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Yngve Myhre - CEO SalMar ASA - How to deliver margins trough low cost production in salmon farming...
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Transcript of Yngve Myhre - CEO SalMar ASA - How to deliver margins trough low cost production in salmon farming...
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How to deliver margins trough low cost production in salmon
farming and value added production in Norway
SalMar ASA
CEO Yngve Myhre 22 November 2011
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Content
About SalMar
Q3 – YTD 2011
Delivering margins:
– Farming
– VAP
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SalMar ASA
• Founded in 1991, Frøya, Norway, listed on Oslo Stock Exchange May 8th 2007
• Revenues 2010: NOK 3,4 billion EBIT: NOK 973 million 600 employees
• 71 wholly owned farming licenses in Norway. 80 including all partnerships
• One of the largest and most cost effective salmon farming companies in the world
Central Norway : 58 licenses / 77 100 tgw including Segment Rauma
Northern Norway :13 licenses / 18 000 tgw
50% of Scottish Sea Farms Ltd. And 24,8% of P/f Bakkafrost
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SalMar Japan KK – sales
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Built brick by brick ……..
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25 % annual
growth in volumes
33 % annual
growth in EBIT
7 9 11 13 14 17 23 2230
45 4250 51
77
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7 11
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011G
'000
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Scottish Sea Farms (SalMars share)
SalMar Northern Norway
SalMar Central Norway
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…to become an integrated salmon farmer
• Brood stock
• Roe
• Genetics
• “Raumastammen”
• 71 wholly owned
licenses
• 80 including all
partnerships
• High quality sites
• Fish health
• SalMar Sales AS
• SalMar Japan KK
• SalMar Korea
• Long time partners
• Global reach
• InnovaMar facility
• Vikenco
• Harvesting
• VAP
• Scale, quality and
cost 5
• Hatch, vaccination
and smoltification
• 7 production
facilities
• Essential for the
performance in the
entire value chain
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Content
About SalMar
Q3 – YTD 2011
Delivering margins:
– Farming
– Processing and VAP
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Short summary of Q3/YTD 2011
Phasing in of InnovaMar in 2011
Room for improvement. especially in VAP
Relatively low contract coverage (20%)
Strong growth, some biological challenges
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All sales done in spot market
Steady cost levels
Most sales done in spot market
Increased production costs in 2H 2011
Contributions from harvesting and VAP
Higher cost level than in Norway
High contract coverage
Central Norway 3Q 11 YTD 11 FY 2010
Operating income (NOK mill) 1 001,9 2 551,5 3 137,2
EBIT bef. value adj. biomass 127,1 379,8 733,6
Harvest volume (1,000 tgw) 23,1 42,5 47,2
EBIT/ kg gw (NOK) 5,51 8,9 15,55
Northern Norway 3Q 11 YTD 11 FY 2010
Operating income (NOK mill) 147,8 409,1 506,0
EBIT bef. value adj. biomass 10,0 121,0 211,2
Harvest volume (1,000 tgw) 5,8 12,4 13,6
EBIT/ kg gw (NOK) 1,73 9,7 15,55
Segment Rauma 3Q 11 YTD 11 FY 2010
Operating income (NOK mill) 139,2 415,9 257,2
EBIT bef. value adj. biomass 9,2 70,7 66,8
Harvest volume (1,000 tgw) 3,0 6,9 4,2
EBIT/ kg gw (NOK) 3,06 10,3 15,92
Norskott / SSF 3Q 11 YTD 11 FY 2010
Operating income (NOK mill) 154,6 549,9 1 026,8
EBIT bef. value adj. biomass 20,9 130,9 279,4
Harvest volume (1,000 tgw) 4,5 14,3 27,1
EBIT/ kg gw (NOK) 4,67 9,1 10,31
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Group profit and loss – 3Q/YTD
Op. income in line with Q3 2010
– Higher volumes
– Lower salmon prices
EBIT NOK 134 mill
Negative value adjustment of
biomass
Income from associated companies
mainly 50% of Scottish Sea Farms
and 24,8 % of Bakkafrost after tax
results.
