Salmon Evolution ASA: Results for the fourth quarter 2022

08 Feb 2023 07:00 CET

Highlights in the quarter

· Batch 1 fully harvested out with very strong results - harvest volume of
~340 tonnes HOG at avg. weight of ~3.75 kg HOG (~4.5 kg LW) - excellent product
quality confirmed by industry leading superior share of 96%
· On track for profitable farming operations in Q2 2023 and steady state
production from late Q3 2023
· Production ramp-up proceeding according to plan with batch 3 and 4 stocked
in October and December, respectively
· Continued strong biological performance with minimal mortality - batch 2
scheduled for harvest in Q2 2023
· Increasing focus on international expansion plan, both in South Korea and
North America
· Indre Harøy phase 2 preparations continuing - clear signs of normalization
in construction markets
· Available liquidity of NOK 400 million per 31 December 2022 including
committed undrawn credit facilities

Subsequent events

· Strengthening of the executive management team - Trond Håkon Schaug
-Pettersen appointed as CEO and Trond Vadset Veibust as CFO

Batch 1 was fully harvested out during the fourth quarter with very strong
results. Total harvest volume ended at ~340 tonnes HOG with an average weight of
~3.75 kg HOG (~4.5 kg LW). The harvest was spread over ~1 month in 3 rounds from
early November to early December which gives an effective production cycle of
around 7-8 months since stocking. The harvest showed a strong product quality,
confirmed through an industry leading superior share of 96% for batch 1 as a
whole. The average realized price for batch 1 ended at NOK 75/kg and NOK 78/kg
for Superior 3+ kg HOG, representing a NOK ~3/kg premium to corresponding Nasdaq
prices.

During the fourth quarter an important milestone was reached when batch 2 was
split in two and simultaneously graded on size using our highly automated fish
logistics and distribution system. This operation went according to plan with
minimal registered mortality. The good growth for batch 2 has continued and as
per 31 January batch 2 had an average weight of around 2,375 grams consisting of
one large group at ~2.6 kg and one smaller group at ~2.15 kg.

During the fourth quarter the Company also released its third and fourth batch
of smolt at Indre Harøy. Batch 3 was stocked in late October and comprised
200,000 smolt with an average weight of around 220 grams. Average weight now
stands at ~870 grams following a good pickup in growth lately. Batch 4 was
stocked in early December and comprised 265,000 smolt with an average weight of
around 260 grams, marking the Company first "full size" smolt release. As per 31
January 2023 the group had reached an average weight of ~550 grams. Going
forward the Company plans to stock "full size" batches of smolt at Indre Harøy
every second month.

The Company continues to see very low mortality levels, even as the density
levels are increasing. For batch 2 the accumulated mortality stood at 1.2% per
31 January 2023, clearly outperforming the levels seen for batch 1. For batch 3
and 4, mortality levels are even lower, demonstrating the benefits of having a
controlled environment with minimal manual handling of the salmon.

Indre Harøy phase 1 is expected to be completed during Q1 2023. All buildings
and structural facilities are now completed and the construction work during the
fourth quarter was centred around installation of equipment, piping, system
integration and commissioning. Currently, 8 out of 12 tanks have been handed
over to the Company with the remaining 4 tanks to be handed over during February
and March. This will allow for streamlining of the production process with two
"production lines" each consisting of 6 tanks and where fish groups are
regularity split and transferred to the next departments allowing for stocking
of new batches in emptied tanks.

The accumulated phase 1 capex to date of NOK 1,578m compares to previous guiding
of phase 1 completion capex of NOK 1,560-1,590m. With the project now being
almost completed, the remaining phase 1 capex is expected to be moderate. The
exact amount will depend on several factors, including finalization of contract
settlements with suppliers, chosen de- and remobilization strategy between phase
1 and phase 2 and overall productivity during the remaining commissioning work.

Similar to the third quarter, the preparatory activities for phase 2 have
continued during the fourth quarter with focus on implementing learning effects
from phase 1, identifying savings and scaling effects from phase 1, defining a
cooperation model designed at further optimizing the project management and
develop a cost budget for phase 2. Salmon Evolution is seeing clear signs of
normalization in the construction market, evidenced by an increasing level of
availability amongst various types of suppliers relevant for phase 2. The
Company has made no contractual commitments as to phase 2 and maintains full
flexibility as to timing and capex.

The Company is currently in advanced discussions with banks for debt financing
of phase 2. The feedback from  banks has been very positive and the Company
expects both significantly higher leverage  for phase 2 compared to phase 1 as
well as improved  overall terms and cost.

For our K Smart project in South Korea activities has during the fourth quarter
continued to be centred around design and engineering activities in cooperation
with Billund Aquaculture as design partner. Significant progress has been made
on the design for the smolt facility which is now set for 90% design review
during Q1 2023. This review is expected to be followed by commencement of early
construction works.

