Peer historical analysis of return on invested capital

In order to fully understand Aker BioMarine's return on invested capital, we turn the spotlight to its comparable companies. As we have provided arguments for in past sub-chapters, no

ROIC excl. goodwill ROIC incl. goodwill Ingredients operating margin

firms listed in the public marketplace today are fully comparable to Aker BioMarine and its industry-specific operational characteristics. We have selected four peers viewed as competitors in the firm's two segments, Ingredients, and Brands, we believe that analyzing their historical ROIC will allow us to get a greater understanding of what drives value creation in its competing segments. Following Koller et al. (2020), we will analyze ROIC excluding goodwill to avoid including the effect of price premiums paid in acquisitions and allow for more consistent analysis across the comparable group. We structure this analysis in the same way as our firm analysis, starting with an analysis of operating margin, before proceeding to look at capital turnover, and finally examining the ROIC. Details of the financials of the firms included in our analysis are attached in the appendix. For visual purposes, we note that the comparable company's in the Ingredients segment is visualized in blue colors and Brands in green in our analysis.

Operating margin

Our comparable firms' operating margin, or EBITA-to-Revenue ratio, is given in figure 23:

Figure 23: Operating margin: Aker BioMarine vs. comparable firms

From figure 23, we see that Aker BioMarine's operating margin in 2017 was well below that of its peers in the same year. Consequently, following a significant boost in margin predominantly driven by increased krill oil sales in 2018 and 2019, Aker BioMarine delivered operating margins above its Brands peers in the last two years of our analysis. Our analysis is notable because peers in the ingredient segment are consistently delivering higher operating margins, ranging from an average of 18.6% to 21.1% within our period of analysis. In comparison, Brands' peers' operating margin fell steadily from 10.2% in 2017 to 7.6% in the same period.

The best performer of the peers, Probi, has a premium position in the Ingredients market which allows them to extract significant margins on their goods sold. This is a trend for companies in this segment, and Ingredients company DSM also posted higher margins than Brands peers in all of the years included in our analysis. While Aker BioMarine's margins have been somewhat more modest due to a significant focus on growth over margins in recent years, it targets these premium markets through their increased offering in the high-margin Ingredients segment. The Brands segment is characterized by more intense price competition, putting great pressure on operating margins for peers in this segment.

Capital turnover

Our comparable firms' Revenue-to-Invested capital ratio, expressed capital turnover, is given in figure 24:

Figure 24: Capital turnover: Aker BioMarine vs. comparable firms

Since we compare the ROIC of the peer group, excluding goodwill, the graph above shows revenue divided by invested capital net of goodwill. In the capital turnover analysis, we see a very dominant trend in which Brands companies post capital turnover numbers vastly above Aker BioMarine and other peers. There are several components to this difference, but the Brand companies are more mature and more effective in generating a return on their invested capital. On the other hand, Ingredients companies are less mature and have more capital tied up to fuel higher growth expectations. This is also very much the case for Aker BioMarine, who posted the lowest capital turnover in all years included in our analysis. As argued previously in our thesis, and which we will further stress in our forecasting, Aker BioMarine has made substantial investments in recent years to facilitate its extensive growth ambitions, which may artificially inflate its capital turnover comparison to its peers.

0.49 0.52 0.56

Return on invested capital

Following our argument that an analysis of ROIC excluding goodwill is favored when comparing across different firms, the results of our analysis of ROIC net of goodwill is visualized in figure 25 below:

Figure 25: ROIC, excl. goodwill: Aker BioMarine vs. comparable firms

Overall, our entire peer group outperforms Aker BioMarine on ROIC between 2017 and 2019.

Although the Brands' peers have delivered lower operating margins than Aker BioMarine in the last two financial years, their efficient operational characteristics reflected in healthy capital turnover push their ROIC well above all three years. On the flip side, the Ingredients peers had notably lower capital turnover than their more mature peers, but due to their healthy operating margins, they posted the highest average ROIC of the two peer groups ranging from 13.2% to 13.9% during the period.

As we have argued, relevant peers in the Ingredients segments are entitled to premium pricing in their end-markets, which pushes their ROIC significantly upwards despite growth anticipation leading to a more capital-intensive operation. Aker BioMarine performs lower in both components of ROIC, which ultimately results in a lower ROIC than its peers. This also highlights the shortcomings of this historical financial analysis, in which an Aker BioMarine set-up for future growth is performing artificially low on these metrics. Thus, we claim that the historical numbers' importance as indicators for future performance is somewhat limited.

However, as we have seen a clear improvement trend during this period, we believe our