Atlantic Sapphire As

Hello everyone and welcome to Atlantic Sapphire's presentation of the 2022 Integrated ESG and Annual Report. I am Johan Andreasen and with me to present today is always, as always, Carl-Ori Haag. In this presentation, we will give you some of the highlights of 2022 for Atlantic Sapphire from a financial and ESG perspective. We will also give a brief operational update that is based on the update we released together with the private placement on March 16th. Although the story is similar to one month ago, we hope it will be useful with a recap of what the company is focusing on over the next few months.

Hi everyone, and thanks for listening in. In an effort to make the presentation easily accessible for all our interested stakeholders, we have pre-recorded the presentation so that everyone can listen in whenever it suits them. If there are any other questions, don't hesitate to reach out directly to Johan or myself afterwards.

Thank you Carl. I will start with a quick repetition over Atlantic software is today. The company is currently fully focused on our American operations. Sapphire is unique to any other salmon farms due to our national given patented water intake and discharge infrastructure that we believe is an enormous advantage as we scale up our business. The company has made significant investments into construction of our 9.5 kilotons Phase 1 facility and part of the 15 kilotons Phase 2 expansion. mostly made before the COVID capex cost inflation. With current construction costs, the replacement value of our infrastructure is way higher than the capex spent. We have a considerable physical asset base, including land, groundwater wells, hatcheries, smolt facility, 36 grow tanks, harvesting, filleting facility, and all necessary supporting infrastructure. Extensive knowledge has been gained from being a first mover and building up more than 10 years of unique experience at large scale. We have also developed a recognized consumer brand and existing offtake, setting the stage for the future. So over to some operational highlights. I will start with a summary of some biological KPIs for Q4 and Q1. The net biomass gain in the first quarter came in at 640 ton, which is in line with Q4 of last year. Our focus over the last couple of quarters has been on heavy infrastructure upgrades and operational improvements. Unfortunately, feeding and production has been negatively impacted by these activities, as we have not had sufficient production capacity available to us while this work has been ongoing, primarily tied to biofiltration. In the same period, we have seen higher than desired mortality rates, The nature of this mortality is different to what we have experienced in the past with large events with high mortality in a short period. The mortality we have seen in the period behind us is more spread over a longer period, but it adds up to a substantial volume. That being said, we are confident that the upgrades we have been doing is what was needed to be done to set the stage for a safer production environment for our fish. and good biomass gain in the future. We had approximately two and a half kilotons of standing biomass and about six million fish swimming in the tanks as the end of Q1. Q1 harvest volumes was around 400 tons hog, and we do expect the second quarter to be similar in size of harvest as we are building up our standing biomass to a fully stocked farm that is expected to be around mid-year. From that point, we expect our monthly harvest volumes to be around 750 to 800 tons monthly. So, over to price achievement. The average price achievement in the second half of 2022 was reduced to a high share of small fish harvested. We do expect to see higher prices going forward due to a combination of larger fish sizes and fewer downgrades. We expect to see a price increase in the first half of 2023 compared to 2022. From the second half of 2023, we expect that 80 to 90% of our harvest volume will fall into the Blue House Premium category and return an average sales price of $12. Over to you, Carl.

