Cermaq Capital Markets Day Bodø, 19. September 2012

Transcription

1 Cermaq Capital Markets Day 2012 Bodø, 19. September 2012

2 Agenda Opening remarks Introduction to Cermaq and strategic priorities Mainstream - Long term cost optimization EWOS - Focus on excellence Mainstream - Chilean farming update Closing remarks & preparing for site visits 2

3 Cermaq introduction Two business units; EWOS and Mainstream EWOS: The leading producer of salmonid feed market share of 37% Sales 2011: 1,081,000 tonns Mainstream: The third largest global salmon farming company - market share of app. 7% Sales 2011: 108,500 tons (gwe) Total EBIT pre gain 2011 of NOK 1,369 mill 4,000 employees Operations: Norway, Chile, Canada, Scotland, Vietnam 3

4 Present in all major salmonid regions Pangasius feed in Vietnam Sales volume per region (2011) Canada 20% 35% Norw ay Canada Vietnam Scotland 7% 8% 3% 45% Chile 31% 51% Norw ay Chile 4

5 Sustainable aquaculture our mission Our mission is Sustainable Aquaculture Our vision is to to be a global leader in sustainable aquaculture with main focus on farming of salmon and trout and the production of feed for these fish species Sustainable aquaculture defined as Operating the business in such a way that it does not reduce the potential for future aquaculture activity and the production of fish feed with basis in the same natural resources Operating in the society in such a way that the business maintains the future support of our stakeholders, including our employees, the local community, politicians and authorities, consumers and customers. Creating value to the shareholders in such a way that the business can attract capital and secure growth and profitability 5

6 Our platform for value creation PLATFORM OBJECTIVES BUSINESS STRUCTURE CERMAQ LONG-TERM OBJECTIVE CREATING SHAREHOLDER VALUE A leading global supplier of feed to salmonids A significant player within global farming of salmonid species Among the best players in R&D on fish feed and salmon farming Maintain strong operational focus as a basis for success and future growth Two separate business units EWOS Feed Mainstream - Farming A decentralized operating structure Centralized strategy, finance, IT and corporate functions Profitable growth within salmon farming and feed operations Delivering solid operational and financial results Sound financing and ability to reap benefits of growth opportunities while maintaining a strong dedication to sustainable aquaculture 6 6

7 Strong financial development and position KEY FINANCIALS SHAREPRICE DEVELOPMENT Operating revenues (NOK bn) Dividend per share 8 9 CAGR +11% 9 EBITDA% NOK 2.25 NOK 0 NOK 1.50 NOK 5.40 NOK % 4% 10% 18% 15% NIBD/EBITDA KEY RATIOS 9.4x ROCE Equity ratio 57.3% 52.7% 59.8% 59.5% 42.0% 1.2x 2.1x 0.7x 0.6x 14.2% 0.8% 8.0% 21.7% 22.1%

8 Value Chain Positioning No position No position Sourcing partners PELAGIC FISHING FLEET TERRESTRIAL FARMING FISH MEAL AND OIL FACTORIES RAW MATERIAL PROCESSING FEED FARMING PRIMARY PROCES- SING VAP SALES BROODSTOCK SMOLT Partnerships in selected areas Limited position 8 8

9 EWOS a leading global feed supplier 7 factories world wide 20 feed production lines Norway, UK, Chile, Canada and Vietnam Global market share of 37% on salmonid feed More than 1,000 employees > 1 mill tonnes sold in 2011 Significant activities in R&D through EWOS Innovation EBIT/tonnes (NOK) ROCE (PERCENT)

10 Mainstream well positioned in key salmonid areas Sales volumes, 1000 tonnes (gwe) e Mainstream Canada Atlantic Salmon Fresh & sea water facilities 2 processing plants 27 farming licenses 230 employees e Mainstream Norway Atlantic Salmon Fresh & sea water facilities 3 processing plants 44 farming licenses 540 employees EBIT/kg (NOK) ROCE (PERCENT) 2011 Chile Canada Norway Scotland Total 40 Chile Mainstream Chile Atlantic Salmon, Trout, Coho Fresh and sea water facilities 2 processing plants Freezing capacity 62 farming licenses 2,200 employees Norway Canada Total e

