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Grieg Seafood ASA

Morten Vike | CEO 22 November 2011

Canadian fish farming in a downturn cycle

Havbrukskonferansen 2011

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Vision and values

”Grieg Seafood shall be a leading aquaculture company”

Our values: • Open • Respectful • Ambitious

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Regions

Finnmark

Rogaland Shetland

British Columbia

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Business overview

Grieg Seafood BC

Grieg Seafood Finnmark

Grieg Seafood Rogaland

Grieg Seafood Hjaltland

Licenses 19 + 1 farming 24 farming 37 farming 101 + 1 farming 21 farming

Capacity ~19,000 tons ~28,000 tons ~23,000 tons ~90,000 tons gwe ~20,000 tons

+20% +39% +43% +27% +39%

2011 guiding

16,000 tons gwt 17,000 tons gwt 16,700 tons gwt 63,300 tons gwt 13,600 tons gwt

Growth pot.

Grieg Seafood ASA

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Regions – British Columbia

Western Canada

21 growout licences

110 employees

20 000 tonnes GWE (capacity)

13 500 tonnes GWE (2011)

MNOK 554 revenue

Vancouver

Broodstock Freshwater Seawater Harvest Value added Sales

Clio Channel

Okisollo Channel

Sechelt

Jervis Inlet Grieg, Egmont

Esperanza Inlet

Nootka Sound Gold River

Calkins and Burke

Walcan, Quadra Island

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BC salmon farming - status

• Higher costs than global cost leading regions:

• Biological particularities (low dissolved oxygen, algal blooms, kudoa)

• Infrastructure

• High involvement 'permission to operate' climate (regulatory, public relations etc.)

• US – the domestic market for Canadian salmon farmers:

• All other salmon farming regions have significant logistic disadvantages.

• Chile traditionally the main supplier to the US – regaining position after the Chilean ISA crisis.

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The global salmon market – Learnings from the last 2 years…

• The farmed atlantic salmon market is a true global market:

• Regional price differences on a 'net price back to farm' basis are not sustainable over a longer period of time.

• Volumes can be shifted between markets relatively flexibly to exploit price arbitration possibilities.

• Logistic costs a real price differentiator between markets and farming regions.

• Demand in the US market hit the hardest by the Chilean ISA downturn and subsequent surging prices:

• Lower retail activity level (filets)

• Less competitive pricing in certain horeca segments ('casual dining').

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Incremental logistic costs – US supply

+7-10 NOK/kg

+6-8 NOK/kg

+6-8 NOK/kg

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BC: Logistic costs offers price/cost protection

• Current logistic costs suggests 6-8 NOK/kg price/cost protection for BC salmon farmers compared to global cost leading farming regions.

• Average historical spot price difference between Norway and BC on FCA-basis: 5-6 NOK

Despite an inherent cost disadvantage, BC salmon farming should be competitive with other global faming regions on the US market.

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BC: Measures to reduce costs and improve biological performance.

• Kudoa:

• A limited issue on GSF sites – only one site with some impact:

• Indirect entries have shown reduced occurrence of kudoa.

• Algae mitigation system ('bubble walls') protecting farms from toxic algae

• Reduced mortality losses.

• Re-oxygenation system to increase dissolved oxygen

• Reduced mortality losses and increased feeding and decrease lost feeding days

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BC: Measures to reduce costs and improve biological performance.

• Freshwater recirculation facility for smolt production:

• Improved smolt quality.

• Reduced smolt costs

• Smolt size – reduce seawater production time and reduce exposure to high-risk algae season.

• Changed production and stocking plan to mitigate environmental risk:

• Harvest out highest risk area prior to 2nd summer season (algea risk).

• Site amalgamations to vacant underperforming farm sites (pending)

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• Potential to exploit niche market positioning with a targeted and differentiated market offer:

• Building on provenance

• Differentiate the extended product – more than just salmon.

• Target market segments with the lowest price sensitivity.

• Grieg Seafood BC recently launched Skuna Bay Craft Raised Salmon:

• High-end restaurant segment

• Chef endorsement

• Craft raised

• Special product standards

• Certified environmental standards

• 1:1 fish in – fish out ratio

• Short travelled salmon

• Unique recyclable packaging

Market differentiation

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Market differentiation

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Summary

• A significant logistic cost advantage over other global farming regions offers 6-8 NOK/kg price/cost protection for BC salmon farmers.

• Cost reductions and biological performance improvements with focus on certain particular cost and biological challenges.

• Potential of increased market differentiation as Chile is regaining position as the major bulk supplier in the US market.

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Thank you !