes next time we beat a record. You know, the environment in farming so it's challenging these days.

So in that context it's also very encouraging. I would also like to take the opportunity to give all our farmers out there a praise for this.

It's highly appreciated. Feed, a very good year for Feed.

Norway 353,000 tonnes also a record high. If you remember back in the days the first target for -- the fact it was 240,000 tonnes, so we have come a long way since then.

We have also started to produce from Scotland. We are not finished with the commissioning phase but we are closing in 52,000 tonnes in the quarter.

We are targeting 150,000 tonnes for 2020. Full capacity is 240,000 tonnes.

With the both factories up and running, we are more or less self-sufficient on Feed in Europe in Mowi. Consumer Products also all-time high volumes in the fourth quarter and for the year close to 200,000 tonnes of product weight, of which 80% roughly is salmon.

As you have already noticed the spot prices, they improved significantly during the quarter from a low level led or driven by the high supply in the third quarter, but we closed the year in Europe above €8 and the Americas followed suit, so a very impressive price development during the quarter. I think we have never seen such a steep increase in the price trajectory in the past.

We completed the 2019 cost-savings program with annual savings of €41 million. The target was €30 million, so also very satisfactory, very good job done by our colleagues all across our business areas.

This is not only Farming, it's also downstream and upstream, so i.e. Feed and Consumer Products.

On that note, we have initiated our new global cost saving program of €25 million. You know the underlying cost pressure in this industry, so these measures are of the utmost importance that we do, so that we mitigate the increased requirements and the challenges we are facing.

We issued our first and also the industry's first green bond in the quarter €200 million, five-year tenure and a coupon of the euro plus 160 bps or 1.6%. It's really impressive I must say.

As the former CFO, yeah, I guess this is something that I cannot take to heart. But for those who have taken over my goodness this is really impressive.

So I commend to those who have been involved also the banks that helped us with this. So this is, of course, very encouraging to see that the market is so willing to invest what we do that they really believe in our history -- or sorry not only our history, but also our story.

And the color it's very much green. The Board declared a dividend of NOK2.60 per share for the quarter, so in line with the previous quarters on a solid balance sheet and -- but also good future prospects.

So, in terms of the key financials, I will leave most of this to Kristian. So we have already been through the turnover a record high.

Operating EBIT, we have touched based upon. He will go to the balance sheet.

So, I just would want to say that in terms of margins, a big spread this time around. We will revisit later on in the presentation.

But overall, I think the fourth quarter was a reasonable good quarter for Mowi taking into account the environmental challenges we have had in some of our Farming segments. Prices.

I already said that the development in the prices in the fourth quarter is unprecedented. In Europe, we started below €4 I think and we closed above €8.

The good prices continued into January until the coronavirus started to take its toll, but we are still at a good level. So, the underlying demand here is really, really good.

And when the supply came down to more modest levels 3%, 4% in the quarter, then the prices really went through the ceiling. Price achievement.

Overall, good price achievement for Mowi in the quarter, 102% in Norway, which is our biggest farming area. In Scotland, 122%, also very good.

Canada, a little bit lower than 100%, driven by first and foremost the mass mortality we had on Newfoundland in the third quarter. Chile, also a good price achievement 100% of -- or 100% of the spot price, although some of this is contracts.

With regard to superior share, good superior share I would say in all Farming segments apart from Canada, also related to the mass mortality we had in the third quarter and the aftermath from that incident. Operational EBIT compared to the fourth quarter of last year, so a waterfall.

Feed as said, a very good quarter, additional €eight million in profit year-over-year, farming down €45 million, mainly explained by lower prices. Remember that we started the quarter at very low levels before we reached very high levels at the end.

So year-over-year, price-wise, the price was down although the price trajectory or pattern or development was very, very different. Last year, the prices they didn't go towards the end of the year.

It didn't go before close to Easter this year. Markets, plus €9 million.

Consumer Products heavily impacted by the competition situation in Europe, so we are also comparing it to the fourth quarter 2018, which was the best quarter ever so far. So, the fourth quarter 2018 was very, very good.

So, you could also say that the fourth quarter this year was more in line with the rest of the year. So, we are subject to fierce competition in Consumer Products in Europe.

There is overcapacity, so it's really, really hard to make a high margin in that market, but we make money. And on invested capital, it's still okay.

It's not great. And this is also very important too for us in order to develop the markets and the demand.

It's not like the salmon sell itself, although you sometimes believe that when you see the prices we have seen recently. Overall -- sorry all in all €166 million in operational EBIT for the quarter.

