Grieg Seafood Asa Ord

Good morning and welcome to Greg Sifud's first quarter presentation. We appreciate that so many have taken the time to join us. My name is Nina Willumsen-Greg and I'm joined here today by our CFO, Magnus Johannesson. I've been CEO in Grieg Seafood for eight weeks. However, I've been in the company for 10 years across regions and working in different roles in the full value chain. The last four years I've been heading Rogaland and I bring with me first-hand operational experience and a deep understanding of the building blocks of a successful salmon production. I'm entering this role at a challenging time for the company. Grieg Seafood have a long and proud history and a strong asset portfolio, but we're not happy with the results that the previous years. The combination of an ambitious CapEx program, biological challenges, and a turbulent geopolitical situation has led us with a financial situation that isn't sustainable. Ensuring financial robustness is at the top of our agenda to create value for all shareholders. I believe both Magnus and myself can bring new perspectives to the company while building on the foundation that is. And with that, let's take a look at Q1 and our key priorities for 2025. For Q1, we deliver an EBIT of 220 million, or 10.6 per kilo, with Rogaland the main margin contributor. As we have seen lower spot prices than anticipated throughout Q1, this reflects early operational improvements. Farming costs for the full group improved 3.4 kilo versus Q4 due to better biology. We are happy to report that underlying production and growth has been good in all regions. Especially in Norway, growth and biology has been strong, and we went into Q2 with maximum MIB in both regions. We are on track to harvest just below 21,000 tonnes in Q2. A main priority in the quarter have been our financial transformation program. And before heading into operational review, I will give a status on. The transformation program launched at the beginning of the year has been essential for the company. Reallocating resources to our strong Norwegian asset base is the main strategic change. This is not only a shift towards Norway, but a shift from growth to profitability. We will prioritize initiatives that strengthen equity, reduce debt, and protect cash flow to maximize shareholder value. Strengthening our financial flexibility has been the main priority through first phase. We successfully placed the 2 billion NOC hybrid bond and launched the sale lease back of our post small facility in Finnmark. In addition, we're strengthening our financial discipline with the goal of increasing operational robustness rather than growth. In Canada, we continue our focus on maintaining optionality while we explore strategic options and minimize loss-making. Our Canadian regions deliver stable production in the quarter, and we believe there is long-term potential in both coastlines. However, to secure financial strength, Grieg Seafood have reduced committed capex of more than 600 million, mainly by demobilizing the PSA site in Newfoundland. So heading into the regions, Rogaland is consistently delivering operational performance in line with leading peers. Harvest volume exceeded guidance by 900 tonnes due to favourable growth and continued low mortality. We're happy to see that our vaccination programme for Moritella has strongly improved the share of superior quality fish from 57% last year to 83% this quarter. We report an operational EBIT of 260 million, a very strong quarter given the lower prices. As a fish farmer, it's especially rewarding when strong biological performance and resulting low farming costs are the main driver behind our results. While realized prices during the quarter was down 13 NOC from Q1 2024, the strong result was driven by eight NOC improvement in cost. This is mainly driven by very strong sites harvested and we expect to stabilize around 60 NOC per kilo from Q2. Still 3 NOC below previous guidance. An important key event was reached at the end of the quarter when the first fish from Årdal, our new post-malt facility, was stocked to sea. The fish reached 1.5 kilos at stocking, once again confirming our leading position in post-malt production. The facility itself remains on track and the very first generation has exceeded our expectations. In Rogaland, we estimate 9,200 tons harvest in Q2 and keep our guidance of 30,000 tons for the full year. Moving to Finnmark, I have great expectations for production this year. Leaving behind two very challenging years, we entered 2025 with high biomass and the fish in the sea looks strong in general. Harvest volumes are up 500 tons above guiding. We have done some important changes to our production in recent years, a renewed vaccination program, improved treatment capacity and site structure. I believe we are just starting to see results of these improvements. The achieved price was 81.3 NOK, up from last year, driven by size and quality. The share of superior grade fish increased from 47% last year to 64%. While this is still below our target, we're encouraged to see that the vaccine is starting to show positive results. Going into the year with high MAB, the incident of CMS at one site will have no significant effect on overall production for 2025. However, harvesting out smaller fish, we have an estimated effect of 25 to 30 million in Q2. We estimate just below 8,000 tons next quarter and 32,000 tons for the full year. up 25% from last year. Finnmark reports an operational EBIT of 110 million NOK, mainly driven by improved prices from Q4, but also by more than 3 NOK improvement in cost. Moving to Canada, in BC we had no commercial harvest in the quarter, only a small tonnage of brood fish. The result for the quarter ended at minus 28 million and harvest will commence from early Q2. Both freshwater and seawater production has been stable so far into the year. We've had no bigger incidents on low oxygen and algae. However, the fish we harvest the coming months will have high cost due to last year's environmental events. 12 months rolling mortality decreased to 84%, mainly due to these prior events. Because of the political situation, both for tariffs and announced open net ban, we have a cautious investment approach in B.C. However, we observe a shift in tone from the new government with an increased focus on an economic growth and local employment. We view this as a potentially positive change and look forward to a constructive dialogue supporting long term viability for salmon farming in B.C. We estimate a harvest of 4,000 tonnes in Q2 and 12,000 altogether for the year. Focus remains on cost control awaiting regulatory clarity. Despite low seawater temperature, we've had good biological performance in Newfoundland with high survival rates. Second generation harvest concluded in Q1 with a superior share of 95% and strong price realisation. Newfoundland is undoubtedly a challenge for Gregg Seafood, given our financial situation. Being a greenfield project, it has great long-term potential, but the region is constrained near-term by our capital discipline. Production remains subscale and farming cost is elevated due to underutilization. As we did a significant impairment in Q4, we're working together with our employees in Canada to find a good way forward that is not loss-making. There will be no harvest from Newfoundland in Q2. Harvest will continue in Q4 and the estimate for the full year is 10,000 tons. I'll now hand it over to Magnus who will go through the financial figures.

