AKVA group ASA (AKVA) Earnings Call Transcript & Summary

[Presentation]

Ladies and gentlemen, very much welcome to this webcasted Capital Market Day of AKVA group. AKVA group had their last Capital Market Day in May 2016, so it was about time to give a new update. The new management team of AKVA has been very busy with updating the strategy and give you -- and we will give a new 3 year's outlook for AKVA during this presentation. So even though we are living very special times due to the COVID-19 situation, we thought still it was appropriate to make it a virtual Capital Market Day. I will start with an overall Vision 2030 presentation, and then translate that into what it means for AKVA's overall strategy. And then all the members of the AKVA group management team, they will make their own update within their own responsible areas. So we do that in one go, and it's going to take about 2 hours. And then we have a short technical break, and then we will do a Q&A session. [Operator Instructions] So that's the framework, that's the agenda, and that's the setup for this meeting. So what we have been looking at as a basis for the AKVA strategy and our choices is a bit visionary. We took one step back. We worked with a third party, Cardo Partners, to come to some view, some conclusions on what to believe in over the next 10 years. And that's what we call the market outlook. And before we go to the real outlook, let's spend a few minutes to look in the back mirror on the history where the industry came from. As you can see here starting with the history, strong volume growth, in particular from 2010 to 2015. And then a few incidents happened in 2015, the algae bloom in Chile and a few other things leading to some supply constraints. So basically volume came down quite a bit. Prices came up. And you can say there is a kind of supply gap of some could be 300,000 tons or something. But that was the dynamic in the last 10 years overall, but still overall a strong growth from around 1.5 million tons to 2.6 million tons of Atlantics. And all this happened on the back of some key demand drivers. And they are consumers' awareness and focus on environment and health, salmon being one of the favorite species; also opening up and distribution to new markets; product development in general, the sushi sashimi trend; and also some modified new packaging. 2020 is of course a very special year for the entire globe, also certainly for this industry. So let's look a little bit into the dynamics for 2020. First of all, somewhere during March you had a kind of almost like a shutdown over the night of the so-called HoReCa segment, the hotel, restaurants and catering. And typically globally that was taking off roughly 30% of the global volume. But -- so you could expect a disaster in the pricing of salmon, but that didn't happen. Of course, some pressure on the price certainly, but not a disaster. And the reason for that positive dynamic which play out is here on the left side, you see that a lot of the volume being replaced on the retail platform, on average to EU, something like 20% increase of the volume into the retail platform; and in the U.S., something like 35% increase. So that's basically what's going on as we speak these days. The interesting question, because we need to be optimistic and believe there is a world and a new normal after the COVID situation after the vaccination, which is expected certainly to happen over the next months. And that is the illustration to the right here. You see in 2019 the typical situation with 70/30 between retail and HoReCa. And then the COVID situation where there was almost like a lockdown of the HoReCa segment and platform being replaced for the most with retail volume. What is then going to be the new normal post-COVID-19? Most analysts, people within the industry, believe that the retail level and volume will be absorbed at a higher level. And if that happens, that is calling for a very positive dynamic and a positive outlook for the salmon consumption in the years to come. And there are positive fundamentals for this industry certainly. Overall, consumers are willing to pay a premium for salmon versus other proteins. You see that here in the upper part of the illustration that salmon is earning a premium to other protein sources, and that's very much due to the health benefits and also the superior taste. On the maybe most prominent sustainability indicator, which is the carbon footprint, also the salmon is favorable with prior level of CO2 emission per edible kilo meat, same level as chicken and half of pork and very much lower than meat. But there is certainly a little twist to that one. Most of the salmon for instance produced in Norway is trucked to Europe, and then you have the very low emission. If airborne for instance to Shanghai, the footprint and the emission will triple in accordance to a SINTEF report. And that leaves salmon with a higher footprint than for instance chicken and pork. Only if airborne; if not, very much competitive. The health benefits are absolutely there. Consumers are favoring salmon because of the high share of omega-3 fatty acids, rich in vitamin D and proteins, and also low in calories and saturated fat. Furthermore, there is an increase in customer awareness on sustainable products. Trend is expected to accelerate over the next decade. A recent survey done by Accenture, if you look to the left here if you look in the back mirror, 72% of consumers said that they have more environmental awareness today than 5 years ago. And they are saying that is even going to increase over the next 5 years. So there is certainly a momentum there. And I believe you can translate that into some certain megatrends, which will further increase the environmental focus and awareness. Likely the most prominent megatrend is related to climate change and very much driven by carbon footprint and also water scarcity. Another megatrend is about locally produced food that is in high demand, both due to freshness but also the carbon footprint challenge. And also, we have seen this year a kind of even higher awareness for security of food supply. Many big nations, they want to control their own security of supply and would like to support value chains locally and regionally. Then last slide about the current situation before we start looking into the future. It's a little bit of a busy slide, but I will help you through a little bit. First of all, salmon and Atlantic salmon is globally traded. So it's about global supply/demand. There are 2 engines, growth engines. That's being Norway and Chile with 80% of the world's supply and production of Atlantic salmon. Home market for Norway is certainly EU; and in Chile you can say it's Latin America. But both countries are large net exporters of salmon. If you look at Norway first, Norway and Europe framed in one box here in the middle, you see that the net export there. Supply is 400,000 higher than demand. So it's a surplus of 400,000 ton of salmon, which is exported out of Europe, 100,000-plus to the U.S. and 200,000-plus to Asia, and then some frozen also to U.S. and Asia. So that's the 400,000 ton. That's the current picture. If you look at Chile, you have some of the same. There is a surplus there of 500 compared to what is being consumed in Latin America. So roughly 300 goes to the U.S., 200-plus as fresh, slightly less than 100 as frozen. And then 110 goes to Asia. 2/3 is frozen, 1/3 is fresh. And then some frozen to Russia, et cetera, et cetera. So this is the 2019 situation with regards to global demand and supply. And that's the basis for us going forward to look at what could happen there in the next 10 years. Looking into the 2030 situation starting on the demand side, we believe -- it's a bit of a rough estimate to start with, but we will get a bit more precise in the coming minutes. But we believe that the underlying demand growth implies 1 to 2 million tons volume increase by 2030. The basis is 2019 with 2.9 -- 2.6 million tons of Atlantics. And the base case is a kind of extrapolation of what happened in the very recent years, with 3% price-neutral volume growth rate. And that's the lower part on the right side. That's the base case where you are stepping up with 1.1 million tons. 1.1 million tons is exactly what the industry did in the last 10 years. So a percentage higher in CAGR historically, but you start with a higher base and you go with the same volume. So that's base case. But we also believe, driven by the global megatrends, there is certainly a momentum and appetite for salmon for also the high-case scenario, which is a CAGR globally of 5% year-on-year. And there are different sum of the parts here, but if you play a bit with it, if you go for 4% CAGR in Europe and North America; you look into China, which is very kind of underinvested marketplace these days and triple that one; and then the other regions with 7% CAGR, that blend will give you 5%. But there could be other way to compose this thing. But we believe if the industry is able to support and supply, if the industry is able and willing to have funding in place for marketing activities, generic campaigns and all that, we believe there is a basis for up to 5% growth on a price-neutral basis. Meaning that it's still going to be a very profitable industry. So that's the perspective. And that, the upper case, the high case is as much as 2 million tons in additional volume. That is what is behind the 5% CAGR. So that's going to be the demand side. That's the appetite for salmon. But if the appetite is as high as up to 2 million tons, you need to produce those 2 million additional tons. And that's going to be a challenge, but it might be possible. But it is from a production standpoint, from a supply standpoint, a challenge to come to 2 million tons more in the next 10 years. But we have grouped it a little bit. We call the traditional sea-based farming, cage-based farming as done by the industry in 40 years. We call that conventional. And then we look into 3 potential growth drivers within conventional. That's traditional growth, that's the incremental growth. Likely that's going to be 1% to 2% supply growth by, over time, new licenses and that the industry get access to more capacity. The other driver is the post-smolt strategy, very much started in Norway, but will probably be translated into other regions. But there is a certainly step-up potential to utilize the licenses better by starting with a bigger smolt 500-gram. Some are even looking at bigger fish size to start with. That will require quite some big CapExs in RAS facilities, in the RAS -- new RAS capacity. And then there is an enormous effort into sea lice prevention and treatment. We believe over the next 10 years that some will also come from there, that more potential will be utilized due to the fact that the industry will get better in control of the sea lice situations. And if you add that together, that is a range from 0.5 million tons to 1.2. So if everything is working, if a lot of innovation is taking place, maybe you can get as much as 1.2 million out of this conventional and traditional sea-based salmon farming. The next group, we call unconventional. Here we think the big winner, the potential big winner is going to be land-based. Land-based will be certainly dependent on whether the industry is able to compete with the production cost plus additional of for instance the airfreight on -- into new regions. I will give more details on that in a minute. And the last category -- and -- sorry, the potential there, we have maths of something from 0.2 million tons to 0.8 million or 800,000 tons of salmon in the next 10 years' window. It's going to probably come more later because it's a long lead time from investment decision to harvest of salmon. And the last category is about offshore/open sea, different emerging technologies. There that could also give, as we see it, up to 200,000 tons. So in total, that's going to be something like 0.9 million to 2.3 million tons. If the demand side has a potential of up to 2 million tons, we see that it's going to be a stretch to feed the world with all that salmon, given the constraints we currently have on the supply side. And it's going to take a lot of innovations and a lot of effort for the industry to move on and capture the growth possibility. Innovation is certainly needed. A little deep dive on the land-based and some of the economics there and the dynamics there. It's very much about the competitiveness of land-based, which is going to determine the success of land-based in the future. So we looked just a little bit into the Asian situation. We looked at the cost/price produced in Norway and Chile, the freight, the tariffs and the handling and the import handling, et cetera et cetera based on the 2018 situation. And that gave us this kind of range that you need to be able to produce locally in Asia for a production cost at approx NOK 63 to NOK 65 per kilo, in order to be competitive as the starting point before investment. We'll come to that in the next slide, and that's very much the situation. And the same picture on Latin America. There we ended up in the range of NOK 51 to 56 per kilo. Of course, there are other factors like if you produce locally, you improve your freshness, and that's probably very attractive. Freshness in Asia is certainly very, very important. And there is a massive huge uncertainty about airfreight rates post-COVID. Currently, they are much higher than what is illustrated here. Quickly on the CapEx levels, if we talk about true new capacity by for instance issuance of new licenses, you have to pay for those licenses. And