Icelandic Salmon : Consolidated Financial Statements for the year 2023

CONSOLIDATED ANNUAL REPORT 2023

THIS IS ICELANDIC SALMON

ICELANDIC SALMON AS

Icelandic Salmon AS

Consolidated Annual Report 2023

1 2 3 4

This is Icelandic Salmon	4
Key Figures for Icelandic Salmon	5
Message from CEO	6
The history of Icelandic Salmon	8
Highlights in 2023	9
Significant Achievements In 2023	10
The ABC of salmon farming	14
Arnarlax's visions, ambition and values	15

Sustainability and
social responsibility	16
Sustainability and corporate responsibility	17
Fish	23
Environment	31
People & Society	40
GRI Index and Third-Party Verification	45
Independent Accountant's Assurance Report	46

Corporate governance	50
Corporate governance at Icelandic Salmon	51
Group management	55
Board of Directors	56
Report from Board of Directors 2023	57

Financial Statements and results	63
Icelandic Salmon AS Consolidated
Financial Statements	64
Notes to the Consolidated
Financial Statements	69
Icelandic Salmon AS Financial Statements	96
Notes to the Annual Financial Statements	100
Statement by the Board of Directors and CEO....	107
Independent auditor's report	108

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Icelandic Salmon AS owns all shares and is the Parent company of Arnarlax ehf., the largest producer of Atlantic salmon in Iceland. The Parent company's shares are listed on Euronext Growth Oslo and NASDAQ First North in Reykjavík Stock Exchange. In this report, the Parent company and Arnarlax ehf., with subsidiaries are collectively referred to as "the Group" or "Icelandic Salmon". "Arnarlax" also refers to the brand under which the Group's operations and productions are marketed.

While the Parent company is registered in Norway, Arnarlax ehf. has its headquarters in the Icelandic village Bíldudalur. It has been engaged in fish farming since 2010. The Group's farming facilities are strategically located in the beautiful West Fjords of Iceland, a region that is well sheltered with stable and moderate sea temperatures and good tidal currents, creating favourable conditions for salmon farming.

The Group is considered a leading salon farmer in Iceland, controlling the entire value chain from hatchery to sales.

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THIS IS ICELANDIC SALMON	1

Key Figures for Icelandic Salmon	5
Message from CEO	6
The history of Icelandic Salmon	8
highlights in 2023	9
Significant Achievements In 2023	10
The ABC of salmon farming	14
Arnarlax's visions, ambition and values	15

KeyKEY FIGURESFiguresFOR ICELANDIC SALMON

for Icelandic Salmon

Our Locations

Current operations

License application

Smolt facilities		6 ASC certified
Smolt		7-8	Million smolt in	sites in 3 fjords
4 facilities		operational capacity

EUR million	FY 2023	FY 2022
Operating revenue	164.82	157.59
Operational EBIT	20.28	36.15
Production tax	2.20	1.33
Fair value adjustments	-4.38	-0.21
Profit (loss) before tax	10.20	41.82
Net interest bearing debts	45.81	56.03
Equity ratio	64%	61%
Harvested volume from	17.919	16.138
own production (tonnes)
Operational EBIT EUR/kg.	1.13	2.24

Harvest Volume	Harvest volume
in thousand tonnes	12 month rolling harvest

				17.9
	19.3	16.5	16.7
16.1
6.0	6.6			7.2
			4.0
		0.1
Q4	Q1	Q2	Q3	Q4
2022	2023	2023	2023	2023

Number of Employees			100%
Average over year						ASC Certified
									production
154		174		193		191		189	Geographical distribution
H2 2021	H1 2022	H2 2022	H1 2023	H2 2023	of revenues from sales of fish

Male 73%	Female 27%	Europe 75%	North America 19%	Asia 6%
Gender		2023
Ratio
Sickness absence	H-factor	2022
4.7% Target <4.5%	3.0 Target <6

Operating Revenues EUR million	Operating EBIT EUR/kg
Operating revenues	Operating EBIT
12-month operating revenues	12-month operating EBIT

	189			165		2.79
158			165
	157		2.24	2.33
					1.55		1.72	1.65
									1.13
52	69	3	42	52			0.00	0.73	0.28
Q4	Q1	Q2	Q3	Q4	Q4	Q1	Q2	Q3	Q4
2022	2023	2023	2023	2023	2022	2023	2023	2023	2023

																				Europe 71%		North America 27%			Asia 2%
Assets EUR million	NIBD EUR million		Liabilities EUR million	Equity Ratio
Fixed assets						Net interest-bearing debt			Non-current liability
Current assets						Leasing								Current liabilities
					257	238	63									91						95	85
235	230
228						7					52		51			74
																	30	73				23
111		99		92		120		97			42	44		6		6
											23
									6
												6
																								64		86		62
124		131		136		137		141		56		36		38		467		46		61		51						61%		68%		68%		63%		64%
																								8		9
Q4		Q1		Q2		Q3		Q4		Q4		Q1		Q2		Q3	Q4		Q4		Q1		Q2	Q3		Q4		Q4	Q1	Q2	Q3	Q4
2022	2023	2023	2023	2023	2022	2023	2023	2023		2023	2022	2023	2023		2023	2023		2022		2023		2023		2023		2023

