Leroy Seafood Group

Welcome to Leroy Sifo Group's third quarter presentation of 2025. My name is Henning Belsa, I'm the CEO in Leroy Sifo Group and with me today I have Sjur Malm CFO. First of all I will take you through the highlights of the quarter and then Sjur Malm will take you through the key financial highlights and then I will come back and talk about outlook. First of all, I want to share this slide, which I always do on my quarterly presentation. Our fantastic value chain. Our goal is to create the world's most efficient and sustainable value chain for seafood. We believe that our value chain is providing what our customers are seeking and we really see that our development in markets together with strategic customer is developing the right direction. Highlights of the quarter. It's been a quarter with low profitability on low spot prices for salmon and trout. It's been a challenging quarter in farming, but year-to-date development remains strong. Record earnings in the web sales and distribution segments. Low quarters in wildcatch offset by significant price increase. The harvest guidance for Norway in 2025 is reiterated at 195,000 tons. We see a positive working capital development and a net interest bearing debt reduced from 8.5 billion to 8.1 billion. Then I will go through the different segments where we repot. So we start with farming, then wildcatch and then at the end BAP sales and distribution. We start with farming. The spot prices are eight knock lower in the third quarter compared to the same quarter last year, which of course have had a negative effect on our operational EBIT. As guided in Q2, costs are up quarter on quarter in third quarter, following four consecutive quarters with cost reduction. It's a challenging biological development in this quarter, but biological performance here to date remains strong. And we, as I said, we keep our guiding for 2025 at 195,000 tons. But if we look historically on the development, we see that the 12 months rolling down at the right is developed from 159,000 ton, fourth quarter 23, and till up to 203,000 ton end of this quarter. So it's a significant improvement in the volumes the last couple of years. Then we will go into the different regions. We start with Lerøy Rora, a strong biological development in the third quarter, a record net growth, high survival rate, high superior share, and continued high license utilization. As expected, cost third quarter in line with second quarter. It's been high seawater temperatures which also continued into Q4 which has been a little bit more challenging than earlier year. And then we had one incident with the ISA at the site that will impact timing of harvest volume in the fourth quarter with a higher share of volume in October. The estimated harvest volume is increased to 54,000 tons for 2025 and the guidance for 2026 is at 49,000 tons. The harvested volume in the quarter is 20,000 tons compared to 17,600 tons in third quarter 2024. And the average size of 4.4 compared to 4.8 kilos. The operational EBIT in the quarter is 9.5 NOK. Then we go to Leremitt, the mid region. It's been a more challenging quarter with a high sea lice pressure. The harvesting weight is below planned. And also the timing of the harvest has been negative due to the price is higher in September than earlier in the quarter where we took out most of, a high share of the volume. But year-to-date development in line with the recent year, cost in third quarter increased quarter-on-quarter and we expect for flat cost quarter-on-quarter into fourth quarter. The estimated harvest volume reduced to 71,000 tons in 2025 and for 2026 we are estimating 73,000 tons. If we look at the volume in a quarter, we have about 21,450 tons in the third quarter, 25, compared to 16,931 in 2024. And the average ratio is 4.1 compared to 4.0 in 2024. And if we look at third quarter 25, we have a negative operational EBIT per kilo value chain of 3.1. Then we take the south region, the west region, Lerøy-Kjørtrollen. It's been a significant year-on-year improvement. Biomass production slightly up year-on-year, high survival rate, high superior share, continue high license utilization, and the year-to-date harvest volume is up 14,000 ton. And TrOTS stands for 59% of the harvest in the quarter. Cost as expected up quarter-on-quarter for fourth quarter in basis of new generation of trout, expectation of a slightly quarter-on-quarter cost increase into fourth quarter. Estimated harvest volume is about 70,000 ton for 2025 and increase to 73,000 ton in 2026. And the harvest volume in the quarter is 17,500 tons compared to 16,800 tons last year. And the average harvest weight is 4.3 compared to 4.0 last year. And the operational EBIT per kilo value chain is minus 1.5, same as we had the same quarter in 2024, but a great improvement when we look at a negative price trend of 8 NOC in the same quarter compared to last year. So a good direction on the performance in Leri Kjetral. Danskotte Ski Farm, strong biological development with the next generation of fish performing well. Lower price return impact result in the quarter. The volume in 2025 impacted by reorganizing site structure, long-term potential significantly higher, and we also see that with the guiding. The estimate for this year is 33,500 tons and for next year we increased the guiding to 45,000 tons. So a great improvement going forward in Scottish seafarm. I'm very happy to see this development and the way we build the biomass going forward. When it comes to the volumes in the third quarter, it's 7,200 tons compared to close to 12,000 tons in the same quarter last year, and an operational EBIT of 1.2, which is an improvement compared to the second quarter in 2025. Then the following, the guiding summarized. We, for 2025, we start with Lerøy Rora, 54,000 ton, Lerøy Midt, 71,000 ton, Lerøy Kjøtroll, 70,000 ton, and a total of 195,000 ton in Norway. and 16.8,000 tonne in Scottish Seafarm is a total of 