Leroy Seafood Grp Ord

Welcome to Lire Sifu Group's first quarter presentation 2025. My name is Henning Belstad and I'm the CEO of Lire Sifu Group and with me today I have Kjur Malm, CFO, which will take us through the key financial numbers. First of all, I will take you through the highlights and then Kyr will take us through the key financial highlights and then I will come back and talk about outlook going forward and to indicate what we believe about the future. First of all, Lyria is creating the world's most efficient and sustainable value chain for seafood. That is our task every day we go to work. Our fully integrated value chain is our competitive advantage. And we really see that today with increased supply that this is a good advantage for us when the volume is getting bigger. So our customer is seeking sustainability and health, quality, traceability, stability and availability and convenience. Welcome to Leroy Sifu Group's first quarter presentation 2025. My name is Henning Velstad and I'm the CEO of Leroy Sifu Group and with me today I have Kjur Malm, CFO, which will take us through the key financial numbers. First of all, I will take you through the highlights and then Kyr will take us through the key financial highlights and then I will come back and talk about outlook going forward and to indicate what we believe about the future. First of all, LIREA is creating the world's most efficient and sustainable value chain for seafood. That is our task every day we go to work. Our fully integrated value chain is our competitive advantage and we really see that today with increased supply that this is a good advantage for us when the volume is getting bigger. So our customer is seeking sustainability and health, quality, traceability, stability and availability and convenience. And we believe that our value prediction can give that in speed and cost efficiency, reliability and trust, product category innovation and traceability and quality assurance and clear ESG commitments. So fully integrated is a perfect match for our key customers. And then about the highlights of the quarter. We've had a strong biological performance starting to show results. Spot prices for salmon and trout well below last year. Record earnings in the WAP sales and distribution segment, 12 months rolling. Low quarters in Wildcatch offset by significant price increase. Positive cost development in farming and expect to continue in 2025. And the board has proposed a dividend of 2.5 NOC per share. And the operational EBIT of the quarter is 1 billion and 49 million, which is a good performance compared to first quarter 2024. Leroy is reporting in three segments, farming, wildcatch, pop sales and distribution. And we start with the farming highlights this quarter. This has been a quarter where spot benchmark prices is about 90 knock lower compared to first quarter, 24. We have seen clear improvement in biology starting to show in our harvest result. We have seen the highest net production in sea in the first quarter ever, reduced mortality, declining cost, and higher superior shear. And we see positive biological development quarter to date in second quarter 25, encouraging for cost and volume development in 2025. And shear link technology is showing good results. If we go into the different regions and the companies, we see Lerøy Rura, we have had a strong biological development, a record net growth in the first quarter, high survival rate, continued high license utilization. quarter-on-quarter cost decrease and a lower cost expected quarter-on-quarter in second quarter 25 and also expect lower costs in 25 compared to 2024 and keep our estimated volume of 50,000 ton so clearly a good good performance in the quarter and also good expectations for further improvement going forward even though good results behind us. And if we look at the harvest volume, it's about 7,000 tons compared to 6,000 tons last year, and an average weight of four kilo compared to 4.6 kilo last year. And an EBIT all-inclusive of about 30 NOC in the quarter compared to 44 same quarter last year. Then we have mid-region, Lerøy Midt, also here, strong biological performance, record net growth also in this region in the quarter, high survival rates, continued high license utilization. And we see continued positive results from shielding technology. And the quote-on-quote decrease in cost on good biological development and expect slight higher cost into second quarter 2025. And the estimated harvest volume is kept at 75,000 tons. In total in the quarter, we harvested 16,000 ton compared to about 13,700 ton in the same quarter last year. And also higher average weights with 4.4 kilo compared to 4.1 kilo. And operational EBIT value chain of 32 NOC, which is about the same level as first quarter, 24. And then Lerøy-Kjøtroll, the south-west region. We're really glad to see the improvements in this region. Significantly increasing growth rates, high survival rates and high license utilization into 2025. And the biological improvement is showing in the results. Cost down quarter on quarter. I expect the cost at the same