Then the biggest business area for us in Norway, Farming Norway. Overall, I would say very good results in the quarter, notwithstanding a lower price achievement.

Volumes are higher year-over-year and costs are stable. So, for Norway in general, I think 2019 was reasonably good, although the segments are quite different from state-of-the-art to yes somewhat more challenging.

In the first quarter, we will harvest lower volumes. We always do.

So this time, we are down by, yeah, close to 30%. That will take its toll on cost roughly when it comes to scale.

We're also reducing the relative share from Regional North, which also will impact the overall Norwegian cost. Remember that Region North is our best margin performer, and I guess one of the best margin performers in the world right now.

That takes us to the margin spread €2.28 in Region South this quarter. Last quarter, we were very low on low volumes 0.12, so €0.12, so it's significantly increased.

But on high volumes, I also think we gave you a heads-up that this would change into the fourth quarter. Overall, the biology in South is more challenging than what you see in the North.

That goes without saying, but taking into consideration, the biology we have in the South, I think we do reasonably well, but compared to the North it's really, really hard. This time we made €2.6 in the quarter, which is really impressive.

So good production in North, a good cost and also a good prospect, although the harvest volumes will go down in the first quarter. Then we have Mid, which stands out this time around a little bit special, because Region Mid harvested 60% of its volumes in October when the price was at its lowest.

So if you adjust for that, Mid is quite similar to South with regard to costs. So these bars this time around they fool us a little bit.

So, again, bear that in mind. Then over to contracts, the contract level for Norway is quite stable.

We contract 80,000-90,000 tonnes per year. We will continue to do that in 2020.

And for the first half, we have already contracted this and the lion's share was contracted during the autumn when the prices were low. So the contracts prices are obviously impacted by the price environment back then.

Then Scotland. Scotland had a fantastic first half year.

Then, I think, it's right to say that the second half has bit -- a little bit more challenging. However, we closed the year with record high volumes for Scotland, which is very satisfactory.

I remember back in the day Scotland was a 40,000 tonnes operation. And now it looks like we have made it to a plus 60,000 tonnes operations, if you take into account the guidance for 2020.

So, a good development of Scotland over time, but Scotland also has its share of the environmental challenges these days. So it's not easy, but it shows that you can also grow the Farming business in Scotland with the right measures and not to mention with the right people.

People is in the end of the day the most important input factor we have. Licenses and the rest of the input factors you can actually buy, but good people they are not easy to find.

So you are -- so you have to train them yourself and it takes a lot of time. Costs relatively stable year-over-year in the fourth quarter.

That being said, compared to the first half they are up. Canada is another important business area for us.

In general, it's much tougher to farm or grow the Atlantic salmon in Canada, so we have setbacks from time-to-time. 2019, I think stands out as one of the years, but over time it makes sense to do farming of Atlantic salmon in Canada.

In the fourth quarter, unfortunately, we lost money in the aftermath of the mass mortality incident on Newfoundland in the third quarter, but also driven by extended periods of low oxygen and plankton in British Columbia or Canada West in the second half. Low oxygen is a general problem in British Columbia, Canada.

But this year it has been very low -- sorry, very high temperatures seawater temperatures in Europe, but also in Canada. That doesn't help when it comes to oxygen level.

All right. Then Chile, biology in Chile is under control.

Sea lice levels are down. And I would also say that, in general, the biology is satisfactory.

We have a good cost in Chile. But compared to the Norwegian margins in the fourth quarter, the margins in Chile are lower than what they usually are.

And the fourth quarter, although, the prices in Chile also increased, it took a longer time. They lagged somewhat compared to the price development we saw in Europe, but also in Canada.

So the price achievement, the absolute price achievement for Mowi Chile was a little bit low. But, in general, prices for the Chilean fish has been more aligned with the rest of the salmon world.

We expect costs to increase somewhat in the first quarter, because we are harvesting from some higher cost performing sites. But again, in general, biology is satisfactory in Chile right now.

We were down there and visit them just before Christmas and we are happy with the development right now. Ireland and the Faroes, two small entities, but still every single volume or kilogram counts in this industry.

Ireland, impressive €3.34 in margin. This is organic salmon, as you know, so a fantastic market, a fantastic product and also a fantastic margin.

So, again, really, really impressive. In the Faroes, we have three sites.

This is the mid site, so somewhat lower margin than Norway, but okay. Year-over-year, we have lower volumes, so obviously less when it comes to scale and higher cost because of that.

