Nordic Halibut : Quarterly Report Q3/2023

Interim Report Q3 2023

KEY HIGHLIGHTS Q3 2023

• Strong biological control enables new commercial strategy that will yield better results with higher margins and increased full run-rate production volumes
• Nordic Halibut continues to be well positioned to achieve long-term production targets of 4,500 tonnes head-on-gutted (HOG) within 2026 and 10,350 tonnes HOG within 2031
• The upward trend in sales prices observed year-over-year persisted into Q3 2023, registering an average sales price of 147 NOK/kg (+2% YoY)
• Harvested 131 tonnes (118 tonnes HOG) with an average harvest weight of 4.8 kg during the quarter
• Total revenue in Q3 2023 ended at NOK 17 million (+23% YoY)
• In line with expectations, EBITDA came in at NOK -13.9 million and loss for the period ended at NOK 21.5 million in total
• Financing of the Tingvoll facility secured, and construction initiated during August 2023 enabling realization of growth phase 2
• Growth phase 1 value chain complete with Batnfjorden site approval, first fish put to sea during Q3 2023 in the on-growing facility

KEY FIGURES

Harvest volume (tonnes HOG)

Sales price (NOK/kg)

		224					169
	195					165
			135	118				155
96								147
				144
Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023

Revenue (mNOK)

EBITDA (mNOK)

		38						2,7
	32,3
						0,1
			21,1	17,3
14,1
					-7,1
						-11,1			-13,9
Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023

SUMMARY OF EVENTS

The third quarter of 2023 witnessed a continuation of the upward sales price trend for Nordic Halibut AS ("NOHAL" or "the Company") on a year-over-year basis. NOHAL achieved an average sales price of 147 NOK/kg during the quarter, reflecting a 2% increase compared to the previous year. YTD sales price for 2023 is averaging at 160 NOK/kg, marking a 14% year-on-year growth.

The total revenue generated during the quarter amounted to NOK 17 million and harvest volumes ended at 131 tonnes (118 tonnes HOG). Harvest volumes YTD has amounted to 530 tonnes (477 tonnes HOG). In line with prior communication, the Company will focus on achieving favourably harvest weight distribution and responding to market signals. This strategy is designed to optimize the utilization of available biomass to strengthen long- term objectives, even though it may impact short-term harvest volumes.

Nordic Halibut targeted a release of 1 million fish into sea during 2023. Assessments related to timing of release, considering optimal solutions for fish welfare, logistics, and batch sizes, are continuously made based on fish available for release by the end of 2023. With some volumes considered transferred to 2024, the Company is capable of releasing 900,000 - 1,000,000 fish during 2023. Notably, short term adjustments in release volumes between periods will not impact the 2026 production target of 4,500 tonnes HOG, owing to the step change effect from the commercial strategy emphasizing larger fish.

The Company strategically harvested fish to align with its commercial focus on larger-sized fish, resulting in a relatively lower average harvest weight of 4.8 kg (4.3 kg HOG) in the quarter. This affected the Company's average pricing achievement, with a reduced volume share sold at preferred size categories above 5 kg. Despite this, price levels for various size categories remained consistent with previous periods, indicating positive underlying market trends.

AVERAGE SALES PRICE PER SIZE CATEGORY

200

150

NOK / kg

100

50

1-3kg3-5 kg 5-7 kg		7-10 kg 10 kg+
	Q3 2023		YTD 2023		Q3 2022

Harvest weights during the third quarter were lower compared to previous periods, resulting in a decreased volume share sold to the US market. Given the significant preference for larger-sized fish in the US market, this underscores the Company's commercial strategy to maximize the potential of larger-sized harvests intended for this market and other prioritized markets. The average sales price to the US in Q3 concluded at 200 NOK/kg, albeit on a lower-than-usual volume share, which contributed to the overall reduction in the average sales price for the period.

New commercial strategy expected to yield better results

The Company's revised commercial strategy aims to capitalize on the noticeable increase in acceptance for farmed halibut within key export markets. The preference for Halibut in size categories exceeding 6 kg continues to grow and represents a significant market trend that is expected to persist as customers show a sustained greater willingness to pay for larger-sized halibut.

