Leroy Seafood Grp Ord

Welcome to Leroy Sifu Group's fourth quarter presentation of 2024. My name is Henning Belsa, I'm CEO in Leroy Sifu Group and with me today I have Sjur Malm, CFO. First of all I will take you through the fourth quarter highlights and then Sjur Malm will take you through the key financial highlights and then I will come back and talk a little bit about Outlook and what we work with going forward. First of all, we start with this. Our goal is to create the world's most efficient and sustainable value chain for seafood. And our value chain is unique both for redfish and also for wild catch all the way to end customer. A fully integrated value chain is our competitive advantage. There are not many companies like Liru. Our customers are seeking sustainability and health, quality and traceability, stability and availability, and convenience. Our value position is speed and cost efficiency, reliability and trust. product and category innovation, traceability and quality assurance and clear ESG commitments. So this is a good match for our customers and we feel and we see Welcome to Leroy Sifu Group's fourth quarter presentation of 2024. My name is Henning Belsa, I'm CEO in Leroy Sifu Group and with me today I have Kjur Malm, CFO. First of all I will take you through the fourth quarter highlights and then Kjur Malm will take you through the key financial highlights and Then I will come back and talk a little bit about Outlook and what we work with going forward. First of all, we start with this. Our goal is to create the world's most efficient and sustainable value chain for seafood. And our value chain is unique both for redfish and also for wild catch all the way to end customer. A fully integrated value chain is our competitive advantage. There are not many companies like Liru. Our customers are seeking sustainability and health, quality and traceability, stability and availability, and convenience. Our value position is speed and cost efficiency, reliability and trust. product and category innovation, traceability and quality assurance, and clear ESG commitments. So this is a good match for our customers. And we feel and we see that We are getting more and more customers that find this value chain interesting and want to have a closer partnership with Liri as a customer and strategic partner for the future going forward. And then highlights of this quarter. Prices for salmon and trout is well below last year. Excellent biological performance with net growth in terms of 41% year-on-year. Improved biological performance in starting to show in results. strong improvement in biology and earnings in Scottish seafarm it's really good to see and record earnings in WAP sales and distribution 12 months rolling basis so and while catch earnings is impacted by low quarters but still there is increase in prices and there has been doing a good job in in in the land industry in this segment, even though it's challenging. The harvest guidance for 2025 is 211,000 tons, including our share of associate, which is Scottish seafoam. And the result of the year is 799 million NOC in fourth quarter. We are reporting in three segments, farming, wildcatch, VAP sales and distribution. And we start with the highlights from the farming. Spot prices is about five knock lower this quarter compared to fourth quarter 2023. We see clear improvements in biology starting to show in harvest results, the highest net production in sea in history in 2024, record harvest volume in fourth quarter of 2024, reduced mortality and declining cost. And we see a positive biological development also into first quarter 2025 and encouraging for cost and volume development in 2025. And shielding technology showing good results and I will come back to that later. If we go into the different regions, we start with Lerøy-Rora in north of Norway, strong biological development, record net growth in 2024, high survival rates, high license utilization into 2025. And on the downside is a high share of harvest volume early in the quarter at lower prices. And also the harvest weights that's been lower compared to fourth quarter in 2023, which affected the price achievement in Lerøy Roa. Quarter on quarter cost increase in low harvest weights and higher feed cost. And we expect lower cost in 2025 versus 2024, but quarter-on-quarter cost increase in first quarter on lower harvest volume for first quarter. Estimated harvest volume in total for 2025 is 50,000 tons. We have seen a strong biological performance, also here highest growth in any fourth quarter in history, high survival rates, high license utilization into 2025, and here we see submerged technology put to the test, and there is