11 ..the combination creates value for Cermaq Group KNOWLEDGE JOINT PROJECTS Feed the single largest cost component in farming Combined knowledge improves performance FINANCIAL SYNERGIES Less volatile feed business improves financial stability and structure Currency hedging synergies ORGANIZATIONAL DEVELOPMENT Larger variances in competencies improves solutions Exchange of personnel 11

12 Strategic Priorities 12

13 Lower supply growth and strong demand support positive sentiment HARVEST OF ATLANTIC SALMON CHANGES IN RETAIL SALE IN KEY MARKETS (%) 1, , , Other Canada UK Chile Change in price Change in volume Change in value GERMANY SMOKED FRANCE SMOKED ,006 1,129 1,146 Norway FRANCE FRESH FILLETS Source: Kontali Analyse Source: Norw egian Seafood Council/Cermaq 13

14 Organic growth in Mainstream require new licenses from 2014 VOLUME IN CURRENT OPERATIONS Estimated harvest volumes based on full utilization, gwe kt CAGR +1% Chile Canada Norway - FM Norway - NL Note: In Canada, 2013 estimated volume is after IHN culling 14

15 Limited aquisition opportunities Enterprise Value NOK/kg Midnor Lerøy 2003 S. Andes Cermaq 2004 Aurora Lerøy 2004 Follalaks Cermaq 2004 Heritage Cermaq 2004 Aqua F. Pan Fish 2005 Senja S. Salmar 2005 MHG Pan Fish 2006 Fjord Pan Fish 2006 Hydrotech Lerøy 2006 Polarlaks Cermaq 2006 Arctic Cermaq 2006 Rauma Salmar 2010 MS, W/R Morpol 2010 Lakeland Morpol 2010 Sjøtroll Lerøy 2010 Bakkafrost Salmar 2010 Jøkelfjord Morpol 2011 Limited # of transactions during the low cycle Recent transactions suggests significant synergies or long term high EBIT expectations Note: Selected transaction multiples (harvest next FY) Source: ABGSC 15

16 Key strategic objectives Mainstream Long term cost optimization by focus on preventive fish health and best in class operations Support industry regulations in Chile to secure long term sustainable operations MAINSTREAM Profitable growth in Mainstream Norway Develop existing licenses and actively pursue new licenses Focus on Nordland and Finnmark Profitable growth Mainstream Chile Increase capacity to enable growth and operational flexibility Acquisitions in selected areas Maintain current activity in Mainstream Canada Focus on good biological and operational results at current levels 16

17 EWOS with 8% annual volume growth in salmonids last 6 years EWOS salmonid feed volumes Thousand tonnes EWOS EWOS market share in salmonids 7.9% 1,081 1, % 32% 35% 33% 35% 37% E Approximately 95% organic growth Continued growth dependent also on increased salmon farming Limited growth in EWOS so far from new markets Source: Cermaq 2011 annual report 17

18 Securing continued leadership position EST. SALMONID FEED VOLUMES (1000 TONNES) FOCUS GOING FOWARD 1,227 1, % 1,353 1,420 PRIORITY ONE - SALMONIDS Secure and develop leading position in salmonids Invest in new capacity if and when needed PRIORITY 2 NEW MARKETS Investment in Vietnam to be developed to secure profitable growth Assess feasibility and develop plans for other markets next months 2012E 2013E 2014E 2015E 18

19 Substantial farming consolidation in Norway the last 20 years CONSOLIDATION IN NORWEGIAN FISH FARMING Number of commercial licenses per holder category license licenses licenses IN 2011, 40% WITH MAJOR PLAYERS Number of all licenses per holder category 6-10 licenses 2-5 licenses 12% 16% 1 license 1% >30 licenses 40% (11%) (41%) 453 (54%) 570 (64%) 636 (71%) 688 (70%) >10 licenses 31% licenses Source: Kontali 19

20 Cermaqs Strategic Positioning Feed ingredients Feed Farming & primary processing Value added products Sales and marketing Large farming consolidation last 15 years opportunities in Norway & Chile also forward Main focus on growth in feed and farming continue developing value added product business in Chile R&D as an important part of value creation - New functional feeds to secure fish health continuously under development - Alternative sources to produce fish oil explored Participation in industry development # of players producing 80% of volume 70 Norway 60 Chile Scotland 50 Canada Source: Kontali 20

21 Key strategic objectives Group Be a leading global aquaculture company within Salmonids with presence in all major production regions Continue developing a coordinated feed and farming group CERMAQ Strong operational and financial performance on key value drivers Participate in the in the salmonid industry consolidation to the extent this generates shareholder values Secure a strong financial position with flexibility during cycles and be able to reap opportunities 21