The ability to supply larger-sized Halibut to target markets presents an opportunity for further market penetration at premium price levels.

Unlike some other species, the production of halibut in the sea is not constrained by biological mechanisms that limit operational range, such as early maturation and lice infestation. Consequently, the Company can control and produce the size categories that best align with market demands.

Leveraging a low-risksea-based production and market preferences, Nordic Halibut's primary priority is to leverage the price dynamics associated with larger-sized fish. This will be accomplished by prioritizing biomass build-up with an optimal size distribution and focusing on larger-sized halibut to achieve target run-rate volumes.

Increased full run-rate production

Harvest volumes at ~6.6 kg harvest weight (ktonnes HOG)	10,4
Step change effect
from new
commercial
strategy producing
larger fish
4,5

0,8

2023 2024

2025 2026

2027

2028

2029

2030

2031

The revised commercial strategy is set to drive an increase in price levels, particularly from larger-sized fish, amplifying the potential for higher margins at elevated production levels. Although the immediate outcome may lead to a temporary reduction in harvest volumes due to the transformation in production dynamics from 2024 to 2026, this adjustment will be balanced by enhanced pricing achieved through the sale of increased

harvest weights. The target for the growth phase 1 harvest volume of 4,500 tonnes HOG by 2026 remains. The redefined commercial strategy is poised to deliver improved outcomes both in the short and long term, yielding an elevated EBIT/kg outlook and increased run-rate production volumes. Moreover, the production target for growth phase 2 has been raised to 10,350 tonnes HOG by 2031.

EXPECTED EBIT / KG AT RUN-RATE VOLUMES PER SIZE CATEGORY

109

97

70

EBIT / kg	Size	EBIT / kg	Size	EBIT / kg
@6 kg	benefits	@8 kg	benefits	@10kg

The Company's adjusted commercial focus aims to optimize the utilization of available biomass, striving for improved margins and EBIT/kg through increased harvest weights. The notable rise in price levels across various size categories will impact each additional kilogram, resulting in a considerable overall earnings boost for every kilogram the fish gains towards reaching its harvest weight. This enhancement significantly raises the achieved margin level.

Growth phase 1 value chain complete with Batnfjorden site

The Company has obtained approval to establish a new grow-out site in

Batnfjorden, located in the Gjemnes municipality. This newly designated Batnfjorden site strategically aligns with the established production hub in the Nordmøre region. With the addition of this fourth grow-out site, coupled with existing facilities, the Company has achieved a fully integrated value chain, covering all necessary capacities to meet the growth phase 1 production target of 4,500 tonnes HOG by 2026. Notably, the first halibut was introduced to the Batnfjorden site in September 2023.

The inclusion of Batnfjorden, alongside the three existing grow-out sites and land facilities in Midsund, Askøy, and Averøy, provides the Company with sufficient capability to annually produce 4,500 tonnes of HOG halibut. This comprehensive and integrated value chain, spanning from roe to sales, enhances operational resilience and flexibility. It ensures consistent and stable production volumes, allowing Nordic Halibut to meet its production targets through well-aligned production buffers derived from internal capacities and the strategic partnership with Sande Seafarm.

Tingvoll financing in place - construction initiated in August 2023

Nordic Halibut has reached agreement for a NOK 230 million debt financing for the new land-based facility at Tingvoll. This funding marks a significant step towards achieving phase two of the Company's growth plan, targeting a production capacity of 10,350 tonnes HOG by 2030.

Strategically located in close proximity to the established production hub in Nordmøre, the Tingvoll facility will serve as a pivotal asset in mitigating risks associated with future production cycles. Diversifying the early-phase production across multiple locations will significantly bolster the resilience of the production process. With plans to double the current production capacity on land, this facility will enable the Company to produce 2 million juveniles annually.

Groundwork at the location commenced in August 2023, and the Company intends to begin construction of the new land-based facility in the first half of 2024. As per the previously communicated project timeline, the

facility is projected to be fully operational by 2027. The recent debt financing and ongoing project development serve to reinforce the estimates for the facility's completion. The Company foresees phasing the facility partially into production during 2025-26, further enhancing the robustness and flexibility of the value chain.

