The Bakkafrost Group delivered a total operating EBIT
of DKK 125.8 million in Q4 2013. The combined farming
and VAP segment made an operational EBIT of DKK 124.9
million in Q4 2013. For 2013, Bakkafrost made an
operational EBIT amounting to DKK 587.0 million. The
EBITDA for the feed segment was DKK 21.3 million in Q4
2013. For 2013, the EBITDA for the feed segment was
DKK 125.8 million.
Commenting on the results, CEO Regin Jacobsen said:
"2013 is the best year ever for the Bakkafrost Group.
The salmon market has been stronger than expected,
with the new markets taking the lead. In 2013 we
announced our 5 year investment plan, which will
prepare the company for the future. Recently we have
tested the veterinary early warning system in the
Faroe Islands. The outcome has proved a good system
and we still have a strong biology."
The Group made a profit for the quarter of DKK 137.9
million (DKK 148.2 million). For 2013, the profit was
DKK 589.2 million (DKK 281.3 million).
The total volumes harvested in Q4 2013 were 11,097
tonnes gutted weight (13,044 tgw). The total harvested
volumes for 2013 were 41,268 tonnes gutted weight
(44,341 tgw).
Bakkafrost transferred 2.8 million smolts in Q4 2013
(2.3 million). In 2013, 9.5 million smolts have been
transferred (10.7 million). This is a bit lower than
the guidance and is due to a slight delay in timing
from the end of 2013 to the beginning of 2014. The
smolt release is less in 2013, compared to 2012, due
to available sites for smolt release. Due to the
favourable seawater temperatures in the Faroes,
Bakkafrost releases smolts during the whole year.
Bakkafrost has built a new hatchery which will
commence production in H1 2014. Following this
Bakkafrost will be self supplied with smolts.
In accordance with the Group's dividend policy,
Bakkafrost aims to give its shareholders a competitive
return on their investment, both through payment of
dividends from the company and by securing an increase
in the value of the equity through positive
operations. Bakkafrost's financial position is strong
with a healthy balance sheet, a competitive operation
and undrawn available credit facilities. The Board of
Directors has therefore decided to propose to the
Annual General Meeting that DKK 4.50 (NOK 5.03*) per
share shall be paid out as dividend. This corresponds
to approximately DKK 219.9 million (NOK 245.9*
million). The dividend per share in NOK is subject to
changes depending on the exchange rate between DKK and
NOK when the dividend is paid out. In addition to the
dividend, Bakkafrost purchased 366,700 own shares at a
price of NOK 86 each in December 2013. Following the
transaction, Bakkafrost holds 378,581 shares
corresponding to 0.77% of the total share capital.
The 28th of October 2013, Bakkafrost announced the
suspicion of Neoparamoeba perurans at a Bakkafrost
farming site in Fuglafjørður. Further PCR analysis
carried out by the Faroese Food- and Veterinary
Authorities have detected the presence of Neoparamoeba
perurans. The Neo-paramoeba perurans agent is known to
be able to cause amoeba gill disease (AGD). All other
sites in the Faroes were examined, and Neoparamoeba
perurans has been detected on a number of them,
including sites that Bakkafrost owns. The detected
sites have been treated with Hydrogen Peroxide. No
increase in mortality has been observed and no disease
outbreak has occurred at any of the detected sites,
but the detection of Neoparamoeba perurans agent has
increased the biological risk.
In February 2014 a routine surveillance test detected
a possible pathogenic ISA-virus on Bakkafrost farming
site A80. The detection was not connected to any
increase in mortality, and there was no impact on fish
health or fish welfare. Bakkafrost decided to activate
the ISA-contingency plan immediately and hence
enforced slaughtering of the last cage at the farming
site A-80 Selatrað. The site was emty before mid
february.
The farming companies and the authorities have put a
lot of work into maintaining the good biolog-ical
status in the Faroe Islands. Regular surveill-ance
tests for ISA-viruses have been performed at all farms
during the last approx 10 years in sea sites in the
Faroes. Bakkafrost and the other farmers in the Faroe
Islands will work with the Faroese Food and Veterinary
authority to avoid the introduction of the AGD and
ISA.
The combined farming and VAP segment made an
operational EBIT of DKK 124.9 million (DKK 95.8
million) in Q4 2013. For 2013 the combined farming and
VAP segment made an operational EBIT of DKK 551.9
million (DKK 311.0 million).