clear evidence that the technology reduces number of treatments. Quarter-on-quarter decrease in cost on good biological development. Expected quarter-on-quarter cost increase in first quarter on lower harvest volume compared to fourth quarter. And estimated harvest volume in full year 2025 is 75,000 ton. And the operational EBIT per kilo value chain is about 20 NOC. Strong biological improvement. It's really good to see the development in this region, west of Norway. Here we also see strong biological improvements, significant increase in growth rates, high survival rates, high license utilization into 2025. Biological improvements starting to show in result. Cost down quarter on quarter and expect lower cost quarter on quarter for first quarter 2025 and also the rest of 2025. And we also, in Lære Kyrtål, a large share of the volume is trout. The realized trout prices is two knock higher than the salmon in fourth quarter. And the estimated harvest volume full year 2025 is 70,000 ton. And the operational EBIT value chain in fourth quarter is close to 11 knock. And then Scottish Sea Farm, it's really good to see the great development that Scottish Sea Farm is showing. We see a significant increase in harvest volume with good harvest weights in the quarter, record harvest volume of 40,000 ton in 2024, strong biological development with next generation of fish performing well in all regions, and a significant increase in profitability. Volume in 2025 impacted by reorganizing site structure. Long-term potential is significantly higher than the expectation for next year and also higher than 2024 volume. Estimated harvest volume 25 is 32,000 ton and we had an operational EBIT in the quarter of 10.3 NOC compared to minus 10 NOC in the fourth quarter 23. So a great improvement. Then we have the farming volumes and the guidings in the different regions. For 2025, we have a guiding of 50,000 tons in Lerøy Rora. Lerøy Midt, 75,000 tons. And Lerøy Kjøtroll, 70,000 tons, which our best estimate is 195,000 tons for 2025. But our target for the full year is 200,000 tons. We believe that this is still possible to achieve this goal, and then it will be 50,000 tonnes in Lerøy-Ora, 80,000 tonnes in Lerøy-Midt, and 70,000 tonnes in Lerøy-Kjøtroll. And there might be an upside in Lerøy-Kjøtroll. For wildcatch highlights this quarter significantly quarter reduction impacts this quarter catch volumes for the trawling fleet, raw material price and volumes in the land industry. And full year 2024, we had an operational EBIT of 130 million NOK in 2024. The situation going into 2025 code quota is down 32%. 25% stem from overall industry quota reduction and 7% is due to the reallocation from the trawler fleet to the coastal fleet under new regulations. Header quota is down 2% to 1.35%. And we see extremely high prices, price development through the year, and it's record high prices for both Kod, Haddock and Seith. Of course, more challenging for the land industry, but the main focus in the land industry is to have improvements in all factories, and we know quota is going up and down, and when quota is coming up again, we believe that the industry will see much better figures and better figures also in total. But for 2025, we will have a year similar to the one that we had in 2024. The wild catch volumes, fourth quarter, so about 10,000 tons compared to 12,500 tons in fourth quarter last year, and full year 65,000 tons compared to 75,000 tons in 2023. Sales and processing operations in 14 countries, 20 years with the development in the markets, close to the customers. It's like I mentioned in the start, being close to the customer, developing together with the customer, and understanding the needs of our customers is the essential thing in this segment. And that is where we are today. No shadow in the light. Yeah, I'm sorry, a small technical problem. And this quarter, it's been a good quarter for this segment and also overall for 2024 with the EBIT of $888 million. And we see a great development. We also see that the EBIT margins is going the right direction. So it's a record high profitability, continued operational improvements for industrial activities, positive development in emerging markets, strong positioning with strategic customers globally. It's extremely important. And expectations for continued positive profitability trend in 2021. And I'm really satisfied with what we are doing in all the major markets where we have these industrial operations and I'm really glad to see the development is going the right direction and that all the efforts that we're doing every day in this market is showing results. Dan Kyr will take you through the key financial highlights.