Thank you very much Nina and good morning everyone. My name is Magnus Johannesson and I'm the CFO of Grieg Seafood. I think starting out Q4 gave us quite a lot to reflect on. We had a big impairment, we had challenging times in the company and I think it's safe to say that we are yet to be in the green. We are still focusing on our financial discipline. we are still focusing on strengthening our balance sheet, and we will continue doing so until we are able to provide the profitability that our shareholders expect. Yet, we do show in this quarter that we are changing direction. We are moving from growth to profitability. We are moving from being ambitious in Canada to ensuring that we reduce loss-making, focusing on Norwegian regions. Against that background, I'll start going through the financial statement, starting with the profit and loss. So looking at the top on our revenue, it was positively impacted by increased harvest weights, but when compared to Q4, we do have slightly higher downgrades, but still an improvement year over year when comparing the same quarter 24. Moving then down to our farming cost, our farming cost comes in at 73 NOK per kilo of improvement from Q4. This is primarily due to that the cost of fish harvested and cost of reduced survival is lower than what we expected. At the same time, we also have to look at the EBIT. Our EBIT for the quarter and for all regions are 10.6 NOK per kilo. However, if we isolate our Norwegian assets, we have an EBIT per kilo of 24 NOK, which we do believe shows the potential of profitability in our Norwegian assets. Going then to our operational EBIT in sum, our operational EBIT is approximately 221 million Norwegian kroners, but this includes 68 million of one-off costs related to organizational changes and related to demobilizing the PSA site. Of course, this is a high one-off cost, but it's also necessary to do the required changes in our direction back to our Norwegian assets. I will not go into the details of the net financial items, but I think it's good to say that you can find the details of how we managed the hybrid bond in Note 7. So I will leave that to self-study. Moving then to our cash flow, I think to highlight one key topic, we have improved the cash situation in the company with approximately 1.2 billion. And this is necessary because we came into the corridor with significantly low cash reserves, and we had to do very quick actions, hence the hybrid bond. If we then break the cash flow down to the three components, we do see our operational cash flow come in at positive 158 million impacted of our building down biology and the biomass and also the changes in working capital. In terms of our investment, it comes in at a total of 167 million. This is significantly reduced compared to previous quarters because we no longer allocate the same amount of capital to newfoundland. I will come into the details of that later. And then, of course, we have quite a big post here on financials. So this is, of course, due to the hybrid bond being placed at gross 2 billion. But at the same time, we have allocated this to repay our debt. And we will allocate this in full for repaying our debt. Hence, we paid down 500 million on our bridge loan facility that we took up in Q4-24, and we also repurchased 173 million of bond shares in Q1. The reminding of the hybrid will be allocated towards repaying the green bond of approximately 1.2 billion. Going down to the investments, I think it's important for me to say that we are investing against two key strategic rationales. One, we are increasing the robustness and operational stability in our company, focusing on our Norwegian assets and ensuring reduced loss making in Canada. Secondly, we are expanding downstream, finalizing and continuing our secondary processing facility at Gardermoen, and we are on track on delivering on that timeline. Against this strategic background, we are investing 167 million in the quarter, predominantly tied to growth investments or robustness investments on Postsmolt in Finnmark. The expansion of Adamshalt is on track and on budget and we are very happy to report that we do expect fish to be put into that facility in early 26. In terms of maintenance investments, this is tied to ensuring the operational stability in Finnmark and of this, half is tied to Finnmark. Going forward, we will still maintain our investment strategy, and we expect to invest approximately 800 million for the remaining of the year, and hence standing firm on our guiding of total investments of approximately 950 million. Having some water before the topic of the day, net interest-bearing debt. I think I want to start this page about just addressing two things. So one, we acknowledge that our hybrid bond is not a long-term solution for Gregg Seafood. We see this as a temporary fix to ensuring that we have the sufficient buffer on assessing the way forward for Gregg Seafood. Secondly, we do believe that we are committed to addressing our balance sheet. We also agree that we cannot continue with this current leverage that we have in our company. We're taking this seriously and we will continue doing so. With that being said, I think I mentioned many of the things already on this page, but going out of this quarter, including on undrawn credit facilities, we have approximately two billion in free liquidity as of going into Q2. The rest is quite heavily detailed in the report, so I will then take any questions afterwards if needed. To sum up the financial transformation, this is a very Yeah, a lot of text, a lot of boxes. But let me try to take you through what we have done. We went into Q4 with a difficult financial situation. And it is still difficult. But we said during Q4 that we would do three financial levers to achieve better financial stability and flexibility. We did two out of three. And the third one is ongoing. We placed the hybrid bond. and also did a hedge on that interest on the Nibiru tied to that hybrid bond. Secondly, we did review our cutbacks in Canada, also an operational review in terms of ensuring not continuing loss making. And this yielded the results as expected. We are no longer in any risk of breaching our covenants. and we do have sufficient cash to continue operational efficiently. And then, on the sale leaseback, this is still in progress, but when we presented this on the 20th of February, the interest from foreign investors were significant. Hence, we listened to the feedback that we received from our shareholders, took a step back, and are relaunching this as an infrastructure investment to international investors. We do see this sale is back to be closed in the second half of the year. To sum it up, we are continuing this effort, and we also appreciate the support in these measures. And on that note, I will hand it back to Nina to go through the outlook.