Going into the first half year now, we start to harvest from our best farming site over there, Hiddenfjord. So we expect somewhat a better cost in the Faroes for the first half compared to the fourth quarter.

But, again, these are small entities, so overall for Mowi they're not that important, although, every kilogram counts. Consumer Products.

We have already touched based upon the competition situation. We are subject to fierce competition in Europe.

There is overcapacity, according to ourselves, at least, but we continue to grow the business. We make money.

We also have an okay return on investing capital, not great, but still okay. This is also a very important tool for us in order to develop market, in order to develop new products.

And the hope is also that the branding strategy we have initiated will give us some more protection from competition, at least, in the longer term, because in current environment in Europe, there are no places to hide. So there are too many production facilities in this segment.

And the entry barriers, they are close to zero. It doesn't take much CapEx to start to process the salmon.

Results in the Consumer Products in the first quarter will, of course, be impacted by this. But the end number, we don't know yet.

Feed. A great quarter for Feed, a great year for Feed, record high volumes, as already said.

We are approaching the end of the commissioning phase in Scotland Kyleakin. We expect to further grow this into 2019 150,000 tonnes are targeted for Scotland.

We also hope to increase our production in Bjugn somewhat more. So the development here is satisfactory.

We are also happy with the quality of the feed. Our test shows that the feed quality compared to peers are at the highest level.

So overall or to sum it all up for 2019, a good year, good development and it looks good for 2020. Then Kristian, the floor is all yours and you can walk us through the financial figures.

Thank you for that Ivan. So good morning.

It's good to see you. Good to be here presenting the financial results for the fourth quarter.

And we start as usual by looking at the overview of profit and loss, which shows the top line, which has a all-time high turnover for both the quarter and the full year. Operational revenue was €1.1 billion in Q4 on strong volumes.

And if we compare with the fourth quarter of 2018, we see that there is a 4% growth. This is somewhat lower than the potential increase in harvest volumes of 10% and the explanation is then lower realized prices in the quarter.

As Ivan also explained prices in the beginning of the quarter were impacted by excess supply in the third quarter. But we had a very good increase during the quarter and prices ended at very healthy levels.

So then we can move on to operational EBIT of €166 million in the fourth quarter. That's somewhat down from the comparable quarter mainly due to lower prices.

But nevertheless, it converts into a return on capital employed of a solid 19%. And if you look at the full year operational EBIT, €721 million that's the third best ever for Mowi.

So a good year for the company. Then we can look at the items between operational EBIT and financial EBIT.

As usual, we have a large item regarding the fair value adjustment of biomass €52 million this time. That's mainly related to higher prices at the end of the quarter.

Then we have income from associated companies €19 million in Q4. That's mainly related to our associated company Nova Sea in Northern Norway.

So this is our share of total profit and loss for Nova Sea. And if you look at the underlying profit then that converts into €2.10 per kilo which is a good performance, although lower than Mowi Region North.

Full year volumes in Nova Sea a record high so very positive from Nova Sea. Net financial items of €13 million as usual this line item consists of different items including interests currency derivatives.

Then we have an underlying earnings per share of €0.22 net cash flow per share of €0.05 this time. That's impacted by a seasonal tie-up of working capital in the fourth quarter, but higher than the comparable quarter.

Harvest volumes of 116,000 tonnes that's more or less the same as we had in the third quarter. And these two quarters were the best ever for Mowi with regards to harvest volumes.

So we had good volumes in Farming, but we also had record high volumes in Feed and in Consumer Products. And this is of course a proof of the very good work done by our employees throughout the world to grow this company and also a proof of the very good underlying demand for our sustainable and healthy products.

Then we can move on to the financial position. We see here that balances were more or less stable compared with the third quarter some working capital movements with reference to what I said about the tie-up.

Total balance sheet €5.8 billion and Mowi's financial position is very healthy with a covenant equity ratio of 53%. If we move on to the cash flow, you see here that we started a period of net interest-bearing debt of €1.2 billion.

Cash flow from operations that was impacted by the seasonal tie-up of working capital in the quarter, that's mainly in Consumer Products and tie-up in accounts receivable. For the year, working capital tie-up of €104 million as we see here somewhat lower than the guidance of €115 million but not far from it.

Taxes paid in the quarter, the main part of the taxes are paid earlier in the year, so around €10 million in the quarter. The full year figure of €156 million is more or less in line with the guiding of €160 million.

