The Bakkafrost Group delivered a total operational EBIT of DKK 173 million (DKK 269 million) in Q3 2024.
(Figures in parenthesis refer to the same period last year unless otherwise specified)
The performance in Q3 2024 per region was as follows:
- Faroe Islands Revenues of DKK 1,420 million (1,628 million)
Operational EBIT of DKK 310 million (542 million)
- Scotland Revenues of DKK 317 million (232 million)
Operational EBIT of DKK -138 million (-263 million)
Commenting on the result, CEO Regin Jacobsen said:
“We are not satisfied with our financial results this quarter, primarily impacted by low salmon prices. The strike in May combined with unplanned harvest of A-19 impacted negatively our ability to adapt to market needs to optimize market value for our products. The early harvest of remaining fish from farming site A-19, where the ISA virus was detected in two pens back in May had a negative financial impact. We are, however, very pleased with the effective response and our strong procedures, which successfully contained the virus. This challenge is now behind us, allowing us to focus forward.
In the Faroe Islands, we have seen very good biological performance. This is evident in the strong growth, low mortality, and increased harvest weights. Our hatcheries have also delivered excellent operational results, enabling us to increase our smolt transfer expectations for this year, with further increases planned for next year.
In Scotland, we conclude that our de-risking strategy has worked. Exceptional mortalities have reduced by more than 80% compared to last year, harvest weights have increased, and sea lice levels are all-time low — just like in the Faroes. We are making steady progress in ramping up production at the Applecross hatchery to produce large high-quality smolt and expect start transfer of 200g smolt in Q4. Hereafter, we expect to only transfer high-quality smolt above 200g.
To maintain a strong competitive position, we are prioritizing cost management and aligning our capacity with operational needs. In line with this, we have implemented several cost-saving measures and capacity adjustments in Scotland, including the closure of the processing facility at Marybank in July 2024. The full effects of these measures were not visible in Q3.
The salmon market has been weaker in this quarter with low salmon prices throughout the quarter, but we look forward to a more favorable price environment – especially in H1 2025, where the supply will be weaker of high-quality salmon. Our expected harvest next year is 100,000 tonnes, of which we plan to allocate around 15% for VAP contracts”
During Q3 2024, the FOF segment sourced 40,134 tonnes (109,685 tonnes) of raw material. The Operational EBIT margin was 20% (30%), and fish feed sales amounted to 41,513 tonnes (35,903 tonnes).
For the first nine months of 2024, the FOF segment’s operational EBIT margin was 20% (22%). During the first nine months of 2024, Havsbrún sourced 267,583 tonnes (413,485 tonnes) of raw material.
In Q3 2024, the Freshwater segments in the Faroe Islands and Scotland transferred a total of 6.8 million (5.8 million) smolts combined:
- Freshwater FO: 4.9 million (3.3 million),
- Freshwater SCT: 1.9 million (2.5 million).
For the first nine months of 2024, the freshwater segments have transferred a total of 16.0 (16.3) million smolts:
- Freshwater FO: 11.0 million (9.0 million),
- Freshwater SCT: 5.0 million (7.3 million).
In Q3 the Freshwater FO segment made an operational EBIT per kg transferred smolt of DKK 40.67 (DKK 34.67), corresponding to NOK 64.11 (NOK 53.04). The Freshwater SCT segment made an operational EBIT per kg transferred smolt of DKK -34.82 (DKK 59.79), corresponding to NOK 54.89 (NOK 91.46). In Q3 2024, the Freshwater SCT segment had incident-based cost of DKK 0 million (DKK 6 million).
The Farming segments achieved lower prices in Q3 2024 than in Q3 2023. The Farming segments had higher volumes in Q3 2024 compared to Q3 2023. In Q3 2024, the Farming SCT segment had incident-based costs of DKK 34 million (DKK 178 million).
The total combined harvest in Q3 2024 of the farming segments in the Faroe Islands and Scotland was 27,029 tonnes gutted weight (20,840 tgw):
- Farming FO: 21,618 tgw (16,740 tgw),
- Farming SCT: 5,411 tgw (4,100 tgw).