this has translated into NOK investment cost or CapEx per kilo of salmon. There you see on the conventional side, we have calculated roughly NOK 190 per kilo. And on the land-based side, it's around NOK 200. So very much on the investment side, on the CapEx on real true new capacity, conventional versus land-based very much at par level as of today. Then we looked into a few scenarios for 2030. And of course we had to bring in land-based and the cost competitiveness as one dimension, as one critical uncertainty to look at. And that's the upper one. And there you have 2 situations, 2 future outcomes. It's a cost disadvantage on land-based. The industry is not able to produce at a competitive cost level. So that's the cost disadvantage. And the other one is a cost advantage that what you can produce for locally is going to be lower than what you can produce for instance in Norway and Chile plus freight costs and the tariffs. So those are the 2 situations. And the other dimension we thought was meaningful to look at were the what we call environmental awareness. We talked already about the megatrends for salmon, and we believe they are there to stay. So we tend to believe that there would be much higher and growing environmental awareness in the years to come. But of course you can consider that, that is just a trend for now and it will stay at 2020 level. Even though personally, I think that's unlikely, but at least we mapped that as one of the scenarios. But on the high environmental awareness, it's very much about that salmon demand is fueled by the health benefits, the lower environmental footprint et cetera, et cetera, and locally produced food security. All the megatrends likely that's going to fuel consumption of salmon, but that's all positive. But there is also kind of a little twist to that one, and that is the question around airborne salmon. For instance 5, 10 years later, will the airborne salmon be accepted at the same time? Because that is adding to the footprint if you have to fly it by air in general. So that is working a bit of the way around. But overall, the high environmental awareness scenario, there we look at the positive momentum on the health benefits of salmon. So we ended up with 4 kind of scenarios for the 2030 situation based on the same 2 dimension: cost disadvantage, land-based cost advantage, 2020 awareness level on the environmental, and high environmental focus or increasing environmental focus for 2030. So we have, for the benefit of the reader or people following this in a good way, scenario 1, 2 and 3 is part of our appendix or package. But I thought it was too much to go into the detailed scenarios because I'm spending quite some time already. So I'm going to dig into the scenario 4, the situation we tend to believe the most in. So the other 3 scenarios is part of the package, but now I go straight to what we consider the main scenario, and we will base our strategy on this one. That's about the 5% CAGR on the demand side driven by the global megatrends. On the supply side, huge supply growth in Europe and particular Norway with step up as you can see here of 1 million tons, and also quite some development of land-based capacity, altogether 800,000 ton; 400,000 ton in the U.S., 200,000 in Asia, 200,000 in Europe. It doesn't need to be like that of course, but this is the dynamic we believe will be played out like that. Then you come to the situation in North America with a supply side of 500,000 ton altogether, driven by -- and fueled by 400,000 more from land-based. But still with the demand of 1 million ton if you believe on the beauty from the demand side, which we do. And that's undersupply of 500,000 tons, so still quite some frozen import from Chile and some fresh from Europe. And then the other side of it is in Asia where you are not able to organize that much supply from land-based in that relatively short time frame. We have 200,000 ton in our scenario. It might call for more, but the demand side will be very much higher still with the potential for up to, up to 1 million tons. Big question mark on what will happen there on the dynamic between environmental awareness, airborne salmon versus frozen, and how the supply chain will be organized in 2030. We have some question marks around that, as you can see here on the illustration. But no doubt that the potential is there, and that's going to be very, very interesting to follow. Summary-ing (sic) our main scenario, we believe this scenario 4 is calling for a paradigm shift of land-based farming, which certainly will require major CapEx investment until 2030 and beyond 2030. In demand side, I spoke about already 5% up. And the conventional production, bright future there as well, with 1.1 million more tons or higher production than in '19. And then the land-based with a big step-up to 800,000 tons. Since we are providing technology for land-based, we are interested very much in the CapEx behind that. With NOK 200 per kilo, that's a total investment of NOK 100 billion to support the 800,000 ton in Capex. Approx 50% of it is related to RAS technology. So that's going to be NOK 80 billion over those 10 years, or on average NOK 8 billion a year. So that is representing a fantastic business opportunity also for AKVA group. Currently, we are working with 5 customers, which is pretty well advanced. And they are representing roughly like 150,000 tons of complete production capacity if they succeed with all their master plans. On the black frame here to the right, the AKVA group implications here. Strong cage farming segment, if you are going to produce 1.1 million tons more of salmon from cage-based, that is calling for a lot of innovation. We believe in exponential growth in land-based revenue. And we believe it's going to be a very healthy marketplace and healthy margins for supplying that industry. So that's very much our 2030 scenario. And then I will, in some time 10 minutes, provide the high level-overview what does this mean for AKVA, and what's the AKVA overall strategy. And so I'm just going to give the high-level overview, and then my colleagues will do each of the parts. First of all, the underlying demand growth implies 1 to 2 million ton volume increase by 2030, as already mentioned. If you look at the logic here, it came from last 10 years a step-up of 6% CAGR equals 1.1 million tons. We believe that's about the potential from traditional and cage-based going forward, and that is also representing a nice CAGR of 3%. On top of that, you have the supply potential driven by the megatrends, also by land-based and local production, which can give another close to another 1 million on top, up to 2 million tons and equals a CAGR of 5%. So that's going to be very exciting to watch and follow, both for the industry and for AKVA. A lot of step change innovation is needed on the hardware side, but also on the digital side. So that's in the core of our strategy. If we start with the most important one, the overall strategy for cage-based salmon farming, we like as AKVA to continue to be in the forefront, offering solutions and services to improve fish health and productivity and also to support our customers, to salmon farmers, to increase production. On the right-hand side, you see some of the current innovations we have to the marketplace with AKVA subfeeder and lights, the Tubenet, Atlantis subsea farming, AKVA Observe, and also hybrid feeding barges. My colleagues, they are going to explain this more in detail. We have made a decision in order to becomes successful ourselves and support the industry. We will make a strong ramp-up of innovation and R&D capabilities. Meaning in practical terms that we are just going to spend more money, more resources, at least 50% more to support those organic growth ambitions for the industry and for ourself. We will have one center of excellence to drive this development. It's going to be here and next to the head office. And we will support both the existing core products and solutions. We will also spend proportionally more money on step change innovations, like for instance the Tubenet. And we will have dedicated resources to look into that. And we are going to combine traditional farming technologies with digital opportunities. On land-based, this is our strategy for an overall plan for land-based. If you start at the bottom here, that's the foundation. We are going to standardize -- I'm talking now ongoing -0 land-based farming ongoing. We are going to standardize our product offering. It's going to be a standard 5,000-tonne modules. We are going to build up a land-based organization in Norway to also attract Norwegian talents and to get more talents into AKVA group. Currently, our biggest footprint is in Denmark. And we also going to centralize a center of excellence when it comes to drive and run our innovation agenda. There are 4 building blocks here. One is about the technology itself, which is called Zero Water Concept. We will put more resources and money into further developing that one. What is also important next to the technology itself, it's all the surrounding equipment like the feeding, the fish tanks, the fish handling, camera, lights, sensors, control systems. We also have innovation programs in place to support development there. And next to the hardware, you need to develop the concept of precision farming. You are in control of all the factors, all the driving -- all the elements in this new spot, land-based farming. But you need to make it digital in order to monitor and have as many data points as possible to come to the let's call it the concept of precision farming. And then finally, the last building block is that we will also add some people and create AKVA group Production Advisory Services. We are going to support the farmers on fish biology and fish health questions within RAS environment. So currently, we just announced that we got the first contract with NIP in China finally financed. And that give us confidence, together with the 4 other customers we are working on, to put people and resources in place to drive and support this development. Very briefly about the new management team. We have changed completely the management team of AKVA in the last months. So we have a new top team. We have 2 people, out of the 8, with long AKVA experience; 2 people with more recent AKVA group experience. And we have 4 people from the outside with extensive AKVA culture experience, but not from AKVA group, from outside the company. In total, the people here is representing 125 years of AKVA culture experience. And I'm very confident that this is the team it takes to execute our strategy. With regards to our guidance, it's going to be very much about organic growth. We don't foresee to do any significant M&A. We believe we have the products, the technology, the companies and the footprint it takes to execute our growth strategy. So it's all about organic growth driven and supported by operational excellence programs in place. And we believe that is going to result in a minimum 25% EBIT increase year-on-year with 2020 as a basis. We are going to step up our capital efficiency, and we expect that ROACE, return on cap -- average capital employed, will be minimum 15% by 2023. We will step up our innovation spending, and we are going to also fuel our development on the digital platforms. ESG focus is going to be essential for AKVA group. Good environmental, social and governance principles are key to AKVA group and our global activities. Our business is certainly very dependent on a healthy environment. So we have very recently started a process to make our ESG focus more visible and measurable, and we are going to report progress on that in the coming months into next year. But as a starting point, we have a number of new innovations. Some products examples are listed here, which is in accordance, to our opinion, in the core of the ESG and requirements. That leads me very much to the AKVA business profile. AKVA has been a big conglomerate of different companies. Many companies were acquired over the recent 10, 20 years. Investors are asking me what is really the AKVA business profile, how to describe the business model. So we have put it together here in one page. And starting with the solutions and products, we like that our products is supported by our own innovation agenda, by R&D. And that is a result of continuous investment in innovation. That's very much product supported by our innovation capabilities. Business model is primarily asset-light. That is the headline there. Other than the service and aftersales, that is to some extent more capital-intensive, but provides higher return. We are doing quite some larger projects, and there we strive to be cash positive. We are not prepared to take on board financial risk. We can take on board technical risk and project execution risk, but not the financial risk. And we strive to be internationally scalable in what we are doing. So that brings me very much to the end of my presentation. This is the mission statement of AKVA group. I can assure you that we -- our 1,400 people. I have 1,400 colleagues in AKVA with great, great passion for technology and greater passion for aquaculture. And what is inspiring us and motivating us on a daily basis is to provide technology for sustainable biology. All what we are doing is about bringing technology to the farmer and support sustainable biology, either on the sea side; on the traditional cage-based farming; or on the new kid on the block, on the land-based farming. So thank you very much for listening in. I'd like to hand over to the CFO of AKVA group, Ronny Meinkøhn. Please, Ronny.

