Mowi ASA

Yes, I think the time is there. So, welcome everyone.

Good morning to all of you out there, and welcome to the presentation of Mowi's Second Quarter Results. My name is Ivan Vindheim.

And with me today, we have our CFO, Kristian Ellingsen. As usual, we start with the highlights, quite an extensive list.

This time, I must say in an eventful quarter, operational EBIT of €99 million in line with the trading update released 15th of July. Operations have been running close to normal despite the COVID-19 pandemic.

We're maintaining strict measures and do whatever we can to secure the health and safety of our employees. Prices have been largely impacted by COVID-19.

We have seen a steep downward trajectory in the wake of it. In terms of farming volumes 104,000 tonnes, 2,000 tonnes above guidance.

We are taking down our full year guidance by 8,000 tonnes, all of it in Scotland, due to biological issues this year in that region. Then in cost farming down from €4.62 per kilo to €4.47.

We have low cost performance in Norway and also have high cost performance in Norway, and we have a broad portfolio consisting of six farming regions. So, this is the average Mowi Norway, Mowi Faroes and Mowi Chile, they are below and Scotland, Ireland and Canada, they are above.

All time high earnings in Mowi Ireland for our organic salmon very, very impressive. We also saw record results and the record volumes for the second quarter in consumer products.

On the back of the shift, we have seen in demand from the food service segment to the retailer segment. Under the prevailing circumstances, the board has not found it appropriate to distribute a dividend for the first and second quarter.

So much about the highlights then over the key financials, Kristian will walk us through this in detail later this morning. So I will just touch base upon that.

Turnover €910 million down despite an increase over for volumes of 6%. So the explanation is as we have already mentioned, price reductions year-over-year in the wake of the COVID-19 pandemic.

This has also resulted in a decline in operational profit, which was as already said €99 million against €211 million last year. The margins we will come back to later on in the presentation, when we address the various regions.

We all really talked a little bit about surprises, as you can see from the curves here are steeper decline in prices this year. We store at record high levels and, at least, I thought this would be another great year for Mowi and the salmon industry.

But this pandemic has absolutely ruined the party. We also think the fall will be challenging, but we are more optimistic to next year and for the long run.

We will come back to that later on. In terms of price achievements, good in the quarter I would say, a little bit below reference price in Norway, due to downgrades, knock on effect from the winter sores, but we had small contribution from our contracts.

So it's all-in-all, okay. Scotland 112% very good.

Canada 95%, slightly below the reference price, also due to the winter and knock on effect from it and winter sores. In Chile, a price achievement was impressive 122%.

Operational EBIT, we saw a profit increase in all our entities apart from farming, a huge decline in farming, mainly driven by the price decline, which we’ve already been through. Costs are also somewhat up year-over-year.

And then over to our most important farming region, Norway, operational EBIT of €60 million in this quarter, so 60% of the profit in Norway, that's normal 56,000, 57,000 tonnes. So, higher volumes compared to last year, also higher than the first quarter, which is good.

Volumes are important in this industry. Operational EBIT margin €106 per kilogram, reasonably good I would say.

Bear in mind that Mowi, it's a Euro company, and we are using Euro as a function of currency more in Norway. So consequently, we have not benefited from the weakening of the NOK we saw in the second quarter, which was unprecedented.

Over time in steady state, carrying Mowi Norway in euro or in Norway, it doesn't matter, it's neutral. But when the NOK is weakening we lose compared to our peers, when the NOK is strengthening, we win.

But we all know that we haven't seen a strengthening of the NOK since 2012. So over the last years, we have had some tailwind from the currency in Norway.

Having said that, being a Euro company gives us a much cheaper financing, and Euro is by far the most important currency in our cash flow. So we still think our strategy is the right one.

But in the second quarter, FX was playing a role, normally it's not. And we do not like to talk about FX in Mowi, we like to talk about fish and markets and the rest.

But we had to make an exception this time around, so we apologize for that. Yes.

Contracts we have already been through. Operational EBIT per kilo per region, okay in mid to north, also an okay cost level.

We have started to facing the new generation, which is better. Our July numbers improved.