Yes, thank you Henning. So as Henning will talk us through afterwards, we set some quite hairy goals back in 2022 and we are moving well towards them. We have done a lot of capex and there's been a lot of hard work and efforts from all employees and it's pleasing to see that we are moving towards these targets. And this quarter, we're also starting to see it in the results. So the last, for 2024, we have the highest net growth in any year in our farming operation. That is very positive and an indication we are moving in the right direction. also in 2024 we have the highest ever operational result in our downstream segment which is very positive and within the whitefish segment we have lower quotas which obviously is challenging but we believe that we are handling the situation quite well and 2024 and even more in 2025 we are probably close to the trough when it comes to quarter levels So this sums up to these numbers. So if you look then on key value drivers, margin in the redfish part of the business, salmon and trout, we know spot prices are down, but we can see the impact on volume. So this quarter, not only did we exit the year with full inventory of fish at sea, we also harvested a 20% higher volume compared to last year. Clear indication of strong biological improvement. With lower prices, I would say margin development is quite healthy. We've done a good work job both upstream and downstream. And we see the margins are down from 16.4 kroner to 14 kroner. In whitefish business, we see volumes down with the mentioned lower quotas. But it's not the only value driver moving. We also see prices, say to Haddock Cod, up 50% to 150%, which helps us in the trawling business. And we also know that bunker cost is down 28 million compared to the same quarter last year. which gives a small positive contribution. In sum, these effects gives us operational EBIT of around 800 million NOC compared to 765 last year. But I must also highlight, as shown in note 2, the bridge between EBIT and operational EBIT. This year we have adjusted for litigation cost related to the competition case with EU countries. We also see that return on capital employed is a little bit lower than last year, which is due to higher capital employed. And looking into where we are employing more capital, here is a balance sheet. We've done efforts, particularly in the farming segments, investing in submerged technology, investing in better small quality, and we see tangibly fixed assets are increased. Salmon prices and trout prices were low for most of Q4 but they increased a lot toward the end of the year and that gave an increase in receivables. And that are key components in the working capital development which I will highlight in one slide. In sum, our net interest bearing debt is up compared to last year. I'll explain the differences in a second. But our clear view is that we have a very strong balance sheet investment grade rated with equity ratio of 50%. So looking at the changes in net interest bearing debt on annual level, working capital is a key figure. It has increased substantially in 2024. The main driver for that is the fact that we have built, had an excellent production in C. We have filled our inventory and licenses in C to full level. moving from 98,000 tons to 110,000 tons, and this is building close to 1 billion in working capital. Then there is the effect on receivables, which lifts working capital. end of 2024 we are fully utilizing licenses we have today so everything else equal there is no more biomass to build up to a higher level in 25 so that should impact then no capital growth from biomass growth capex i'll highlight where we have invested in the next slides we paid a dividend last year two and a half kroner per share and we the board is suggesting to do the same this year Net finance is up and there's also one effect on payable tax and some changes on implementation effects. There I will refer to our notes, which I hope and believe explain those effects quite clearly. These are related to changes and choices being made with the implementation of a resource tax in Norway. We are reversing some of those effects this year. And also we have chosen to, on a periodization effect, increase tax with 600 million this year, which will reduce with the same level next year. So in corporate tax, we expect very low levels in 2025 due to periodization effect. And we believe that that choice will make it possible for us to subtract the value of biomass, also any resource tax. This is our capex. As highlighted, we have invested quite substantially in our value chain, most notably in new technology in farming. It's pleasing for us to report during 2024 that these investments are bearing fruits when it comes to increase in production at sea. And it's pleasing to see harvest volume this quarter being up, and that poses well into 2025. For 2025, we will continue to invest in submerged technology. We will also invest somewhat in lysolasers in Lerøy-Rora, We will continue to work on improving small quality and we will continue to develop the downstream segment and the value added and the wildcatch segment. This slide relates to what are the ripple effects of our activity in Norway and obviously relates also to the discussion on resource tax and to which degree this industry has ripple effects. And this slide clearly shows that LRU has huge ripple effects from our activity. On the map you can see where we have operation, you can also see where we buy goods and services from suppliers and in 2023 we bought for 20 billion NOC from over 5000 suppliers in 250 municipalities. We have 4,000 employees and indirectly related jobs of 6,000 bringing a total to 10,000. And you can see the value of creation is estimated around 15 billion. Taxes from company and employees estimated around 2 billion in 2023. And we will update this with the figures for 2024 as soon as they are ready. Dan Henning, I give the word back to you.