22 Agenda Opening remarks Introduction to Cermaq and strategic priorities Mainstream - Long term cost optimization EWOS - Focus on excellence Mainstream - Chilean farming update Closing remarks & preparing for site visits 22

23 Mainstream leadership philosophy Competence and decision-making close to the fish Lean business management at BU level Autonomous OpCos Committed and educated site management Highest possible operating result through Biological performance Optimization Benchmarking Prudence Efficient procurement 23

24 Cost leadership strategies various approaches SHORT TERM LONGER TERM LONG TERM MAIN FOCUS Cost per kg fish harvested Cost per kg fish over time/across cycles Sustainability, i.e., having lowest possible risk adjusted cost IMPLICATIONS Low cost (as long as everything works ) Close to the limit of risks and regulations Low average cost over time Possibly higher cost short term Might give higher short term costs Should over time give lower costs and less volatility WE STAY FAITHFUL TO OUR LONG-TERM STRATEGY 24

25 Mainstream cost optimization: Critical to focus on the right elements FOCUSING ON THE RIGHT ELEMENTS KEY DRIVERS FOR OPTIMIZING COST Preventive fish health LOWEST POSSIBLE COST PER KG HIGHEST EBIT = EBIT per kg x Volum Smolt quality Optimal feed and nutrition 25

26 The main driver in cost optimization is biological performance THE TWO MAJOR COST ELEMENTS Effects on total cost from a 10% increase in cost 4% EFFECTS ON PERFORMANCE Increased mortality by 5%-points increases costs by NOK per kg Increased feed conversion of 5% increases cost by NOK ~0.50 per kg 1% Smolt cost Feed cost 5% lower MAB utilization reduce EBIT by NOK ~1 per kg 26

27 Dedicated focus on fish health across organization Mainstream Central fish health team Mainstream Central fish health team Research on critical topics (e.g., ISA, SRS, Parvicapsula) Developing policies and best practice Staying updated on external research Assisting the OpCos on case-by-case basis Functional team Functional team Global functional team Coordinate best practice and competence Extensive fish health work in each OpCo Extensive fish health work in each OpCo Monitoring fish health status Preventive measures Responding to issues Operating procedures and policies 27

28 Current fish health status MS Canada IHN - depopulated two sites Low sea lice levels Winter Ulcers is reducing premium percentage Algae and low Dissolved Oxygen levels (DO) MS Norway Overall status is good Mortality is low Low sea lice levels PD in Finnmark MS Chile Increasing Caligus levels SRS creates problems Increased antibiotic use 28

29 Preventive measures per country MS Canada IHN: Screening, reduced handling and vaccination Winter Ulcers: Vaccination, vitamin C trials and antibiotics trials Fungus: Improved handling and water quality Algae and DO: Close monitoring and preventive measures MS Norway Stress reducing measures Education and competence building Working on smolt sourcing MS Chile Harvesting trout before summer SRS vaccine trials Antiparasite treatments Extensive use of functional feed 29

30 Industry cost leveling out and increasing since 2005 VOLUME, PRICE AND COST IN SALMON FARMING Source: Kontali 30

31 Sharpen Mainstream an improvement process in Mainstream Sharpen focus Sharpen mindset EXECUTION PROCESS Bottom-up process Generating support and enthusiasm Input to cost-reducing and performance-enhancing measures from all levels in the OpCos KEY TOPICS Competence Biological performance Competitive prices on supplies and services Re-thinking logistics and processes Sharpen position 31

32 Focus on developing operational excellence in Finnmark e 2013e Smolt 5,5m 8,5m 7,4m 7,5m Harvest 15kt 16kt 27kt 32kt Growth 35 % 4 % 70 % 20 % Learn to tackle the more challenging climatic conditions Develop organization to handle volumedoubling Benchmark and stabilize operational performance EX-CAGE COST PER KG FOR ALL HARVESTED SITES 2004G UNTIL TODAY (NOK) 25 NORDLAND 25 FINNMARK

33 Agenda Opening remarks Introduction to Cermaq and strategic priorities Mainstream - Long term cost optimization EWOS - Focus on excellence Mainstream - Chilean farming update Closing remarks & preparing for site visits 33