TINGVOLL FACILITY ILLUSTRATION

CONSTRUCTION STATUS PER OCTOBER 2023

Additional overdraft facility tranche released with Eksfin financing guarantee

An additional tranche of the overdraft facility with Sparebank 1 SR-Bank has been made available, supported by an Eksfin financing guarantee, prompted by the Company's growing biomass and biological performance. This released option represents an increment of NOK 50 million, expanding the existing overdraft facility from NOK 150 million to a new total of NOK 200 million. The extended overdraft facility significantly strengthens NOHAL's liquidity, serving as important support to finance the planned growth in biomass. The backing of Eksfin (Export Finance Norway) through its financing guarantee improves the Company's financial robustness.

AVAILABLE LIQUIDITY (MNOK)

135,2132,8

Released tranche in Q4 2023

Q2 2023

Q3 2023

New sales office established in Bergen

Nordic Halibut has established a new sales office in Bergen, recognized as Norway's seafood hub, reinforcing its sales team with the addition of a Sales Manager VAP. This managerial appointment holds vital importance in driving product development and specifically focuses on positioning halibut in our key markets, aiming to maximize market penetration at premium prices that highlight the product's distinctive qualities. The bolstered team and strategic location will substantially amplify our knowledge base, fostering the ongoing expansion and advancement of our product for commercial success.

FINANCIAL PERFORMANCE

Sales revenue in Q3 2023 ended at NOK

17.3 million, an increase of 23% from the corresponding quarter in 2022. The Company increased its revenue YTD 2023 by 60% compared to the same period in 2022, ending at NOK 76.5 million. The average sales price during Q3 ended at 147 NOK/kg (+2% YoY). The average sales price YTD 2023 demonstrated a significant YoY increase of 14%, concluding at 160 NOK/kg.

Financial results for the quarter ended in line with what was expected. EBITDA came in negative in the quarter at NOK -13.9 million and loss for the period ended at NOK -21.5 million in total. According to expectations and the current growth phase of the Company, expenses are frontloaded and scale effects on financial results from increased production and sales will emerge stepwise moving forward. The Company's value chain is currently dimensioned to run at growth phase 1 volumes of 4.500 tonnes HOG and the Company will continue to build a strong foundation for further development and robustness towards our production and profitability targets both short-term and long-term towards 2030.

The increase in cost of materials during the quarter was mainly driven by increased feed expenses, up NOK 9.2 million compared to the corresponding quarter in 2022 and NOK 9.8 million up from the previous quarter. The increased feed costs mainly relate to increased feed consumption from a growing biomass and higher feed

prices. An overall increased activity level from operations led to somewhat higher operating expenses. Increased production both at land and in sea led to a fair value adjustment of live halibut of approx. NOK 25.3 million in the period.

Net financial costs are YoY up 0.4 million during Q3 2023 mainly due to increased interest expenses.

The Company is comfortable with the current situation towards our growth and long-term profitability targets towards 2026 and 2030.

FINANCIAL STATUS

On 30 September 2023 Nordic Halibut's total capital was NOK 584.9 million (YoY change + NOK 93.5 million).

Inventories and biological assets are capitalized at NOK 289.4 million compared to NOK 227.6 million on 31 December 2022.

After a net change in cash and cash equivalents during Q3 of approx. NOK

4.1 million, the Company's cash at period end Q3 2023 ended at approx. NOK 14.3 million. Including the committed credit facility of NOK 150 million with Sparebank 1 SR-Bank the total liquidity entering Q4 2023 was NOK 82.8 million. In addition, the Company have uncommitted credit facility of additionally NOK 150 million that is expected to be released in tranches to support biomass growth and growth plan going forward. Overall, the Company assesses the current financial situation as acceptable.

Total equity stands at NOK 328.2 million on 30 September 2023. That represents an equity ratio of 56% vs. 75% on 31 December 2022. The Company was also in Q3 in compliance with all financial covenants.

Averøy, 15 November 2023

Vegard Gjerde	Aino Olaisen	Birthe Cecilie Lepsøe
Chair of the Board	Director	Director
Tore Hopen	Jan Erik Sivertsen	Øyvind Schanke
Director	Director	Director
Edvard Henden
CEO