212,000 tonne. When it comes to 2026, we guide La Rura a little bit down to 49,000 tonne. but still at a higher level than 22 and 23 and 24. So, and for Lerre-Mitt, we increased the guarding to 73, Lerre-Kjørtroll 73, and a total of 195, and a total of Our share of Scottish FIFA 22,500 tonnes, a total of close to 218,000 tonnes. And then wild catch highlights. It's been a seasonal low quarter. It's been an okay performance. Catch volume, the quota in 2025 is down 32% year-on-year, impacting catch volumes for the trolling fleet and a higher raw material price and volume in the land industry. Challenging operation conditions for 2025, but positive to see that the price increased more than offset impact from lower quota. Further quota reduction expected in 2026, but potentially increasing again from 2027. And if we look at the price for the key species, we see there has been an extremely positive development in the price increase quarter by quarter the last couple of years. For the catch volumes in the quarter, a total of 13,500 tons this quarter compared to the same level as we had the third quarter last year. And the remaining quarter for 2025 is 2,900 tons for COD, 9,200 tons for SAIT, and taking most of the HADDOC quota. around 13,000 ton remaining quota compared to 9,600 ton in 2024. Then the sales processing, the WAP sales and distribution segment. We will go look at the key performance in the quarter. It's been a record quarter. Structural improvement continue to yield results in almost all units that we have out in the markets. It's a record 12 months rolling operational EBIT. effects of structural improvement and the reason for that is effects of structural improvements work, strong demand in the end markets, positive development in emerging markets and the strong positioning with strategic customer globally. And we also see that the new branch offices in Asia are starting to show results and we expect continued positive profitability trend in 2022 and also into 2024. And we see the EBIT margin in Turkwater is close to 5%, which is at a very good level. And we see that the 12-month rolling now are up at where we set the target some years ago and we are going towards 1 billion 250 million NOK in EBIT in this segment. So a fantastic job what they do in this segment and we believe that we will see further improvement going forward and we'll come back to that afterwards. So then, Kyr, we'll take you through the key financial highlights.

Yes, Henning, thank you. So if you look at farming, the last four quarters we've seen production higher than expected and costs lower than expected this quarter. We said at Q2 that we saw increased risk due to a very warm summer in Norway. And we have seen a production in Q3 which was basically in line with recent years, but not showing the same improvements that we've seen in recent years. As Henning has highlighted, the improvements in a downstream segment has continued. And in sum, this translates to this P&L. We can see the key value drivers on the lateral lines. First of all, we see that harvest volume is up 15% compared to last year. That is then a reflection of the significant improvement in production year to date in farming. And we're happy with the volume. But obviously, we're not happy with the profitability on that volume, where we see that the profits through value chain is down from 10 kroner last year to 2 kroner this year. Looking at the drivers for that reduction in profitability, The spot prices for salmon and trout was down 8 kroner a kilo. Our price realisation for farming is down 10 kroner a kilo this year compared to last year, which is a reflection of timing of harvest volume. Secondly, we can say then looking at the development in EBIT kilo in farming that our cost is 1 kroner a kilo higher this year compared to last year. The cost in this quarter in farming is higher than in Q2. If you look at the wildcatch segment, volumes are in line with last year. It's positive to see price development, which is helping profitability. And it's also positive to see that the land industry is performing well in very, very challenging conditions. In sum, this translates to operational EBIT at 50 million NOC, which we obviously are not pleased with. But there are positive signs and we see that in revenue we see the impact from the increase in production and farming as well as the increase in volumes in value-added sales and processing. Looking at our balance sheet, the biggest change is related to right of use assets, which is basically well boats, and we have more well boats on contracts this year than last year. Secondly, it's related to capex and fixed asset, which I'll come back to on the next slide. Other than that, I think the key development on balance sheet items is the quarter on quarter development in working capital, where we, through high focus, are able to reduce working capital in our downstream segment. And the reflection of that is, as shown here, a significant reduction in working capital. So in a challenging quarter when it comes to earnings, we are pleased to see that cash flow generation is healthy in a quarter with high capex and we're able to reduce our net interest bearing debt. This shows our capex for 2025. There are no changes to this. We will get back to capex for 2026 at the latter stage. But as this highlights, we have invested through the value chain, in particular in new shielding technology in farming. This slide is important in Norway with the current discussion on to which degree this industry is impacting and making ripple effects. And we just want to highlight that our activity in Norway, which is vast, has massive ripple effects in Norway. We have done purchases from 5,000 suppliers of 18 billion in 2024. We have our own employees around 4,000 and the impacts in total in Norway is around 10,000 jobs and we contribute significantly both through value creation and through taxes. So Dan Henning, I give the words back to you.