So we're crossing our fingers for the rest of this very, very important season in which we are. South a poor quarter on low volumes.

We harvested out two CIC sites, that is R&D, which always carry high cost. In addition, we also took out some big fish.

So the second quarter is not representative of a region South, and we expect improvements in the third quarter, and July was much better. Then over to the contract portfolio, I guess a lot of you are interested in this one, this is for Norway unstable.

No changes since last time, but we are going into the contract season. So the next few months to come will be important to us with regard to prices and price achievement next year.

Scotland, €40 million margin of close to €1, reasonably good I would say in a challenging environment. Production cost was very high in the first quarter.

They are substantially down in the second quarter, because we have harvested from better performing sites. Having said that, the biology in Scotland has been challenging this year.

It was also challenging last autumn. And as of today, we see a higher cost, unfortunately, in the third quarter, as we saw in the second quarter.

So a heads up on the coast in Scotland. Then Canada, negative numbers, driven by very weak prices in Americas.

Canada is and will most likely be a high cost region. So then you know how it is when prices decline, you get the hit or the biggest hit where you have already carried the highest cost.

And we saw cost was coming down in the second quarter, which is encouraging. We also hope for a better improvement going forward.

But in general, cost level in Canada is high. And with the current spot prices, we see then it's a challenging environment.

The fish from Canada goes first and foremost into the U.S. market as a whole fish, somewhat fillets and that are not the products that the market ask for these days refer the COVID-19 situation.

Chile, a good quarter. I would say €12 million with the prices we saw is impressive.

So, relatively speaking, I think Chile was our best region this quarter, although it was not in absolute terms. Margin €0.82, so quite close to Norway, it's again really impressive.

And thanks to the downstream setup we have in the U.S. We are in a position where we can produce and sell the right products and that we have benefited a lot from.

At the same time, we have both satisfactory cost and biology, in Chile. So, the situation in Chile relatively speaking is good, but taking into account the current price environment, it's of course very challenging.

But we see that with our business model, we stand out to this quarter, and we also think it will be so going forward as long as we have this pandemic ongoing. I'd also like to take opportunity to say that we are carrying limited frozen inventory.

If you take out the inventory, which is sold then we're close to zero. So you're on a toast you could say here, and we have started this challenging a second-half season.

Ireland and Faroes, fantastic results this quarter. If you start with Ireland, €15 million, 50% or more is profit in the quarter on 4,000 tonnes.

That is all time high in absolute terms and not margins wise but in absolute terms 4,000 tonnes for this entity is a high number, but very impressive. We are also satisfied with the numbers for our Faroes salmon, a good cost with good price achievement for them and high volumes gives a good result.

So, all together, we made €21 million in what we at least back in less cold orders. And that's more than 20% of profit.

So, it shows that being diversified, having a broad portfolio is beneficial. So we are happy with that.

Consumer Products have done a great job in the quarter. And they have kept our volumes going.

Without Consumer Products, I don't think we would have managed that with our size. So yes, we are very grateful for this proper value chain, and particularly this time.

As already said all time high profits on all time high volumes for our second quarter value added margin 4.1%. And as we say it here in the bottom, the COVID-19 pandemic underlines once again the strategic value of this downstream operation footprint we have.

So, again we have much to thank Consumer Products for this quarter. They will also be very important in the coming quarter.

Then over to feed, second quarter is better than the first quarter, but it's still low season. So, having said that, I think the second quarter was a reasonably good quarter.

Operational EBIT of €6 million, a margin of 4.1% is cool, okay higher than last year. Very good production in Norway.

We are ramping-up in Scotland. And the self-sufficiency ratio in Europe was 95%.

Then over to cost, again, I would say we have seen an increasing cost in the industry, and in Mowi over the years. And I guess you also can say that the pace has increased too.

We started a cost saving program in 2018, and have saved costs of €180 million to-date, which is good through more than 700 separate initiatives. So we are working with our cost base.

In addition, we try to improve biology, increase survival ratio, et cetera. So this is the cost base, and hard work really.

And so, we are quite satisfied with the cost saving program, but we still see that cost is increasing. And we have cost pressure from a tougher biology, but also from stricter regulation and all the other input factors.

