Salmon – price, demand and market trends

Kolbjørn Giskeødegård, Director

21 November 2018

Salmon supply – growth dramaticly down after 2012

0

500

1 000

1 500

2 000

2 500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Volume global

2003-12: CAGR 8%

2013-17: CAGR 2%

Source: Kontali and Nordea est

2

Average harvesting weights Norway, Chile, Faroes

3 •

4

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

5.8

6

2012 2013 2014 2015 2016 2017 2018E

Kilo

WFE

Chile Norway Faroes

4.2

4.3

4.4

4.5

4.6

4.7

4.8

4.9

2018 2017

Kil

o W

FE

1H 2H

Source: Kontali and Nordea est

Norway: Harvesting weights, number harvested, biomass

4 •

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

Ch

an

ge

in w

eig

ht k

ilo

s

2H 2018:

Volumes: + 18,900 tonnes (4%)

Weight – 212 grams (-4.5%)

Number of fish + 9.3 mill (9%)

Biomass: -3.5% y/y (Nordea est.)

Source: Kontali and Nordea est

5

Markets, prices, demand

Source: Nordea

6

Global markets – “other” up twice as much as EU/USA

0

50

100

150

200

250

300

350

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Ind

ex (2006=100)

EU USA Other Markets

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

EU USA Other Markets

Sources: Kontali and Nordea Markets

7

Market shares 2006 and 2020E

EU51 %

USA23 %

Japan4 %

Russia4 %

Other Markets18 %

2006

EU40 %

USA18 %

Japan3 %

Russia3 %

Other Markets36 %

2020E

Sources: Kontali and Nordea Markets

Prices in NOK doubles in ten years

8 •

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E

Salm

on

pri

ce (N

OK

/kg

)

30’ish 40’ish 60’ish

Kilde: FishPool og Nordea est

When is salmon too expensive and when do low price

trigger demand hike?

«RED» ZONE (risk for price drop):

2009: NOK 37

2010: NOK 40

2014: NOK 45

2016: NOK 62

2018: NOK 70

9

Source: Nordea Markets

Split in the value chain – who takes the biggest chunk?

10 •

• Whole cake = price to consumer (observed)

• Norwegian part = Export price

• Difference = «Value add»

Prices to end consumer – split by part of the value chain

11 •

-

2,00

4,00

6,00

8,00

10,00

12,00

14,00

w1-2

015

w7

w13

w19

w25

w31

w37

w43

w49

w3

w9

w15

w21

w27

w33

w39

w45

w51

w5

w11

w17

w23

w29

w35

w41

w47

w1-2

018

w7

w13

w19

w25

w31

w37

w43

EU

R p

er

kilo

HO

G w

eig

ht

Export price Value add

Win-win situation - Value add +30%, spot price +38%

12 •

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

w1-2

015

w7

w13

w19

w25

w31

w37

w43

w49

w3

w9

w15

w21

w27

w33

w39

w45

w51

w5

w11

w17

w23

w29

w35

w41

w47

w1-2

018

w7

w13

w19

w25

w31

w37

w43

Valu

e a

dd

-EU

R p

er

kilo

Axis TitleValue added EUR/kg Linear (Value added EUR/kg)

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

w1-2

015

w7

w13

w19

w25

w31

w37

w43

w49

w3

w9

w15

w21

w27

w33

w39

w45

w51

w5

w11

w17

w23

w29

w35

w41

w47

w1-2

018

w7

w13

w19

w25

w31

w37

w43

EU

R p

er

kilo

Export price

Source: Kontali and Nordea est

4 years ago – 50/50 distribution of total value, now back to the same

13 •

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

w1-2

015

w7

w13

w19

w25

w31

w37

w43

w49

w3

w9

w15

w21

w27

w33

w39

w45

w51

w5

w11

w17

w23

w29

w35

w41

w47

w1-2

018

w7

w13

w19

w25

w31

w37

w43

Spot Value add

Source: Kontali and Nordea est

14

The future

15

Walking in the mountains – long trend is obvious, but what

is the visibility on short and medium term?