34 Key topics Salmonid fish feed is an enabler in feeding the world and EWOS has an increasingly stronger position Raw material sourcing is challenging, but EWOS has a unique set-up in understanding and generating value from raw material transformation Large feed volumes with significant elements of seasonality is logistically challenging EWOS with new technology to increase flexibility and capacity 34

35 Global aquaculture volumes will increase FEEDING A GROWING POPULATION SUSTAINABLE AND EFFICIENT Low resource usage Efficient energy retention 35

36 Salmon feed is a relatively small part, but a frontrunner in the global aqua feed market GLOBAL AQUA FEED MARKET (MILLION TONNES) 100% = 23 MILLION TONNES Front-running the industry Other aqua feed 86% Salmon 14% feed More industrialized than any other aqua feed segment Consolidated from decades with fierce competition in innovation and operation efficiency High barriers to entry from significant investments, knowledge requirements and distribution capacity Source: EWOS 36

37 EWOS has strengthened its position through profitable growth EWOS SALMONID FEED VOLUMES EWOS volume (1000 tonnes) EWOS market share* FINANCIAL PERFORMANCE EBIT-margin* ROCE 23.2% CAGR: 15.9% 1, % 1, % % % 37% 6.1% 6.9% 6.7% * In salmonids E * Before unrealised fair value adjustments 37

38 Current capacity and competitive edge support strong entry barriers EWOS HARDWARE CAPACITY IN PLACE EWOS SOFTWARE BUILDING COMPETITIVE EDGE Nutritional excellence 1.5 million tonnes NOK 4.5 billion Operational excellence Logistical excellence Economies of scale Market orientation Brand leverage Current capacity Replacement cost Significant installed capacity in good shape, with an assumed replacement cost of NOK 3 per kg Building competitive edge through transformation of commodity-like raw materials to customer oriented advanced nutrition solutions 38

39 Key topics Salmonid fish feed is an enabler in feeding the world and EWOS has an increasingly stronger position Raw material sourcing is challenging, but EWOS has a unique set-up in understanding and generating value from raw material transformation Large feed volumes with significant elements of seasonality is logistically challenging EWOS with new technology to increase flexibility and capacity 39

40 Significant amounts of raw material pass through EWOS EWOS RAW MATERIAL SOURCING VALUE 2011, USD million Marine proteins % Oils % Vegetable proteins Micro ingredients Carbohydrates/ binders % Represents more than one million tonnes of raw material Other 54 Total 1,195 40

41 jan.02 jan.03 jan.04 jan.05 jan.06 jan.07 jan.08 jan.09 jan.10 jan.11 jan.12 High volatility and increased raw material prices RAW MATERIAL MARKET PRICES, (NOK PER KG CIF) 13,00 12,00 11,00 10,00 Fish Meal Soy Protein Concentrate Soy (non GMO) 9,00 8,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,00 41

42 To meet these challenges, EWOS has organized a global and specialized sourcing function EWOS APPROACH TO RAW MATERIAL SOURCING SOURCING AND PURCHASING TEAM Category management Focus on category management Global knowledge of the raw material markets Leading raw material skill set High commercial and biological competence and knowledge Understanding the drivers in the market R&D knowledge base EWOS Innovation Develops operational tools for better selection of optimal raw materials Ensuring best raw materials and suppliers 42

43 EWOS knowledge enables significant cost avoidance on raw material sourcing improves competitive position 4.3% USD 1.2 BILLION TOTAL COST AVOIDANCE NORWAY 2011 GLOBAL RAW MATERIAL SOURCING VALUE 2011 Note: Cost avoidance is defined as EWOS price vs. spot price in the Norwegian market 43

44 Large variations in raw material availability and quality FISH GROWTH WITH DIFFERENT FISH MEALS Proportional fish growth for various fish meals 44

45 Controlling and optimizing raw material sourcing is handled through EWOS Innovation You cannot make high quality feed from low quality raw materials! 45

46 EWOS Innovation with competence to evaluate prospective raw material batches PREDICTION CYCLE RAW MATERIALS «Fm-tool» predicts the potential for growth in fish in any selected fish meal sample before we sign the contract 46

47 Functional feed only(?) way to influence fish in production STOCKING SEA PRODUCTION: MONTHS MEALS SERVED TO EACH FISH HARVEST 1 BILLION SALMONIDS SWIMMING AROUND WITHOUT SUPERVISION OR INFLUENCE-POTENTIAL EWOS obvious strategic platform is to develop products that can influence the fish positively through oral delivery 47

