Salmon market balance and share

prices

Kolbjørn Giskeødegård

22.11.2011

24.11.2010 Salmon market balance and share prices 2

Nordea: Public seafood transactions 2010-11

March 2010

IPO (OSE)

NOK 716m

Joint Lead Manager and

Joint Bookrunner

March 2010

IPO (OSE)

NOK 150m

Joint Bookrunner

Nordea 2010-11 Transactions

Sale of 41%

Sale of shares

Sell side advisor

January 2010

Merger with

Advisor to Bakkafrost

March 2010

Senior Unsecured

Convertible Bond

EUR 225m

Co-lead Manager

March 2011

Sale of

Bringsvor Laks AS

to

Advisor to Sellers

April 2011

Aqcusition of

Havsbrun

Advisor to Bakkafrost

24.11.2010 Salmon market balance and share prices 3

Q3 ranking EBIT per kilo (farming ex VAP)

(3.00)

(2.00)

(1.00)

-

1.00

2.00

3.00

4.00

5.00

6.00

Marine H Morpol SalMar Lerøy Cermaq Bakkafrost NRS Grieg

EB

IT p

er

kilo

24.11.2010 Salmon market balance and share prices 4

Salmon farming: Key issues – one year ago

Massive disease problems in Chile, hampering production by

270,000 tonnes in just two years.

Demand has been surprisingly firm during the financial crisis,

both in mature EU markets and BRIC countries.

Favourable market balance has led to a 20% price increase and

impressive profit margins.

Main concerns as we enter 2011:

– Sustainability of demand

– Impact of the upcoming Chilean production ramp-up

24.11.2010 Salmon market balance and share prices 5

Salmon farming: Key issues looking back

Yes, demand destruction seem to have played a key role during

2010-11

No, Chile ramp up was not the main trigger for the plunge in

salmon prices, though indirectly contributing through

– Pressuring Norwegian salmon back from the US and into Europe

– Setting the stage for a change in market psycholgy

Because, Norway and UK did not need Chilean assistance to

lower the salmon prices by 50% in 9 weeks, they managed this

very well on their own…

24.11.2010 Salmon market balance and share prices 6

Salmon farming: Key issues last years

2009-2011 Draught Q2 2011-> Flooding

24.11.2010 Salmon market balance and share prices 7

2011: “Salmon super-cycle” terminated

Source: Kontali (history) and Nordea Markets

0

200

400

600

800

1,000

1,200

1,400

1,600

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

E

2011

E

2012

E

2013

E

1000 tons

15

20

25

30

35

NO

k/k

g

Prod Europe (k Tonnes) Price* Cost

24.11.2010 Salmon market balance and share prices 8

Still reluctant on the sector

Seafood sector has faced melt down during

the last six months

Still it is fairly high priced compared to the

underlying earnings expected for 2012-13

For the first time in 8 years, the industry has

seen red figures in some weeks.

2012: 14% supply growth and steep growth

in smolt introduction.

Fish Farming Rating Target Actual Down/-upside Mcap

Cermaq Buy 80.00 62.75 27% 5,804

Bakkafrost Hold 45.00 36.00 25% 1,750

Lerøy Hold 70.00 79.25 -12% 4,325

SalMar Hold 23.00 29.00 -21% 2,987

Grieg Seafood Sell 3.00 4.18 -28% 467

Marine Harvest Sell 1.50 2.64 -43% 9,438

Average fish farming

24.11.2010 Salmon market balance and share prices 9

EV/kilo

Grieg and Scottish Salmon

Company lowest EV/kilo – and

most unstable in terms of

EBIT/kg

SalMar and Bakkafrost most

expensive based on a normal

margin premium compared to its

peers.

Company EV/kg

SalMar 55.04

Bakkafrost 41.93

Marine Harvest 39.87

Norw ay Royal Salmon 33.16

Lerøy 30.79

Scottish Salmon Comp. 30.21

Cermaq 28.93

Grieg Seafood 27.25

Average 35.90

Global supply growth – over the top?

2012: Still 2X average demand growth….

24.11.2010 Salmon market balance and share prices 10

-5%

0%

5%

10%

15%

20%

2008 2009 2010 2011 1H 2011 2H 2012E 2013E

Share prices: Dramatic drop from the top

24.11.2010 Salmon market balance and share prices 11

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

BAKKA CEQ LSG SSC MHG Morpol SALM NRS GSF

24.11.2010 Salmon market balance and share prices 12

Farming related debt per kilo fish in sea

0

5

10

15

20

25

30

35

CEQ BAKKA LSG MHG SALM GSF SSC NRS

Ad

jus

ted

de

bt

pe

r k

ilo

bio

ma

ss

Looking forward

Yes, 2012-13 is going to be tough in terms of supply

Demand will improve, the lower prices the sooner recovery

Meanwhile; risk for “blood, sweat and tears” in 2012

Having a 2 year perspective the sector looks attractive, if you

want to stay through, look for

– Strong balance sheets (low debt)

– Low cost/highest industry margins over time

– Diversified cases

Long term – how to meet the demand rather than how to control

production growth.

24.11.2010 Salmon market balance and share prices 13