Atlantic Sapphire As

Hello everyone, and welcome to Atlantic Sapphire's earnings call for the first half of the year, and an operational update. My name is Johan Andreasen, and with me to present today is a student, our CFO, Karl-Erik.

Good morning and good afternoon. Going forward, we'll keep all of you updated on the latest developments in Atlantic Sapphire on a quarterly basis. Our quarterly operational update will follow a similar format as previous monthly updates, where we will open up for a Q&A at the end of the presentation. You type your question in the Q&A tab, but note that we will only ask questions from attendees that have identified themselves with names. John?

Thank you, Carl. In the first six months of the year, we were able to give the fish stable conditions that allowed us to work on fine-tuning in our blue house operations. We have harvested out all our initial batches with a high degree of maturation and higher than normal day-to-day mortality. Positively, we see no sign of the above normal earlier maturation issues nor higher day-to-day mortality on the new batches that are currently in the farm. After a very challenging ramp-up and commissioning period of Phase 1 in 2021, We saw a reduction of overall cost per kilo compared to the same period in 2021, despite seeing price inflation for most of our key production inputs. This summer, our new filleting facility was completed, which ensures cost-efficient processing, higher yields and improved quality control. Since we started harvesting in the U.S. in September of 2020, we have delivered consistent price premium achievements on our premium fish. Risk mitigation strategies have been implemented to address key operational, systemic and diversification risks. Phase 2 construction is focused on optimizing quality and cost, not speed. Finally, we completed financing of the Phase 2 expansion through a $125 million private placement, combined with a $98 million in additional debt from BMD. The net biomass gain of the new batches in Q2 came in at 1240 tonnes, an increase of 300 tonnes compared to Q1 2022. So far in the third quarter, we have seen significant improvements in our key operational KPIs. First, we are seeing low maturation across all batches in the Blue House. Further, we are also registering low mortality across the farm, and considerably lower than in the first half of the year. We are currently feeding approximately 28 tons of feed per day, which is the equivalent of approximately 77% of our targeted daily feeding once phase 1 is in full steady state. Another milestone is that all our 19 RAT systems, both fresh and saltwater, are now stocked with fish for the first time. It's also worth noting that we have been operating the Miami facility for 17 months and counting, without any larger mortality events. To put that into perspective, it is the equivalent of operating one single RAS system for more than 20 years without incidents. As we have communicated earlier, we continue to expect to hit steady-state standing biomass early in the fourth quarter of this year. This means that we will have the necessary volume of fish to be able to reach our targeted biomass gain, as I will get back to on the next slide. The Q2 harvest volumes was about 400 tons hog. As pre-announced, we harvested quite low volumes in June as we were installing the new filleting line. In Q2 as whole, we had an average JAA index of 0.25 across the whole farm. We continued to take more tanks in use, which added more cubic meters of tank volume to distribute the biomass gain on. Right now, our standing biomass is approximately 3,500 tons, which is about 83% of the planned Phase 1 steady-state biomass. That means we will add another 20% of biomass to the farm. If we assume that we will have no further improvements from the actions we have taken, but simply keep the current growth rates, but assume that we have 20% more biomass on a fully stocked farm, that would yield a GA index of 0.42, or the equivalent of 8,500 tons of harvest annualized. Of course, our target is to continue the improvements over the next few weeks and months. so we can close the gap after the 9,500 tons budgeted. Seeing where we are tracking now makes us confident that we will be able to reach our budgets once the farm fully stops. I will give you some more details on that on the next slide. I would also like to point out that the tools we have to improve the JA index include both higher growth rates and higher standing biomass. The third quarter is going to be a ramp-up quarter as we get towards steady state. The Q4 biomass gain is expected to be in the range of 1,750 to 2,250 tons hogs. depending on our growth rates and FCR during the fourth quarter. The operational focus areas. On this slide, I would like to give you some more color on where we have identified room for improvement and a selection of initiatives that we expect will have a positive effect on growth rates and biomass gain. Number one is temperature. We are currently installing a new pre-cooling system for the intake water from the wells that will give more temperature stability than we have had in the past. Instead of sending 26 Celsius groundwater into our systems to be cooled locally in the systems, we will now be able to send 14 Celsius water from the wells directly into the systems. Second, lighting. Underwater lights is important for both growth and for mitigation of potential maturation. We have done a scrutiny evaluation of our farm and we have found that we can do better on lights. So we are now installing additional tank lights across the OG systems. Thirdly, nutrition. We have made some feed formula changes that will give positive effects on both appetite, growth, and product quality. Other than that, other focus areas are in processing. Our filleting line is operational, as mentioned before, but we are still doing fine-tuning in operations with a focus on yields, cost, and product quality improvements. Cost cutting, on that side, we have multiple opportunities identified. It's worth mentioning that in Denmark, we did experience significant reduction in OPEX costs once we achieved a stable operation for a period, and the tail of the commissioning-related costs eased off. Although we are battling cost inflation across the board on our consumables, We expect to see efficiency in the consumption of various production inputs going forward.