For the first nine months of 2024, the farming segments have harvested a total of 70,178 tonnes gutted weight (55,939):
- Farming FO: 46,138 tgw (36,403 tgw),
- Farming SCT: 24,040 tgw (19,536 tgw).
In Q3 2024, the Farming FO segment made an operational EBIT per kg of DKK -1.31 (DKK 6.47), corresponding to NOK -2.07 (NOK 9.90). The Farming SCT segment made an operational EBIT per kg of DKK -33.14 (DKK -68.70), corresponding to NOK -52.25 (NOK -105.09).
The Services segment made an operational EBIT per kg of DKK 0.70 (DKK 0.99), corresponding to NOK 1.11 (NOK 1.52). The operational EBIT margin for the segment was 8% (10%).
The Sales & Other segment had a revenue of DKK 2,488 million (2,188 million) and an operational EBIT margin of -6% (4%). The operational EBIT per kg was DKK 5.48 (DKK 3.73), corresponding to NOK 8.64 (NOK 5.70).
The performance related to the Faroe Islands and Scotland as a region can be found in the Appendix.
The long-term goal of the Board of Directors is that 30-50% of earnings per share shall be paid out as a dividend. Bakkafrost’s financial position is strong, with a solid balance sheet, a competitive operation, and available credit facilities.
OUTLOOK AND OPERATIONAL PERFORMANCE
Market
Supply increased in Q3 2024
The supply of salmon increased 4.9% in Q3 2024 compared to Q3 2023, incl. inventory movements. Without inventory movements, the supply increase was 4.7%, according to the latest estimate from Kontali Analyse.
Lower salmon prices in Q3 2024
Salmon reference prices (Sisalmoni/Nasdaq Norway, EUR) were 12% lower this quarter compared to Q3 2023. The price reduction was largely driven by increased supply, especially from Europe where supply increased by around 9%. A high share of European supply was small sized fish supporting the price premium for large fish.
1% growth in 2024
The global supply is expected to increase around 3% in Q4 2024, compared to Q4 2023. In H2 2024, the global supply is expected to grow around 4%, compared to Q3 2023. For the full year 2024, the global supply is expected grow around 1%, excluding inventory movements, and in H1 2025 the global supply growth is expected to be around 3%.
Bakkafrost has a strong focus on ensuring a well-balanced flow to the different markets to increase diversification and mitigate market risk. Bakkafrost operates in the main salmon markets, Europe, the USA, and the Far East. Since the beginning of the war in Ukraine, Bakkafrost has stopped all trading with Russia.
Farming
The biological performance in Q3 2024 in the Faroese farming operation was strong with good growth, continued high harvest weights and continued strong control of sea lice. However, in August Bakkafrost harvested out the remaining fish from the farming site A-19, where ISA virus had been detected in Q2 2024 in two pens. This was done to comply with the Faroese ISA regulation and marked the end of the ISA incident, which was effectively contained and did not spread outside the two pens. As 2.9 thousand tonnes were harvested from the site with an average weight of only 3.3 kg (HOG), this had a significant negative impact on the Q3 results for the Faroese farming segment.
Having a strong biological performance with a lot of healthy large fish in the water, Bakkafrost will seek to maximise the market value of the fish. Hence, the harvest target for 2024 of 63,500 tonnes in the Faroe Islands is maintained, in favour of expected stronger salmon prices in Q1 2025.
In the Faroese freshwater operation, the main focus for Bakkafrost is to continue to increase the production volume of high-quality large smolt, utilising the >50% increased hatchery capacity obtained in 2023 (Glyvradalur and Norðtoftir). The current hatchery capacity in the Faroes allows for an annual smolt production of 18 million smolt of 500g and in Q1 2024, Bakkafrost started the construction of the new hatchery in Skálavík, Faroe IsIands, which will further increase the production capacity by around 7 million smolt at 500g. Late 2026, when the Skálavík hatchery is complete, the annual smolt production capacity in the Faroe Islands will be 24 million smolts of 500g, as targeted in the 2024-2028 investment programme. In Q3 2024 5.2 million (3.3 million) smolt were transferred to marine in Faroe Islands with an average weight of 425g (405g).
