Grieg Seafood Asa Ord

Welcome to Greek Seafood's first quarter presentation. As usual, it's Atle Harald Sandtorv, CFO of the company, who is here, and me, Andreas Kvame, CEO of Greek Seafood. Then we will go straight on. This is for your own interest. We will first go through a little about the highlights and what has happened throughout the quarter. Then we will go more into the operational aspects of the various regions. Atle Harald will come in on the financial side. Finally, we will look at the future prospects and a summary of the quarter. Operational EBIT in the quarter was 292 million against 385 in the same quarter last year. In Rogaland, they delivered the next best result ever in the region. I am very pleased with the development there. I will come back to that when I comment on the different regions. Results in Norway. Finnmark is significantly affected by previous biological events. You can read Spiro, but also biological challenges when it comes to links with networks that have been in this area. We have through the quarter. This is the first generation in Newfoundland. It has good weights and good quality fish. We are very pleased with it. Post Malt is a very important part of Greg Sifenten's strategy. It shows the success story from Rogaland that it is in the right direction. Construction continues in Rogaland, Finnmark and Newfoundland. We are working on identifying a partner for further development in Canada. I will comment on that later. For the second quarter, the slag volume is going down slightly. 17,100 tons in this quarter. But the guiding for the year is maintained at 81,000 tons. A little about the operation. As I said, the rugs are almost 40 kroner in EBIT kilo. This is the best result I have ever had in this region. This is largely due to our post-mortem strategy. All the fish in Rogaland are slaughtered on an average weight of 6 kilos. This also means that you reach markets that are well-paid. This has been very positive. Production is going well. The sea temperature has been low. 1-2 degrees lower, both in Finnmark and Rogaland, than what we normally have in sea temperature. But at the same time, it has been fine. We took out some extra fish in the quarter, because of the sea temperatures and the risk of winter sores. Winter sores have been there, but we took them out. In Årdal, we have... We are working on constructing a large post-mortem facility for 6,000 tons. It will be finished next year, but the first implementation of the facility is in the fall. We expect 3,600 tons of slaughter volume in the quarter, and slaughter at the end of the quarter from now on. The costs are slightly higher, but the main thing is that the volume is lower during the period. The grading is maintained at 28,000 tons in this region. Finnmark has been a challenge for us for two years now. It is largely due to the spiro parasitic that we got into the facility. Hopefully, the last time we talk about it in the second quarter, it will be finished and there will be no spiro fish in the sea. The biological situation in Finnmark looks good. But in addition to the fact that we had Spiro, we also got the link magnet, which I see several of you have mentioned. And it came in some areas, more or less in other areas. And for us, it was the social hammer fest area that had a significant impact on it. We have done a lot. We are very concerned about fish health and fish welfare. And when we work here, we have a very high agenda in the company. Our post-mortem strategy is one of the most important measures. It shows all the results in Rogaland, with significantly higher survival, lower mortality. So it is important that it goes on, but it takes time to get to the place with everything. But in Adamshelt, construction goes as planned. We have introduced a new vaccine against winter wounds in the area. We have in each set, as previously mentioned, a large tube filter to take all the water that comes into the fishing and smelting facility in Adamshelv. I was there last year. And we have also added more capacity, considering that if there should be any, we are already out. That is, the fire water that we had in Rogaland, we have now moved to Finnmark, because in Rogaland, 65-70% of our fish was not treated at all. So the capacity has now been moved to Finnmark, to have a greater willingness to be out earlier in the autumn, if it hits us, whether it is salmon or scott. We will continue to have the effect of spiro in the second quarter, but when we have released what is guided by volume in the second quarter, then we will be spiro-free in Finnmark. And God forbid that this will happen again. We will maintain the volume of 20,000-20,000 tons, and that is like in Rogaland, from now on, the fish will be released in Finnmark. So B.C. is very little we have slaughtered. And when we slaughter it, it is also so that in the North American market, the prices were very low throughout the entire first quarter. Surprisingly low compared to, for example, Europe and Asia. So it was low, but that was mainly due to the fact that quite large volumes came in from other regions such as Chile. Canada, and we were probably part of the cause as well. As we came in with a completely new region with 5,000 tons, we entered the market at a relatively short time. I will comment a little more on that when I come to Newfoundland. Production has gone well in BC. The costs have dropped compared to the fourth quarter. A little higher costs now in the second quarter, but not much. And the positive thing is that in the second quarter, with relatively good market prices, we have a record high volume, or at least 10,000 tons from BC. And that has come out now in this quarter, and it has gone very well so far. We are also working on the guiding in this area, on the 15,000 tons as before. So, a little over to Newfoundland. It is, as I said, a completely new region. And there has been a lot of excitement connected to this region. Both from the outside and the inside. How this will go. We have had many... But biologically it has gone very, very well in this area. We have high survival on the fish. We have high quality fish with a high superior ratio. We have not yet seen salmon. We expect salmon to come at some point. But there is very little wild salmon in this area. We have monitored the river Elven in 2016. So we know how many salmon go into the river Elven. In these eleven, which we have monitored and counted on salmon every year, there is a place between 370 and 450 salmon in total. So it's not very much. So hopefully the pressure is not as much on the west side. We have a good small deal there. In relation to what you put and what you slaughter, one per 4.3 is significantly higher than the average in Norway. But the cost is... It is a region that is ramping up. There is a lot of fixed costs at the start, and then production comes afterwards. That is what we are working with, but we see several areas for improvement. The average weight in the quarter was 4.4 kg. In total, the whole generation was slaughtered at 8,500 tons. Of this, 5,300 in the first quarter. The guidance for the next generation, which is going to be slaughtered this year, is 11,000 tons. And in contrast to the last generation, you can now start much earlier with slaughter. Our challenge was to get started when you start in such a region, and you have a logistics system in the world that is a bit in jeopardy, then equipment comes in too late. We were supposed to start in the beginning of October, but we did not start until the end of November. This is a sign that a lot of slaughter is being practiced this year. This year we will start slaughter in the third quarter. Tillegg fortsätter med konstruktion av postmålanlegget i Maristown. Forventa det er ferdigt i 2026. Det har alldeles kommet litt mer tilbake til fordelingen av CAPEX gjennom sin gjennomgang. Another pillar in our strategy has been to work more downstream. This is seen both in terms of internal needs, but also in relation to the market, which asks for more and more sustainable products. We have chosen to set up this at Gardermoen, which is a central place for a hub where the logistics out of Norway largely goes from this area. For us to combine Rogaland and Finnmark, this is a good place, in addition to the fact that we can actually exploit the slaughterhouses even better by taking the picking and this on the cars. at Gardermoen, at the logistics hub, if you want to call it that, and the sales hub. We expect this to be ready and ready for use by the summer of next year. This will also, if we were to have challenges in production and degraded products, they will also be a tool to upgrade this fishing to high-quality products. Then I will give the floor to Atle Harald.

