Leroy Seafood Grp Ord

Welcome to Lehre Civic Group's second quarter presentation 2025. My name is Henning Beltsaar, I'm CEO in the company and with me today I have Kjur Malm CFO. First of all, I will take you through the highlights in the quarter and then Kjur will take you through the key financial highlights and then I will come back and talk a little bit about the outlook going forward. Our goal is to create the world's most efficient and sustainable value chain for seafood and we are very proud of the value chain that we have developed and this gives us great opportunities going forward. Our fully integrated value chain is our competitive advantage. We mean that we deliver value for our customers, which are seeking sustainability, health, quality, traceability, stability, availability and convenience. And our value position is speed and cost efficiency, reliability and trust, product and category innovation and traceability and quality assurance and clear ESG commitments. Highlights of the quarter. Strong biological performance. Spot prices for salmon and trout well below last year. Group contract share of 30%, supporting both farming and web sales and distribution. Record high earnings in web sales and distribution segments. Low quotas in wild catch, offset by significant price increase and positive cost development in farming. And in the quarter, we have paid out a dividend of 2.5%. NOC per share paid in the quarter. And we have had an operational EBIT of 680 million compared to 906 same quarter last year. We are reporting in three segments, farming, wildcatch, WAP sales and distribution, and we will go into some details of the quarter in the different segments. And we start with the farming highlights. And the spot prices for salmon is about 30 NOK lower compared to the same quarter last year, which of course has affected us in this quarter. But we still have managed to keep a good profit in this segment, especially in with some contract shares. Improvement in biology showing results, the highest net production in C in the second quarter, high survival rate, higher superior share, higher average harvest rates, and declining costs. So that's the positive side. The biological development in start of Q3 is a little bit more challenging following high sea water temperatures and we keep our guidance of 195,000 ton. Shielded technology continues to show good results. And in this quarter, we harvested about 49,000 tons compared to 36,000 tons last year. So a good increase in volume. If we go into the different regions or companies, we start with Leroy Rura in the north, a very strong biological development. both in growth, survival rates, superior share and continued high license utilization. We see a significant cost decrease compared to the quarter before and expect a slight decrease going forward into versus expectation of a slight decrease and the cost expected for third quarter is at the same level as a second quarter. Also here we see high sea water temperatures in especially beginning of third quarter but so far the measures against sea lice appear to improve situation versus last year and the estimated harvest volume is 50,000 ton The volume harvested in the second quarter is 11,000 tons in 2025 compared to 5,000 tons in 2024. And the operational EBIT is 18.9 compared to 37 in the second quarter of 2024. Lerumit also a strong biological performance in this quarter. Record net growth, high survival rates, continued high license utilization, and also we see improvement in superior share compared to the same quarter in 2024. As expected, a quarter increase in cost. Also here, high seawater temperatures and a challenge at the start of Q3, expect coasts at the same level in quarter-on-quarter in third quarter. Estimated harvest volume is 75,000 tons. If we look at the harvest volumes, it's close to 17,000 tons compared to about 16,000 tons last year. EBIT per kilo of 11.5 compared to 37.5 last year. Lære Kjøtroll, also here, a strong biological improvement, record net growth, high survival rate, high superior share, and continued high license utilization. In this quarter, 47% of the volume is trout. where we had a realized trout price for a group of two knock lower than salmon in the quarter. It's been a decrease in cost compared to first quarter and we expected the cost the same level so that's that's a good thing and then we will see going forward we expect a cost increase compared to the second quarter. And also here we have some risk when it comes to temperatures, the increase in July and August. Estimated harvest volume of 70,000 tonnes 2025. harvested volume 21,000 ton compared to about 16,000 ton in second quarter last year and an EBIT value chain of 9.7 compared to 13.5 last year. So it's a strong development in Lerøy Kjøtroll and if we also look at the The numbers in the second quarter last year, we see there is also always only a small decrease. And when it comes to the price reduction, this is a good improvement in performance compared to last year. Scottish e-farm. Strong biological development with next generation of fish performing very well. Lower price return impact result in the quarter. The volume in 2025 is impacted by reorganizing site structure, long-term potentials significantly higher and the smolt input to sea in H1-25 of 6.5 compared to 3.5 million in first half, 24. So great expectation for especially next year in Scottish seafarm. Estimated harvest this year is 32,000 ton. The harvested volume in Q2 is 11,600 ton compared to 12,000 ton last year. And unfortunately, this second quarter is a negative EBIT of minus 2.4 compared to 19.1. Same quarter 2024. When it comes to farming and guiding, we keep our 195,000 ton guiding in Norway, 50,000 ton in Lerøy Rora, 75,000 ton in Lerøy Kjørtroll, and 70,000 ton in Lerøy Kjørtroll. And our share of Scottish Seafarm is 16,000 tons, so a total of 211,000 tons. Wildcatch, I would say a good quarter and a good first half. The cod quota is down 32%, impacting catch volumes for the trawling fleet. and of course also the raw material price and volume in the land industry. I would say that it's done a great performance on both sides handling the quota situation in a good way. So a very good performance H1 and with the EBIT 140 million higher than And we see the key species, the prices, it's extremely high cod prices, close to 80 NOC. The head of prices is still very high and the zade prices is up to 30 NOC. If we look at the wild catch quarters and catch volumes, we have the same volumes as second quarter last year, about close to 18,000 ton. But on a positive side, we see that the remaining quarter for 2025 is 3,000 ton higher. 