The farming operation in Scotland has performed considerably better in Q3 2024, than during the same period past years. Mortality levels have reduced, sea lice levels were all-time low and average harvest weights have increased. Though some challenges have been faced, the de-risking strategy Bakkafrost developed one year ago, has significantly contributed to improved biological performance and reduced overall risk exposure. Consequently, the exceptional mortality costs have reduced around 80% in Q3 2024, compared to Q3 2023. Looking ahead into Q4 2024, Bakkafrost will focus on building up the biomass and increase the size of fish in the water for harvest in H1 2025.
In 2025, Bakkafrost will apply a similar de-risking strategy as followed in 2024. In the meantime, in 2025, the farming operation will undergo the transition into using large high-quality smolt, which is paramount to turnaround the performance in the Scottish farming operation.
In the Scottish freshwater operation, the main focus lies on ramping up the production of large high-quality smolt in the Applecross hatchery. In Q4 2024, the first large batch of 200g smolt is planned to be transferred, and all smolt in 2025 are planned to be larger than 200g. The operation of the new Applecross phase 5 module will commence in Q4 2024 which increases the hatchery capacity with around 50%. This enables Applecross to produce around 3,500 tonnes of smolt. As announced in Bakkafrost’s Q2 2024, this capacity will be utilised to make Bakkafrost self-sufficient with around 14 million high-quality smolt of 250g.
With the completion of the Applecross phase 6 and 7 in 2025, the biosecurity in the smolt production will be further improved.
In Q3 2024, the average weight of transferred smolt in Scotland was 86g, which is 23% lower than in Q3 2023. The reduced average weight was a result of the previously announced startup issues at Applecross, experienced in Q1 2024.
As shown in the Faroe Islands, large high-quality smolt will face lower risks in the marine environment because of shorter production cycles in the sea and more robust salmon.
Smolt transfer
Bakkafrost’s expected smolt transfer in 2024 in the Faroe Islands is increased to around 17.7 million smolts with average weight of 410g. In Scotland, the smolt transfer in 2024 is expected to be around 6.2 million smolts with an average weight of 114g. The number and average weight of smolts transferred are key elements of predicting Bakkafrost’s future production.
Million smolt transferred | ‘25e | ‘24e | ‘23 | ‘22 | ‘21 | ‘20 |
FO | 18.5 | 17.7 | 14.4 | 14.5 | 14.4 | 14.3 |
SCT | 10.0 | 6.2 | 10.5 | 10.8 | 11.1 | 10.4 |
Avg. weight (g) | ||||||
FO | 430 | 410 | 396 | 345 | 376 | 320 |
SCT | 200 | 114 | 117 | 107 | 95 | 88 |
In 2024, Bakkafrost expects to harvest around 63,500 tonnes gutted weight in the Faroe Islands and 26,100 tonnes gutted weight in Scotland, giving a total of around 89,600 tonnes gutted weight.
In 2025, Bakkafrost expects to harvest around 77,000 tonnes gutted weight in the Faroe Islands and 23,000 tonnes gutted weight in Scotland, giving a total of around 100,000 tonnes gutted weight. The quarterly harvest profile is outlined in in the table below. Biological, environmental and market conditions can affect the expected harvest profile.
Expected harvest profile in 2025 as a % of total harvest pr. region:
Region | Q1 | Q2 | Q3 | Q4 |
FO | 24% | 21% | 31% | 24% |
SCT | 33% | 36% | 9% | 22% |
The estimates for harvest volumes and smolt transfers in both geographies are dependent on biological development.
Sales & VAP (Value added products)
Bakkafrost’s highly flexible value chain includes state-of-the-art VAP processing capacity, which enables the company to adapt effectively to rapidly changing market situations.
As a result of changes in the Faroese revenue tax, Bakkafrost has adjusted the strategy for contracted VAP (Value-Added Products) to reduce contract exposure.
For 2025, Bakkafrost intends to sign contracts covering around 15% of the expected harvest volumes in the Faroe Islands and Scotland combined.
FOF (Fishmeal, oil and feed)
The outlook of fishmeal and fish oil production is dependent on the availability of raw materials.
