The Bakkafrost Group delivered a total operating EBIT
of DKK 185.5 million in Q1 2014. The combined farming
and VAP segment made an operational EBIT of DKK 176.7
million. The EBITDA for the feed segment was DKK 22.2
million in Q1 2014.
Commenting on the results, CEO Regin Jacobsen said:
"Q1 2014 is the quarter where Bakkafrost has had the
highest margins per kg since the listing of the
company in 2010. The result is based on a good biology
and a strong salmon market. Bakkafrost´s focus is on
maintaining the good biology and selling the products
to the best long-term paying markets."
The Group made a profit for the quarter of DKK 87.2
million (DKK 67.5 million).
The total volumes harvested in Q1 2014 were 9,269
tonnes gutted weight (8,296 tgw) an increase of 11.7%.
Bakkafrost transferred 3.0 million smolts in Q1 2014
(2.1 million). Due to the favourable seawater
temperatures in the Faroes, Bakkafrost releases smolts
during the whole year.
In Q1 2014 the associated company P/F Faroe Farming
harvested 2,166 tonnes gutted weigth (2,355 tgw).
On the 24th of April 2014 Bakkafrost - via its 100%
owned subsidiary Havsbrún - acquired an additional
41.15% in Hanstholm Fiskemelsfabrik. After the
acquisition Bakkafrost owned 81.01% of the company.
The 9th May 2014 Bakkafrost divested all its shares in
Hansholm Fiskemelsfabrik to FF Skagen A/S. In return
Bakkafrost, via its subsidiary P/F Havsbrún, received
a 17% share interest in FF Skagen A/S. The transaction
is subject to the approval of the Danish competition
and Consumer Authority. The investment is a strategic
investment and part of the consolidation of the
fishmeal and fish oil industry.
In accordance with the Group's dividend policy,
Bakkafrost paid out DKK 4.50 (NOK 4.98) per share in
April 2014. The amount corresponds to approximately
DKK 219.9 million (NOK 243.3 million). Bakkafrost
purchased 366,700 treasury shares at a price of NOK 86
each in December 2013.
In February 2014, a routine surveillance test detected
a possible pathogenic ISA-virus at Bakkafrost's
farming site A-80. 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 empty before
mid February. No signs of ISA have been detected since
and no cost increase was related to the detection.
The farming companies and the authorities have high
focus to maintaining the good biological status in the
Faroe Islands. Regular surveillance 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 176.7 million (DKK 101.3
million) in Q1 2014.
The farming segment made an operational EBIT of DKK
186.2 million (DKK 124.5 million). The reason for the
improved result is mainly due to higher prices, but
also due to higher harvested volumes.
As expected, the VAP segment had a loss on its
operations in Q1 due to high salmon spot prices. The
VAP segment made an operational EBIT of DKK -9.5
million (DKK -23.2 million) for Q1 2014. There is
normally a time lag between the changes in the spot
prices and the changes in the contract prices. Even if
the contract prices have increased significantly
lately, they did not cover the strong spot prices that
we have experienced in Q1 2014.
The third segment - fishmeal, oil and feed - made an
operational EBITDA of DKK 22.2 million (DKK 24.8
million) in Q1 2014.
In Q1 2014, Havsbrún sourced 44,159 tonnes of raw
material (30,938 tonnes).
The Bakkafrost Group had a net interest bearing debt
at the end of Q1 2014 amounting to DKK 503.4 million
(DKK 641.6 million at year-end 2013) including
deposits and losses on financial derivatives relating
to the interest bearing debt. Bakkafrost had undrawn
credit facilities of approx DKK 804.6 million, of
which DKK 16.0 million are restricted at the end of Q1
2014.
Bakkafrost's equity ratio is 57%, compared to 54% at
the end of 2013.
Segments
Farming:
The operating revenue for Bakkafrost's farming segment
was DKK 518.1 million in Q1 2014 (DKK 425.0 million).
Operational EBIT, which is EBIT before fair value
adjustments on biological assets, amounted to DKK
186.2 million in Q1 2014 (DKK 124.5 million).