Yes. Thank you, Andreas. Then we move on to the financial side. I'll start with some comments on the results. I'll comment on some of the most important posts. Starting with our revenue, which was 2.2 billion. It is up compared to the corresponding quarter last year. It is also in line with the fact that we have started to slaughter from Newfoundland. A point here is that Newfoundland fills B.C. very well on the revenue side on the American market. We get slaughter in the quarters from Newfoundland where we have not had so much slaughter from B.C. The operational revenue was 292 million, and we have a negative fair value line of almost 600 million this quarter. This must be seen in connection with the fact that we have slaughtered biomass. Our financial line is positive with 18 million this quarter, and is due to an increase in CAD, Canadian dollars. This means that our share in Canada is valued higher, and part of that profit is transferred over the financial line. We have a tax cost of 29 million, and a negative result after taxes of minus 330 million. A little about the EBIT Kilo development. We had a minus of 3 kroner in Q4 2023. And then we have moved to a plus of almost 14 kroner per kilo. And the main reason for that is better prices. And as we can see from the overview, the costs have been quite stable over the quarter. Otherwise, we are still working to improve our operations, especially in terms of cost efficiency. Our goal is 150 million in the next two years. A little about our yield. It has gone down through the quarter from 3.8 billion to 3.6 billion. An EBITDA of NOK 443 million. We have also freed up labor capital by investing NOK 302 million. We have spent NOK 284 million on investments. The other effect is NOK 220 million. This is a major change in the supply chain and the payable interest. Otherwise, the free liquidity out of the quarter was 1.3 billion. After that, we have increased our banking facilities by 1 billion. If we take that with us, we have a free liquidity of 2.3 billion. Yield per kilo is now 44 kroner. A little more detail on our debt, which consists of a green bond loan of around 1.4 billion, a term loan of 1.3 billion and a truck revolver loan of 680 million. We have a balance of 312 million. This gives us the 3.6 billion in net interest in Berne Gjeld, exclusively IFRS 16. 56% is linked to basic financing. A little more about our investments. As I commented, we have invested 284 million in the quarter. This is 92 million in rainwater maintenance investments, and 192 million in growth investments. The main thing in this quarter is the construction of the postmortem facility in Finnmark, and the location of the post in Nufonen. We are now guiding a total investment of 1.5 billion NOK in 2024. This is up 400 million NOK. This is due to the fact that we are starting to build on the post-molding system on Nufonen. This is the 400 million NOK that will run this year. The rest, as Andreas mentioned, will be divided into 2025 and 2026. Our equity investments this year are estimated at 300 million, and the post-mortgage investment in Finnmark is 500 million. And then we have localities in Newfoundland that will be added to the 400, so there are 300 million on that. So in total there are 700 million that are related to growth in Newfoundland. The need for working capital out this year is 700 million, and that is essentially the construction of biomass in especially Finnmark that will be added. Summing up the financial situation, we are comfortable with the financial situation. We have a good equity percentage of 49, and according to the Bank Covenants, it is 53%. The free liquidity, if we take into account our new frame, is 2.3 billion, which is a pro forma number, and the help per kilo is 44 kroner. And then we have an exchange policy that says that we will pay 30-40% of the result after tax. And we paid 4.50 kroner in 2023. And then the board has proposed 1.75 kroner to be paid out in 2024, according to the 2023 budget. Then I give the floor back to Andreas for summary and future considerations.