17,000 ton this year compared to 14,000 ton last year, same period. Sales and processing, we have operation in 70 countries and sales to more than 80 markets. It's been here a record quarter, really good performance. Structural improvement continue to yield results. It's a strong half with the first half with record 12-month rolling operation EBIT, and this is an effect of a structural improvement work, strong demand in end markets, positive development in emerging markets, and strong positioning with strategic customers globally. And also, new branch offices in Asia are starting to show results. The expectation for continued positive profitability trend in 2025. So we are on a good trend in this segment and we are really satisfied with the development and are positive for the future. Thank you. We will take you through the key financial highlights.

Yes, thank you, Henning. So this quarter has seen excellent development in a lot of the factors we control ourselves. And then we are obviously impacted by a significant fall in spot prices for salmon and trout. Starting then with our profit loss sheet, we can see the result this year compared to last year. key drivers on the latter lines. So spot prices are down 30 kroner a kilo, so a full impact of that on the close to 50 million kilos of salmon and trout we harvested would mean a result drop of 1.5 billion NOK. we are seeing a significantly lower fall in our operational EBIT, and that's also then highlighting the balanced business model we have. So looking at the profitability on the salmon and trout, we are seeing good cost development, we are seeing good development in superior shares, and excellent biological development. This also includes the profitability downstream, where we see high and increased activity, better capacity utilization, and an increased profitability. Still, with a significant fall in spot price, we see that overall EBIT per kilo in that value chain is down from 27 kroner a kilo to 12.5 kroner. But we are satisfied with the development in the key operational KPIs in the quarter. Looking at the wild catch segment, we know quarters are down. We can see that the catch volumes are relatively equal to last year. There are some timing effects when comparing this quarter to last year, but the core impact if looking at numbers year-to-date this year compared to last year is that prices achievement is higher because price development has developed more positively than the quota reduction, and year-to-date quota is down 114 now, or operationally a bit year-to-date. is up 114 million and we see that this quarter the operational EBIT per kilo is up from basically zero last year to eight kroner per kilo. In sum, with these value drivers, we see operational EBIT is 680 million compared to 906 last year. And we see that we have a healthy revenue development, much helped by volumes, both upstream and downstream, and off-weight somewhat by lower prices on salmon and trout. Turning to our balance sheet, the long-term, non-current asset we see is up close to 2 billion NOC. This is a reflection of CAPEX, which I will return to in the next slide, but includes, among others, new farming technology. And there's also some leasing agreements on right-of-use assets, which predominantly relates to new agreements on wellboats. If you look on the current asset, our standing biomass of fish is up from around basically 100,000 tons last year to 110,000 tons this year. And that is the driver for the increase in biological asset cost. I would say we have good control on working capital and healthy development on key working capital items. And we have a healthy and strong balance sheet. We are investment grade rated and equity ratio 49%. Net interest-bearing debt rose from 7 billion to 8.5 billion in this quarter and the key driver for that is the payment of dividend. Looking beyond that, we saw that working capital was developing relatively healthy with small changes. We have EBITDA of a billion and we see that CAPEX has increased 600 million. It's fair to say that this debt level, net industry debt level is a bit higher than what we expected it to be at this point of the year and that is due to lower profitability in the farming side and a lower salmon price than expected. But we believe we have a healthy balance sheet and a strong balance sheet. On capex we have not made any changes to this slide compared to previous quarter and we expect to invest 2 billion NOK. You can see the split it's maintenance in capex, smaller growth capex which is in the area of 1 billion and then the core of our investment strategy and where we allocate capital is new technology in farming and particularly then in submerged farming, but also on smolts, also on lasers. And then in addition, we are investing in smolts. And Henning will highlight in a later slide when we expect to see the impact of these investments in operation, but we believe we already are seeing the impact of them in our numbers this first half of 2025. There is a discussion, particularly in Norway, on what are the ripple effects of our activity. So this slide is included to highlight those. So what we see here is in the light blue lines, where we and Leder operate, and the dark blue dots is where Leder has bought from suppliers. And this is for 2024. And what we can see is that there's vast ripple effects in all of Norway, in particular in the coastline. In addition to our 6,000 employees, which is a global number, and 4,000 employees in Norway, we have significant effects when it comes to creating jobs all along the coastline. And all of these, we are proud to be part of producing the most sustainable food protein that's available out there today. Value creation estimated to 15 billion NOC and a substantial tax contribution. So with that tending, I give the word back to you.