Other adjustments of €25 million in the quarter, that's mainly related to insurance payment regarding our plant in Kritsen. Net CapEx if you look at the full year figure and focus on that €286 million, that's more or less spot on compared with the guiding of €290 million.

Other investments and dividends received in the quarter of €14 million that's related mainly to dividends from Nova Sea. And then if we look at the financial items here, net interest and financial items paid of €16 million in the quarter and the €57 million for the year, that's also more or less in line with guiding of €55 million.

And we closed the year of net interest-bearing debt of €1.3 billion, so still below the long-term target of €1.4 billion. Then we can focus on the year that we have now started 2020 and look at what we expect now for the full year with regards to the cash flow.

We guide here for working capital tie-up of €90 million to grow this business, to support further organic growth. We have a capital expenditure of around €265 million and we have written some comments here about the expansion side -- expansion projects.

We continue to invest in freshwater sites, smolt facilities in order to build, in order to grow larger smolt high-quality smolt. And we have several ongoing projects.

We have Sandøra Region North; Aqua Region Mid; we have [indiscernible] Region South in Norway; we have Stephenville in Canada East. So, these are still important parts of our investment program in Farming.

And then we have seawater expansions around €20 million, so new sites investments in Farming to support the growth that we are aiming for. In the Consumer Products the largest investment there is the Kritsen factory, the state-of-the-art new factory that we are building in France around €15 million in 2020.

And you will then find that this add up to more or less €100 million. So, the rest around €165 million more or less maintenance CapEx.

So, that is in line with the depreciation level you will find. Interest payments of €40 million, so somewhat lower than this year and taxes paid €145 million for 2020.

So, this slide gives an overview of our very, very solid financing. And the new item here is of course the green bond which Ivan also talked about.

So, in January this year, we issued an unsecured five-year green bond of €200 million. So, this was the first green bond in the industry.

The bond was significantly oversubscribed. We met with a lot of investors in January with great interest both from regular bond investors and also dedicated ESG investors.

So, accordingly the interest rate is very favorable EURIBOR plus 1.6%. And in our view the green bond is a very good fit for Mowi.

As a green company producing sustainable and healthy products and the terms are good then this is a win-win of course. We have a strong cost focus also going forward.

In 2019, we had a target of €30 million in annualized savings in all the business areas. And the achievement was, as Ivan also pointed out, €41 million which we are of course satisfied with.

With the challenging biological environment and also other factors contributing to the cost pressure like feed prices, like regulations, like compliance costs, it is of course important that we continue to focus on cost. We believe that these cost programs are very important for us.

And so, we have initiated also a program for 2020 of €25 million in targeted annualized savings. And these cost initiatives they are concrete actions in each business area, in each business unit, regarding specific costs, regarding agreements, regarding procurement improvements.

So this is an important focus also going forward. And we could also point out when you look at the development here that if you adjust for regional mix then costs are actually stable.

That's also the case if you adjust for the feed prices and the mortality cost we saw in 2019. We had several incidents as you know in 2019.

Okay. So then we can move on to the fundamentals.

We start with the supply side. Supply growth in the fourth quarter was modest 3.5%, as we see here on total.

And that was of course significantly lower than the 13.2%, we saw in the third quarter. So, the excess supply we saw in the third quarter that was more than the market could absorb without prices being impacted.

So the first part of the fourth quarter was very much influenced by this. But then prices increased during the quarter as we have already commented.

This Q4 growth was in line with the overall expectations. If you look to the specific regions then Norway was a little bit more than expected due to a higher number of fish being harvested.

But the feed consumption declined, and the year-end biomass for the industry was flat compared with 2018. In Scotland, 4% increase more than expected due to negative biological conditions in the beginning of the quarter.

And in Chile, the 3% decrease was below expectations as a consequence of the logistical challenges we saw in Chile in October and November due to the social unrest. And this overview shows the reference price development with the price starting low, but the increase during the quarter was very good, unprecedented increase in prices in the fourth quarter.

And this development also meant that timing of sales had an impact in this quarter on realized prices. If you look at the beginning of 2020, it has also been very good with regards to prices.

We have seen the second best prices in January ever in Europe and in Chile. Canada, also a very good level, all-time high.

So, of course the case is that recently prices have declined somewhat due to the coronavirus as you have all read about and heard about. And it's important to bear in mind that the Chinese consumption of salmon that takes place mainly in the foodservice segment, so that means restaurants, hotels.

And with activity slowing down, that also means that demand is reduced. And that China is -- has its share of the total market, so demand there is down due to this corona outbreak.