Thank you. As I said, we went into 2025 with a renewed energy, I think, as a company. For market outlook, the long-term fundamentals remain strong. However, prices this year will be low, and that is, of course, somewhat of a worry for us as a company. Norwegian export volumes are up 19% in the quarter with higher superior grades and harvest weight. And I believe it's a long time since we've seen these good environmental conditions across the board. Spot prices was consequently lower and more volatile than expected coming into the year and we're monitoring price expectations closely. We have a total contract share for our Norwegian volume of 30% for Q2 and 26% for the full year. While tariffs are not good for any industry, I believe Salmon has repeatedly proven to be resilient to geopolitical shocks. We believe that the direct effects from today's tariff levels are limited, and a zero tax agreement from Canada to the US is positive for our Canadian business. We are working to increase our presence in the market, and in Q1, construction of our value-added processing facility at Gardermoen is progressing as planned. And we aim to implement production late this year. The strong production from Q1 have continued into the second quarter, and we believe we have a robust volume guidance for the year with 84,000 tons across the four regions. As a result of strong biology and continued focus on cost control, we expect underlying cost per kilo to improve. However, as mentioned, Q2 will see somewhat higher cost in Rogaland and Finnmark. So to sum it up, we are moving in the right direction, but for Griegs Seafood 2025 is a transition year focused on cost control, capital discipline and full execution of our transformation roadmap. As a new management team, we're assessing all regions to see how we can reach full potential to create shareholder value. And we're focusing on financial stability, operational enhancements and future improvements. So while the past quarters have tested us, they've also clarified where our strength lies and where focus must be placed. Politics and regulations are changing fast, both in the marketplace and across our production regions. Latest with the white paper Havbruksmalingen in Norway. For Griegs Seafood, we have acknowledged that we need to shift our focus from growth to profitability, and that will position us for the future. And with that, Magnus can come up to the stage and we can open for questions.