Thank you for having me, Lara. Let's take a look at our framework. This is what I've been talking about. The guidance for this year is up to date. In the second quarter, we will have 17,100 tons. And you know that I have a high volume in BC. When it comes to the market, it's good. For the time being, we expect through the second quarter still a strong market. That is, the situation is now and in the future. We also expect that there will be limited volume growth, if any, throughout this year for some of the regions or some of the production countries. We expect zero growth. Our contract share is low, significantly lower than we normally would have had it, and this is again connected to a discussion that took place last year about the basic rights and this problem that is going at an enormous price. I expect this to come up in the future. We at Herdigt are working to get the Næstrøms activity in Gardermoen in place. And that is part of the plan. We expect a 28-29% VAP share in the company this year. It is related to the fact that we have not had enough capacity with our partners to be able to sell more. We should have done a lot more, but we have not had that. Now we want to get that capacity. So, Summing up, Rogaland delivers the next best results in a quarter, at some point. There is significant activity going on in fishing health and fishing welfare in Finnmark, something we are very concerned about. We have slaughtered the first generation successfully in Newfoundland, and what we also see in the next generation that comes is that it looks very good. In the first quarter, we have prioritized biomass growth in B.C., and now we will start fishing in the second quarter. The construction of the post-malt plant is planned in all the regions we work in. That is Rogaland, Finnmark and Newfoundland. And then there is Gardermoen, which I was at the end of. And then there is this process of finding partners in Canada, which many are excited about. That is also possible. There is good interest. It varies both from industrial and financial actors. In addition to that, we do not have much more to add to it, but we are working on this and we expect to have a conclusion on this, not before we see at least three quarters, within three quarters. Yes, that was it. Let's go through. Then I open for questions. At least on the web.

Yes, we can start on the web. There are two questions related to the expansion of Newfoundland. The first one is about why it is now taking a further expansion before you have found a strategic partner and increase the CAPEX.

We have had a strategy in the company that goes according to what I have been talking about when it comes to Rogaland, how successful it has been. The facility in Newfoundland is half finished. We want to finish it. And that is simply because the quality should not be diminished. At the same time, there is a big pressure when it comes to building activity at Newfoundland, which means that we risked coming very late. There are big windmills projects, there is a big prison to be built, there is a hospital to be built, and so on. So Newfoundland is a relatively small place. So we started to fear that this would take a long time if we didn't do it when the window was open. At the same time, it would increase the value of Newfoundland. If we had waited three to six years before this was done, there was a risk that we would not be able to get enough money. We get good profitability when the volumes come up. As it is now, the fixed costs are too high for us to get good profitability. We ramp up, and we do so gradually. It is learning by doing in this area, but we have good competence and we will take it further.

And then there is a general question about the partner process in BC and Newfoundland. Status on that. I think I just commented on that. Then we have a question that goes directly to milestones and status on that related to Newfoundland.

There are milestones in the future. It's when you get over 15,000 tons, as stated in the agreement. But it's the independent government that can decide if you want to go that way. They can decide that if they want to. I think that this is nearing the end of the milestone. So it's also possible to talk to Selger about making some adjustments to this.

So a question to the average weight in Rogaland. Do you still expect to have a strong average weight of 6 kg in Rogaland for the second quarter?

There is probably something going down there. But we expect to continue to have good average weights in Rogaland. Six kilos is unique when you think about a whole quarter and such a large volume.

Then we open up for questions from the audience.

Thank you, Herman Alnord. Can you tell us how the cost would be to set up in Finnmark without Spiro? Have you thought about that?

Yes, we have. We have a forecast for this, and what we see in our forecasts now is that the cost over the last half year, and especially at the end of this year, will begin to approach its levels in Rogaland.