However, prices are still good. And despite short-term issues, we believe that the supply-demand outlook is tight, and we see continued good demand.

And we see also, as I said, reduced industry supply growth for 2020. Yeah.

And some further comments on demand. We see that total salmon consumption was in line with the supply.

That was also the case for Europe. We saw a very good retail demand in the quarter in Europe, very strong retail demand in the core markets, including Germany, U.K., France, Southern Europe.

In the U.S. total consumption increased by as much as 11%, as we see here.

Both foodservice and retail developed very favorably. And if we look at our own growth rates in Consumer Products in the U.S., we see even higher figures.

So there is a great demand for salmon in this market. We see great demand for our pre-packed fresh products in the U.S.

with increased volumes in the store that we are already in and our products coming into new source as well. So these figures are very encouraging.

And we also have to remember that, there is a great potential also going forward in this market. So with our value-added plants in Maine in Miami, Dallas and Vancouver we are very well positioned here going forward.

Yeah. We see a good growth also in Brazil 11%.

And we see China, Hong Kong as much as 15% in the quarter on improved availability of the larger sizes. So when the right sizes are available the Chinese are definitely in the market for salmon.

Also in this market the potential is great. And we believe that we are well positioned here with our new factory in Shanghai.

So while the development in China and Hong Kong was great, the rest of Asia was impacted by reduced availability of frozen volumes from Chile in the quarter, as it's also commented here on the slide. This was due to the logistical challenges in the quarter in Chile.

China as I said that's primarily a fresh foodservice market, so they did not see the same impact. But still fresh exports to several of these regions South Korea, Taiwan, Thailand Vietnam, showed positive growth in the quarter.

So the underlying demand picture for Asia is better than what these figures could give the impression of if you – if you just take a brief look at this. But if you go into the fundamentals here, you see that the underlying picture is still very favorable.

And of course, there is short-term friction now with regards to the coronavirus, especially in China but also in other markets. So that is of course also important to comment, when we talk about good demand in China.

Yeah. And then we can look at the growth expectations for the industry in 2020.

We expect modest global growth. We see here the guiding 2% to 5% industry growth.

This is in line with the market consensus. In Norway, we expect industry volumes to develop in the range of 2% to 5%; in the U.K.

minus 2% to 3%; in Chile 2% to 7%; and North America minus 9% to minus 4%. So all in all expectations of modest growth in 2020.

Yeah. The figures are here for you to study further.

And then, we can look at our own volume guidance. So we have a volume guidance for 2020, which is unchanged from the third quarter.

This figure here would give 14,000 tonnes extra volumes compared with 2019. That's mainly related to improved utilization of our capacity in Norway.

This is one of our key priorities to work with this. And we expect that the effects of the Traffic Light System in Norway for Mowi for 2020, those effects will be limited.

In Canada, volumes are expected to be reduced with – if you compare with 2019, due to the challenges we saw in 2019. We believe that the biomass in Feed supports this volume guiding.

If you look at the number of individuals in sea at the end of the quarter that number is stable, but the composition is different. So we have more individuals in sea in Norway 7 million more individuals in Norway, and we have less in Canada.

So due to biological performance in the different regions, we believe that this change of composition is favorable with regards to harvestable volumes for 2020. Then Ivan I will give the word back to you to comment on outlook.

Thank you, Kristian, and thank you for a thorough walk-through of the financial figures and the fundamentals. So that is just to sum up go through the outlook and the way forward.

So as Kristian just said here, notwithstanding short-term issues with the coronavirus, we see sector fundamentals as strong. There are good demand in all our key markets and the supply outlook is modest.

Fish pool forward price is €6 which you are all aware of. We have also maintained our harvest volume guidance for 2020 backed – on the back on the number of individuals in sea.

As of today as Kristian just thoroughly explained the mix here is quite different compared to last year. We have more individuals in sea in Norway and less in Canada the latter because of the mass mortality we had on Newfoundland last – sorry not last year but last quarter.

Going forward, as you have read from the press release we have changed the organization of Farming in order to increase our focus. So we are we are heading towards three CEOs instead of one, as we have had so far.

Because competence is not enough you also need the time to follow up this. And good husbandry is about focus.

It's about being hands-on. The devil is in the details but in this context the solution is in the details.

So heading towards as said, that's because we haven't hired the permanent COO of Farming Norway. That's individual we are looking for.

So we have just started a recruitment process. Further we are establishing something we have decided to call the Mowi Global Processing Excellence Team, a really nice name.