Thank you, Knut, for your introduction. I am pleased to present the financial outlook of AKVA group. I will, in my presentation, focus on revenue development, operational excellence and also our financial targets with regards to EBIT level and return on capital employed. As Knut highlighted during his presentation, our focus in the coming years is organic growth. And our organic growth ambition requires a strong and attractive innovation agenda and step change development in our digital products. To achieve this, we have decided to increase our R&D spending by 50% already next year, and at the same time increase our digital spending by 25%. It will require a lot of energy from the entire organization and also a lot of management attention to have success in developing new products and new solutions. So consequently our M&A focus will be low in the coming years. We strongly believe that we will achieve a higher return on investments in our innovation agenda and digital agenda compared to acquisition of new companies. Also, AKVA group has made several acquisitions during the last 10 years, and now it's time to focus to fully integrate all entities into one AKVA group and take full advantage of the synergies. On the other hand as a part of our innovation process, we are involved with third parties, startups, et cetera regarding new technology. And during some of these interactions, it may be favorable for us to enter closer cooperations, either through partnerships or even acquisitions. And we have the financial capacity to do so. When it comes to revenue development, as Knut stated during his presentation, we have a positive market outlook. And we expect an increase -- a solid increase in revenue within all our business segments. The total revenue level is however driven by an expected exponential growth within our land based segment and then particularly from on growing projects. We are well positioned within this new business in land based. We have a strong and proven RAS technology. And we're also currently working on several pre-engineering contracts that can, at a later stage, turn into delivery contracts. And also, we just have this newly awarded contract from NIP in our order backlog. So currently, our Land Based segment is close to 10% of our total revenue, and we expect this to increase significantly in the coming years. Our cage-based revenue is somewhere 85% to 88% of our total revenue today, and we also expect this market to remain strong in the coming years. But to achieve our organic growth ambition within cage-based, we need to be successful when it comes to innovation of new and improved products and technology, in close dialogue with our customers. We also see a great potential within our digital solutions. But to realize this potential, we need to invest more and further develop our solutions, so we meet or exceed the expectations from our customers. Andrew Campbell will explain more about our digital products later on in this presentation. When its come to geography, as of today we are present in all key markets for salmon farming. And close to 70% of our revenue is in the region Nordics, but we also have good business in the rest of Europe and Americas. Going forward, we think that several of the upcoming projects within this on growing the business will come in large cities or close to large cities in the U.S. or Asia that we will strengthen our presence in these regions in the coming years. Close to 90% of our revenue is related to salmon technology, and this will also be our key focus area in the short term. For the time being, we think that we need to spend more time to invest in our existing business and be well organized, before we make a new evaluation of whether we should invest in technology for new species. Our OpEx base or recurring revenue is just about 30% of our total cage-based revenue. And we have strong intentions to increase this important and profitable business in the coming years. So next year, we plan to establish and invest in 2 new service stations in Norway. And we see that our service station concept provides a great value for our customers and is also an important and profitable business for AKVA group. Also, we will increase our net cleaning business out from Chile. So far in 2020, we have seen a very strong and profitable development of this business. We will now increase our capacity to grow further in the coming years. Also, improving our operational excellence is a key focus area within our organic growth strategy. We have implemented the AKVA way in our organization. And the AKVA way is the name of our internal operational excellence program. During the next few years, we will invest more in training of employees, improving processes, IT systems to achieve a step change within our operational excellence. Also next year, all our 14 operative companies will execute at least one significant improvement as a kickoff to our operational excellence program. The focus is to improve efficiency in our project execution and reduce quality costs; and at the same time, improve our competitiveness, increase customer satisfaction; and last but not least, improve our profit margins by reducing the gap between sold margin and delivered margin. We have come a long way in our cage based business especially within large projects, but there are still areas for improvement. And within land based, we will drive our operational excellence program across the entire organization. We will train the current product organization, but we will also recruit new project specialists to the organization. It's also important that we are able to transfer and implement the best practice from our cage based business to the land based business and make sure that we are well organized and have an efficient organization when the activity increase next year. We also see clear benefits of having one common ERP system. For the time being, we have 11 different ERP systems in our group, and we think that establishing one common ERP platform is an important step in becoming one AKVA Group. We also think that the state-of-the-art ERP system is required to standardize processes, improve visibility, improve control and also improve our project execution capabilities. We have also strengthened our project controlling and business controlling capacity and capabilities the last 6 months. We have improved the control of our business. And we have also established a framework for continuous improvements and are managing our business by relevant KPIs. Clearly, we see that this has a positive effect on our operational excellence, and we expect more of this in the years to come. We have also set some ambitious but achievable financial targets in the coming years. Based on the current market outlook, our growth ambition and also our operational excellence program, we expect a growth in EBIT by 25% year-on-year in the next 3 years with the 2020 EBIT as the baseline. A significant part of the EBIT growth will come from our operational excellence program, but the main part will come from increased revenue and then especially within the land-based segment. Our CapEx levels the coming years will be somewhat higher compared to recent years due to our step-up on innovation and digital agenda. But our largest hardware or tangible investments will typically be related to the 2 new service stations as an example. So by increasing our EBIT and still maintain a very strong focus on our cash is king project and working capital project, we expect to increase the ROACE significantly the coming years and be minimum 15% at the end of 2023. And also during the same period, we expect to increase our dividend gradually in accordance with our dividend policy. We're also very pleased with our financial position, and we are fully financed to execute our organic growth strategy. Available cash, including unused credit facilities, was NOK 562 million at the end of Q3. Our covenant structure also allows for more debt if required. Then an update on our AKVA Marine Service business. As informed during our Q3 presentation, we stated that we would conduct a strategic review of our AKVA Marine Service company. This company operates within the diving service and service vessel industry in the southern part of Norway, total revenue just north of NOK 100 million and a very profitable business. As Knut stated during his presentation, we think that all our products and services should have a strong foundation in our innovation agenda and R&D department. This is not the case with diving services or operation of service vessels. This is not our core competence. So we are confident that this profitable company will have a better home with a new owner. And we have initiated a sales process and has engaged Danske Bank to be our financial adviser. However, we will only complete this transaction if it adds value to all stakeholders, and we'll make sure that this is a very robust process. This brings me over to my summary. Our focus the coming years is organic growth supported by increased investments in both innovation and digital agenda. We expect minimum 25% EBIT growth year-on-year, mainly to come from increased revenue and partly through our operational excellence program. We are financially robust and fully financed to execute our strategy. And last, with the strong EBIT growth and a still strong focus on our cash is king project, we expect to increase ROACE to 15% by the end of 2023. Okay. Thank you for your attention. Espen Staubo, our Chief Innovation Officer, will now take you through our innovation agenda.