The farming segment made an operational EBIT of DKK
130.8 million (DKK 84.3 million). The reason for the
improved result is due to higher prices as the
harvested volumes are lower. On the other hand result
and volumes are lower than expected because of the
early harvest on the first site with the suspicion of
Neoparamoeba perurans. For 2013, the operational EBIT
was DKK 642.3 million (DKK 274.0 million).
As expected, the VAP segment had a loss on its
operations in Q4 due to high salmon spot prices. The
VAP segment made an operational EBIT of DKK -5.9
million (DKK 11.5 million) for Q4 2013. For 2013, the
accumulated losses amounted to DKK -90.5 million (DKK
37.0 million). There is normally a time lag between
the changes in the spot prices and the changes in the
contract prices. Therefore, typically the VAP segment
has losses the first quarters in a longer period with
increasing salmon prices.
The third segment - fishmeal, oil and feed - made an
operational EBITDA of DKK 21.3 million (DKK 18.4
million) in Q4 2013 and for 2013 the operational
EBITDA amounted to DKK 125.8 million (DKK 84.5
million). The increase in the EBITDA is primarily due
to higher production of fishmeal and fish oil.
In Q4 2013, Havsbrún sourced 18,432 tonnes of raw
material (11,691 tonnes), and for 2013 the raw
material intake was 160,581 tonnes (47,122 tonnes).
The Bakkafrost Group had a net interest bearing debt
at the end of 2013 amounting to DKK 678.0 million (DKK
806.9 million at year-end 2012) and had undrawn credit
facilities of approx DKK 684.0 million, of which DKK
15.6 million are restricted.
Bakkafrost's equity ratio is 54%, compared to 49% at
the end of 2012. Bakkafrost paid out DKK 97.7 million
in dividend in Q2 2013.
On 14 February 2013, Bakkafrost issued un-secured
bonds at a total nominal value of NOK 500,000,000; the
issue date was 14 February 2013. The bonds were listed
on the market on 3 May 2013. The interest rate is
NIBOR 3 months plus a margin of 4.15 %. The bonds are
measured at fair value at initial recognition. The
bonds mature five years from the issue date at their
nominal value.
In Q2, all full-time employees from 2012, still
employed at Bakkafrost, have received bonus shares
with a total value of 2% of paid out salary in 2012.
In total Bakkafrost has allocated 45,957 shares to its
employees at a fair value on DKK 3.2 million. The
grant date was 22 May 2013 and the share price was DKK
69.65 (NOK 69.75) per share.
Segments
Farming:
The operating revenue for Bakkafrost's farming segment
was DKK 525.9 million in Q4 2013 (DKK 435.0 million)
and DKK 1,991.6 million for 2013 (DKK 1,371.7
million).
Operational EBIT, which is EBIT before fair value
adjustments on biological assets, amounted to DKK
130.8 million in Q4 2013 (DKK 84.3 million), and for
2013 it was DKK 642.4 million (DKK 274.0 million).
Operational EBIT/kg for the farming segment was DKK
11.79 (NOK 13.02) in Q4 2013, compared to DKK 6.46
(NOK 6.38) in Q4 2012. The salmon prices in Q4 2013
have been stronger than in Q4 2012 and thus higher
margins per kilo. Operational EBIT/kg for 2013 was DKK
15.57 (NOK 16.27), compared to DKK 6.18 (NOK 6.20) for
2012.
Value Added Products (VAP):
The operating revenue for the value added segment
amounted to DKK 202.6 million in Q4 2013 (DKK 153.8
million). For 2013, the revenue was DKK 666.2 million
(DKK 526.3 million). The increase in the revenue from
Q4 2012 to Q4 2013 is 32%, while the volumes that went
for VAP products only increased by 12%.
Operational EBIT amounted to DKK -5.9 million in Q4
2013 (DKK 11.5 million), corresponding to an
operational EBIT of DKK -1.17 (NOK -1.29) per kg
gutted weight in Q4 2013, compared to DKK 2.55 (NOK
2.52) per kg gutted weight in Q4 2012. The decrease in
the operational EBIT margins is due to higher salmon
spot prices. The VAP segment acquires its raw material
(fresh salmon) at spot prices each week. For 2013,
operational EBIT amounted to DKK -90.5 million (DKK
37.0 million), corresponding to an operational EBIT of
DKK -4.93 (NOK -5.16) per kg gutted weight in Q4 2013,
compared to DKK 2.30 (NOK 2.31) per kg gutted weight
in 2012.