And we cannot sit still and not address it. So we have to do more.

Labor cost is number two cost in Mowi, accounting for 60% of the total cost. And so far, we haven't worked very hard on headcount in Mowi.

We have had a growth strategy, we have grown significantly over the years. But now we think it's time to also see can we do this more efficiently.

So, the board has decided to introduce our productivity program in our cost saving program, where we are targeting a 10% reduction in headcount for Mowi as is by 2024. The strategy is still to grow the company, so the aim is to be a net job creator also in the future.

But maybe different jobs. This we will do through automation, digitalization, i.e.

using existing and new technology, but also through improving our production processes, and rightsizing of the organization. In terms of all the details, I think the most asked for some time, we will revert to it when it's relevant, when the timing is there.

But now we have been given the task. Now we will start to work on.

We have some ideas. We have some preliminary thinking, but the announcements, they will come later.

Then Kristian, can you please walk us through the financial figures and fundamentals? The floor is yours.

Thank you very much, Ivan. Good morning, everybody.

I hope you are well and safe and enjoy our updates on Mowi on our Q2 results. I will start with the overview of profit and loss, where the topline shows operational revenue of €911 million, down from Q2 '19 on lower prices.

The reduction in operational EBIT as we see here down 53% is almost in its entirety explained by reduced farming prices. And the operational EBIT of €99 million translates into return on capital employed, as we see here in the last figure, 12.2% which is above our target of 12%.

But of course, ROCE and the other key metrics such as underlying earnings per share, operational EBIT margin, they are all impacted by more than 50% reduction in earnings. If you look at the items between operational EBIT and financial EBIT as usual, the largest individual item is the net fair value adjustment of biomass.

This is a negative this time on lower salmon prices. If you look at associated companies, this is mainly related to our associated company Nova Sea, which had very good results and operations in the second quarter.

So, we congratulate Nova Sea on good results, and we see an EBIT per kilo as much as €1.7 from Nova Sea. Net financial items, negative €14 million this time.

Interest costs are reduced from Q2 '19, that is as expected, but on the other hand, we are affected by negative currency effects over P&L. So, that gives us a slightly more negative number at this time around.

Then we can move on to the overview of the financial position, which shows stable total assets from Q2 '19, €5.6 billion. When it comes to equity and liabilities, equity ratio is healthy 51.2% as we see here, and not interest bearing that is slightly below the long-term target of €1.4 billion.

The cash flow statement shows that net interest bearing debt moved from €1.357 billion to €1.380 billion, so relatively stable. We saw a large tie up of working capital in the quarter €74 million, that is related to sales and marketing with the €24 million on tie up of accounts receivable, as sales increased versus the first quarter of this year.

Feed tied up €26 million mainly due to buildup of inventory before the peak season. And farming had a special effect of €21 million in VAT payments in Norway delayed from Q1 to Q2, as part of the COVID-19 aid package from the authorities.

We also see the taxes paid as a bit low at this time. Taxes remaining to be paid this year will mainly be paid in Q3, but also some in Q4.

And in Norway tax payments scheduled originally in Q2 were postponed to Q3, as part of the COVID-19 aid package. Net interest and financial items paid as guided €10 million.

And as it's written here in the margin, we purchased 2.25 licenses in the Norwegian capacity auction in August, for approximately €29 million to be paid now in the third quarter. And then we have the cash flow guidance for the year, we maintain mainly our cash flow guidance for 2020 except for taxes paid, guided slightly down.

The CapEx projects are progressing more or less as planned. And as even commented, when it comes to dividends, this is an important part of Mowi's financial strategy, but under the prevailing circumstances, the board has decided that is not appropriate to distribute quarter dividend for the first and second quarter.

We have a solid financing, no changes here since the last quarter. We have no long-term debt maturing until Q2, 2022.

We have cash on undrawn lines of about €550 million. And we have a very good relationship with the lenders in our bank syndicate, DNB, Nordea, ABN Amro, Rabobank, Danske Bank and SEB.

Then we move on to the supply and demand section. As we see here, global supply increased by 3% from Q2 '19.