Thank you, Ronny. I'm Espen Staubo, the Chief Innovation Officer of AKVA Group. And I'm really happy to have you here today to be able to present the new innovation agenda of AKVA Group. As Knut has already reviewed, an analysis shows quite clearly there's a great potential for demand growth going forward and also an untapped demand potential from the recent history that can support a substantial growth in supply. But what we also see is that sustaining and develop the conventional sea-based salmon production and also entering into a completely new industry with land-based grow-out facilities will require a lot of innovation to be able to actually execute and realize this growth. And what we're talking about is a sustainable growth, which means that when you look at our pillars for innovation, yes, it's -- pillars for innovation is reflecting the demands on sustainable growth. It's increased productivity and safe operations for people and fish. It's improved fish health and biological performance, environmental solutions and cost-efficient products and services. It's our stated ambition in our group that we will take a leading role in developing innovative solutions to be able to support this sustainable industry growth. So to succeed, this requires the R&D to be close and stay loyal that way to what's core to AKVA, the customer needs first, and match this with the latest science and technologies, which means to stay customer and commercially oriented, being continuously updated in competing solutions, et cetera, or in other words, stay in the deal flow for ideas. We need efficient development processes and project management in order also then to persistently discover and develop what we call the step change product solutions at the same time, while we balance the need for the short-term developments and the long-term development needs. And finally, but not least, the most important part, we need to have the best people. We have -- I think AKVA Group already demonstrated that we are positioned uniquely in addressing also the fundamental challenges in our industry, and especially when it comes to sustainable solutions. We're in the lead of the concept of what we call the subsea farming, which means that the fish is swimming, living in deeper waters. And a lot of the sea lice, parasites and so on, they thrive in the upper waters of the sea. It means farming on more exposed sites and stable and controlled production environment. So this is a range of products we already have established. It's from what we call voluntarily, the fish moves to deeper waters, through subfeeders, feeding at low levels and lights to the tube net, which physically separates the upper water of the fish with -- upper waters with -- to the fish, and then Atlantis Subsea Farming where the third-generation of fish is soon going into sea in a completely submerged farm. And also, we are in the lead of using digital solutions to support the farmer. AKVA Observe, our digital-assisted feeding solution and also a management analysis tool. We're also in a lead when it comes to addressing energy needs and usage for a farm and the local environment through our hybrid barges and waterborne feeding, and this could reduce the energy usage of feeding up to 90%. It reduces local environmental impact such as noise and microplastics. Similarly, we have a great challenge globally when it comes to access to freshwater, which is a scarce resource. Our Zero Water Change technology for land-based recirculation facilities only replace water at 0.1% per hour. It also reduces the effluent coming out from a farm and recirculates phosphorus, which is a scarce resource going ahead globally, and it removes nitrogen. So with these growth prospects, what we decided, that we will have a strong ramp-up of innovation and R&D capabilities. Already next year, we will increase our spending on R&D and innovation by 50%. We centralized the innovation facilities for efficiency, future opportunities but also the creativity in having cross-functional competencies centralized in the same place for exchanges of ideas and capabilities. We're moving to step change innovation, which means that we, at the same time, need to take care of our existing core products. So organizationally, we are doing quite large changes. We developed a completely new recirculation innovation department, combined that with the centralized innovation facilities and the way we separate our core activities into incremental development and step change production. We think that we're uniquely positioned in exploiting the synergies and competencies with sea-based and land-based technologies. And finally, we will build further on our capabilities and competencies in merging the traditional farming technology with the digital opportunities, call it, if you want, Fish Farming 4.0. So one really critical aspect of this is that we can maintain and sustain and develop our position with the core products, which means incremental development. It means the next generation of the core products and supporting the organic growth agenda. This is critical for maintaining sound EBIT going forward. At the same time, we need to address the fundamental innovation challenges in this industry through step change solutions. This has substantial growth potential products, quite dedicated investments but also clearly has higher risk. And we must be able to do both. So maybe a bit untraditional in the farming industry, but we state our ambition quite clearly that we will build a pipeline of step change products that will deliver one product of this kind a year. This requires a changed approach, dedicated team, investments and processes to facilitate these step change innovations. And it's based on addressing the major industry challenges such as local and global environmental concerns, consumer health focus, fish health, cost efficiency, inherent process risk both in land-based and sea-based and the limited new farming areas available at sea. And finally, the salmon farming closer to the main consumer markets. Same time, it also includes then developing the optimal grow-out RAS factory for the future and combining this with the enabler of digital technologies. As already mentioned, we are in a position with having products that address these fundamental challenges already. But as for Tubenet, we're already working on the next generation of Tubenets, adapting the Tubenet to steel cages. We have AKVA Observe as an advanced feeding assistant, but further machine assistant decision support will be relevant for including environmental sensors in sea, including all process sensors and new process sensors in the land-based facilities and Atlantis Subsea Farming in its closing edge and what is the end stage and what is the next steps for that. So this may come -- appear as a contradiction that you want to do creative next step, step change products with structure. So how do you combine creativity with structure? That's the demanding tasks and it requires new established internal processes. That's one thing. But even more, it means that we systematically have to rely on exposure externally. We are already strongly involved externally in, for example, customer development projects like the Atlantis project, joint R&D licenses and also other projects, but involving our -- even more strongly, the startup companies, networks and clusters. We're involved increasingly in the Stiim Aqua Cluster, NCE Aqua Cluster today and Blue Planet but systematically addressing all the different ideas that we know are out there and part of our industry. Trade organizations, and also finally, we are involved already in fundamental research projects like the DIGIRAS project towards the recirculation facility and fundamental issues with, in particular, risk factors in the -- and digital factors in the recirculation facilities. It's a 3-year program with external universities and other -- and also farmers throughout the whole EU. So closing, I think AKVA Group can show that we are uniquely positioned today to take advantage and actually support the demand and then supply growth through innovation. If you go back to what Knut showed earlier on the supply sources and the drivers, you can see that on the traditional growth, we are already a world-leading supplier of the full range of products. We are spearheading new technologies, targeting the major growth concerns like preventive lice technologies, more exposed sites, energy and environmental impact. When it comes to post-smolt and also grow-out RAS facilities, we're a major supplier already of RAS systems. We are -- have synergies with the land-based and the sea-based technologies, and we are already have the abilities to combine digital and traditional technologies. Effective lice prevention and treatment, subsea farming, Tubenet, Atlantis already are products reducing the need for lice treatments dramatically. And finally, offshore/open sea, we are also involved in development licenses in the Norwegian sector, which [ we addressed ] today. So I think we have an agenda for innovation that we can execute together with the environment of external companies, smaller companies going forward. And this, I think, will supply -- really support the development of sustainable growth in this industry going forward. Thank you. Then I'd like to introduce my colleague, Erlend Sødal, the COO of Nordics Cage Based.