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49 EWOS knowledge enables increasingly improved product-mix towards higher margin products EWOS FUNCTIONAL FEED (1000 TONNES) EWOS other feed EWOS functional feed Functional feed share% 1, % % 6% 6% % % % % % % %

50 Key topics Salmonid fish feed is an enabler in feeding the world and EWOS has an increasingly stronger position Raw material sourcing is challenging, but EWOS has a unique set-up in understanding and generating value from raw material transformation Large feed volumes with significant elements of seasonality is logistically challenging EWOS with new technology to increase flexibility and capacity 50

51 Distribution some challenges Feed volume in peak month Average volume x 2 For large companies x 4.5 Up to 100 tonnes/day Delivery 1-3 times a week Storage capacity varies from 50 to 600 tonnes 51

52 Distribution increased capacity Maximizing what we already have - Cabin Factor - PIT Stop A new Lemon - Flexible trade (Blue Line) - Not specialized - Lower cost - Two In Two Out 52

53 Agenda Opening remarks Introduction to Cermaq and strategic priorities Mainstream - Long term cost optimization EWOS - Focus on excellence Mainstream - Chilean farming update Closing remarks & preparing for site visits 53

54 Introduction to Mainstream Chile Harvest 2012e: 54,000 tonnes (rwe) 2,200 employees 63 sea water licenses in regions Los Lagos, Aysén and Magallanes ( X, XI and XII) Strong value-add processing capacity Focus on performance Focus on margin 54

55 Four cornerstones of the Chilean operations 3 regions 3 species On-shore smolt Preventive fish health 55

56 Región de Magallanes (XII): Update on operations 3 regions KEY HIGHLIGHTS Stocking plan: 2.2 mill Atlantics smolt/year Harvest volume: - 3,000 t in Avg. 10,000 t from 2014 Employment: ~120 people (direct/indirect) AMBITIONS Access to unutilized organic growth opportunities at acceptable cost Ensure risk diversification - Work in an isolated area - Better sanitary conditions Pto. Natales Pto Montt Aysén Pta Arenas S, W Total investment - USD 25 million - Net investment reduced with 36% tax benefit Current status: Fry grows according to plans 56

57 Region XII: Status and experience so far 3 regions First stocking was 28. December 2011 Two full sea sites currently stocked with Atlantics Lower than expected sea water temperatures Low mortality Good growth 57

58 USD/ KG RWE Strategy on species 3 species 2,50 Gross margin per specie 2,00 1,50 1,00 0,50 0,00-0,50-1,00-1, YTD Atlantic Coho Trout Disease resistance different between the three species, specially ISAv & sealice Better usage of licenses considering the new regulations Ability to be present in different markets with different products (USA, Japan, Russia, Brazil) 58

59 Historical Coho and Trout price development ( ) 3 species 59

60 Coho price and margin development 3 species COHO PRICES AND GROSS MARGIN YTD 60

61 Challenging market outlook for the 2012/13 season 3 species MONTHLY INVENTORY OF FROZEN SALMON IN JAPAN (TONNES) COMMENTS 120, , ,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 High inventory of frozen salmon Typical annual Coho consumption in Japan: 90,000 tons (HG) Expected Chilean Coho production in 2012/13: ~115,000 tons (HG) Reduced catch of Sockeye in Alaska, 97,000 tons vs. 113,000 tons in Reduced Sockeye export to Japan 61

62 All Atlantic and Trout smolt are now on-shore On-shore smolt PRODUCTION CYCLE PRODUCTION AND CAPACITIES (MILLION SMOLTS) Mainstream Broodstock 100% in Fresh Water Rio Pescado 2.0 Cipreces Full individual screening for all relevant diseases Providencia Mainstream eggs are sent to six different MS incubation facilities Confluencia Mainstream Atlantic and Trout incubation/smolt facilities are land-based and 100% isolated The Mainstream on-shore smolt cycle ensures high quality smolt free of diseases production 4.0 Collin 4.0 Trafun Max production 62