Operational EBIT/kg for the farming segment was DKK
20.09 (NOK 22.51) in Q1 2014, compared to DKK 15.01
(NOK 14.95) in Q1 2013. The salmon prices in Q1 2014
have been stronger than in Q1 2013 and thus higher
margins per kilo.
Value Added Products (VAP):
The operating revenue for the value added segment
amounted to DKK 232.3 million in Q1 2014 (DKK 147.7
million). The increase in the revenue from Q1 2013 to
Q1 2014 was 57%, while the volumes used for the VAP
products only increased by 37%.
Operational EBIT amounted to DKK -9.5 million in Q1
2014 (DKK -23.2 million), corresponding to an
operational EBIT of DKK -1.62 (NOK -1.82) per kg
gutted weight in Q1 2014, compared to DKK -5.46 (NOK
-5.44) per kg gutted weight in Q1 2013. The
operational loss in the VAP segment is due to the high
salmon spot prices. The VAP segment acquires its raw
material (fresh salmon) at spot prices each week.
Fishmeal, Fish Oil and Fish Feed:
The operating revenue for the fishmeal, fish oil and
fish feed segment amounted to DKK 178.1 million (DKK
157.5 million) in Q1 2014, of which DKK 92.9 million
represents sales to Bakkafrost's farming segment
corresponding to 52.2% (74.0%).
Operational EBITDA was DKK 22.2 million (DKK 24.8
million) in Q1 2014, and the operational EBITDA margin
was 12.45% (15.75%).
Sales of feed amounted to 13,956 tonnes (14,906
tonnes) in Q1 2014, of which the farming segment
internally used 10,598 tonnes (10,991 tonnes).
In the quarter, Havsbrún received 44,159 tonnes
(30,938 tonnes) of raw material for the production of
fishmeal and fish oil. The raw material intake is
dependent on the fishery in the North Atlantic and
available species of fish.
Statement of Financial Position
The Group's total assets as of end Q1 2014 amounted to
DKK 3,064.5 million, compared to DKK 3,112.2 million
at the end of 2013.
The Group's intangible assets are unchanged compared
to the beginning of the year and amounted to DKK 294.7
million. Intangible assets comprise primarily of the
fair value of acquired farming licences. No licences
in the North region are recorded with a value in the
Bakkafrost accounts.
Property, plant and equipment amounted to DKK 911.8
million at the end of Q1 2014, compared to DKK 916.7
million at the end of 2013. In Q1 2014 Bakkafrost made
investments in PP&E amounting to DKK 17.7 million.
Non-current financial assets amounted to DKK 126.2
million at the end of Q1 2014, compared to DKK 116.8
million at the end of 2013. The increase in the
financial assets relates mainly to the investment in
the new pelagic processing company Pelagos next to
Havsbrún in Fuglafjørður. It is expected that the
processing plant will be up running during the summer
2014. Bakkafrost owns 30% of the shares in Pelagos.
The Group's carrying amount (fair value) of biological
assets amounted to DKK 845.1 million at the end of Q1
2014, compared to DKK 965.9 million at the end of
2013. Included in the carrying amount of the
biological assets is a fair value adjustment amounting
to DKK 182.6 million, compared to DKK 296.4 million at
the end of 2013. The decrease is primarily due to
lower salmon prices at the end of Q1 2014 compared to
end 2013.
The Group's total inventories amounted to DKK 248.5
million as of end Q1 2014, compared to DKK 235.5
million at year-end 2013. 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 394.8
million as of end Q1 2014, compared to DKK 400.6
million at the end of 2013.
The Group's equity at the end of Q1 2014 is DKK
1,760.8 million, compared to DKK 1,665.3 million at
the end of 2013. The change in equity in Q1 2014
primarily consists of the profit for the period, and a
positive fair value adjustment to a currency-/interest
rate swap related to the bond financing. The dividend
totalling DKK 219.9 million, approved on the AGM the
5th of April 2014, has been paid out 29 April 2014.