Thank you, Espen. I'm going to talk a little bit about the cage-based part of the business. That is actually from history what AKVA Group has been known for, delivering solutions, provide more or less everything that's needed to operate an industrialized fish farm, everything except from the fish itself and the field. And this is hardware, infrastructure and components, also including digital solutions. AKVA Group has been working over the years with developing smart solutions to be able to help the farmer to gather smart -- gather information for smart decision-making and more and more real-time decision-making. We are there just now. And then we are a true global company with a base from Norway. Now -- so this is a slide that I just explained. Left-hand picture is the picture of all the infrastructure that we can provide. Mid picture is about symbolizing the digital solutions, advanced. And then it is about where we are around the world. Next slide is just giving a glimpse of where we are and where we are delivering. We are at all spots around the world where it is done industrialized and efficient, scalable aquaculture fish farming. And for the global -- particularly for the global salmon industry, it is attractive to have a solid and trusted global supplier with local presence in all the markets where they have operations. We come -- we stem from Norway, Norway-based company, going international over the years. We have a really strong home market. That is our customers, the Norway -- Norwegian-based salmon farmers. It's a big market, an important market to us and the best fundamental to be able to be successful out in a bigger world. And we -- our strategy is clearly to be present with feet on the ground, people on the ground in those markets where the size and business scale allows us to be there in a good way. And that is mainly the salmon regions but also Mediterranean. In addition to that, we also are having a sophisticated supply chain, sourcing, technology and components around the world with long-term strategic partners in order to balance the quality and the cost ratio in the right way. The bar chart on the left-hand side of this picture is very much showing us that approximately 1/3 of the cage-based revenues comes from international business out of the Nordic countries. And this is -- so this is a big and important part of AKVA Group's business. And international success requires balancing proven solutions with understanding of local differences. That's for sure. And this is what we have experienced over the years and what we believe in. And just to give some few examples, comparing Norway and Chile. Norway is typical plastic cage type of business, salmon business, while Chile is metal cages. Fundamentally, it's exactly the same, what's going on. It is about salmon farming. But because Chile has different and significant challenges with the predators in the sea, they need a different solution compared to Norway. And therefore, it is so important that we have knowledgeable people, experienced people who's actually being very close to the customers in the various local markets. Another simple example is about Internet connectivity, which is now -- these days taken for granted wherever you are in Norway. This is not a given in Chile still. And of course, then you need to adopt accordingly with local solutions. But as a common denominator, everything is built on AKVA Group technologies and knowledge. It is well proven, and it is innovative solutions and services from AKVA Group. This picture is -- this picture is just giving -- well, different pictures here is giving overview of the different product groups, which we are providing and selling in the markets around the world. And we have -- we are strongly positioned in all those groups. And the -- we are moving a little bit from selling items to selling whole solutions. So we are more and more bridging our services and sales and solutions across the various product groups. It's becoming more complex. But fundamentally, this is to help customers to perform strong, healthy, efficient, low footprint fish farming or salmon farming. This slide is those pictures we have seen a couple of times before during this presentation. But we believe in deep sea farming as, one, again, the topic from our broad innovation agenda. And not to go into reasons why it's clever to go deep in water, Ronny mentioned one, and that is the sea lice challenge. Actually, we have solutions, which we can both motivate the fish and control the fish to keep down in the lower layers of the water. And we have various technologies being complementary to make that happen. And you see the examples there with the subfeeder, lights, Tubenet and also Atlantis Subsea Farming. The 2 left pictures are commercial solutions. And the right-hand picture is working. It's out there. It's [ efficient ], but it's not for commercial use yet. And then I'll go a little bit more into the Tubenet. This is our patented concept, which is, these days, very attractive to help prevent -- help farmer to prevent lice infestation during operations. And Institute of Marine Research, Havforskningsinstituttet, has actually documented that the lice infestation is reduced by 80% by applying this concept or product. So this, in combination with other measures, is a good tool for our customers to reduce the pressure from lice. And the payback -- or the cost of this concept, investment cost -- the additional investment costs, I should say, is paid back through one reduced de-licing process during one fish generation. We are talking about industrialized sustainable fish farming or salmon farming, if you want. This is very much about combining nature forces and high-tech solutions. AKVA Group is providing advanced technology tools for monitoring, control and optimization of daily farm operations under harsh conditions. This is very much about operational excellence. The farmer needs the right people, the right knowledge, competence, experience at hand. He or she simply need a good organizational culture. But of course, that is not enough. They also need the right technology, and especially to be able to monitor, get the right information and control what's happening out there, get the information. AKVA Group is providing all sorts of measures and sensors and cameras in combination with the digitalized feedback loops. And all in all, this is this is what is needed for the farmer to make good decisions. We have artificial-based feeding and decision-making, combining real-time condition monitoring and historical documented experiences. This is kind of a -- we do also now self-learning solutions, especially in feeding, which you also can term as machine learning. And then one very important leg of the business of cage-based is the service part. Our service business, as mentioned before, today, it's approximately 1/3 of the cage-based business. And the whole service concept is built around our products and solutions. So we sell the solutions and products. And in next run, we help the farmer to keep those solutions in good order to make them work as they should in the harsh environment. This is important to AKVA Group. My last slide is very much about footprint, sustainability, UN sustainability goals. In many ways, we are contributing as a supplier to our customers, both directly and indirectly. Directly through our solutions. I will not go into the details of this slide. It's too much. But directly, our solutions can reduce footprint but also indirectly because by applying our solutions, we are helping our customers, the farmers, to reduce -- to increase the efficiency and productivity of their farming operations and thereby reducing the footprint. So it is a direct and an indirect dimension to this. And if you look into the 17, in total, 17 UN sustainability targets or goals or focuses, we in AKVA Group, we are contributing into 11 out of those 17. So that was my last slide. And next is Johan Fredric telling us about land-based. Thank you.

