Added value of marine catches. The industry point of view.

1. Added value of marine catches.The industry point of view. Guðbrandur Sigurðsson ÚA Seafood Group September 6th 2002

2. Content • ÚA Seafood: Some very basic information • Laugafiskur: Drying of fish heads and backbones • Fish farming: Will cod remain the king?

3. ÚA Seafood Some very basic information

4. The ÚA Seafood Group • A leading seafood company in Iceland • The seafood business of Eimskip • Consolidated sales 2002 - estimate • USD 110 million / EUR 112 million • Five defined business areas • Approximately 650 workers • We are operating in 10 different locations • Seven independent companies

5. Finance • Info. systems • Environment • Quality systems • Marketing • Business devel. • Strategic planning • Quotas Headquarters Akureyri Groundfish At-sea Services Groundfish On-shore Groundfish Salted fish By-products Prawns / shrimps • On-shore • On shore • Akureyri • Grenivík • Raufarhöfn • Seyðisfj. • On-shore • Húsavík • On-shore • Laugar • Reykjanes • Akranes • Skagastr. • Blönduós • On-shore • Hólmavík • Skagastr. Finance and IT systems Technical- and product developm. • Fisheries • Sléttbakur • Arnar • Örvar (1/2) • Fisheries • Árbakur • Harðbakur • Kaldbakur • “Gullberg” • Fisheries • Fisheries • Fisheries • Rauðinúp. • Örvar (1/2) Quality and environmental iss. Common projects Est. sales ‘02 2.000 1.000 1.000 1.900 3.200

6. Organisation – ÚA and Skagstrendingur Summary: Five defined business areas Seven independent companies Ten different locations in Iceland Around 650 employees • Finance • Info. systems • Environment • Quality systems • Marketing • Business devel. • Strategic planning • Quotas Headquarters Akureyri Groundfish At-sea Services Groundfish On-shore Groundfish Salted fish By-products Prawns / shrimps ÚA Akureyri Grenivík Jökull Raufarhöfn Dverga- steinn Seyðisfjörður • On-shore ÚA Sléttbakur Skag- strend- ingur Arnar Örvar GPG Húsavík Lauga- fiskur Laugar Njarðvík Akranes Leirvík Skag- strend- ingur Skagaströnd Hólma- drangur Hólmavík • On shore • Akureyri • Grenivík • Raufarhöfn • Seyðisfj. • On-shore • Húsavík • On-shore • Laugar • Reykjanes • Akranes • Skagastr. • Blönduós • On-shore • Hólmavík • Skagastr. Finance and IT systems Technical- and product developm. • Fisheries • Sléttbakur • Arnar • Örvar (1/2) • Fisheries • Árbakur • Harðbakur • Kaldbakur • “Gullberg” • Fisheries • Fisheries • Fisheries • Rauðinúp. • Örvar (1/2) Quality and environmental iss. Common projects Est. sales ‘02 2.000 1.000 1.000 1.900 3.200

7. Production Metric tons – product weight

8. Laugafiskur Drying of fish heads and back- bones – a short case

9. Background information • Company specialized in drying of fish and fish products • The main products are dried fish heads and back-bones • Has grown from operating 1 factory in 1995 to operating 4 factories • The key to growth – strategic development

10. Export of stockfish USD ‘000 Tons

11. Export of heads and backb. USD ‘000 Tons

12. Laugafiskur - milestones • 1988 Five founders, each with 20% share – Factory at Laugar • 1995 ÚA aquired a 60% share • 1996 A growth strategy developed • 1997 Second factory – Reykjanesbær • 1998 ÚA bought a further 15% share • 1999 The third and fourth factory were bought and merged into one

13. Laugafiskur - milestones • 2000 A new organisational structure. ÚA aquires the whole of the company. A new type of plastic drying grids developed • 2001 Faroe Marine Products founded in the Faroes A new automated production line designed and implemented in the Faroes • 2002 The factory at Laugar renovated. Further projects abroad.

14. Laugafiskur - operations Factory Head office Faroe Islands Iceland

15. Raw material – metr. tons • Heads / back-bones • 1997 5.834 • 1998 8.922 • 1999 11.275 • 2000 11.059 • 2001 12.517 • 2002 13.400

16. Production – dried products • Total packs (30 kg) • 1997 36.304 • 1998 56.674 • 1999 73.714 • 2000 73.751 • 2001 79.982 • 2001 89.787

17. Export - share Metric tons Share 15% 19% 23% 22% 21%

18. Laugafiskur - income ISK - million

19. Laugafiskur - conclusion • A strong and important company specialized in by-products • Our target is a turnover of ISK 1 billion • The way forward • Product development – convenience • Market development – spreading the risk • Foreign projects

20. Fish farming Will cod remain the king?

21. The Icelandic Cod Project The main objective: • Evaluate the competiveness of cod farming in Iceland. • Collect and distribute information and know-how regarding cod farming in Iceland. • Formulate and develop a R&D strategy in the field of cod farming.

22. The Icelandic Cod Project • Good access to feed • About 1 million ton of raw material for fish meal and fish oil production • Sufficient to product approximately 300.000 tons of biomass • If cod – an increase of ISK 20-30 billion (15-25%) in exports • About 2.000 new jobs

23. The Icelandic Cod Project • A long road ahead of us: • Breeding programmes • Smolt production • On-growth in sea cages • Harsh environment • Temperature • Production cost vs. market price

24. Temperature Source: Peter Braccio: Advanced Arctic Ocean Model with Sea Ice

25. Production cost – round weight Source: Torskeutredning for SND – KPMG – March 2000.

26. Market price – round weight Source: ÚA Seafood – September 2002.

27. Production cost – market price Market price Production cost

28. The salmon saga Source: Frank Asche and Ragnar Tveterås, 2002.

29. Cod – supply and demand Source: Frank Asche and Ragnar Tveterås, 2002.

30. Cod farming • Still in the R&D phase – gaining of knowledge and experience • If it to become profitable we have to work on: • Breeding programmes • Farming technology • To soon to say whether it will become a business to Iceland or not