The Bakkafrost Group delivered a total EBIT of DKK 434.2 million in Q3 2018.
Harvested volumes were 7.2 thousand tonnes gutted weight. The combined farming
and VAP segments made an operational EBIT of DKK 142.4 million. The farming
segment made an operational EBIT of DKK 139.6 million. The salmon spot prices
decreased in Q3 2018, compared to the previous quarter. The price decrease had a
negative effect on the operational EBIT in the farming segment. The VAP segment
made an operational EBIT of DKK 2.8 million. The EBITDA for the FOF segment was
DKK 41.4 million.
(Figures in parenthesis refer to the same period last year unless otherwise
specified)
The Group made a profit for Q3 2018 of DKK 355.9 million (DKK 56.2 million). For
the first nine months of 2018, the profit was DKK 966.9 million (DKK 533.3
million).
Commenting on the result, CEO Regin Jacobsen said:
"The activity in the third quarter this year has been somewhat lower, compared
to the same quarter last year. The quarter has also been affected by the
elevated mortality level at farming site A-81 Kolbanagjógv in September, which
resulted in higher costs and a negative effect on next year's harvest volumes.
Despite challenges and a decreasing salmon price in the quarter, the operational
result for the Group was DKK 168 million for the quarter.
The new harvest factory in Vágur, Suðuroy, was delayed in start-up, compared to
the timetable, but we now look forward to see how the increased activity in
Suðuroy will be, after the harvest factory started operation in October."
The total volumes harvested in Q3 2018 were 7,217 tonnes gutted weight (11,585
tgw). Total harvested volumes in the first nine months of 2018 were 32,356
tonnes gutted weight (43,145 tgw). The guidance for harvest in 2018 is reduced
by 3,000 tonnes gutted weight, from 49,000 to 46,000 tonnes gutted weight.
3.3 million (3.2 million) smolts were transferred during Q3 2018. During the
first nine months of 2018, 9.2 million (6.5 million) smolts were transferred.
One million smolts - out of the 13.9 million smolts, which were expected to be
released in 2018 - will be postponed for release in 2019. Thus, the new expected
smolt release for 2018 is 12.9 million smolts.
The combined farming and VAP segments made an operational EBIT of DKK 142.4
million (DKK 212.2 million) in Q3 2018. The operational EBIT per kg in Q3 2018
was DKK 19.73 (DKK 18.32), which corresponds to NOK 25.34 (NOK 23.02) for the
combined farming and VAP segments. For the first nine months of 2018, the
combined farming and VAP segments made an operational EBIT of DKK 735.5 million
(DKK 967.4 million).
The farming segment made an operational EBIT of DKK 139.6 million (DKK 216.7
million) in Q3 2018. The harvested volumes were lower, and the average spot
price was higher in Q3 2018, compared to Q3 2017. For the first nine months of
2018, the operational EBIT was DKK 761.3 million (DKK 1,079.4 million).
On 20 September 2018, Bakkafrost recorded elevated mortality level at farming
site A-81 Kolbanagjógv. Poisonous species of algae were registered in the sea at
the farming site A-81 Kolbanagjógv when the incident occurred. Approximately 700
thousand fish with an average weight of 500 gramme live weight died within a
couple of hours. The fish at farming site A-81 Kolbanagjógv was released into
the sea in June - August 2018. The Farming segment had a net expense of DKK 7.2
million in Q3 2018 due to the incident.
Farming activity has been at the farming site A-81 Kolbanagjógv for the past 30
years. Bakkafrost has not observed any similar situations, neither at farming
site A-81 Kolbanagjógv, nor at any other farming sites before or after the
incident. The remaining fish at farming site A-81 Kolbanagjógv has not been
affected by the incident and is performing well.
The VAP segment made an operational EBIT of DKK 2.8 million (DKK -4.5 million)
for Q3 2018. For the first nine months of 2018, the operational EBIT was DKK
-25.8 million (DKK -112.0 million).
The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 41.4 million (DKK
79.5 million) for Q3 2018, and the EBITDA margin was 11.7% (23.2%). The EBITDA
was DKK 193.9 million for the first nine months of 2018 (DKK 172.5 million),
corresponding to an EBITDA margin of 19.8% (18.4%).