In Norwegian, what we do is that we gather our best men and women of engineers in one team so that we can coordinate and hopefully learn from each other. We have 38 factories in Mowi, altogether including primary processing so not only secondary processing, all across the world.

I think they are spread on 19 countries. So in order to coordinate this, in order to use best practice that's a challenge in itself.

But in addition, we also see that the trend on automation, digitalization give us some untapped potentials here. The way we process salmon today is very, very labor-intensive.

The lion's share of our 50,000 employees they are in downstreams. So through replaces our processes with new technology, existing machines, new machines, we can improve the productivity substantially we think in the longer term.

But in order to do so you have to address it. So the idea is that this team will help us with it.

In addition you also have the working processes. It's not only about the machines but also the way you do this, so how smart can you put up a processing line, et cetera.

So we're taking the best people out, putting them into a team so that we can learn from the best ones within the company but also from other industries, we think will help us going forward. I just went through the fierce competition we are facing in the Consumer Products in Europe.

So this is a low-margin industry. So – and until the brand strategy has started to really work the solution is through improved productivity.

In order to produce at lower cost than our competitors, we have to establish a higher productivity because we have to pay more or less the same price for the labor, which is the lion's share of the costs apart from of course the fish raw material. Right.

Then feed plant, as said, we are approaching the end of the commissioning phase. We are targeting 150,000 tonnes this year, which will take us close to self-sufficiency in Europe on feed.

That has been the goal and the target for a long time since actually we started this back in 2013. So, it's very encouraging to see that in 2020, we are there.

So long-term strategies, they work, but it just takes a little bit of time. So -- but for those who are patient, things change, not from day to day, but over time.

We have already discussed brand and branding how important we think this will be in the future in order to build entry barriers in order to increase our margins, but also in order to improve the food experience for our customers because in the end of the day that's -- I guess it's the most important thing. The rest will actually follow suit.

We are -- we started with Poland last year. That was a pilot.

And now, we started for real through addressing France maybe the most sophisticated salmon market in Europe now at the end of the first quarter and the USA through our factories in Americas or the USA. Quarterly dividend, NOK 2.60 for the first quarter, in line with previous quarter, on the back of a solid balance sheet, very good financing, but also a tight supply and demand outlook.

With this, we open up for Q&A. Please say your name and ask your question as loud and clear as you can.

And if we forget something, please let us know.

Christian Nordby, Kepler Cheuvreux. How should we think about the costs in Scotland and Canada not necessarily for the next quarter, but more for the longer-term development for costs here?

Are they supposed to revert back to lower levels? I assume Canada might not as quickly because of the lower volumes, but in general speaking.

The answer is yes over time. But you know, this industry very well Christian and so it takes some time in this industry.

You cannot just change it overnight because, we have -- this is biology individuals. And if you start with Canada, the biomass this year is low.

So the part which is named -- it comes to scale it's lacking in a big part of the value chain there. So, I think we must be a little bit patient there.

If we take -- I think for Canada, you must think of 2020 as a recovery year. That being said, we are still aiming at growing East and also get back to peak levels we have seen in the West.

So nothing has changed. But of course, what happened in the third quarter was a setback.

We must admit that and it takes some time because -- before we have recovered. So we lost a large share of the fish we had in the East.

And you know this without fish there's not much left really.

Yes. And on that note, the biomass year-over-year is down 5%.

I assume that you have more individuals at lower weight because you have a skewed back-end harvest profile. Is that correct?

That's correct. And also the part that Kristian emphasized that the number of individuals is substantially up in Norway seven million as of the year-end; and the other way around in Canada mainly due to Canada East.

So, yes, you're right we are a little bit back-ended this year, but not that much. If you look at our historical figures, we are always a little bit lighter in the first half of the year compared to the second half.

And I think already in the second quarter even be quite similar to last year at least on an overall basis, so this -- particularly the first quarter that stands out. Yes.

Kolbjørn Giskeødegård, Nordea Markets. Two questions.

One on the volume guidance. You are guiding -- or your volume guidance compared with what you state for the whole industry implies that you will cover 60% of the growth in Norway alone.

And my question is the risk for the volume guidance be a little bit excessive or alternatively underestimating the total volume growth in Norway. Comment on that.

And the second one goes more in the market. The current -- how do you experience the current market situation given what you also mentioned on the coronavirus and impacts mainly in Asia, but also indirect in other markets?

Thanks.

Yes. Thank you for two good questions.

To start with the volume guidance. So you say we account for approximately 60% of the growth in the Norwegian -- or for the Norwegian industry this year.