Fishmeal, Fish Oil and Fish Feed:
The operating revenue for the fishmeal, fish oil and
fish feed segment amounted to DKK 252.5 million (DKK
248.1 million) in Q4 2013, of which DKK 150.7 million
represents sales to Bakkafrost's farming segment
corresponding to 59.7% (61.5%). For 2013 the revenue
was DKK 1,083.0 million (DKK 889.3 million), of which
DKK 631.3 million represents sales to Bakkafrost's
farming segment corresponding to 58.3% (64.7%).
Operational EBITDA was DKK 21.3 million (DKK 18.4
million) in Q4 2013, and the operational EBITDA margin
was 8.45% (7.43%). For 2013 the EBITDA was DKK 125.8
million (DKK 84.5 million), and the margin was 11.61%
(9.50%).
Sales of feed amounted to 20,270 tonnes (25,047
tonnes) in Q4 2013, of which the farming segment
internally used 14,736 tonnes (16,210 tonnes). For
2013, the feed sale was 85,333 tonnes (91,398 tonnes).
The internal sale was 63,820 tonnes (61,506 tonnes).
The production of fishmeal in Q4 2013 was 4.324 tonnes
(2.829 tonnes). The production for 2013 was 34.031
tonnes (10.808 tonnes).
The production of fish oil in Q4 2013 was 1.619 tonnes
(1.229 tonnes). The production for 2013 was 15.996
tonnes (4.199 tonnes)
Statement of Financial Position
The Group's total assets as of end 2013 amounted to
DKK 3,112.2 million, compared to DKK 2,570.9 million
at the end of 2012.
The Group's intangible assets amounted to DKK 294.7
million at the end of 2013 (DKK 293.7 million) and
comprise primarily the fair value of acquired farming
licences. No licences in the North region are recorded
with a value in the Bakkafrost accounts. The increase
of DKK 1 million is goodwill in connection with the
acquisition of Faroe Seafood UK Ltd.
Property, plant and equipment amounted to DKK 916.7
million at the end of Q4 2013, compared to DKK 812.8
million at the end of 2012. In Q4 2013 Bakkafrost made
investments in PP&E amounting to DKK 63.9 million and
for 2013 DKK 165.2 million. In addition to the
investment, prepayment of DKK 34.6 million has been
made for future investments.
Non-current financial assets amounted to DKK 115.3
million at the end of 2013, compared to DKK 91.2
million at the end of 2012. The increase in the
financial assets relates mainly to the positive result
in Faroe Farming, a financial investment.
The Group's carrying amount (fair value) of biological
assets amounted to DKK 965.9 million at the end of
2013, compared to DKK 747.0 million at the end of
2012. Included in the carrying amount of the
biological assets is a fair value adjustment amounting
to DKK 296.4 million, compared to DKK 181.1 million at
the end of 2012.
The Group's total inventories amounted to DKK 235.5
million as of end 2013, compared to DKK 242.9 million
at year-end 2012. The inventory primarily represents
Havsbrún's inventory of fishmeal, fish oil and fish
feed, in addition to feed at the feed stations,
packing materials and other raw materials.
The Group's total receivables amounted to DKK 400.6
million as of end 2013, compared to DKK 358.4 million
at the end of 2012. The increase is primarily due to
the increase in the salmon price and hence higher
accounts receivables. On the other hand, other
receivables have decreased due to lower receivables
from associated companies.
The Group's equity at the end of 2013 is DKK 1,665.3
million, compared to DKK 1,262.9 million at the end of
2012. The change in equity in 2013 primarily consists
of the profit for the period, a negative fair value
adjustment to a currency-/interest rate swap related
to the bond financing and payment of dividend to the
shareholders. Bakkafrost paid out DKK 97.7 million in
dividend in Q2 2013.
The Group's total non-current liabilities amounted to
DKK 1,071.0 million at the end of 2013, com-pared to
DKK 990.4 million at the end of 2012. Deferred taxes
amounted to DKK 310.9 million, compared to DKK 258.4
million at the end of 2012. Long-term debt was DKK
760.0 million at the end of 2013, compared to DKK
731.9 million at the end of 2012.