That is driven by 10% growth in Chile, as we see here, that is on good production and high average rates in Chile. But if we look ahead, supply growth in Chile is expected to be low in the second-half of 2020, and negative in 2021.

Small stockings are significantly down in Chile, down 12% year-to-date July. And prices, as we see here, we all know that we started at very good levels in 2020, but prices fell as a result of COVID-19, first in Asia and then in the rest of the markets.

In the second quarter, we saw a drop of 90% in Norway, and more than 20% in Americas where the food service share is larger and COVID-19 more challenging. The global supply outlook indicates a tighter supply and demand balance.

If we look past the short-term. And then we have the volume by market.

And of course, COVID-19 significantly impacted the trade flows and channel logistics in the second quarter. The food service segment represents around 40% to 45% of global consumption.

And this segment as we all know, was heavily impacted by COVID-19. In many countries lockdown measures eased somewhat and demand improved somewhat.

Retail sales have been strong. So, we have seen that has offset some of the demand shortfall, but the net effect is a demand reduction of about 10% resulting in lower prices in the second quarter.

In Europe, we have seen a strong retail sales growth in the key markets, such as Germany, France and the UK. That has been positive, of course, and has offset some of the food service demand reduction.

In the U.S., we see the consumption increased by 3%, despite the closed down of food service, increased retail sales and particularly pre-packed products are very positive. Brazil, on the other hand, declined by 24%, as the food service segment is very large in that market and the COVID-19 situation very challenging.

In Asia, we see that consumption increased by 11% from Q2 '19, air freight rates have improved since the peak on better capacity. In food service demand had almost recovered before the second wave of COVID-19 started.

It's important to stress that we believe of course, that there is still a very good underlying demand for salmon. That has not changed the underlying fundamental demand for this product, and the increased home consumption we have seen now in this period when more people are cooking at home, prepared healthy salmon products at home represents a potential.

When it comes to the supply outlook, the outlook is a modest growth. You see the range here 2% to 5% in 2020, and the low growth of 1% in 2021, driven by lower growth in Chile.

And this gives a tight market outlook given continued COVID-19 recovery. You see the range here from Q3, 2% to 7%, and Q4, 1% to 5%.

And when it comes to our own volume guiding as Ivan commented upon, we have guided down at the Scottish volumes by 8,000 tonnes due to biological issues and increased mortality. The remainder of the 2020 volume guidance isn't changed, so that gives a net figure of 442,000 tonnes.

Then, Ivan, I would like to hand over to you to discuss the outlook.

So, thank you, Kristian. Yes, outlook.

So this goes without saying in the short-term COVID-19 has impacted the market dynamics and prices negatively. And then we're talking about the food services segment that accounts for 40% to 45% of the market.

But in the longer-term, our view is unchanged, which really belong in this. We believe in this.

We see a strong underlying demand. So this is, in our mind COVID-19 driven.

We get often question when we will see a recovery? Well, if I am to answer, I would say it's purely depend on the COVID-19 situation.

So, we believe that when we have a vaccine in place, then the sentiment will change, and things will normalize quite soon with regard to the salmon. So, we are optimistic in the long-term.

And we also believe in 2021, we do. The supply side is constrained.

And with the market recovery, that should give rise for tight market balance and improvements compared to this year. How good then and how much depends on how long time this will take, we don't know, of course.

Meanwhile, we will continue to capitalize on the current shift we see in demand from food service to retail. We are integrated and we have the right business model for this.

So as I think relatively speaking, we would do quite well. And we also do believe that food service -- sorry, consumers will continue to make good results.

And we are as said previously in a presentation, expecting a volatile autumn. We know that volumes are increasing.

We know that the COVID-19 situation is ongoing. So part of the market is out.

For the autumn, I think it's about working ourselves through it. But again, we have the right business model to come through this in a reasonably good way.

And then cost, cost is important, cost fighting is never ending story. The development we've seen in this industry and in Mowi is concerning.

So we have to address it, we have to take further measures. We believe in this new productivity program, there are all these potentials.