Thank you, Malm. Then we're ready for, wow, I got the electrical shock again. Then I will take you through the outlook going forward. And I think a lot of positive things is happening in Lira at the moment. And we'll try to take you through the different steps and the initiatives that we're doing to improve the value chain. First of all, you know, having goals is important. You know, we need to know where we want to go. First of all, we need to know where we are. And in 2022, we set these goals of 50 billion NOC in turnover within 2030. being number one in salmon farming through the value chain. And of course, it's not an easy goal to achieve. We have good competitors, but we believe with our fantastic value chain that it is possible to achieve this goal. And then we have for WAP sales and distribution, here we go of 1.25 billion NOC result and that's up from close to 900 million NOC 2024. So we have great job to do in 2025 but we believe that it's possible to go in this direction and to achieve the goal so if all employees in this segment really do their utmost you know every day i think this can be possible and i and the rest will support you as good as possible And then in reduction in total emission, we have a goal of 46%. And we have a farm volume goal of 200,000 tons, which is up close to 30,000 tons compared to last year. So also a big hairy goal, but we believe that that also is achievable. even though after two months we cannot say that this is achieved. So there is a yellow light, but we believe with hard work that we can achieve this goal also. And then when it comes to circular economy and sustainability, which is an extremely important area for us in the whole value chain, we have set a high ambition for this, which is based on the Paris Agreement, based on the baseline 2019. I think we are on the track to achieve this goal. But to take it further, we really need that everyone in the village and all 6,000 people in Leroy have this on top of mind and work with the sustainability in everything that we do every day. And the main focus areas is sustainable fish feed, airborne transport and alternative fuel. One example of a great initiative that is done for the feed, which is one of the areas where we can have the highest improvement, We last month communicated that we started using protein from byproducts of European chicken in our fish feed and this will be implemented this spring. It's cost competitive and readily available feed. positive nutritional effect replacing soy and truly screened and tested before use and this will give us a reduction of total emission in Lerøy of 5-10%. So this is showing some initiatives that we are doing to reduce the total emission. So that's a good story and a good example of how we can work with the improvement within sustainability. And WAP sales and distribution, record high earnings and promising outlook. It seems like, you know, we want to go up, up. And, you know, we invested a lot the last 15 years in this segment. We have a way to go to have the optimal capacity utilization. We have a good fundament now. We have a good structure, we have a good way of working and implementing Larry Way in the whole segment. And this will take us towards the goal of 1.25 billion NOC goal in 2025. But as I said, it's hard work. And in long-term actions, we have consequence products in our own value chain. the value of a fish today is extremely high both on white fish and on salmon and we need to use the whole fish and take you take out the value of everything of the fish sustainable logistic increased flexibility and price achievement we need to be good in the in the work you know how we price the products and how we work as a value chain together And then implementing Leroy Way, which is an extremely important program for us if we want to take out the potential of all our sites in this segment. If we look at the goal for farming, the volume, almost 30,000 ton increase this year. It's a high target, but we believe it's possible. And how should we achieve this? It's through operational efficiency. And how do we work with it? We work within many areas. It's not only one initiative. It's a long value chain. It takes three years to farm a salmon. But this shows where we can see effects or results on harvested fish of the different initiatives like genetics, row, smolt, shielding technology, and later away within the farming segment. And we see that second half of 2024, we have seen great improvements, but still it's going forward that we will see the largest improvements. If we look at the biological performance in the farm exam at 24, we see a net growth rate of increase by 11% compared to the last five years net growth. Mortality is down 27% and lice treatment is down 15%. So a significant improvement in biology and fish health. And we also, if we go into Lerøy Kjøtroll, which has the greatest improvements in last year, we see a net growth of 12%, mortality down 39%, and lice treatment down 23%. So it's really good to see the improvement in Lerøy Kjøtroll. And then we have shielding technology, which we invest a lot into this. We see that the lice treatment, shielded versus not shielded, is down by 85%. So a great achievement in new technology, and we will further invest in this going forward. And this shows where we are. We already are at 34% of number of fish shielded in end of 24. And our plan is 40% of number of fish expected shielded at end of 25. And 30% of both salmon and trout expected from shielding technology in 25. And 50% of salmon in Leroy Mitt and Leroy Kjøtroll is shielded end of 2025. And 40% of salmon, Nubra fish, is expected shielded end of 2025. And 30% share of total harvest volume from shielding technology in 2025. So a good development here. So, a short outlook at the end to summarize. Farming, positive biological development gradually to impact results. Contract share for salmon in 25, currently around 16%, including downgrades. High-standing biomass going into 25 will impact seasonality in harvest volume. Expect to see significant improvement from row, genetics, and small quality, new farming technology, process improvement, implementing layer weight. For the wildcatch, a challenging quota situation. Quotas for 25 is for cod down 32%, haddock down 2%, and safe salt plus 40%. Bob sales and distribution expect improved profitability in 2025 compared to 2024, increased demand for integrated sustainable value chain,