Marine Harvest “Is there any hope for Chile in the next two years”?

Havbrukskonferansen 24 November 2015

Perfect storm in Chile

2

Rapid growth

Biological issues

Antibiotics & reputation

Lack of smart regulations

Slow consolidation

Financing

Currency

3 Source: Kontali

0

100

200

300

400

500

600

2008 2009 2010 2011 2012 2013 2014 2015e 2016e

Thou

sand

ton

nes

GW

E

Atlantic Salmon

Rapid growth of Chilean harvest volumes…

4 Source: Sernapesca

…facilitated by unsustainable levels of antibiotics

0

100

200

300

400

500

600

2008 2009 2010 2011 2012 2013 2014

Tonn

es

Antibiotics use for industry (salmonids), tonnes

5 Source: Marine Harvest and Sernapesca

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014

Gra

ms/

tonn

e

Antibiotics use (grams/tonne), MH Chile

Antibiotics use (grams/tonne), industry (salmonids)

MH Chile not immune to biological challenges

6 Source: Marine Harvest

Profitability in Chile impacted by both low prices and higher costs (in NOK)

- 15

- 10

- 5

0

5

10

15

2008 2009 2010 2011 2012 2013 2014 2015 YTD

EBIT

/ k

g G

WE

(NO

K)

MH Chile EBIT/kg (NOK)MH Chile EBIT/kg average for periodMH Norway EBIT/kg average for period

7

Approximately 1,300 licenses issued vs ~ 600 licenses being used across production cycles. No limit on biomass

Regulations on mortality has led to farmers moving to poorer sites for the next generation

There are many other legal limits to what farmers can do and cannot do, but no real results

Today’s regulations – no real impact

8

After ISA no real change in industry structure

2014e2013

20122009

20062003

20001997

0

20

40

60

80

23

13

4 42 2

Source: Kontali Note: Numbers of players producing 80% of the farmed salmon and trout

9

Restricted financing – magic cash?

10 10

Significant USD appreciation last 5 years

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2011 2012 2013 2014 2015

USDNOK USDBRL USDJPY USDRUB USDCLP

USDNOK USDBRL USDJPY USDRUB USDCLP

48% 127% 51% 112% 53%

Source: Bloomberg

11

Positives Tight global salmon supply Flat supply from North America Industry try to come up with suggestions to regulations Negatives Authorities resist to make real changes in regulations Industry acts to slow, and complicates solutions Opportunities Consolidation Currency Development of value added products Reduction in use of antibiotics New medicine against SRS and caligus

Chile – any hope the next two years?

12

1. Split licences from locations

2. Asses total carrying capacity in each region (all species) – current level way to high

3. Divide carrying capacity on number of licences per region and let companies determine their best locations for farming salmon within each region. Apply x number of licences (MAB's) according to environmental carrying capacity per location

4. Monitor environmental impact per location

5. Set key biological indicators

Use of antibiotics

Number of sea lice treatments

6. Set a horizon, for example 10 years, and give the industry players incentive to comply, by rewarding growth

5 percent per generation MAB increase on locations that comply with biological indicators

No growth or reduction of biomass if targets are not reached

What does it take to make salmon farming in Chile sustainable?

13

Thank you for the attention