You've also been through a long period with significant growth that also does something with the organization. Sometimes you have to take a breath and look around, and see if this is the smartest way to do this.

So, I think we will deliver on the target set by the board, i.e. reducing headcount by 10%, as is by 2024.

At the same time, our growth strategy is still valid. It's still our main strategy.

So, the aim is also to be our net job creator in the future. So, this last part is an important part of the message.

So, nothing has changed. In 2016, we started our well boat venture.

And we have now built 10 vessels, which are in operations, two are under construction and two new ones will be contracted in near-term. So we have developed a full-fledged valuable company.

We think the timing is right to initiate a divestment process for our stake in this company. This has never been defined as a core asset for Mowi.

It was an opportunistic move back in '16, and the strategy has been clear all the way that when the time is right, we will divest it. So, now we will start the work doing that.

The outcome, we believe will revert to when the timing is -- or when the time is right. So, so much about outlook, then I think the time has come for a Q&A.

Kim, our IRO will administrate it, Kristian, our CFO will join. So, then I think the floor is yours again, Kim.

Okay, thanks. The first question is from Alexander Jones from Bank of America Merrill Lynch.

The first question is on costs. Can you give any color on where you see farming costs in the third quarter from €4.47 reported this quarter?

And given the new productivity program launched today, it would be helpful, if you can give any view on where you see costs going over the medium-term, net of this program relative to the cost levels reported in the past year?

As indicated before, we believe that the costs will improve in the second-half. We will see higher volumes.

And we also harvest from a generation, which currently has better performance. You see that the third quarter has started good.

But we now enter a season, which is more challenging, biological wise and it's still too early to give the final answer. And we have not sort of given detailed numbers, but we will believe in improved costs and that's still the case.

And even commented that in Norway, which is South had high costs in the second quarter, and that is expected to improve in the third quarter. And yes, when it comes to the productivity program and cost savings, as even commented, we have had a cost saving program since 2018, where we have realized significant cost savings, even though costs have increased on, first and foremost, more challenging biology, but also regulations and generally cost increases for the input factors.

And so we now include productivity, we now it include labor costs in the program. That is a major cost component, and that is, of course, important to address also, labor costs, but still the main driver for costs will remain to be biology.

So, we don't expect to see any major shifts in costs until we have more fundamentally better solution, when it comes to less [ph] treatments and related issues.

Okay. His second question is on the license auction, can you please give more color on your approach to the recent and regional license auction?

And whether the relatively low share of licenses won by Mowi, at least compared to your existing market share, reflects a more cautious view on the value of those licenses than peers, a desire to preserve balance sheet capacity given COVID or some other factors?

I can take it. In general, we never comment on our M&A strategy and we will not make any exception this time either.

What we did was what fitted with our plans this time around. So we do not have much more to say than that.

Okay. And then a question from Sebastian Bray, he represents Berenberg.

He has also a question on costs. Could Mowi provide any quantitative guidance on the blended form and cost improvement relative to Q2 levels of €4.47 expected from the new farming as the new generation of salmon, and cost savings over the next two years?

We usually aren't that detail that we've given specific numbers for the cost development. There are many factors impacting this.

So, I think I will leave it at that. I don't know if you have any further comments, Ivan.

No, I liked your answer. So, stick to it.

And then, his second question is on the cost savings program. Will one-off charges related to the 10% headcount reduction be excluded from operational EBIT going forward?

And are the cost savings frontend or backend loaded?

Yes, maybe I can take this one. So very valid questions, but a little bit early.

So this, we must revert to and meanwhile ask for forgiveness.

Okay. And then Carl-Emil Johannessen at Pareto.

He is asking, do you expect consumer products to continue to deliver the same strong margins and high volumes in the second-half of this year?

Yes, it's always hard to predict about the future, but we think as long as we have this situation with COVID-19 ongoing, consumers will continue to leverage on the shift we have seen in demand from food service to retail. And it takes time to copy our business model and set up.

So for the third and fourth quarter, yes, I believe -- at least I personally believe in continuation.

And then his second question is on costs. Should we expect cost in Norway to come down longer-term measured in euro if the NOK Euro exchange rate remains unchanged?