So to start with ourselves, we like to talk about ourselves not the others. We have the individuals in sea.

So -- and if you are looking at the normal license we have, you would conclude that our utilization to date has not been satisfactory. So we are just trying to get to a satisfactory utilization level in Norway.

So we have to stock more fish aligned with the biology we have these days. So again, we have the fish.

So for our numbers, we are as sure as we can be at this part of the year. So as long as the fish is surviving, of course some mortality we will have then we are fine.

And also remember that the baseline here was last year and last year was not a great year for Mowi Norway. We had a lot of small incidents in yes all business areas also including Region North.

For the rest of the industry, we still believe in a tight supply situation in -- or from -- or a small growth from Norway last year, because in terms of the -- in general, it's about how good can you utilize your licenses. And it's hard to see that some of our competitors can actually squeeze so much more out of their current capacity.

And the Traffic Light System will not be that effective this year. So yes, we do that.

And we think that we will gain market share, if you want to use that word in 2020. We have the individuals and that's the bedrock of this.

The rest I think you have to yes wait and see. But we are firm in our belief we are.

Then over to the coronavirus. Well as you know, we are not any experts in this.

So we know what you know about this coronavirus and that's what you can read about it on the Internet. With regard to China, China is for all practical intents and purposes closed.

So there is no demand. Their people do not go out and eat.

And as Kristian said 95% of the salmon consumption in China is through restaurants and the likes. So 120,000 tonnes of that market is out.

So taking into account the current prices, they are impressive at least in my mind. So -- but the big question is how will this develop going forward?

And I guess it's anyone's guess. I heard on the news yesterday that this is supposed to level off in April.

I think this was one of the big global organizations that have a responsibility in this not for the virus, but to solve it. But we don't know.

We assume this is a short-term issue. We have been there before with SARS with other viruses and it looks like the Chinese are quite good at fixing this.

They have a little bit more discipline than what we are used to. So we think this will blow over, but we don't know.

And -- but right now there is no trade with China of salmon, although you can find the air freight for the salmon. It doesn't help because you don't have the clients.

And the price is also very high because of the cost of the air freights. For the rest of the market, we think it works quite well.

That being said, salmon is a global product. I think we sell salmon to 150 160 countries all over the world.

And there are according to United Nations 200 countries. So salmon is one of the most global products there is.

I guess you have oil and a few other ones Coca-Colas that compete, but not many. So there are always some trade frictions in this.

It has been like that as long as I've been in the industry. So now its coronavirus and then, we have had Russia.

Then we have had EU, the U.S. and then we were excluded from China, because of some diplomatic issues.

So, I think this is a part of a game. In a global world there, are always something.

So this is something we just have to work, work this through really.

The next question from the web, it's from Xian Deng. She is asking -- she's representing, Berenberg.

She's asking any comments on the tax situation, in Norway? Some papers -- some paper proposed 40% resource, rental tax.

Can you please give us some background on this, the development and your thoughts on this?

Yes. So from coronavirus to resource tax, another topic, we are not an expert in.

So there's a hearing around now. The deadline was at the beginning of this month.

So now it's up to the politicians really, how they want to take this forward. We are as you know, and as you understand strongly against this.

So we think a resource tax on Norwegian, salmon farming would be devastating for the Norwegian salmon industry. So if we -- the target from the government is to grow this 5 times, by close of play 2050.

And if that's still the idea to create jobs and keep the lights running on our coastline, then we cannot introduce this. That will be an effective showstopper.

So 62%, then you do not have the money to invest. And, despite some professors in salmon farming, it's not like oil or energy.

Salmon farming you can actually move. We have a RAS technology.

So this you can do on land, in other countries. So you don't need the coastline, in Norway.

The only reason why Norway has half of the total production in the world is that, we are cost competitive. If you put on 62% resource tax, we are the highest cost performer there is.

And then it goes without saying that, that will ruin our position, but also our future. So instead, I think, we need a good system.

We also have to pay our share of the tax. And to secure that, we can continue to grow this, because if this industry over time goes out of the country, then you have no taxes really, although, the tax rate is high.

But if you grow this to 5 times, then you get tax revenues. So I think, again, it's about patience.

And also bear in mind that, 50% of the profit of this industry in Norway has been made the last five years. And this industry started for more than 50 years ago.

So they are basing this proposal on a very short time period. And in this period, the Norwegian kroner, has been record low.

And according to my numbers, the super profit, from 2000 to 2015 was NOK1 billion. And from, 2015 to 2019 it was NOK20 billion.