Related to the prices in the US, you say that the 5,000 tons you had in the market in Q1 could have affected the prices negatively. Were you a little unprepared on how to place the volumes, or did it happen very quickly, or are there any special reasons for it to happen like that?

No, we were not unprepared, but we were perhaps a little unprepared on the logistics challenges, that they became so big. Because this is on an island. So you're going to land. It's a 6-7 hour ferry ride from Newfoundland to land. And as you've probably noticed, there has been a lot of weather in the area, so the ferry was set up. The fact that something comes late in the market, that's one thing. Another thing is that, and this is my job to find solutions for, if you look at the third quarter now, the ferry goes directly from Agencia to the US. So this season, as soon as you get started, but in the middle of the winter it is difficult to have the ferry operational. So we work with that, and we also work with other actors over there. Gander Airfield is someone who probably remembers and knows. A very large airfield that is there. So we also work with the same other producers, both of salmon and other species, like crabs and so on, that we can take it out from there. This was a completely new region for the market and a completely new producer. This has some time to build it up, but now I expect what I have done in both the fourth quarter and the first quarter, so that we see a completely different situation when we get into the third quarter. We can spread the harvest much more than we had to before, because now there is a high volume in a short time.

Thank you.

Kristian Nordby, Arctic Securities. Can you tell us a little bit about what you think about a partner in Canada? Is it a partner that should help with CapEx, or is it a complete sale of the new trade? Or how do you think about that?

No, at the moment it's a partner. If it's a complete sale, then we don't have a partner. But when it comes to this with partners, we are open to different types of solutions in that area. But concretely, I can't say anything more than that there is good interest, and that it is both financial and industrial that is interested.

And when it comes to the US, when they're going to slaughter 10,000 tons in BC, pretty much towards the end of Q2, is it a concern that the market won't be able to handle it that well? Or how did it go on Q1? Do you think it's going to be all right?

No, I'm not worried about Q2. We're already halfway through Q2. I doubt that we'll see the same situation as we saw last time. We remember that Chile is back in the winter. It looks to be a sad volume. The Norwegian volume is relatively limited in the market today. The price in the US market has changed significantly compared to the first quarter. It is very strong.

Henrik Knudsen, Carnegie. You mentioned that there was a lot of construction activity at Newfoundland, and that was why you started the next phase of the expansion, but given that there is a lot of, let's call it a stressed supplier chain, do you see that you are done with the expansion until the first half of 2026, or is there any risk that it will disappear?

Building activity is always a risk, but I feel we have taken a very good height, both in terms of time and contingency in our budget. Those who have been chosen as suppliers also have very good track records on building activity. The main enterprise is a large supplier over there, which has done a lot of such projects before. There is always a risk, but we have been very thorough in dealing with this. If something very wide happens, because all equipment is not produced in Newfoundland. When we did the first phase on the concrete, we had to go to Texas to find cranes. It's empty on the authentic side of what it is to build cranes. So there are things that can jeopardize, but as I see it today, I'm very confident about it.

Kjetil Kjørsen in ProFond. There was a lot of volatility in fair value in the last few quarters. Could you just take us through it briefly? Because it's not that easy to understand from the outside.

For value, it's a calculation of the future value of the fish. And what significantly affects the value from quarter to quarter is our market price and what we can sell the fish for. So that's one of the things that affects the most. But it would also be the case that if you build up the biomass, or the composition of the biomass, it can also affect the value. And if you have fish that you evaluate with a slightly higher risk, and that has happened, for example, in Q1, then it will also be able to affect the value negatively. So it's those elements that play in. The cost of that... So you think it will cost to produce the fish, of course the price you think you will get from it, and the volume. So there is a combination there, and then there are all four regions that play in here.

What is the biggest change that has happened from the end of the year to the first quarter?

The biggest change is the volume that we have slaughtered down the biomass, that is the biggest change. We have relatively little forage in the winter, and we have slaughtered relatively a lot. There were no more questions from the audience. Let's just check if there was anything on the web.

Put on your glasses.

You have been talking about this, Andreas, about the partnership in Canada. Are we looking for a partner for the whole of Canada, or just Newfoundland? You have been talking about that, but you can repeat that.

As I said, we are looking for a partner. That partner is for the whole of Canada, or parts of Canada. We are relatively open. Because we have one on the BC side and one on the Newfoundland side, or the total, which is open.

And then there is also a detailed question about partners, whether you should just go with Carpex or buy parts of Jont Venture.

That depends on what structure it will be until the 20th of last year. We'll get back to that. I don't have any more round times in one year, but when we get a little further in time, we'll be more or less concrete.

I think that's what we have there.

Yes, then I would just like to thank you for the meeting. Very good.