I don't know. Shall I, or will you?

Yes, I guess all else being equal, but I guess currency is also hard to predict.

What I was -- of course, if the NOK is strengthening that will help us in the short-term. But in the long-term, this is neutral in steady state.

So it depends on the horizon really, because let's say at some point that it was at 13. Let's say 13 was the new number, then it would have been neutral after generation.

So as off the cycle from magnitude [ph] to plate. So the dynamic here is short-term, that's when we see the difference.

So, it's a little bit tricky to answer that question. So various -- as Kristian said, that we are various -- what is the new FX?

So let's say the new FX is 10 or 10.5. Off the cycle, this is again neutral.

So it sounds maybe a little bit peculiar, just to pick up the time I put under the numbers. So this is same really.

So it's just a change that matters. And that change is normally rather small.

So we do not talk about FX, but as we all see and second quarter was a quarter that stood out FX wise. It was unprecedented.

We have never seen this, at least in my time. I guess, if you go even further back, we have seen it in combination with wars et cetera.

But in a normal economy, we don't see that. We're not even close in the financial crisis in '08 and '09.

So…

Okay. Then moving on to Martin Kaland from ABG.

He has some questions. The first one is on the shift in demand.

Is it possible to quantify the approximate activity level of the Horeca segment for salmon compared to normal activity? Any signs of improvement?

I don't know, specifically it can be. But we're talking about a significant reduction in the food service or Horeca segment.

And I don’t know if you should give any percentages, Ivan.

Yes. This is not easy, of course.

But we have calculated our net effect number internally, and which we believe. And so I guess we can share it with the rest of the world.

So do not be shy Kristian.

We, of course, believe the food service segment to be down significantly. But, retail as we know, is also up compensating partly for this.

So we believe the net effect is around 10% a small reduction all in all.

All right. And do you expect the activity level in Consumer Products to remain stable or increase going into the second-half?

Well, you know there are more volumes in the second-half. We also have a Christmas, although maybe Christmas a little bit different this year.

So, if I had a crystal ball, which I have not, I would say yes, and something else would surprise me really. So, yes.

Okay, very good. And then moving over to farming in Scotland.

Is the biology in Scotland still challenging? Also on the younger generation of fish, do you expect this to improve in the short to medium-term?

Well, we actually thought an improvement by now. But we haven't seen it.

And the third quarter hasn't started the best. So, we gave a heads up on the third quarter.

And I still think we should take that under advisement, so to speak. In the long run, of course, all of us that I have followed the farming and salmon farming for long time, we know that this goes in wave.

So, Scotland will come back, absolutely. But the second -- sorry, the third quarter will not provide any improvements.

I'm afraid at least that's the stance we have today.

Christian Nordby in Kepler. He has a question also in relation to farming in Scotland.

And he is asking if you can elaborate on the biological issues in Scotland? What were the issues in the second quarter?

And can you do something to mitigate these effects, or these problems going forward?

Another good question. So when people are before their laptop, they seem to have too good time to come up with questions.

Yes, so as Scotland and second quarter and also the first quarter, CMS is an increasing issue also in Norway, but to much more extent in Scotland. 30% of mortality is actually related to CMS.

And this is a result from the mechanical treatment maybe started in '50 and '60. So this has made CMS [indiscernible] Norwegian a big issue or to be a big issue.

On a positive note, the heritability factor for CMS is quite high, 45%. So this is something we can solve through breeding, through selection, but that will take time.

CMS is caused by virus and there's no vaccine available. So unfortunately, there is no quick fix.

It's about not stressing the fish and not handling it, try to avoid lice. So then again, you have to keep the lice away.

So it's a good husbandry, good farming. But when you have it, there is unfortunately no quick fix.

But over time this can be solved through breeding. That is our view, i.e.

using the traits of the salmon. So obviously, CMS is a part of the selection program in Mowi breeding.

We also had allergies in Scotland. That is Mowi nature.

We have that once in a while. So that's something that comes and go, hard to control.

And lice in general, but we also have struggled with Pasteurella not in the second-half, but we had big issues last autumn, which has impacted costs in the first-half since we are harvesting out some of that fish. Now Pasteurella Skyensis which is a bacterial disease.