Bakkafrost's interests bearing debt consists of two
bank loans and a bond loan. The bank loans are one
instalment loan of DKK 300 million, payable with DKK
25 million each quarter, and one loan payable in 2016
with the full amount of DKK 553 million. The bond loan
of NOK 500 million was issued at 14 February 2013 and
is payable in full after five years i.e. at 14
February 2018. The interest rate of the bonds is NIBOR
3m + 4.15%. Following the issuance of the bonds,
Bakkafrost has entered into a currency/interest rate
swap, hedging the exchange rate and has switched the
interest rate from NIBOR 3m to CIBOR 3m. Bakkafrost
has entered the swap due to its exposure to DKK, as a
large part of the income and costs are in DKK and EUR.
At the end of 2013, the Group's total current
liabilities are DKK 376.0 million, compared to DKK
317.6 million at the end of 2012. Short-term interest
bearing debt amounts to DKK 100.0 million and relates
to a short-term part of long-term debt as described
above. Accounts payable amount to DKK 276.0 million,
compared to DKK 217.6 million at the beginning of the
year. The increase is first of all due to higher tax
payables, provisions for onerous contracts and other
payables.
Bakkafrost's equity ratio is 54%, compared to 49% at
the end of 2012.
Cash Flow
The cash flow from operations in Q4 2013 was DKK 187.1
million (DKK 103.8 million). The Cash flow from
operations was positively affected by higher sales
prises on lower volumes and positive cash-flow due to
decrease in inventory. For 2013, the cash flow from
operations was DKK 517.5 million (DKK 285.6 million).
The cash flow from investment activities in Q4 2013
amounted to DKK -96.7 million (DKK -44.6 million). The
amount relates primarily to invest-ments in fixed
assets. For 2013, the cash flow from investments
amounts to DKK -204.4 million (DKK -66.9 million).
Included in the prepayments made for purchase of fixed
assets are approximately DKK 22 million for the well
boat that Bakkafrost has ordered for delivery in 2015.
Cash flow from financing activities totalled DKK
-72.2 million in Q4 2013 (DKK -43.9 million). The
interest bearing debt decreased by DKK 53.6 million,
purchase of own shares was DKK 28.1 million and
changes in financing of associated companies
contributed positively with DKK 16.3 million. For
2013, cash flow from financing amoun-ted to DKK -156.1
million (DKK -210.6 million).
Net change in cash flow in Q4 2013 amounted to DKK
18.3 million (DKK 15.3 million) and for 2013 DKK 157.0
million (DKK 8.2 million).
At the end of 2013 Bakkafrost had unused credit
facilities of approximately DKK 684.0 million of which
DKK 15.6 million are restricted.
Outlook
MARKET
The salmon marked have proved to be strong recent
years. Therefore the outlook for the salmon market in
2014 is good. Global supply of salmon in 2014 is
expected to increase 4-6%. Based on historical
numbers, the salmon marked is in balance, when the
supply increases by 6-8% per year. This together with
an average NOS (Independent exporters purchase price,
spot from farmers) price in 2013 of NOK 39.07 per kg
gives indications of salmon prices in the same price
range as in 2013 in average. As the supply of salmon
is expected to be low first half of 2014 it is
expected that the market will be tight, while more
salmon will be harvested in the second half.
Bakkafrost expects to sell around 55% of the harvested
volume of salmon in the spot market in 2014 and around
45% as VAP. The market place is one of Bakkafrost's
most significant risk areas. To reduce the exposure to
the market risk, Bakkafrost has a geographical
approach and a market price approach. To diversify the
geographical market risk, Bakkafrost sells its
products to some of the largest salmon markets in the
world, US, the Far East, Europe and Russia.
FARMING
The outlook for the farming segment is good. The
biological situation is good and the price outlook in
the spot market is good. Bakkafrost expects to harvest
45,000-48,000 tonnes gutted weight in 2014 and Faroe
Farming, which Bakkafrost holds
49% in, expects to harvest around 5,000 tonnes in
2014.
The number of smolts released is one key element of
predicting the future production for the Group.
Bakkafrost's forecast for the smolt release in 2014 is
11.6 million smolts and shall be compared to the
number of smolts released in 2012, when the smolt
release was 10.7 million. The same sites are available
for smolt release in 2014, as in 2012. Therefore 2014
is comparable to 2012. Bakkafrost has invested in a
new hatchery amounting to DKK 53 million, which will
commence production in H1 2014. Following this
Bakkafrost will be self supplied with smolts.