63 Current sanitary status CHALLENGING SANITARY SITUATION More challenging sanitary situation YTD 2012 compared to 2010 and 2011 Increased mortality due to bacterial diseases (SRS), hence increased usage of antibiotics Increased sea lice level and anti parasite treatment Reduced effectiveness of anti parasite treatments jul- 08 jan- 09 jul- 09 Preventive fish health MORTALITY (PERCENT IN INDUSTRY) jan- 10 jul- 10 jan- 11 jul- 11 jan- 12 Coho Atlantic Trout jul- 12 USE OF ANTIBIOTICS (FULL-YR, GR/TONNES) 800 Mainstream Industry CALIGUS (PARASITE PER FISH IN INDUSTRY) YTD 63

64 Mainstream s fish health plan going forward Preventive fish health SHORT TERM Caligus Develop a system for closed treatment (Best) alternation of available treatment products Use of functional feed Test of vaccine Test of skirts around cages SRS & IPN Use of oral vaccine across the sites Continue use of functional feed against SRS and implemented across the sites as policy Use of Boost post transfer to sea LONG TERM Re-definition of capacities, species, time of stocking of Neighborhoods / Areas / Sites To be based on analysis of historical data Identify connections between diseases/ areas/sites neighbors and confirm those with statistical facts Stop SRS - project 64

65 Update on regulatory framework in Chile Preventive fish health Establishment of macrozones New concessions suspended in X and XI regions Sites with > 9 avg. total adult parasites is declared as High Infestation Sites No more than 3 events in a six weeks period Non compliance => mandatory harvest Sanitary fallowing program, January Extended to 2016 Health management and biosecurity regulation required to loading ports and unloading ports (Resolution 302), February 16th, Establish biosecurity measures. Obligatory from March, 2013 Certification and other health requirements for import of aquatic species (Decree 72), March 24th, Risk analysis required before import eggs from other countries - Chilean authority has to approve sanitary certification issued by origin country Changes to the Fisheries Act (Decree 430), April 2nd, Establish macrozones - New concessions suspended in X and XI regions - Establish new penalty and and license rental payments Caligus (Resolution 1141), May 29th, Obligatory closed system will not be before than May, Sites with > 9 Average total adult parasites, it is declared, High Infestation Site : No more than 3 events in a six weeks period (non compliance => mandatory harvest) Mortalities handling and sorting (Resolution 1468), July 28th, Obligatory classification (twice a week) - Daily removal of mortalities - Necropsy (twice a week) 65

66 Summary of focus in the Chilean operations 3 REGIONS Controlled growth in Region XII 3 SPECIES Diversifying biological and market risk by maintaining three species ON-SHORE FRESH WATER OPERATIONS Broodstock, trout and Atlantic smolt production moved on shore PREVENTIVE FISH HEALTH Structured approach to fish health with both short-term and long-term strategies 66

67 Agenda Opening remarks Introduction to Cermaq and strategic priorities Mainstream - Long term cost optimization EWOS - Focus on excellence Mainstream - Chilean farming update Closing remarks & preparing for site visits 67

68 Closing remarks A walk to the boat (follow the guides) Boat trip to the facilities Further info to be provided on the boat Presentation of Mainstream Norway Q&A from the presentations Touring the facilities And then safely to the airport 68

69 Cermaq Capital Markets Day 2012 Part II Site visit Bodø, 19. September 2012

70 Agenda Capital Markets Day 2012 Part II Presentation Mainstream Norway Site visit Oksøy sea farm Site visit Dyping Hatchery 70

71 Overview Mainstream Norway 44 licenses in operation Estimated 2012-harvest: 52kt Growth 32% Licenses fully utilized in Nordland and fully utilized in Finnmark from August 2012 Main markets are Russia and EU 2011 Harvest volume 38 Turnover EBIT 217 Growth (%) 3 % 71

72 Nordland complete aquaculture production Broodstock/eggs Hatchery On growing Processing Nordnorsk Stamfisk AS - JV with Aqua Gen, Nordlaks and Nova Sea - Secure local production and supply of roe Three hatcheries in Nordland, covering 50 % of stocking requirements New hatchery in Steigen under planning to boost own smolt production by 8.4 mill 17 licenses in Northern Nordland Two processing plants: Skutvik and Alsvåg 72

73 Main advantages in Nordland Geography Deep fjords with unique sites Limited number of neighbors makes long term biosecurity and sea lice strategy easier to implement Opportunity to develop new production cluster in Ofoten (Narvik) with Ballangen Sjøfarm (2 licenses) 73