The ICES 2025 recommendation for blue whiting is 1,447 thousand tonnes, which represents a 5.4% decrease from the recommendation for 2024.
In 2025 Bakkafrost expects similar production volumes of fishmeal and fish oil as in 2024.
Bakkafrost expects the feed production at Havsbrún to be around 150,000 tonnes in 2025. Close to all of this will be sold internally to Bakkafrost’s Faroese and Scottish Farming segments.
Investments
On the Capital Markets Day on 6 June 2023, Bakkafrost announced a 6.3bn DKK investment plan for 2024-2028. The investments will enable a transformation of the operation in Scotland and provide sustainable growth in the Faroe Islands as well as Scotland.
The main purpose of the investments in Scotland is to replicate Bakkafrost’s successful operation in the Faroe Islands. A part of this is to implement Bakkafrost’s large smolt strategy in Scotland, which is achieved through building sufficient and energy-efficient hatchery capacity. The 2024-2028 investment plan includes projects to build hatchery capacity to produce above 15 million large smolts annually. Having large smolt in Scotland will transform the performance, lower the biological risk and increase harvest volumes. In addition to building hatchery capacity, Bakkafrost plans to strengthen the processing capabilities and increase flexibility in operation. Bakkafrost will also invest in more service vessel capacity to improve the mitigation of biological risk and improve the cost of operation. Further, Bakkafrost will make investments in marine site development.
The investments in the Faroe Islands include increasing annual hatchery production capacity to around 24 million smolts at 500g, cost-efficient repurposing of old hatcheries into broodstock operation, expansion of feed production capacity and obtaining growth through optimization of existing sites and new technology.
With the investment plan, Bakkafrost expects to sustainably grow the total annual harvest volumes to 165,000 tonnes in 2028. Over the same period, the total annual production capacity in Bakkafrost’s value chain will reach 200,000 tonnes gutted weight.
Update on the 2024-2028 investment plan
Since the announcement of the 2024-2028 investment plan, Bakkafrost has decided to change the priority of some of the investment projects in Scotland, including the second planned hatchery at Fairlie and new processing facility. Consequently, the capex spend is expected to reduce around 300 mDKK in 2024 around 500 mDKK in 2025, compared to the investment levels announced in the 2024-2028 investment plan.
Bakkafrost will host the next Capital Markets Day on 16-17 June 2025 in the Faroe Islands.
Financial
The global salmon product market’s long-term balance is likely to favor Bakkafrost. Bakkafrost has a long value chain and a cost-efficient production of high-quality salmon products and will likely maintain financial flexibility going forward.
In March 2022, Bakkafrost secured a 700 mEUR sustainability-linked credit facility (expandable by 150 mEUR) with a 5-year term and 2-year extension options which have been executed. This facility, along with Bakkafrost’s strong equity ratio, bolsters the Group’s financial strength for organic growth and cost reduction in Scotland, while also facilitating M&A and future organic growth opportunities, and upholding an unchanged dividend policy.
Please find the Company’s Q3 2024 report and the Q3 2024 presentation enclosed.
Contacts:
- Regin Jacobsen, CEO of P/F Bakkafrost: +298 235001 (mobile)
- Høgni Dahl Jakobsen, CFO of P/F Bakkafrost: +298 235060 (mobile)
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
About Bakkafrost:
Bakkafrost is the largest salmon farmer in the Faroe Islands and the second-largest salmon farmer in Scotland. The Group is fully integrated from feed production to smolt, farming, VAP and sales. The Group has production of fishmeal, fish oil and salmon feed in the Faroe Islands and primary and secondary processing in the Faroe Islands, Scotland and Denmark. The Group operates sea farming and broodstock operations in both the Faroe Islands and Scotland. The Group has built a biogas plant in the Faroe Islands. The headquarter is located in the Faroe Islands, and the Group has sales and administration offices in Grimsby (UK), Edinburgh (Scotland), Boulogne-Sur-Mer (France), New Jersey (US) and Munkebo (DK). The Bakkafrost Group has 1,686 employees (full-time equivalents).
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