Thank you for the introduction, Erlend. In this session, I will share with you our strategy and how we position for becoming the market leader within land-based salmon farming globally. Starting with the market, we currently see a very strong interest for building land-based salmon facilities globally. The long list of planned projects are increasing significantly quarter-by-quarter. And we have previously presented a possible scenario of where 1 million tonnes of production capacity could be sanctioned towards 2030. With the current development in this segment over the last 6 to 12 months, we firmly believe that this 1 million tonnes scenario could very well happen over the next 10 years. I just want to clarify that the 1 million tonnes are contracted volumes and not production volumes, which was the focus earlier today. Looking more at the geographies, we see that the current pipeline of projects are mainly being planned in U.S.A. and Norway. Longer term, we believe in the closeness to the customer as the most important factor. This is, of course, driven by the potential cost advantage and also the environmental logic in producing salmon locally. So in the longer view, North America and Asia should be the regions where we see the highest activity for these types of projects. How much volumes that can be produced and absorbed in Europe is, as you have seen earlier today, a function of how much growth that will come from the more conventional sea-based farming. The investment levels needed for constructing a complete RAS-based grow-out facility is, in our view, around NOK 200 per kilo. Applying the 1 million tonne on that investment level. And in addition, adding global investment levels for smolt and post-smolt, we see that the total land-based market is well above NOK 200 billion towards 2030. The technology share is typically between 40% and 50%. And that means that AKVA are playing in an addressable market of well above NOK 100 billion over the next 10 years. With this high activity and a significant pipeline that we see, it is extremely important for AKVA to have a robust process when it comes to sales and the business development work that is happening around these projects. As you see on the slide, we have created a phased process where we route the projects into a pre-project, where we help the project with a feasibility study and deliver the basic design. Secondly, we run an engineering phase, where the overall engineering and the needed detailed design to come up with a firm price and agree or define the needed interfaces to the complete facility is delivered and prepared. And the last step is, of course, a complete contract where we would then do the remaining parts of the design and construct and commission the facility. As you see, the lead time is quite long from first -- from point of first contact until the project has come to a phase where it's ready to be fully capitalized and build a facility. And the key with this process is that we mature the project together with the customer. And if, for some reason, the project is not going all the way, we still have made some money on that engagement. Our go-to-market strategy for land-based salmon farming is, as you have seen earlier today, build around 4 building blocks. I will, for the remaining part of the presentation, talk more in detail about each one of them. Starting with comparing our zero water concept technology with the other production technologies out there. It's -- the message from us is really that we see a RAS system with the zero water technology as the most versatile and sustainable technology of choice. When it comes to ongoing and flow-through, we don't regard flow-through as an option, basically due to the significant water usage. Reuse on the other hand can be used, but you would probably need to be close to the shoreline in order to utilize seawater as your water source. And of course, with large amounts of water going into your facility, you're still dependent on the natural conditions of your water source being water quality, temperature, et cetera. And also, as you see on the slide, large amount of water going in, a large amount of water going out. That means that the water treatment on the wastewater will not be as good with reuse as we see for the RAS technology. The water usage is, of course, one of the main benefits with the RAS technology. And with the zero water concept, we have taken this one step further. We are basically using only 10% of the water compared to traditional RAS. And both the process water and the wastewater, we can clean where we take out all the nutrients and suspended solids. How far we take this? It's just a matter of the criteria from the customers and how we apply the zero water technology. On this picture, you see a RAS loop with the zero water technology as part of the process flow. It can also be used outside the recirculation flow, treating the wastewater isolated. But you see here that the key elements in this technology is the 3 steps at the bottom. First, we have a plate separator, which basically separates the solids from the water. The overflow water goes through the de-nitrification unit, where bacteria transformed nitrate into nitrogen gas. And the last is the phosphorus system, where we add ferric chloride so that dissolved phosphorus is precipitated. The zero water concept will indeed be the spearhead into this market segment for AKVA. But as mentioned already earlier today, we will, of course -- we aim, of course, to deliver the complete technology scope to land-based salmon farming. That will include a lot of core farming technology, which is coming from our in-house portfolio, being feeding fish tanks, camera lights, sensors, fish handling systems and so forth. But also it's key to integrate and deliver good solutions for deliverables coming from external third parties. The complete delivery from AKVA Group will and is packed together in a standardized 5,000 tonnes module, specifically for on-growing. As you see from the drawing here, it's, of course, covering everything you need from hatching to purging. And it's fully scalable in the sense that if you want to take this module from 5,000 tonnes to 10,000 tonnes, you basically add 5 more submodules for the on-growing part. The current smolt capacity in this first step of the module can already accommodate that. And why is this standardization important? Well, it's, of course, important for the customer in the sense of buying a solution from AKVA that is proven and that is known to work efficiently. And of course, it has the internal perspective as well. It will make -- it will shorten the time from project start to delivery basically by making sure that we can have more efficient internal processes being engineering, design and so forth. It is indeed a standard. But a standard has, of course, to be optimized and improved as we go along. And this step-up in R&D, as we have talked about, is, of course, around making this standard module even better in the future. Precision farming has been mentioned today. And what is that really about? Well, it's about making sure that land-based salmon farming delivers consistently and an optimized output. Land-based salmon farming has the potential to become a fully controlled process, low risk, predictable and competitive costs and, of course, predictable and high outputs. In our view, you need 3 building blocks to achieve that. Firstly, it's about a smart and automated control system. Secondly, it's about more sophisticated and AI-boosted farm management systems. And lastly, we need this complete ecosystem, which allows for machine learning on all sources and even across customers. And for those who knows us well, we have these building blocks in our portfolio together. And hence, we're quite optimistic in terms of realizing this ambition together with ambitious customers of AKVA. The Production Advisory Services is about helping our customers to succeed with our facilities. It's about achieving, of course, the desired production with the highest level of productivity. As mentioned earlier today, this is -- it's not rocket science. It's about establishing a very competent cross-functional team. We are already good on the way there. And this is basically a service that we will sell to our customers on the back of projects that we deliver. This is something that will be good for the customer. But it will also be good for us in the sense that we, by this, get very close to the facility, our technology, the operational side of things. And that will again make sure that we have the best basis for delivering even better solutions for this on-growing segment in the future. Thank you. The next speaker is Per Andreas Hjetland, our Chief Commercial Officer.