level in the second quarter. But then you use a significant potential for cost reduction in 2025 as a whole. So we are really glad to see the development in Leroy Kjøtroll. And the estimated harvest volume is about 70,000 ton. The harvested volume in a quarter is close to 15,000 tons compared to 6,700 tons. So a great increase in volume in this quarter. And the EBIT all inclusive of 18 NOC compared to nine NOC in first quarter last year. So yeah, great improvement. Scottish FIFA, 50% owned by Leroy. Here also, increase in harvest volume with good harvest rates, strong biological development with next generation of fish performing well. Significant year on year decrease in price realization in this quarter. Volume in 25 is impacted by reorganizing site structure and long term potential significantly higher than the level that we we see 32,000 tons, which is the estimate for 2025. And in this quarter, we achieved the operational EBIT of nine NOC compared to 19 NOC first quarter last year. And the main reason for the decrease is the price realization. Then if we look at the farming and the guiding numbers, we, to summarize that, 2025, 50,000 ton, 75,000 ton, 70,000 ton, and a total of 195,000 ton. and we all know about our target, which is 200,000 tonnes, and we believe if we continuously work with improvements like we do today, our target should be within reach. So right now we are in a good position and have a great fundament for achieving our goal of 200. And our share of Scottish seafarm is 16,000 tons, so a total of 211,000 tons. Wildcatch, of course, a challenging... segment at the moment because of significant quota reduction. The catch volume for trawling fleet, raw material price and volume in the land industry is affected by these reductions. There is 2025 will be challenging higher prices has partly offset the impact of lower quotas for trawling but still it's really challenging for the industry to take out the price level the increased price level and the reduction in availability of fish to to get to to be at a very high level in this segment in 2025. So code quota in 2025 is down 32%. 25% stems from overall industry quota reduction and 7% due to reallocation from the trawler fleet to the coastal fleet under new regulations. And header quota is down 2% in 2025. And EBIT in a quarter, operational EBIT in a quarter is about 150 million NOC. And if we see at the prices for the key species, the cod price is close to 80 NOC. The haddock is close to 60 and Z8 is about 30 NOC, which is a strong increase in price level compared to the same quarter last year. The wild catch quotas and the catch volumes for first quarter, we catch the 3,600 ton cod, 5,400 ton seet, 3,400 ton haddock, and a total of 90,000 ton compared to 24,000 ton last year. But the good thing is to look at the remaining quotas compared to 2024. We have a 5,300 ton COD compared to 6,000 ton last year and SAIT 13,000 ton compared to 10,000 ton SAIT and HADDOC 2,700 tons. So we have more remaining quota this year compared to last year and taking into consideration that the fairly good first quarter and the remaining quarter means that we are in a good situation compared to last year if we take the quarter situation into consideration. Yeah. Then sales processing. We have operations in 70 countries and sales to more than 80 markets all over the world. And this has been, you know, investments done over 20 years. And we feel now that we really have a strong position in all the key markets for seafood. The new thing in this segment is the branch office in South Korea, in Vietnam and in Thailand. And the main reason for this is to take out the potential of this market and to drive the innovation and the market development together with our partners in this market. And this is also very crucial for our trout operation that we have to create new markets for trout from Norway. DevOps sales and distribution had a strong quarter. We continued a positive development in the segment with operational EBIT of first quarter of 212 million compared to 176 million. First quarter 24, so a great improvement. In the first quarter of 2024 and the first half of 2024, profitability was supported by the high capacity utilization of Norwegian processing capacity following a high share of quality downgrades. But this year, there is less quality dog race. And we see now that the profitability growth is more from the capacity utilization and high demand in our downstream units in this segment. And we see that we're really, really improving mainly all of our operation out in the market. So there's been a strong start of the year with record 12-month rolling operation. There's a strong demand in the end markets, positive development in emerging markets, strong positioning with strategic customers globally, and effects of structural improvements really starts to work in a different operation. and we have expectations for continued positive profitability trend in 2025. So I feel that we have a really strong position out in all our key markets and a team that's really focused on building the markets and the category for seafood.