The estimates for harvesting volumes and smolt
releases, is as always, dependent on the biological
situation in the Faroe Islands. The overall biolog-
ical situation in the Faroe Islands is good, but the
detection of Neoparamoeba perurans in the Faroes and
the possible detection of an ISA virus are new risks
to handle. The number of sea lice is lower than in
previous years after a coordinated treatment in the
whole Faroese farming area during 2013. The number has
been significantly lower during the summer 2013,
compared to previous years. Therefore the farming
companies in the Faroes have decided, to do an
coordinated treatment again sea lice again in 2014.
Value added products (VAP)
The outlook for the sale of value added products is
good. Bakkafrost has already signed contracts covering
around 70% of the VAP capacity for 2014 corresponding
to 30% of the expected total harvested volumes in
2014. The last 30 % of the VAP capacity is expected to
be committed during the year. The contracts are at
fixed prices based on the salmon prices in 2013 and
the expectations for the salmon spot price for 2014.
Therefore the contracts are based on a significant
higher level in 2014 than in 2013.The contracts lasts
for 6 to 12 months. The strategy is to sell around 40-
50% of the harvested volumes of salmon as VAP products
on fixed price contracts. Selling the products at
fixed prices reduces the financial risk with
fluctuating salmon prices. The market price for
contracted VAP products follows a more stable pattern
with trends instead of short-term fluctu-ations as in
the spot marked.
Fish oil, -meal and feed
The major market for Havsbrún´s fish feed is the local
Faroese market. It is expected that the total
consumption of fish feed in the Faroe Islands will be
approximately 90,000-95,000 tons in 2014. Depending on
the purchase from external customers in the Faroe
Islands and abroad, the sale of fish feed will be
approximately 83,000-87,000 tonnes.
With the positive outlook for the fisheries of blue
whiting and the establishment of a pelagic fish
processing plant next to Havsbrún's production
facilities in Fuglafjørður the outlook for sourcing
raw material is better than in recent years. Off-cuts
from the new processing facility, which Bakkafrost
has a 30% share in, can be used for the production of
fishmeal and fish oil. However, depending on supply,
demand and the price level, the sourcing of raw
material for the production of fish oil and -meal is
very uncertain. An alternative to Havsbrún's
production of fish oil and -meal is purchasing these
raw materials from other producers, which has been
common in recent years.
Investments
In July 2013, Bakkafrost announced a five-year plan
for optimising its value chain, resulting in savings,
increased production and reduced biological risk. The
yearly investments amount to DKK 170 million per year,
including maintenance investments of DKK 80-90 million
per year. In addition to the yearly investments of DKK
170 million, Bakkafrost is building a new well boat,
estimated to DKK 230 million. Thus, the total
investments will exceed DKK 1 billion for the 5-year
period. The investments in 2014 are estimated to DKK
170 million in addition to prepayment for the well
boat amounting to DKK 42 million.
Financial
Improved market balances in the world market for
salmon products and costs effective production will
likely improve the financial flexibility going
forward. A high equity ratio together with the Group's
bank financing and the issuance of bonds, makes
Bakkafrost's financial situation strong, which enables
Bakkafrost to carry out its investment plans to
further focus on strengthening the Group, M&A's,
organic growth opportunities and fulfil its dividend
policy in the future.
Contacts:
Regin Jacobsen, CEO of P/F Bakkafrost: +298 23 50 01
(mobile)
Teitur Samuelsen, CFO of P/F Bakkafrost: +298 23 51 11
(mobile)
This information is subject of the disclosure
requirements acc. to §5-12 vphl (Norwegian Securities
Trading Act)
About Bakkafrost:
Bakkafrost is the largest salmon farmer in the Faroe
Islands. The Group is fully integrated from feed
production to smolt, farming, VAP and sales. The Group
has production of fish meal, fish oil and salmon feed
in Fuglafjørður. The Group operates licenses on 14
farming fjords. The Group has primary processing in
Klaksvík, Kollafjørð and Strendur and secondary
processing (VAP) in Glyvrar and Fuglafjørður. The
headquarters are located in Glyvrar, and the company
has a total of 640 employees.
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