Thanks, Johan Fredrik, for the introduction. My presentation will be about international sales and more specific on the barges that have been mentioned several times today. AKVA Group business segment, the feed market has turned into international success story for us. AKVA Group has, the latest 15 years, in total, delivered 276 barges. 85% of these barges has been delivered into the Norwegian salmon market. As average, we have had a market share on 35% to 45% in the market. During these 15 years, we have seen -- sorry, we have had a stable customer base, and we have been chosen repeatedly to deliver barges to many of the same customers. As a part of the new strategy introduced in 2017, AKVA Group did establish an international sales force to boost the sales globally. As a result of this sales boost, we have seen increased numbers of feed barges sold into the international market. This last year, we have sold, in total, 29 barges into 14 countries. As the first result of this international sales boost, AKVA Group Scotland did secure the first contracts in 2017 and '18 to a large salmon farmer in Scotland. This customer did order these barges to be operating on the 2 biggest production sites in Scotland. The contract was, in total, 3 barges with a feed capacity of 450 and 650 tonnes and did include all the newest AKVA Group technology. All 3 barges was delivered 10 months later, directly from the shipyard in Estonia, completely tested and ready to go into the operation after arriving in Scotland. During the last 2 years, these barges has been tested in rough weather and has proven to be reliable in all sort of operations. These deliveries was combined with other AKVA Group products like cages, cameras and [ auto ] farm infrastructure. Also as a result of the international sales boost, AKVA group Chile did secure a contract in 2019 on 4 600 tonnes barges to a large customer in Chile. These barges will be put into operation in the remote regions in Chile, region 11 and 12. Because of this remote operations, the crew will stay on the barge for several weeks. And therefore, these barges are constructed as small hotels with accommodation for 20 people and equipped with all necessary equipment. These 4 barges is at the moment under last construction in the shipyard in Vietnam and the plan is to ship them as deck cargo to Chile early in December this year. Also, in early 2020, AKVA group In North America, did secure a contract with a large Canadian company to deliver 2 AJ 96 tons feed barges, completely equipped with AKVA group feeding systems. Early October this year, these barges were lifted on to cargo ship and ship directly to the U.S. where they were lifted off and put directly into operations. In the 15 years, AKVA group have been delivering feed barges, we have managed to have a good and close relationship to our customers. During the years, we have seen the trend of the feed barges change into bigger and more equipped barges. The new trend is that the barge are being more advanced and that it needs to handle more exposed sites, very often, equipped as complete operation centers with the option to be fully remotely operated from an office onshore. As a response to the need for more exposed operation, we have designed a new feed barge with V-shape hull. This V-hull barges gives a unique soft and more controlled behavior in exposed and rough seas. 16 Of these V hull barges has been delivered and are in daily operationally now globally. AKVA group has also developed a new series of barges with 400, 600 and 800 tonnes feed capacity. This design gives us the chance to standardize the building process and also combine this with customized sizing according to customer needs and preferences. In this new series of barges, we are able to install our newest technology. Depending on country and location, these new barges can accommodate up to 20 people. In October 2020, we did deliver the biggest feed barge we have ever built to Norwegian Royal Salmon, Arctic Offshore Farming, to their new development site. The feed barge will be controlled -- will be the control center for the 2 semi-submersible steel cages that will be put into operation on Arctic Offshore Farming's development license, west of Tromsø. This barge -- feed barge has the new AKVA group waterborne feeding technology, and it is 64 meters long and has the new V-shape Hull construction and also, we have a ballast system integrated. The barge is certified for 6.5 meters significant wave height for the offshore farming segment. It also have a new design, a remote operated integrated boat garage, enabling the crew to embark directly and safely into the barge. As a part of the international sales strategy, we also need to secure the global delivery capacity and reduce the lead time. This, to be able to be competitive in our main regions in the world. The last 15 years, AKVA group has been building 60% of the feed barges in shipyards, in Estonia and in Poland. The following new sourcing strategy AKVA group did in 2019, entered into an agreement with the shipyard in Vietnam, close to Hanoi. 13 barges has been contracted from the shipyard up to now. For our markets in Australia and Canada, AKVA group has chosen to build in local shipyards. During the next 3 to 5 years, we expect the global market for new feed barges to be 100 to 150 barges. This includes steel and concrete barges. And our target is to deliver 25% to 35% of these barges. All AKVA barges are designed and built according to NS9415 and DNV-GL and also local regulation. In all our shipyards, we have AKVA group technical personnel following up during the building process. At the moment, we have 17 barges under construction, 9 in Estonia, 7 in Vietnam and 1 in Canada. AKVA group, as a major supplier of barges, has a clear strategy to be in front with new technology. This strategy is to supply of demand solution that gives a direct cost reduction and secure maximum operation for our customers. During [ AKVA No ] in 2018, AKVA group presented a complete feed barge with waterborne feeding technology. And as of today, we have 54 waterborne feed lines running in the market. AKVA group hybrid solution was introduced in our barges already in 2018. Last 2 years, we have delivered barges with waterborne feeding combined with AKVA group hybrid solution. This combination is a new world compared to barges delivered only 4, 5 years ago. This combination is showing a large environmental saving up to 90% saving on fuel consumption and also 90% of the CO2 emission. This compared to standard technology. Waterborne feeding also have an important effect on less microplastic released into the environment. In practice, the AKVA hybrid solution is reducing the daily operation of the generators up to 5 to 6 hours instead of running 12 to 15 hours. And this gives a large saving on fuel and service intervals on the generators. There is also a very positive effect on the working environment for the crew on both the parties because of less generator noise and the vibration during the night and during the daily operations when the generators are not running. As an example, we have calculated the payback on the AKVA group hybrid system to be 1 to 2 years because of the reduction in fuel, service maintenance cost on their generators. Thank you. That was my. And now it's the podium is to you, Andrew.