Thank you, Henning. So we are 6,000 employees and we work daily on creating sustainable food for global population. But we also work with structural improvement initiatives. And while we were not happy with the results we posted, perhaps particularly in 2023 and we through 2024 have talked about, Signs of improvement. We are pleased to report these quarterly figures showing that the improvements are starting also to show in the financial results. At this slide, we can see the key value drivers on the latter line. We must keep in mind that the spot price for salmon is down 19 kroner compared to the corresponding quarter last year. And despite that, you can see that the margin through the value chain for salmon is more or less unchanged. That is very positive, and that is a reflection of a significant cost cut in farming, and in particular, in . It's a reflection of significant improvement in quality and share of superior. It's an increase in harvest weights. And you can also see the biological improvement in the harvested figure, which is up 50% almost compared to last year. It's also a reflection of good work in our downstream operations. If you look on the catch part, we see margins are more or less even with last year. Volumes are down following a lower quota. In this, it's important to highlight what's written about in the report, that we have a negative inventory effect of around 50 million NOC in Q1 this year compared to last year. And when that inventory is sold, it will lead to also a profit. So all in all, a good quarter also in Wildcatch, given the low quotas. So this sums up to the EBIT, Henning already has mentioned, of $1.5 billion. The result we are pleased with, given the price development, and we also see there's a healthy development in EPS, and the return on capital void was around, well, 15% this quarter. At the balance sheet, I will focus on what's changed. You see, compared to last year, we have a higher standing biomass, which is building working capital compared to last year. And you see biological acid cost up just above 800 million. We also see the effect of the investments we are doing in the targeted initiatives. I'll return to them, but you see tangible fixed assets are up. And you also see the size of balance needed to run this operation. And total asset of around 40 billion NOC. We believe we have a strong balance sheet, investment grade rating, equity ratio just above 50%. Looking down on cash flow, we are pleased with cash flow development this quarter. There is a working capital build compared to the corresponding quarter last year, but compared to fourth quarter, standing biomass has remained high and we have held good working capital control. While operation in downstream is growing, there's a strong operational cash flow. Our return to investments, and you see the effect of financing cost and the IFRS 16 effects. In sum, net interest bearing debt is reduced by 700 million NOC this quarter. This shows our planned capex. There are no changes, but it highlights our priorities also. We have a maintenance capex of around one billion. It has increased measured in NOC due to weak Norwegian kroner. We are investing in all parts of operation. We are developing the whitefish operation and now we are coming to an end when it comes to the upgrades of these factories. We are investing also downstream, but we are particularly investing in farming, in initiatives in shielding technology and in improving quality of smolt. And we believe the results this quarter are showing that these investments are having good returns. Then there is a debate, particularly in Norway, to which degree this industry makes an economic footprint. So this slide is just highlighting in 2024. The fact that 3,900 employees in our activity in Norway contributed in total with around 2.5 billion NOC in tax in 2024. In addition to that, there are significant ripple effects through our 18 billion NOC in acquisitions from companies all around Norway, as the dotted line shows. And we see the total value creation in Norway is close to 15 billion NOK and generating around 10,000 jobs. So this is an important industry in Norway and Leri is important both for Norway and for many coastal communities. There is a new aquaculture paper. In that paper, there are suggestions on quite significant changes in how licensing regime in Norway will work. And we support the view of the industry organization Sjömark Norge, which basically is that there is need for more evaluation and considering consequences before there is any major principal decision being made. Yeah, and we also believe the development we are showing in these results, which Henning will return to in a few minutes, they are showing that there are incentives and it's possible to do quite a lot of positive work also in the current regulation. So with that, Henning, I give the word back to you on Outlook.