Short term – down (November 2018 as in 2017)

16 •

30.00

35.00

40.00

45.00

50.00

55.00

60.00

65.00

70.00

21-0

8-2

018

23-0

8-2

018

27-0

8-2

018

29-0

8-2

018

31-0

8-2

018

04-0

9-2

018

06-0

9-2

018

10-0

9-2

018

12-0

9-2

018

14-0

9-2

018

18-0

9-2

018

20-0

9-2

018

24-0

9-2

018

26-0

9-2

018

28-0

9-2

018

02-1

0-2

018

04-1

0-2

018

08-1

0-2

018

10-1

0-2

018

12-1

0-2

018

16-1

0-2

018

18-1

0-2

018

22-1

0-2

018

24-1

0-2

018

26-1

0-2

018

30-1

0-2

018

01-1

1-2

018

05-1

1-2

018

07-1

1-2

018

09-1

1-2

018

13-1

1-2

018

15-1

1-2

018

19-1

1-2

018

NO

K p

er

kilo

2018 2017

63.5

5347.1

0

10

20

30

40

50

60

70

2018 fwd oct 2018 "Actual" 2017

NO

K p

er

kilo

Source: Fishpool

17 •

Short /medium term:

Flattish – although 2019 contract trending slightly down

Source: Fishpool

50

52

54

56

58

60

62

64

66

68

70

21-0

8-2

018

23-0

8-2

018

27-0

8-2

018

29-0

8-2

018

31-0

8-2

018

04-0

9-2

018

06-0

9-2

018

10-0

9-2

018

12-0

9-2

018

14-0

9-2

018

18-0

9-2

018

20-0

9-2

018

24-0

9-2

018

26-0

9-2

018

28-0

9-2

018

02-1

0-2

018

04-1

0-2

018

08-1

0-2

018

10-1

0-2

018

12-1

0-2

018

16-1

0-2

018

18-1

0-2

018

22-1

0-2

018

24-1

0-2

018

26-1

0-2

018

30-1

0-2

018

01-1

1-2

018

05-1

1-2

018

07-1

1-2

018

09-1

1-2

018

13-1

1-2

018

15-1

1-2

018

19-1

1-2

018

FY 2019

Long term: Up - the market potential is “unlimited”, supply the issue

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Change 2010-20 Change 2020-30

Asia Pacific Africa/M.E Central & South America Europe North America

Asia Pacif ic28 %

Africa/M.E8 %

Central & South America

10 %

Europe36 %

North America18 %

2010

Asia Pacif ic66 %

Africa/M.E7 %

Central & South America

6 %

Europe14 %

North America7 %

2030

Source: World Bank

18

Growth global middle class, mill persons

Share of global middle class per region

19

How much supply growth can the market absorb at stable

prices?

y = -1.7964x + 0.1788R² = 0.5992

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-10% -5% 0% 5% 10% 15% 20%

Pri

ce

ch

an

ge

Supply change %

2014

20182015

2016

2014

2017

Source: Nordea estimates

• If the market is like average 2014-18 NOK 64, EBIT NOK 27

• If the market is in «2015 or 2017 mode», NOK 60, EBIT NOK 23

• If use the 2011 scheme, a 4% supply growth => 9% price decline NOK 55, EBIT NOK 18

• If we use 2016, extreme shift, supply +4%, price + 37% NOK 83, EBIT NOK 56

• Regardless of scenario, fish farmers EBIT margin will be

3.5 to 11 times average historical earnings in the period 1985 to 2010

• And the current price level offers very good business opportunities also for the customers processing and selling the

farmed Atlantic Salmon

• Which is the perfect introduction to wish us all a

20

The 2019 price

Thanks!

Kolbjørn Giskeødegård, Director

kg@nordea.com

Nordea Bank Abp, filial i Norge, Essendrops gate 7, PO box 1166 Sentrum, 0107 Oslo, Norway, 920058817 MVA (Norwegian Register of Business Enterprises)

Nordea Bank Abp, Helsinki, Finland, 2858394-9 (Finnish Patent and Registration Office)

Nordea Markets is the name of the Markets departments of Nordea Bank Abp.

The information provided herein is intended for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea

Markets as of the date of this document and are subject to change without notice. The views have been provided solely based on the information made available to Nordea

Markets and for the purposes of presenting the services made available by Nordea Markets. This notice does not substitute the judgement of the recipient.

Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. Relevant professional advice should

always be obtained before making any investment or credit decision. This document may not be reproduced, distributed or published for any purpose without the prior

written consent from Nordea Markets.

.

Web: For disclosures and disclaimers, please click this link