– Share of EBIT SSF: -8,9 mill
– Share of EBIT Bakka: 38,9 mill
Other financial items include both
interest and currency effects
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NOK million 3Q 11 3Q 10 YTD 11 YTD 10
Operating income 1 077,2 1 002,3 2 763,6 2 279,8
Cost of goods sold 665,1 477,3 1 571,5 1 106,5
Payroll expenses 114,7 83,1 270,0 204,6
Other operating expenses 128,9 114,3 299,8 275,8
EBITDA 168,5 327,6 622,4 692,8
Depreciations 34,5 26,9 94,5 66,0
EBIT before biomass adj. 134,0 300,7 528,0 626,8
Value adjustment biomass -71,0 -48,9 -385,3 171,1
EBIT after biomass adj. 63,1 251,8 142,7 797,9
Income from ass. comp. 30,8 13,2 81,8 81,5
Other financial items -49,4 -22,4 -74,6 -54,1
Earnings before tax 44,5 242,6 149,9 825,2
Tax 3,8 64,2 19,1 208,2
Result for the period 40,7 178,4 130,8 617,0
Earnings per share (NOK) 0,38 1,73 1,16 5,99
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Content
About SalMar
Q3 – YTD 2011
Delivering margins:
– Farming
– Processing and VAP
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10 Source: Pareto Securities
SalMar has over time delivered “best in class”
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Source: Company financial reports
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4q06 1q07 2q07 3q07 4q07 1q08 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11
EBIT/kg
SALM
SalMar has over time delivered “best in class” - 2011 more challenging with start up cost, and low contract share
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Best performing SalMar site 2005G
Production cost (live fish) pr. kg:
– Well below 11.00 (10,55)
– Equal to 15,38 gutted in box
Feed costs NOK 6,47 average pr. kg
Salary costs NOK 0,63 pr. kg
Administration costs NOK 0,35 pr. kg
Other operating costs NOK 0,28 pr. kg
Health & veterinarian cost NOK 0,06 pr. kg
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Marked difference from best performing 2005G
to 2010 production cost levels
NOS Price 2010 : NOK 37,45
Estimated average production cost best performing listed
companies 2010:
– NOK 22,00 per kg gutted weight
– Average Norway above NOK 24 per kg (SalMar estimate)
Comparison
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Top performer 2005 G Sample 2010 harvest Delta
Cost live weight 10,55 15,94 -5,39
Cost gutted in sea 12,71 19,20 -6,49
Harvest & well boat 2,67 2,80 -0,13
Cost gutted weight 15,38 22,00 -6,62
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Illustration of developments in key cost
components
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Cost component Cost development (approximation)
Comment
Feed Costs + NOK 3 – 4 A product of price of feed and feed conversion ratio
Health & veterinarian + NOK 0,5 – 1,5 Sea lice treatments, medicine & vaccines, veterinary costs
Administration + NOK 0,2 – 0,4 Corporate HQ, listing costs, IT & telecom, business support etc.
Smolt + NOK 0,2 – 0,5 Price, mortality rate
Harvesting + NOK 0,1 – 0,3 Charter costs, fuel, salary, packaging, utilization
Other operating costs + NOK 0,5 – 1,0 Depreciation, insurance, maintenance, salary , rent
Total + NOK 4,5 – 7,7
Source: SalMar estimates of development for the industry in general
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What can be done to counteract this development?
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Cost component Focus areas and actions to mitigate cost increase (examples)
Feed Costs Feed conversion ratio, selection of feed (feed composition), commodity prices
Health & veterinarian Sea lice treatment: Wrasse, mechanical, less use of chemicals
Administration “Rightsizing” the organization, streamline IT & communications platforms, effective business support
Smolt Size, timing, mortality rate, vaccines
Harvesting Volume, high capacity utilization, automation, flexibility
Reduce production time in sea
Feeding strategies, size of smolt, use of lights, fewer and effective treatments of sea lice
Other operating costs Centralized purchasing arrangements, efficient working practices, high utilization of fixed assets
How much of the cost increase can be addressed?
NOK 2,50 – 3,50
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Content
About SalMar
Q3 – YTD 2011
Delivering margins:
– Farming
– Processing and VAP
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InnovaMar – a strategic and value creating
investment
Harvest and processing capacity
Economies of scale
Optimize biological production
− Flexibility
− Fish welfare
− Product quality
− Optimal use of raw material
Reduced need for transportation
- 10 000 tons GW in august 2011
- Pre rigor processing online
Handling of waste & byproducts
The InnovaMar facility
Investment of EUR 70 million
17 500 square meters
Capacity >70 000 tons GW per shift
Capacity > 25 000 tons GW to filet
per shift
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InnovaMar 2012 – Harvest / HOG
Key Innovations
Expected quality and cost improvements
Automatic stunning
Automatic in feed, gutting and cleaning
Capacity of 120 fish/minute
Direct flow to pre rigor lines
Automation and improved working conditions
Hygienic design of plant and machinery
Reduced handling and improved shelf life
Flexibility in use of raw material (fresh/frozen/fillet)
Capacity and economies of scale
Reduced use of man hour
Flexibility in selection of sizes to customers needs
Estimated cost saving of 10-20% compared to
industry average in Norway
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InnomvaMar 2012 – VAP
Key Innovations
Direct flow of pre – rigor raw material
Flexibility to produce pre – rigor and post rigor
volumes in three separate lines (50/50 share)
Total capacity of 50-60 fish/minute. >15 tons/hour
Traceability (organic salmon 2x125 grams)
Moving down the value chain
Product flexibility, with potential to sell volumes to a
less price sensitive market segment
Improved shelf life
Meeting to strict quality standards
Improved yield
Reduced need for transport (lower CO2 emissions)
Target of 100+ tones raw material per shift/day
Improve efficiency of 10-20% versus old plant
Expected quality and cost improvements
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Thank you for your attention See www.salmar.no for more information
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