Thank you. Then I will go through the outlook going forward and we start with our strategic targets. I will not go into details about all of these. We try to give you a kind of reporting every quarter now how we are on the way to reach the targets and and we feel that after first quarter that we are in a good position for the rest of the quarters for 2025 and also for what we're going to achieve going forward after that so but we focus of course keeping our long-term goals and objectives out there at the same time as we focus a lot on the operational improvements in order to get to our targets. And where are we? If we look at VAP sales and distribution, we have a target of 1,250,000,000 EBIT target. And where are we? The last 12 months rolling is about 924. And one year ago, we were at 723. So we have the directions towards our goals this year. And we work hard with the short-term action and also long-term actions. But I don't go in details with that. But we have a good drive in the whole segment. And people are motivated. And I'm really impressed by what they... achieve every quarter going forward also so so we work hard and we believe that this is achievable If we look at the farming, we have a target of 200,000 ton. We were at about 171,200 ton last year. So that means improvement or increased volume of close to 30,000 ton. This is going to be done through operational efficiency, through adjustment or improvements in row. in small production and new technology in sea. And is this achievable? Yes, we believe it's achievable. This has been a long-term program to achieve this goal. This is showing where we will get the results on harvested fish from the different initiatives that's done on genetics, roe, smolt, chile technology, and the implementation of Larry Way. And we see that We are on track on the improvement as we expected for first half and we hopefully, there is no guarantee, but we will see greater improvement for second half of 2025. And if we look at the first quarter with the total improvements in the farming segment, it's been a very good quarter for us compared to the average of the last five years. We have net growth 30% higher. Mortality is 33% lower, superior share is 11% higher, and the biomass at sea is 7% higher. So this shows that we are taking out the improvements as expected. And if we look at the shielding technology, we started to harvest much more in the first quarter. And now we report on harvested fish of shielded and not shielded. And if we compare the harvested fish, we see that we reduced lice treatment of 75%, the superior share increased by 20%, and the average harvest rate increased by 8%. So that's a great improvement, and the results are really promising. So we believe that that what we have done in new technology and especially in submerged technology is making better fish health and improving the way we operate the farming segment. And if we look at farming shielding technology, increased share of harvest volume from shielding technology in the first quarter, we were at about 30%, and the plan for 2025 is about 35%. And then we see the total production of salmon and trout of Leroy. And we are focusing on three areas. technology, submerged farming, semi-contained farming, and LASA de-lousing in north of Norway. So we invested a lot into this kind of technology that we really believe in and we see that this is showing more and more good results. And then at the end, we take up the supply side and expectations for 2025 and also 2026. And the global supply growth of 6.4 for 2025 and about 2% for 2026. But we also have seen the last couple of months that we have had a tremendous increase in supply. And so the big question is, will this last? And if we look at the monthly harvest volumes from Europe, we see that we had an increase of close to 17% first four months. And if you look at April, it was... up almost 30% and we see that the growth compared to last year will be lower going forward. So we expect that we build a lot of markets now which will make a huge potential for the demand in the second half of the year. And we also see on the market sides, the markets are taking out the volume. Both in EU, other markets, and also in U.S., it's a stable growth in the markets the first three months. But if you look at dig into the other markets. We see especially one market that is really speeding up, and that is China. And China has a huge potential also going forward. And we see that in April and in May that the growth in the Chinese market is three to four times what it was in the same weeks last year. So China is really taking a strong position as a the number one market from Norway. And that's good to see and also to summarize shortly about the different segments. Farming, we've had a good period behind us. We also see that the position with the fish in the sea and what is coming forward is in a good position. So that feels good. A wild catch, of course challenging with the quota situation, but we are doing what we can out of the reduced quota that we have and we feel that we are doing a good job. And VAP sales and distribution is showing big momentum. more available supply and also building markets both in Asia and also in Europe and other markets. And we have a strong belief in what we're going to do in this segment and all the three different segments going forward. So that's what I have. Thank you very much.