THIS IS ICELANDIC SALMON

MESSAGE FROM CEO

In 2023, Icelandic Salmon supplied the world markets with a record- breaking 17,919 tonnes of salmon. This marks an all-time high volume for our company and our employees have done a tremendous effort to make this happen. This also underscores the essential of our close cooperation with our excellent suppliers, service partners and customers, which all played a vital role to make this happen.

Growth

The harvest volume of 17,919 tonnes represents an increase of 11% from 2022, which showcases our ability to grow and supports our ambition for further growth. To continue this growth trajectory, we have invested in smolt production, and are now in a position where we have sufficient smolt for our existing licenses (23,700 tonnes MAB). As a part of our smolt strategy, we have increased the average weight of the smolts by 48%, from 147 grams to 218 grams. Our largest smolt groups, approximately at a size of 700 grams, were released into the sea in early summer, marking a strong improvement in MAB utilisation.

Significant investments have been done in our seawater operations to prepare for further growth. In 2023, two new barges with a feed storage capacity of 900 tonnes each were delivered to the Westfjords of Iceland. In addition, new vessels, cages, nets and moorings have been acquired.

When it comes to harvest capacity, Icelandic Salmon have sufficient capacity for harvesting from existing licenses in the harvest plant in Bíldudalur.

Market

Despite the various uncertainties in 2023, including macro-economic fluctuations, geopolitical tensions, and regulatory changes, the salmon industry has seen a strong market overall. Especially during the first half of the year, we witnessed a very strong demand, resulting in high salmon prices. The main market for Icelandic Salmon is Europe, but the American market is also of high importance for us. Additionally, we have sales to the Far East, with China being an important market.

For the American market, we have a strong competitive advantage in our ability to deliver fresh salmon by sea to the East Coast US. This gives a significant reduction of CO2 emissions, with a 95% reduction compared to airfreight.

Results

I am proud of the record-high volume achieved this year and the dedicated work of our employees. However, despite strong underlying operations, the economic results have been affected by the biological challenges. More details on this can be found under the financial sectionof the annual report.

During the summer and autumn, the success of the smolt strategy became clear, and strong results were observed in the smolts that were put into sea.

The harvest plant maintained a stable and good performance throughout the year and received a AA+ grade (the highest grade) during the BRC certification audit. This shows that hard work on food safety yields results, and even safer food for our customers.

Another milestone I would like to highlight is our successful closing of a refinancing process during the year. The total amount for the financing package is EUR 100 million, and this will secure financing for operations and growth going forward.

ICELANDIC SALMON AS

People

In Icelandic Salmon, our commitment to self-development is key. The most important tool we have for this is our Arnarlax Academy. In 2023, all employees participated in shaping the Academy's strategy and to develop the content of the course further.

The contribution from the company in the rural areas we are operating is significant, and to document the contribution a community footprint report is published yearly, also in 2023. As the main private employer in a community the responsibility is huge, and to make things work a strong cooperation with the community is important.

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THIS IS ICELANDIC SALMON	ICELANDIC SALMON AS

Dual listing

In September, Icelandic Salmon hosted its first capital market day in the Westfjords of Iceland, and the interest and attendance was very good. The capital market day was coordinated with our dual listing on NASDAQ First North list at the Reykjavik stock exchange. The formal ceremony took place at the harbour in Bíldudalur, attracting a large audience, including investors, banks, municipalities, NASDAQ, employees and locals from the community. The listing on the NASDAQ First North list marked another important milestone for our company, increasing the accessibility to Icelandic investors.

Outlook

In 2024, we see a preliminary stagnation in the growth of harvest volumes, due to the biological challenges we witnessed in the second

half of 2023. This was unfortunately due to circumstances related to lice, causing threat to the welfare of our fish. The health and wellbeing of our fish is our top priority, and mitigating measures has been initiated to avoid this from happening again.

Looking further ahead, the demand for salmon is expected to be strong, presenting an opportunity for Iceland to expand its market share. In Icelandic Salmon, we will continue to work hard and proactive for this to happen, with our aim to be able to contribute to the worlds increasing food demand. Salmon is a healthy alternative that is good for people today, tomorrow and for years to come.

Salmon farming also holds great promise for the Icelandic economy, in terms of future oriented valuable jobs and economic growth. During the past few years, we have seen significant increases in overall tax levels for aquaculture, and a new law proposal is now in Althingi for final sanctioning.