Thank you, Ivan. So in this year's version of the ESG report, we have focused on filling some of the gaps that we've identified in our ESG reporting. We will not go into detail on everything that is covered in the ESG report right here and now, but recommend everyone to read the report to learn more about our unique sustainability opportunities. The materiality matrix that we're showing on this slide shows a selection of the focus areas for Atlantic Sapphire that have the greatest impact on our shareholders' decisions and where we as a company have the greatest impact. Jumping to the next slide, we would like to highlight some of the most important ESG milestones achieved by the company in 2022. In this year's report, we have introduced scope one and two GHG emissions reporting. We have also started the process of calculating Scope 3 emissions for our next report. Another key target for us is to transition over to renewable energy. In 2022, we've engaged with the local power company, FPL, on a plan to transition to solar energy over the next years. Although this will take some time because FPL needs to build up more capacity we're happy to have a path towards green electricity ahead of us. Last year, 80% of finished products were packed in compostable and recyclable shipping boxes. 100% of byproducts from filleting operation was sold as pet food ingredients, and we maintained a fish in fish out under one, making Atlantic Sapphire a net marine protein producer. We were certified by the American Heart Association as hard checked. And finally, we supported several community initiatives with employee representation. We encourage all of you to open up our history report to learn more about the targets that we're setting for 2023 and longer term for 2030. Moving over to the financials and starting off with the P&L statement. In total, we harvested 2,253 tons head on gutted in 2022. In the US, up 26% from the 1,788 tons that we harvested in 2021. Revenue for 2022 came in just below $19 million, up by 2.1 million from 2021. A year, we also had some harvest volumes from Denmark. Cost of materials was up by 4.4 million year over year, attributed to an increase in cost of goods sold and harvesting, processing and shipping costs here in the US. Indirect production costs expensed through cost of materials for underutilized capacity was approximately flat year over year at around $16 million. As Johan repeated in the operational update, We did a lot of infrastructure upgrades in Q4. In dollar terms, we spent around $2 million in extraordinary temporary labor costs tied to this work, the majority being on the biofilters. Salary costs were down by $4 million year over year. Although headcount increased from 2021 to 2022, the group had a decrease in share-based compensation costs, temporary labor, and other payroll costs and benefits. In 2022, we saw a significant $8.4 million reduction in other operating expenses driven by lower temporary chiller rental and operating costs of $5.9 million. The chiller costs in 2021 in comparison were as high as $11 million. As highlighted in our first half 2022 report, We did a $25.3 million reversal of the impairment of the Denmark asset after the successful completion of the insurance case in May last year. The adjusted Group EBITDA loss, excluding the Denmark impairment effects that I just mentioned, was reduced by $10.4 million to a negative $73.5 million, driven by overhead cost reductions and the fact that we didn't have any negative EBITDA contributions from Denmark in 2022. In conclusion, 2022 financials reflect ramp up of US phase one production and the ongoing cost cutting initiatives that we have. As a general comment, the main focus for Atlantic Sapphire is to reach profitability. There are three important areas to attack in order to get there. First, higher production volumes. Second, higher price achievement and third, lowering fixed costs. The key production volumes and higher price achievement is tied to biological performance, which we expect will improve now that the majority of the infrastructure improvements are behind us and we expect to be able to offer the fish the right conditions to thrive. On the fixed cost side, we see several opportunities to cut across many different line items. By reducing the fixed cost, we reduce the harvest volume that is required to break even. One example is the new chiller bank that is expected to reduce our chiller rental cost and our electricity consumption by as much as a third. We are already seeing these effects. In the same way, we are working our way through every line item in our P&L as we target profitability later this year. Other areas where we're currently cutting costs include chemical use, labor cost, and oxygen. Moving over to an overview of the balance sheet. The group ended 2022 with total assets of $357.5 million, an increase of $46 million from one year earlier. The vast majority of the company's assets are PP&E over $300 million in total net of depreciation. Total 2022 capex was 52.4 million, largely tied to US phase two construction. At year end 2022, we had invested around $91 million into the phase two projects. Group equity, as of December 31st, 2022, was just shy of $300 million. up from 240 million the year before. The cash position at the end of 2022 was 23.7 million, but as most of you are aware, the balance sheet was subsequently strengthened last month with the $55 million private placement we successfully carried out. Right now, we're in the middle of the subscription period for the subsequent offering that may raise up to 100 million NOC in additional financing. The net interest bearing debt at year end 2022 was $23.4 million with $47.1 million in drawn term debt on the balance sheet at year end. In addition, we have access to a $20 million undrawn RCF facility and have $100 million in undrawn term debt earmarked for Phase 2 construction if we take the latest amendments from March 31st to our credit agreement into account. The last financial slide that we'll show you gives an overview of the split between the different segments of the group. Given that we didn't have any production in Denmark in 2022, almost all of the group's activity is in the US. As mentioned briefly earlier, the P&L effects in the Denmark operation in 2022 were largely tied to the insurance settlement after 2021 fire. This will of course continue to be the case that we will continue to have all focus on the US also going forward. The last slide before I give the word back to Johan for concluding remarks is a summary of the status of our phase two project, which is unchanged from what we shared one month ago. To repeat, Phase 2 is estimated to take the total run rate production volume up to 25,000 tons head-on gutted per year. As mentioned in the summary of the financial statements, around $91 million was invested at the end of 2022, with cash conservation in focus until we make the decision to speed up again construction later. We estimate that maximum $10 million has been spent in additional capex in Q1 2023 and expect an even lower number in Q2. Our estimate for total phase two capex remains unchanged at 275 to $300 million. The phase two team is currently working on value engineering and on finalizing the design and phase two budget over the next months. Importantly, as stated in the takeaway at the bottom of the slide, phase two construction spending will be kept at the minimum until phase one reaches breakeven in line with what we've been communicating before. So with that, I'll give the word back to Johan to wrap up the presentation.

Thank you, Carl. Despite the fact that we have put a disappointing year behind us, Atlantic Sapphire is at an inflection point and I want to sum up some of the things that I think are important to underline. Our company has done significant infrastructure upgrades and taken a new water chiller system in use to ensure a safe production environment for our fish. Secondly, we have entered into a collaboration agreement with our largest shareholder, Nolax, one of Norway's most profitable salmon farmers and also the largest privately held salmon company in Norway. The equity race we completed in march is securing sufficient capital to get to profitability later this year increased taxation and regulatory pressure on key conventional salmon farming geographies will limit growth in salmon supply which in turn will lead to strong salmon prices and increase in atlantic sapphires relative profitability While energy prices have been skyrocketing in Europe following the Ukraine war, the US energy supply remains local, reliable and cheap. We are operating in a very business friendly and stable regulatory environment in Florida. Given the current market cap, there is some considerable upside versus the replacement value of the company's assets. And with that, all that is left is to thank everyone for their attention today and wish you all a great rest of the day. Bye.