Thank you, Per. during the presentations this afternoon, you heard my colleagues talk about precision farming. And in this presentation, I would like to talk more to you about what that is and how it is aligned with our vision of technology for sustainable biology and then explain the role that the AKVA digital platforms have to play in that. Fish Farm. The farming of livestock goes back as far as 10,000 BC, when our ancestors began to settle following the end of the Ice Age. And traditionally, when we talk about farming of livestock, we think of cows grazing in the field. But after many centuries of research and development, it has become a very sophisticated and efficient industry. Through the use of satellites, sensors and drone technology for pasture management as well as tagging and tracking of animals, farmers use detailed information of their fields and livestock to optimize the productivity and sustainability of their farming operations. Today, this is what is referred to and traditionally as precision farming, the use of technology to optimize farming. And although fish farming can maybe track back its origins to 4,000 B.C., fish farming, as we know it today, is still a relatively new industry. Salmon farming began on an experimental scale in the '60s, but didn't become commercial at an industrial level in Norway until the '80s, and in Chile, during the '90s. Now fish farming does share many common fundamentals with traditional farming, things like the importance of genetics, nutrition and health, but it also has its own special challenges. The environment that we operate in can be challenging. So for sea farms, technology has an extremely important role to play as it does for land based, but the challenge is sometimes are very special on the cage base. So traditional farming is largely in 2 dimensions. The farmer can see both at the land and the animals and the farming practices can be optimized for each animal. Even with the tracking of individual animals, you can get the yield and performance of each individual animal. Fish farming on the other hand is in 3 dimensions. The farmer can only see the surface of the water and just a few of the millions of individuals that the industry are farming. So rather than tracking individuals, fish farmers track populations or batches of fish, and that can be done down to the cage or the pan level, but even that is at a population of thousands of fish. Industrial fish farming is at an early and exciting stage in the development of precision farming. And AKVA group's vision of technology for sustainable biology is about supporting fish farmers to optimize farming through data-driven decisions. AKVA has 3 main digital platforms: AKVAconnect and control the farming equipment; Fishtalk for tracking biological performance and planning future production and AKVA Observe, using artificial intelligence to optimize fish feeding. So briefly, AKVAconnect is a modern scatter system optimized for the equipment and the conditions of the aquaculture industry. It's used extensively around the world with installations on more than 1,000 farms and across multiple countries. It is capable to operate and monitor many different types of equipment like the sophisticated feed barge right through to simply connect in a camera or an oxygen sensor. The AKVAconnect architecture is designed with open interfaces, so our fish farmer can connect all of the equipment on their site into AKVAconnect or control the AKVA equipment directly using their own systems. So briefly on Fishtalk. It's a solution that captures data from brood stock through to harvest and gives the farmer complete control over the traceability of their stock and finances. It also supplies powerful tools for reporting and analysis. Today, it's used on hundreds of farms around the world, but it is clear that the users' needs are changing. Fishtalk, therefore, will be a key priority in our development program. In fact, it started already with Fishtalk Plan. Precision farming starts with a good plan. And this new tool allows the farmer to plan their operations, optimize the biomass utilization at a site, a region or at a company level. And it does this by using advanced optimization algorithms that recalculate immediately if there are any changes in the production. Fish farming today at the farmer site level is delivery practical hands-on industry. We have experienced and skilled people making decisions on a day-to-day basis based on what they see, or what they anticipate in the moment, something we refer to as the art of farming. The use of technology, however, is increasing. And today, it is increasingly come to fish farmers talk about their digital strategy, integration platforms, Big Data analytics and improve decision support. As an industry, we are in an exciting transformation, a digital transformation from an experience-based art-of-farming type paradigm to more scientific-based data-driven approach. One exciting example of this is the solution AKVA Observe and the use of artificial intelligence to bring data-driven decision support to the highest cost of farming, the feeding of the fish. I'd like to take a few minutes now just explain a more detailed this example where we use technology to optimize fish farming, something we call precision feeding. Today, the feeding of fish is done by watching videos like this. Fish feeding is monitoring the feed in behavior, watch for pellets and then adjust the feeding system based on what they see. But in essence, the job is to wait, watch and then adjust or stop the feeding system. An experienced feeder can anticipate it. They can manage the system well. But it is a manual system reliant on the information they have at that moment. With AKVA Observe, we can now take this manual process and bring science and artificial intelligence to assist the farmer. What you're seeing here at 12 simultaneous video streams of pens a fish being fed on the same farm at the same time. And the AI engine is running across all 12 of those, there's a series of algorithms to calculate the level of fish activity, while at the same time, detecting and counting pellets. And then by crossing the results of those 2 processes, is able to generate a recommendation bar that you see at the bottom of each one of the videos. When that bar goes to the left, it's either red or yellow, it indicates that there's an increased risk and perhaps you should be slowing down or maybe stopping the feeding. When it goes to the other side, and it will be going green or blue, giving the farmer input that you're on track, going well, maybe even you could increase the feeding. In addition, whenever the bar goes red, meaning the activity has gone down and the pellet count has gone up, it will generate an alert that we will then capture and send to the cloud tool. So what you have is a tool, which is giving the customer advice and counsel in regards to help to feed the fish, not just relying on the moment of their own assessment, but being complemented by a series of algorithms. So as awesome as that is, we then take it and send it to the cloud for further analysis. And in the cloud too, here, you can see an example of all the data for 1 pen, for 1 week. I'd just like to just drill in and show you what that looks like on one particular meal. In gray here, you can see the feeding rate. And remember, this is -- the person is feeding the fish, controlling the feed based on what they see, and the system is working alongside giving them advice. So they're increasing the feed rate happen to the point where the person detecting that there is something changing and the algorithm, and you see the green line there, that's the reducing activity of the fish. And the blue line is coming up, meaning there's an increase in pellet counts. At that point also, because of that combination, it generates an alert, which is the red bar. So that the user is making adjustments and the system is coming along supporting them. So we can now -- if we were to click on one of those bars, which is the next one here. We've captured the little video clip at that particular time when the person made the adjustment. And here you can see the fish are starting to spread out as pellet count's going on, supporting the decision to reduce the feeding. So an incredibly powerful tool first off on the farm in regards to give advice. But secondly, afterwards, they be able to analyze, understand and then improve the feeding practices. This system today is installed and running on 20 farms across 5 different countries, and we're in discussions with a number of farmers to implement it across all of their farms. So not just a promise of something we will develop in the future. This is something that's available now on a commercial scale and is being used at an industrial level. But we don't stop there. What I've talked about so far is when the system starts giving you advice and support to the user. What we've got here now is the next step of it. We're together with AKVA Observe, we integrate with all the different data sources, and we put it all into the AI and then we give it control of the feed system. So what you're seeing here in this short video clip is the AI engine detecting pellets, as you can see by the round red circles. And it's already detecting a reduction in activity has picked up by that same green-yellow bar -- line coming down. And then you can see how the blue bars have started to be reduced as the algorithm is starting to adjust the feed system directly. And then the recommendation bar, you can see has gone red, and it hits the point where AI system turns off the feeding completely. So salmon farming is at a very early stage in the development of precision farming, but digital solutions like this and the use of technology like this are an extremely important contribution. Our ancestors started farming 10,000, 12,000 years ago as a result of the end of the Ice Age. And today, as we face our own climate challenges, development of digital technologies for precision farming are fundamental for a biologically sustainable future. We'll now show a short video from the founders of Observe Technologies, our partners in the development of this solution that I've just presented. Thank you. [Presentation]

Okay. Then we are ready for the Q&A. So it's very exciting for us to see that we have more than 100 people listening in. So I hope you will post some questions to us, some we have already received. But please feel free to post more questions. So I hand over to Giulio our moderator, which will start with the first question.

Yes. There is a question from [ Doug Zlatmuo ]. Do you think better freezing technology and higher consumer acceptance for frozen or previously frozen product can be a factor in looking at land-based farming in air freight markets that is -- that competition could be not only with airborne priced products, but also frozen products shipped by sea?

Yes. I think that is going to be one of the considerations. If you remember the slide I showed on Asia, there is -- even though you put, for instance, or installed 200,000 tonne of land-based capacity, there is still a huge, huge supply gap there or undersupply, I should say, of 700,000, 800,000 tonnes in 2030. And part of that solution probably needs to be import of frozen products. So that's going to be one of the considerations. And if frozen technology is going to improve with regards to the feeling of freshness, that is going to play a role. At the other hand, one of the considerations with regards to Asia is that Asians, they really love and pay for freshness. So I think if you can produce locally, land-based and provide -- and also at a cost-competitive level and provide the freshness the Asian people is looking for, I think that is still going to be a very good place to be, just to use one example.

And [ Jon Luan ] is asking, how do you see the GOR profitability of reoccurring sales services versus the new products, in brackets, now and also going forward?

I'm not familiar with the concept of GOR, but If I understand the question correctly, it's about the service and recurring revenue versus the product and also new product and project sales. Generally, at AKVA, we have 30% recurring revenue, and we have 70%, which is more CapEx-based turnover. Typically, our service and recurring base revenue is earning a bit higher EBITDA percentage than the other part. At the other hand, it's also more capital intensive. So in a way, that comes hand in hand. So some higher returns on the recurring but also higher investments, more capital-intensive. One service station for us is typically NOK 40 million, NOK 50 million as investment, as a greenfield investment, and we have 10 of those in Norway. So more capital intensive providing higher returns. With regards to the 70% CapEx-based revenue, we have -- we are not guiding exactly about what the future will look like, but we have said that the new leg on growing land base, we expect that to earn EBIT percentage of north of 10%. So that's what I can say in general to that question.

[ Jon Luan ] is also asking, you're ramping up R&D spending. What has the R&D spending as a percentage of revenue being historically? And what is the same rate expected to be going forward?

Yes. I will ask Ronny to answer that question.

Yes. The current R&D spending is approximately 2% of our total revenue. And we will ramp up over the next 6 to 9 months to be 3% of -- approximately 3% of our revenue. Thank you.

In addition to the investment in innovation or how the spend in innovation, we will also ramp up our digital spend considerably. So it's -- when we talk about ramping up here, it's both about innovation on the hardware side and also above our digital spend as well. Andrew explained that in an excellent way. So we are going to put much more resources and investment into that as well.

A third question from [ Jon Luan ]. Translating the project growth in salmon demand going forward into market potential for AKVA, what can be expected as total revenue potential for AKVA products and corresponding industry, EBIT -- EBITDA percentage expectations?