So, what we have seen in the last four years is, unprecedented. So how can we build a system on this?

And believe that this will continue, when we know what's going on with the RAS technology, et cetera, so according to ourselves, that would be a big mistake. So, we do not believe in this.

And we do not believe that, the Norwegian politicians will do this everyday. They are far too clever for taking this bait from the committee.

So we believe in a good tax system in Norway also going forward, that protect this industry and this industry's competitiveness towards the rest of the salmon world.

Okay. And that brings us over to the next topic of land-based salmon farming from Alexander Jones, Bank of America Merrill Lynch.

He's asking, how do you think about land-based, salmon farming and Mowi's participation in full cycle land-based salmon farming activities? What would change Mowi's mindset about not participating in this area?

And if this happened, how would you decide, whether to build internally or buy externally?

Yes. I'm not sure we can address all those questions.

They were really good and I can understand why he asked them. But we also have to protect ourselves.

But -- as everyone has noticed so far, we have not done anything on land apart from building in smolt facilities and also growing the smolt bigger. Our core assets are in sea.

So what we do is what we call fjord-based salmon farming. That's what have taken the company where it is as the biggest salmon company with the biggest earnings.

So we are of course following the situation closely we are. So we have open eyes open ears.

But until further notice, we will continue to focus and invest in what we do today which is fjord-based salmon farming. We think we can come around, the short-term issues we have first and foremost with the sea lice with better techniques.

We also think that we'll come up with new remedies that would change the current picture. At the end of the day this is about cost.

We do not believe in a resource tax in Norway so we think the competitors in -- for the Norwegian fjords will still be there. And as long as that is the case, we will continue to put our money on that type of farming.

But if it changes then we will adapt of course. So we -- Mowi is into this forever.

So if the future is different then we must align with the future. But right now we continue with the current strategy.

And the day we decide otherwise we will let you know afterwards.

Lars Johnsen, Carnegie. Just a quick question or more of a follow-up on the volume guidance.

You had some ISA outbreaks or potential outbreaks I suspect it is probably the right word in January. How did that fit into your volume guidance?

As far as I know there were about 2 million, 2.5 million individuals at risk?

Yes. So we have had one outbreak and that was at Voldnes and that was only 1.5 million fish and it was harvestable fish.

So that instead will not impact our volume guidance this year. That's part of what we do.

We have ISA every year in Norway. So we have and industry have and we have our share roughly.

And you will see that those numbers are quite stable over time. So Voldnes will not change anything.

And then there is a suspicion at Minnesund. So yes forget about the names.

This is in Region North. But that's a suspicion.

It's not confirmed yet. And that is 1.7 million fish, but it's not a harvestable weight yet.

But in a few months it will be. So for Minnesund we don't know.

So based upon what we know today our volume guidance is fine. And also remember that the base last year, we produced 436,000 tonnes in Norway.

And when we say we have 7 million more individuals as of year-end we are comparing to 2019. And 2019 was also a very troublesome year for Mowi.

We lost fish because of ISA. We had four ISA incidents in Mowi Norway last year.

Plus we also had to stamp out three sites in Mowi Mid because of PD so the wrong variant in the wrong area. So the base on -- you could argue, it's not the hardest one to beat.

So far there's nothing there that changes this. And ISA is a part of the biology in Norway.

And we have one out of 5 fish, so then we also have our share with widespread, we have in our Norwegian portfolio.

Thank you. And then the second one on Russia, you commented on the coronavirus.

How do the Russian situation affect you and the overall market?

Yes good question. So Russia, we -- as you have seen we were excluded from Russia for Mowi Chile, but that doesn't impact as much because we sold 4% of fish to Russia.

So for Mowi Chile, it's still business as usual. And that was also frozen which is not the best paid product.

If you take the Faroes -- for the Faroes we are on what we call the yellow list so we can still sell fish from the Faroes to Russia. And for rest of Mowi we are not allowed because of the ban.

So Russia has banned all fish from EU.

And can you comment on the overall market then? What's kind of -- there's a lot of harvest facilities in Chile banned also – like on Faroes Island.

Is there a political agenda? Could you say something about the dynamics time line et cetera?

No, I rather not. So we just take this under advisement.

So we are banned from Russia for the fish from Mowi, Chile. So we accept that and that is the case until they say yes otherwise.

Yes. Okay.

Then I would like to say thank you for showing up. We'll meet again in the next quarter.

Meanwhile, take care, travel safe and spend your time as useful as you can. Thank you.