So there we have a vaccine, and we have started to vaccine all the fish. So hopefully Pasteurella is something that we can lay behind us, but we don't know.

So this is the first version of this vaccine. In general, the sea water is warmer in Scotland.

The shores are more shallow. So it's more challenging to be a salmon from Scotland than in Norway.

So in terms of costs Scotland has and will most likely be a higher cost performer than Norway. But the profit overtime has been really good, return on capital employed far above our requirements.

So it belongs in the portfolio. But I don't think I will stand here and say that someday that Scotland now is the best cost performer in the salmon, simply because the geography and the nature is different.

But in the past we have had very good figures in Scotland, so we and Scotland will strike back. But the last quarter we had struggled a little bit.

Okay. And then moving on to a different topic, branding.

Can you give an update on the overall brand development in the quarter? Has the higher retail demand helped your Mowi brand launch in France, for example?

Well, unfortunately, COVID-19 hampers the launch of the brand, so we had the big plans with both France and the U.S. this year.

And then retail is key and the environment hasn't been ready for it. So to a large extent, we have put off some of the launches.

We have done so many in e-commerce, but we need disease free world, I think before we are ready to speed up branding again.

Very good. And then moving on to another analyst, Lars Konrad Johnsen from Carnegie.

He has two questions. The first one is on costs and the cost cutting program.

And he is asking you're addressing headline count in the new cost cutting program. But what do you do to improve the underlying farming cost?

And what cost level should we expect out of Norway over the medium-term?

I guess the cost level, we have already commented upon. When it comes to the concrete actions on farming on the biological side, maybe you want to say something about that, Ivan?

Yes. So we're taking a lot of measures.

This is a long list. And we also are trying out new things.

But we do not like to elaborate so much about it in a forum like this. We have competitors out there.

So if some of this we must protect, but there are a lot of measures ongoing. So we're fighting costs on all levels.

And just to put all doubt aside, the main driver of cost in this industry is biology. So it's not the people, it's not inflation or regulation or the rest, it's biology, biology, biology.

So that is number key in Mowi. But back to all the measures we take, we do not want to reveal it.

Okay. Then his second question is on the supply demand outlook for the second-half.

You say that you expect the volatile autumn driven by seasonality and COVID-19 market disruptions. How do you see the supply demand dynamics over the coming two quarters?

And how do you think that this will affect the contract renegotiations with larger clients towards yearend?

To the autumn and the time ahead, as we have already explained, of course, we are in a very challenging situation in food service and that will continue to impact us. And, yes, that will improve when we have a more clarified COVID-19 situation with regards to vaccine, recovery.

But it's difficult for us to give any precise answers on that development. But our belief is of course that this is short-term and that we'll see a recovery after the short-term.

When it comes to contracts, we are into the processes now, and I don't think we want to go into too much details when it comes to that.

No. I think we have to negotiate the contracts with our clients first.

But we are going into very important months with regard to contract. And you all can read fish and the expectation.

So, I think the backdrop is rather clear for all of us. And then we'll see how we can work around it, it's also about the number of contracts/volumes we enter into.

But this is again not something we want to elaborate on. This is business secrets, so I have to apologize and ask for forgiveness.

But we have to keep some to ourselves.

Okay. And then Alexander Aukner from DNB.

He is asking, are you looking at other non-core operations to divest in addition to this aquaculture?

Yes, good question. As we already have said, in general, we do not comment on M&A and such stuff.

These are things we must come back to if we come back to it. So, this is the strategy and the strategy discussions.

They belong in the boardroom and not on this podium. So, again I apologize.

And then, finally, Nils Thommesen. He has one question in relation to Mowi's small stocking program for this year in Chile.

And he's asking if the expected stocking has been changed due to COVID-19?

Shall I answer it?

No it hasn't, so in line with plans and in line with previous years. So there is no surprises from Chile in that regards for our part.

So that concludes the questions we have received. So, do you have any closing remarks?

Well, I would just like to say thank you for having us. And stay safe, let's hope this is over, and then we can meet sooner rather than later.