Design work for the grow-out facility in Yangyang was intensified during the
fourth quarter with focus on implementing learning effects from Indre Harøy
alongside incorporating required site-specific changes. K Smart is also working
actively with the permitting processes and significant resources have been
devoted to document the environmental effect of the project. Contrary to Norway,
land-based salmon farming is a new industry in South Korea and regulatory
processes takes time, but the company is continuing to experience strong support
from both local, regional and national stakeholders and expect clarification on
several key permits over the coming months, allowing for construction start of
grow-out facility during 2023.

Salmon Evolution continues to evaluate selected identified potential production
sites in North America, both on the US and Canadian side of the border. As part
of the site verification processes which include fatal flaws analyses of both
water, biological, technical and regulatory aspects, the Company is currently in
dialogue with various stakeholders, both public and private. The Company expects
to use the next quarters for such site selection and initial site verifications.
It is expected that the site verification and relevant regulatory approval
processes will take around three years, allowing for construction start in 2025
or 2026, upon which the plan is to build a full scale 31.5 tonnes HOG "Indre
Harøy" facility drawing on the experiences learned in both Norway and Korea.

Summary and outlook

2022 was a step change year for Salmon Evolution starting with the batch 1 smolt
release in March as per the original timeline and rounded off by fully
harvesting out our first batch with excellent results. Through this great
achievement the Company has demonstrated that it is possible to produce salmon
on land, all the way to full harvest weight, at an industrial scale, with strong
biological performance and with the end result being an excellent quality
product.

Throughout 2022 the Company has been gradually ramping up production and a total
of four batches have been stocked at Indre Harøy of which the last one in
December being a "full size" batch. The next smolt release is scheduled for
February and throughout 2023 the Company will release smolt every second month
ensuring that the regularity in harvest volumes will gradually increase over the
coming quarters.

Batch 2 is planned harvested during the second quarter and from late Q3 2023 the
Company expects to reach steady state production levels, yielding an annualized
production of 7,900 tons HOG from Indre Harøy phase 1.

The Company is very satisfied with the biological results seen in 2022 and see
the results achieved as a clear proof of concept as to the assumptions in our
production plan. Although taking a facility like this into operation is a huge
task that involve a lot of learning and tuning in the beginning, the biological
performance has exceeded expectations. Furthermore, the Company is satisfied to
see that the mortality levels have been very low, with the latest batches even
outperforming both batch 1 and 2.

Going into 2023 most analysts expect low single digit global supply growth which
should support a scenario with strong salmon prices. With Salmon Evolution now
in the process of ramping up production, the Company should be in a good
position to benefit from this over the course of 2023.

Looking further ahead, the Company continues to see a significant demand growth
potential for salmon and the Company remains firm in its belief that land-based
farming will need to play an important role alongside conventional farming for
the industry to be able utilize the demand potential.

After almost one year of successful farming operations and with phase 1 expected
to be completed during the first quarter, the Company is in a unique position to
execute on its growth plan and solidifying its position as the global leader
within land-based salmon farming.

Results presentation

CEO & CFO Trond Håkon Schaug-Pettersen will present the results at Hotel
Continental in Oslo, Wednesday 8 February at 08:00 a.m. CET.

Participants may also follow the presentation and submit questions through a
live webcast available on www.salmonevolution.no, or with the following link:
https://www.direktesending.com/salmeq4

The presentation and subsequent Q&A will be held in English.

For further information, please contact:

Trond Håkon Schaug-Pettersen, CEO | CFO
thsp@salmone.no
+47 91 19 13 27

About Salmon Evolution

Salmon Evolution is a Norwegian land-based salmon farming company targeting a
production capacity of 100,000 tonnes HOG by 2032. The Company's core focus is
on extending the ocean's potential by transferring the best preconditions
offered by the sea to farm fish on land through its chosen hybrid flow-through
system technology (HFS). This secures a truly sustainable production process
with controlled and optimal growth conditions and limiting operational and
biological risk.

The Company's first production facility is strategically located at Indre Harøy
on the Norwegian west coast with unlimited access to fresh seawater, renewable
energy, established infrastructure, and an educated and experienced work force.
Phase 1 is already in operation and will have an annual capacity of 7,900 tonnes
HOG at steady state. Fully developed, the Indre Harøy facility will have an
annual capacity of 31,500 tonnes HOG.

The Company has also entered into a joint venture with Dongwon Industries where
the parties will develop, construct and operate a land-based salmon farming
facility in South Korea with an annual production capacity of 16,800 tonnes HOG,
using Salmon Evolution's chosen HFS technology.

Furthermore, Salmon Evolution has initiated a process with the aim of
establishing a land-based salmon farming operation in North America.

Salmon Evolution ASA is listed on Oslo Børs under the ticker SALME.

To learn more, please visit www.salmonevolution.no

This information is subject to the disclosure requirements pursuant to section 5
-12 of the Norwegian Securities Trading Act.

More information:
Access the news on Oslo Bors NewsWeb site

581593_SALME_Q4_2022_Report.pdf
581593_SALME_Q4_2022_Presentation.pdf