The Group's total non-current liabilities amounted to
DKK 1,017.1 million at the end of Q1 2014, com-pared
to DKK 1,071.0 million at the end of 2013. Deferred
and taxes payable in 2015 amounted to DKK 333.9
million, compared to DKK 310.9 million at the end of
2013. Long-term debt was DKK 619.1 million at the end
of Q1 2014, compared to DKK 685.2 million at the end
of 2013. Derivatives amounted to DKK 64.2 million at
the end of Q1 2014 compared to DKK 74.9 million at the
end of 2013.
Bakkafrost's interests bearing debt consists of two
bank loans and a bond loan. The bank loans are one
instalment loan of DKK 275 million, payable with DKK
25 million each quarter, and one overdraft facility
payable in 2016 with the full amount of DKK 553
million. The bond loan of NOK 500 million has a five-
year maturity and is payable 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 Q1 2014, the Group's total current
liabilities are DKK 286.5 million, compared to DKK
376.0 million at the end of 2013. 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 186.5 million,
compared to DKK 276.0 million at the beginning of the
year. The decrease is primarily due to lower
provisions for onerous contracts.
Bakkafrost's equity ratio is 57%, compared to 54% at
the end of 2013.
Cash Flow
The cash flow from operations improved significantly
in Q1 2014 compared to Q1 2013. The cash flow from
operation in Q1 2014 was DKK 108.3 million (DKK 34.1
million). The Cash flow from operations was positively
affected by higher sales prices.
The cash flow from investment activities in Q1 2014
amounted to DKK -34.2 million (DKK -28.6 million). The
amount relates to investments in fixed assets and in
the investment in the pelagic processing company
Pelagos.
Cash flow from financing activities totalled DKK -12.7
million in Q1 2014 (DKK 93.5 million). The interest
bearing debt decreased by DKK 66.1 million, while
financing of associated companies contributed
positively with DKK 62.5 million.
Net change in cash flow in Q1 2014 amounted to DKK
61.4 million (DKK 98.9 million).
At the end of Q1 2014 Bakkafrost had unused credit
facilities of approximately DKK 804.0 million of which
DKK 16.0 million are restricted.
Outlook
MARKET
The outlook for the salmon market in 2014 is good. We
expect a seasonal supply increase during the summer
and autumn.
The total Global supply of salmon in 2014 is expected
to increase around 8% mainly due to a mild winter in
Norway. Based on historical numbers, the salmon marked
is in balance, when the supply increases by 6-8% per
year, but the previous two years have indicated that
the salmon market is stronger than before and can take
a supply increase up to 10-12% and still be in
balance. In 2013 the average NOS (Independent
exporters purchase price, spot from farmers) was NOK
39.07 per kg. Therefore, it is expected that the
average NOS price for 2014 will be in the same price
range as in 2013.
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. The sale
to Russia has been low the last quarters, as the
Russian market is not a strategic market for
Bakkafrost.
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's expected harvest
is unchanged at 45,000-48,000 tonnes gutted weight in
2014, and Faroe Farming, in which Bakkafrost holds
49%, 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.
The estimates for harvesting volumes and smolt
releases, is as always, dependent on the biological
situation. The overall biological situation in the
Faroe Islands is good, but the detection of
Neoparamoeba perurans in the Faroes and the 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 Faroe Islands in 2013.
The coordinated strategic treatment against lice will
continue in 2014.
Value added products (VAP)
The outlook for the sale of value added products is
good. Bakkafrost has signed contracts covering 75-80%
of the VAP capacity for the rest of 2014,
corresponding to 30% of the expected harvested volumes
for the rest of 2014. The last 20-25 % of the VAP
capacity is expected to be committed during the rest
of the year. The contracts are at fixed prices based
on the salmon prices at the time they are agreed and
the expectations for the salmon spot price for the
contract period. Therefore, the contracts are based on
a significant higher price level in 2014 than in 2013.
The contracts last 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
fluctuations as in the spot market.
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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