Okay, then we're gonna Go for outlook. And yeah, we have set some ambition targets three years back. And I will say that we can start with a target for volume, 200,000 ton. We have a guiding at 195 now. We were last year at 171,000 ton and we believe that it's achievable to get to 200,000 ton. We believe that it It will be possible, and we keep the direction towards the 200, even though we have the guidance of 195. the target for drop sales and distribution it's of course it's it's a high target but we see on the 12 months rolling we are at close to the target end of end of second quarter and we believe that we will also have a strong performance going forward so this is within reach and I think the whole segment are working extremely hard to achieve this goal. For the EBIT for farming to be number one, it's a hard competition. It's still five months left of the year and we will see end of the year where we end. But we strongly believe that we are in the right direction to achieve this also. And the 2030 target is 50 billion NOC. And we also believe that this is within reach going forward the next five years. But okay, WAP sales and distribution, yet another quarter of earnings record reaching for emissions targets, as I mentioned. We see a strong improvement in the 12 months rolling from second quarter 2024 to 2025 and we will have an 18% increase in EBIT up to 1.250. And this is done through short term actions and long term action. And we really believe that we see structural improvement initiatives in all units in Europe. We see continued improvement in WAP factories and expect through 2025 based in higher capacity utilization and increased operational efficiency. And we work hard with also the long-term actions. But I have to say I'm really impressed by the job that is done in this segment and to see all the improvement and that we are going in the direction to achieve our goal. For the farming, as I said, we have a target of 200,000 tons. We were at 171,000 tons last year and we will increase by close to 30,000 tons. And how are we going to do this? It's through a long-term improvement program focusing on row, small production and new technology and this is showing where we are you know this improvement program started four or five years ago focusing on improving genetics row smolt shielding technology and the other way implementation And we see that step by step, we see that this will give effect on harvested volume. And we see now for second half of the year, we see that we take out benefits from this program at a higher level than first half, 25. So I will come back to some improvements afterwards. Like I said, we see the improvement in the second quarter. We see a strong biological performance in farming. If we look at the growth rate, we see that we increased 16% in the second quarter compared to the last five years. For superior share, we see a 9% improvement. For mortality, a 50% reduction. And biomass at sea is 9% higher end of second quarter compared to the average of the last five years. So yes, this strategy is showing results and the improvements that has been done. And if we dive into the new technology and submerged technology, we see great results. When it comes to lice treatment, traditional cages compared to submerged, it's a reduction of 71%, superior shear plus 3%, and mortality is down 24%. So that's good to see. And shielding technology, we are increasing share of harvest volume from shielding technology. Plan for 2025 is that 35% share of total harvest volume from shielding technology in end of 2025. And it's three different technology, submerged farming, semi-contained farming, and laser de-lowsing. And then we need to look at why have we seen a decrease in prices, especially second quarter of the year. And we see that the main reason for that is the supply increase. And we see in July also we had a 21% increase in supply. But expectations for the rest of the year is that it will be zero increase in supply compared to last year. And we believe that we will see a positive price development going forward and also into 2026. And let's hope that The low price level that we see in the last couple of months, it's been the bottom on the price level that we've had. So, to summarize, farming, positive biological development in H225, while higher temperatures are challenging at the start of Q3. Contract share for value chain in second quarter of 30% and for 2025 at around 25% which will have a positive impact on both farming and web sales and distribution. Structural improvement initiatives expected to continue gradually showing the result. Spot prices and price realization quarter to date in Q3 is below production cost and of course will impact profitability, but we believe that there will be a positive price trend going forward. Wildcatch, if we look into 2026, there will be a further reduction of 21%, Haddock plus 18%, and SAIT down 15%, and SAIT south 24%. And WAP sales and distribution progressing towards profitability target in 2025 also supported by contract positions, lower salmon and trout prices are building markets, increased demand for integrated sustainable value chain and improved market share in some key markets utilizing the potential of our value chain. And then please you know if We want to show you this fantastic product, the trot, and the presentation with this fantastic product, which we really believe has a great future, and Leroy produces about 40,000 tons of trot from Norway. Thank you very much.