As a leading producer of salmon, we are concerned that the uncertainty that these processes have introduced could be making it more difficult for Iceland to build this new pillar of our economy where competitiveness is of key importance in the global markets. We remain committed, however, to work with policy makers and other stakeholders to establish a balanced, competitive and predictable legal and fiscal framework going forward.

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THIS IS ICELANDIC SALMON

ICELANDIC SALMON AS

THE HISTORY OF ICELANDIC SALMON

Arnarlax ehf., a subsidiary of Icelandic Salmon AS, was founded in 2010 in Bíldudalur, a small Icelandic village inside a long fjord called Arnarfjörður. Bíldudalur is the hometown of the company's founder, Matthías Garðarsson, who knew that the area had excellent conditions for farming salmon. Today, the company is Iceland's biggest producer of Atlantic salmon. Modern salmon farming is relatively new in Iceland compared to our neighbours in the Faroe Islands, Scotland and Norway. The company's vision is "Sustainability - it's in our nature", so to be sustainable in every aspect of its operations and lead the way in terms of cost efficiency, biology and the development of the whole value chain for salmon farming in Iceland.

The Group successfully completed a private placement in the autumn of 2020 followed by a listing on Euronext Growth. The Group also successfully completed a dual listing on NASDAQ First North Reykjavík in the fall of 2023. At the end of 2023, SalMar owned 52 per cent of the shares in the Group. The Group is fully integrated with its own hatcheries, sea farms, harvesting plant and sales department. The natural conditions, with good quality seawater and temperatures on a pair with northern Norway, provide a sound basis for engaging its sustainable aquaculture in Iceland.

The Group has its headquarters and harvesting plant in Bíldudalur in Iceland's West Fjords region, close to the sea farms located in surrounding fjords. In addition, the company has an office facility in Reykjavík and four smolt facilities, whereby one is located in the West Fjords, and three on the south cost of Iceland.

The Group strongly believes in sustainable aquaculture production in Iceland.

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THIS IS ICELANDIC SALMON

ICELANDIC SALMON AS

HIGHLIGHTS IN 2023

• Harvest volume of 17,919 tonnes in 2023, increase of 11 per cent from 2022.
• Delivered five million smolts to sea in 2023.
• Harvest plant received highest BRC score, AA+, in an unannounced audit.
• Arnarlax received certificate of company Excellent in Iceland from Viðskiptablaðið and Keldan.
• Continued developement of sales to North America returning 19 per cent of the groups total revenues.
• Dual listing on NASDAQ First North in Reykjavík
• Finalised refinancing of EUR 100 million with DNB, Danske bank and Arion Bank.
• Company experienced high mortality of it's biological assets, mainly driven by lice situation.
• All production in sea ASC certified.

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THIS IS ICELANDIC SALMON

ICELANDIC SALMON AS

SIGNIFICANT ACHIEVEMENTS IN 2023

ASC Certification

All production within the Group was ASC certified in 2023. This is important documentation for the Group and the sustainability profile. With the ASC certification, it is documented that the environmental and social responsibility impact of the Group is acceptable and under good governance. This also states that the Group complies with laws and regulations and that employees are treated in fair way.

BRC Certification AA+

Supporting the Group's focus on Food Safety, the Groups harvest plant is BRC certified. This certification assures customers that they can eat the Group's excellent salmon without concerns related to food safety.

The Group received the BRC certificate in 2021 and in 2023 the overall score was upgraded to AA+ after first unannounced BRC audit. Companies who participate in the unannounced BRC audit choose to be challenged at the highest level, confirmed by the plus sign at the end of the score. The auditor may arrive at the company any time after a certain date, so everyone needs to be ready at all times.

The Groups BRC AA+ rating is a huge compliment to all the hardworking and dedicated employees who are focused on achieving excellence every single day.

Certified as "Excellent in Iceland"

In 2023, Arnarlax achieved certificate as "Excellent in Iceland" from Viðskiptablaðið and Keldan. With this certification, Arnarlax place itself as role model companies in Iceland. The exclusive list of role model companies is an acknowledgement of excellent business performance.

In 2023, only 2.8 per cent of Icelandic companies were awarded the certification. To qualify, companies of various sizes, categorised as large, medium and small, must meet strong criteria related to profit, equity ratio, revenue and properties.

To achieve the designation of "Excellent", the jury considers the operational years 2020, 2021 and 2022, where key criteria must be met.

Equal pay certificate

Having received its initial equal pay certificate in 2021, the company has maintained this certification. The current certificate remains valid until January 2025, subject to an annual audit to ensure ongoing compliance with equal pay standards.

The primary objective of obtaining equal pay certification is to address the gender pay gap and maintain gender equality within the workforce. By incorporating the equal pay certification process, businesses and institutions can establish a management system that guarantees pay- related procedures and decisions are grounded in objective considerations, free from any form of gender-based discrimination. The equal pay standard ÍST 85, available through the Icelandic Standards Council, serves as a benchmark for organizations pursuing this certification.

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