74 Practicing risk adjusted cost leadership in Nordland Not the most aggressive when it comes to short term cost leadership Pay a risk premium in some cost elements Avoid mixing well boats Conservative when it comes to equipment and size - Larges cages limited to 120m in diameter - Still use feed automats at some sites - Feeding is done at the cage - Largest site is 5,400 tonnes MAB Some biological statistics - Not used antibiotics since Sea lice treatment cost was NOK 0.20 per kg (lwe) last generation 74

75 Main advantages in Nordland People Mainstreams leading principle: Operational decisions to be decided as close to the cage as possible Good site managers is the key to ensure operational success 83 % of employees have Craft Certificate Annual courses at the University of Nordland for site managers to improve competence and update skills Extensive internal and external benchmarking 75

76 MSN Nordland the best farming region in Norway? MAB UTILIZATION* FOR NORWEGIAN FARMERS, ,000 1,200 1,400 MSN Nordland Average sample MS Norway MSN NORDLAND WITH THE BEST MAB-UTILIZATION IN 2011 *Tonnes produced per normal license Source: Kontali 76

77 MSN Nordland with low mortality 16% 14% DEVELOPMENT IN MORTALITY (PERCENT) 15% Industry average MSN NL 8% 5% 4% Focus on preventive fish health and reduced stress in smolt production and during stocking has given results Decreased mortality in Mainstream Significant improvement of production parameters Reduction of fixed costs 10G Source: University of Nordland 11G Est. 12G 77

78 Large potential for future growth in Nordland Northern Nordland with significant potential for future growth Strong biological results - No disease issues - Low levels of sea lice Available areas - Opportunity to expand within existing sites - New areas are available Economy of scale for well boat and processing will secure cost optimization but new licenses are needed 78

79 Agenda Capital Markets Day 2012 Part II Presentation Mainstream Norway Site visit Oksøy sea farm Site visit Dyping Hatchery 79

80 Oksøy Sea Site The first smolt was stocked in ,000 tons harvested in 1994 Maximum allowed biomass 5,400 tons Total production approx. 6,000 tons lwe Stocking of 1.2 mill. smolt every second year One site manager and 5 staff The fallow period is 12 months at this site 80

81 FarmBase 500 The FarmBase 500 is a feed barge constructed and delivered by Marine Construction Central feeding system which feeds 12 cages at the same time 380 tons silo capacity When the site is at peak biomass, we feed 50 tons per day 4 Cabins with separate bathroom Sauna and fitness room 81

82 Testing of Polarcirkel EcoNet High durability and escape prevention This long-life net technology used to make over 4,000 fish farming nets in Japan the last 20 years Also eliminates the use of antifouling paints and ongoing net changes Easily recyclable Technical data; - PolarCirkel 400 mm -120m. - EcoNet: - Depth of cylinder 17.4 m - Depth of bottom 9.6 m - Circumference of net m. 82

83 Dønnland Well Boat Next generation wellboat which will be put in operation late September ,500 m³ capacity and state of the art technology First type of well boat that fulfills the requirements in the new regulation currently on hearing and supposed to come into force in 2017 Full recirculation of water Sea Lice filter both on intake and outlet of water 83

84 Agenda Capital Markets Day 2012 Part II Presentation Mainstream Norway Site visit Oksøy sea farm Site visit Dyping Hatchery 84

85 Mainstream Norway Dyping Hatchery Annual production of 2.5 mill. smolt split 50/50 between S1 and S0 Dyping was amongst the first hatcheries in Norway with an electric generator installed to produce electricity from the water intake The generator cover 80 % of the needed electricity of the production Uses sea water during winter time to enhance growth 85

86 Grading and vaccination Grading of the fish is essential in order to have fish with equal performance and good growth We also vaccinate all the fish manually before transfer to sea In one day 130,000 fish are vaccinated Laboratory and quality control are crucial to secure good performance and smolt quality 86

87 Growth hall In this hall we have 100 % control of temperature to maximize the growth of the fish Four tanks of 190 m3 volume and maximum biomass of 30 tons of fish The water temperature never exceeds 14 C because too strong growth increase the risk of deformities 4,500 l/min of warm water 87

88 Outdoor area The outdoor area consists of 10 tanks which uses natural tempered water In the winter time sea water may be used to boost growth on the smolt before transfer to the sea sites The seawater is pumped up from 100 meter deep and the temperature is approx. 7 C year around The seawater pump station has a capacity of 30,000 l/min 88

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