OK, thank you. Then I will take you through the outlooks. And yeah, regarding targets, this is showing lights on where we are. We use these targets internally in the organization. And it's very important for us to have this and also to show these targets external. But we will come back and evaluate on the targets in the end of and in the beginning or next quarter presentation. And then we will have a summarize of where we ended in 2025. If we look at the WAP sales and distribution, we are trending in line with the EBIT target of 1.25 billion following another record quarter and it's fantastic to see this development and how the whole segments and the units out in the market are working structured in the direction of achieving these targets through short term actions and also long term actions. So a fantastic performance the last couple of years in this development. When it comes to farming, also the same, a long-term strategic direction and we see improvements in row and smolt expected yield results from harvest in 2025. This showed when we will take out the result from the earlier changes that we have done in genetics, row, smalt, shielding technology and also the implementation of Leroy Way. And we see that second half of this year we we expect and we are taking out improvements, even though we also see that we have external factors that can affect our production, like higher temperatures or a higher pressure of sea lice. But you know, on the quality of the fish that we have in the sea, we see that we have improved in the directions or the steps that we see in this map. So that's really good to see and we have a strong, robust fish going into 2026. When it comes to development in biology and in farming year to date, it shows clear improvement. We see a net growth rate compared to the last five years average of a 10% increase, a superior share of 5% increase, mortality down 15% and biomass at sea plus 5%. although third quarter was more challenging. And in this quarter we see a net growth down 3% compared to the last five years average, superior share a little bit up 1%, mortality up 7% and biomass at sea at the same level. And high seawater temperature resulted in a more challenging biological situation, which the effect of this is a higher sea level, which has made it more challenging and more treatment on the fish. Improvements still visible in growth speed average days in seed for fish harvested in third quarter is at 383 days compared to 444 days in third quarter 2024. So that's a very good development. For the shielding technology, we see continued reduction in treatments from submerged technology. We see a reduction of 50% compared to traditional. Superior share is a little bit down. Mortality is a little bit up in this quarter. And we have faced some challenges, especially with higher... temperatures in the surface. Continual reduction in treatments from in the third quarter also we see now year to date it's down 65%, superior share up 7% and mortality is down 2%. and for the shielding technology the key focus areas in deep sea farming and where do we put the effort is on locations where there's been historically very high number of lice treatments And we see that we really have had a great effect of the implementation of shielding technology and deep sea farming. The key challenges that we have, we work in a structured way how to do problem solving. and one challenge has been the conditions in the temperature layering in summer with different with water stratification and that we see that on Down at 35 meters, it's been around 10 degrees and at the surface between 20 to 25 degrees. And this has affected when we take up the cages. It's been some incidents with mortality. But this will be changed going forward for next summer when we go into the season. And then we also need to continue to improve how we work with planning, streamlining operations, and that work has already started. And we also need to improve feeding with potential to reduce feed factors. And then also to evaluate and analyzing all sites based on new data and all the learning that we have done for the two and a half years after the first output of Chile technology. And we still have a strong belief in this concept and we believe that this is really a part of the future for Leroy in locations where these technologies are suitable. And we are investing heavily into shielding technology. There is mainly now four shielding technology in Leroy. It's submerged farming, semi-contained farming, laser delousing and closed contained farming system where we decided to invest in three units which will be ready from first quarter 2027. So we invest in new solution also and trying to be innovative to have an even more sustainable production and to increase the performance in sea. When it comes to supply, we see that this year, global supply of 10%. In Norway, around 11%. But if we look into next year, we see negative growth in Norway, minus 2%, and globally at the same level as last year. So to summarize, for farming, while third quarter was more challenging, the trends year to date are still positive. Contract share for value chain of 24% with positive impact on both farming and VAP sales and distribution. Expect higher share of fourth quarter harvest volume in October and contract share of 35%. I expect a lower cost in 26 compared to 2025. And we keep our guidance for 2025 at 195. And we keep the same guidance also into 2026. So a total, including Scottish Seafarm, 50% of Scottish Seafarm, 270,000 ton, 500. 217,000 ton in total. Wildcatch, challenging quarter situation, but price development is positive. Quarters, 25, down 32% for Cod. Headlock, 2%. Seat North, unchanged. Seat South, plus 40%. And the indications for 26% is positive. a reduction of 21% of cod, 18% of haddock, 15% of salt north, and minus 24% of salt south. and as i said for up sales and distribution progress progressing toward profitability target of 2025 also supported by contract position lower salmon and trout prices are building markets increased demand for integrated sustainable value chain and improved market share in some key market utilizing potential of our value chain so a positive outlook for actually all the segments, even though there is a negative trend on the quota for wild catch. And then we want to inform that we will have a capital market day 2nd and 3rd March 2026 in Bergen and Österval. So there will be a limited number of spots