Thanks, Herman Dahl, Nordea. Could you say something about the differences in terms between the players you discussed the Salee spec with earlier on and the more, I guess, international infrastructure players you're in discussions with now?

Yes. Do I need a microphone? I'm good? Okay. Yes, we do expect approximately 5% to 10% value uplift on the Salee spec.

Hi, Alex from D&B Carnegie. Just on the cost guidance in Rogaland, it's in the mid 50s now, slightly higher in Q2. And you mentioned 60 for the full year, implying that the second half will be higher than 60. Can you just try and clarify why cost is increasing in the second half?

I think first of all we in Q1 we harvested from a very specifically very good sites so and I think 60 is more our long-term target in that region.

And in terms of the strategic review you had on the Canadian business, it was postponed due to the uncertainties with tariffs, etc. Now it seems like the tariff situation might have eased off a bit. Is that something that could be re-initiated?

I think we have been open to that. We are looking into all opportunities in Canada. I think, as I said, there is a great potential in both those regions, but Greek Seafood cannot lift those regions on our own. So looking into various opportunities.

And final question on Finnmark, the one of the 25 to 30 million. That's a pure cost increase because of the smaller fish. It's not including the price effect of smaller fish. Is that correct?

It's all in. Okay. Yes, we managed to sell approximately 50% of the harvested fish on our price campaign. That yielded very good results.

Okay, so it's basically all in. Yes. Okay, thank you.

Christian Norbert, Arctic Securities. Just a clarification on BC. You guide cost next quarter in line with Q4 24, but there you had no volumes then? spelling mistake it should be q1 yes q124 yeah okay yeah thanks and in terms of liquidity during q2 you will repay the bond and then you will do the salee spec during the second half as you said we will obviously have enough cash as i see today but it's going to be relatively tight are you going to have increased rcfs in some ways or how do you think about that

We do focus on ensuring that we have sufficient cash to operate it, but that's also why we are safeguarding our RCFs of approximately 650 million to allow for drawing on that if needed. But we do believe that we should have sufficient cash and then with the sales back additional 1.12 billion, which will be sufficient for the whole year and coming year.

Thank you.

We'll take a few questions from the web. From Ulf Gritemark. Are you in any conversation regarding sale of the Finnmark region and have you received any kind of non-binding offers for the Finnmark region?

Our main focus is to create value in the regions that we have and I know there are a lot of rumors out there. We don't comment on those.

So the follow-up on what's the probability of initiating strategic review of more regions in Greek seafood regarding sail split up?

I think that was the same question as before, so I stand with that answer.

And regarding Canada from Alexander Lindman, following the write-downs in Canada that has kind of contributed to the loss in Q1. Are there any scenarios where these values can be reversed or realized through a sale or partnership?

So if you do a sale or partnership, you would have a fair value. So then you would not write it up. That would be a profit or a loss. If we were to own them ourselves, the threshold for reversing an impairment is quite high. It's always an opening in the standards, but we are not focusing on optimizing for reversing write-ups. We don't think that's... It's a high bar for us, yes.

That was all from the web.