2. Nordea: Public seafood transactions 2010-11
Nordea 2010-11 Transactions
January 2010 March 2010 March 2010 March 2010
Merger with IPO (OSE) IPO (OSE) Senior Unsecured
Convertible Bond
NOK 716m NOK 150m EUR 225m
Joint Lead Manager and Joint Bookrunner Co-lead Manager
Advisor to Bakkafrost
Joint Bookrunner
April 2011
March 2011
Sale of
Sale of 41% Bringsvor Laks AS
Aqcusition of
to
Sale of shares Havsbrun
Sell side advisor
Advisor to Bakkafrost
Advisor to Sellers
2 24.11.2010 Salmon market balance and share prices
3. Q3 ranking EBIT per kilo (farming ex VAP)
6.00
5.00
4.00
3.00
EBIT per kilo
2.00
1.00
-
Marine H Morpol SalMar Lerøy Cerm aq Bakkafrost NRS Grieg
(1.00)
(2.00)
(3.00)
3 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
4 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…
5 24.11.2010 Salmon market balance and share prices
6. Salmon farming: Key issues last years
2009-2011 Draught Q2 2011-> Flooding
6 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 Farm ing Rating Target Actual Dow n/-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 farm ing
8 24.11.2010 Salmon market balance and share prices
9. EV/kilo
Grieg and Scottish Salmon
Company lowest EV/kilo – and Com pany EV/kg
most unstable in terms of SalMar 55.04
EBIT/kg Bakkafrost 41.93
Marine Harvest 39.87
SalMar and Bakkafrost most Norw ay Royal Salmon 33.16
Lerøy 30.79
expensive based on a normal
Scottish Salmon Comp. 30.21
margin premium compared to its Cermaq 28.93
peers. Grieg Seafood 27.25
Average 35.90
9 24.11.2010 Salmon market balance and share prices
10. Global supply growth – over the top?
2012: Still 2X average demand growth….
20%
15%
10%
5%
0%
2008 2009 2010 2011 1H 2011 2H 2012E 2013E
-5%
10 24.11.2010 Salmon market balance and share prices
11. Share prices: Dramatic drop from the top
0%
BAKKA CEQ LSG SSC MHG Morpol SALM NRS GSF
-10%
-20%
-30%
-40%
-50%
-60%
-70%
-80%
-90%
11 24.11.2010 Salmon market balance and share prices
12. Farming related debt per kilo fish in sea
35
30
Adjusted debt per kilo biomass
25
20
15
10
5
0
CEQ BAKKA LSG MHG SALM GSF SSC NRS
12 24.11.2010 Salmon market balance and share prices
13. 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.
13 24.11.2010 Salmon market balance and share prices