During Q3 2018, Havsbrún sourced 7,496 tonnes (21,937 tonnes) of raw material,
and for the first 9 months of 2018, Havsbrún sourced 255,987 tonnes (291,604
tonnes) of raw material.
Bakkafrost has, through its recently established subsidiary Bakkafrost US,
signed an agreement in Q2 2018 to acquire the business and assets in North
Landing, which is a US salmon importer focusing on the East Coast and has a
sales office, handling and processing facilities in Clifton, New Jersey, USA.
Through the acquisition, Bakkafrost will have a better market access and better
abilities to serve Bakkafrost's customers in the US market. The acquisition of
North Landing was closed in Q3 2018.
The net interest-bearing debt amounted to DKK 286.4 million at the end of Q3
2018 (DKK 258.1 million at year-end 2017). Undrawn credit facilities amounted to
DKK 1,204.9 million at the end of Q3 2018.
The equity ratio was 70% at 30 September 2018, compared to 70% at the end of
2017.
OUTLOOK
Market
The latest estimate from Kontali Analyse of global supply of Atlantic salmon in
Q3 2018 is an increase of around 5%, compared to Q3 2017. The global harvest of
Atlantic salmon in Q4 2018 is expected to increase 1.4%, compared to Q4 2017.
The estimated global supply of Atlantic salmon for 2018 is an increase of around
7%, compared to 2017.
The supply of Atlantic salmon will be tight in 2019, as global supply in 2019 is
estimated to increase around 4%, compared to estimated supply in 2018.
Bakkafrost operates in the main salmon markets, Europe, USA, the Far East and
Russia. Variation in sales distribution between the different markets is driven
by the change in demand from quarter to quarter in the different regions.
Bakkafrost, however, aims to have a balanced market diversification to reduce
market risk.
Farming
The outlook for the farming segment is good. The estimates for harvest volumes
and smolt releases are dependent on the biological development.
Bakkafrost focuses on reducing biological risk continuously and has made several
new investments and procedures to diminish this risk. Bakkafrost focuses on
using non-medical methods in treatments against sea lice and has invested in new
technology to follow this strategy.
Bakkafrost's guidance for harvest in 2018 is reduced by 3,000 tonnes gutted
weight, from 49,000 to 46,000 tonnes gutted weight. In 2019, Bakkafrost expects
to harvest 53,000 tonnes gutted weight.
As Bakkafrost has postponed 1 million smolts from expected smolt release in Q4
2018 to Q1 2019, Bakkafrost expects to release 12.9 million smolts in 2018,
compared to 9.9 million smolts in 2017 and 11.7 million smolts released in 2016.
In 2019, Bakkafrost expect to release 13.5 million smolts. The number of smolts
released is a key element of predicting Bakkafrost's future production.
VAP (Value Added Products)
Bakkafrost has signed contracts covering around 12% of the expected harvested
volumes for the rest of 2018. Bakkafrost is presently negotiating new contracts
for 2019. Bakkafrost's long-term strategy is to sell around 40-50% of the
harvested volumes of salmon as VAP products at fixed price contracts.
The VAP contracts are at fixed prices, based on the salmon forward prices at the
time they are agreed and the expectations for the salmon spot price for the
contract period. The contracts last for 6 to 12 months.
FOF (Fishmeal, Oil and Feed)
The outlook for the production of fishmeal and fish oil is dependent on the
availability of raw material. The ICES 2018 recommendation for blue whiting is
1,388 thousand tonnes, compared with 1,342 thousand tonnes in 2017. The ICES
recommendation for blue whiting in 2019 is 1,143 thousand tonnes, which
corresponds to a decrease of 18%, compared to ICES's recommendation for 2018.
The production of fishmeal and fish oil in 2018 will not reach the same level as
in 2017. Bakkafrost expects a decrease in production volumes of fishmeal and
fish oil in 2019, compared to 2018.
The major market for Havsbrún´s fish feed is the local Faroese market including
Bakkafrost's internal use of fish feed.
Havsbrún's sales of fish feed in 2018 are expected to be at 80,000 tonnes,
depending on external sales. Sales of fish feed in 2019 are expected to be
around 85,000 tonnes.
The new salmon meal and salmon oil plant started operation in Q3 2018 and
production is still at an early stage. This operation will increase the value of
offcuts from salmon harvested and processed in the harvest/VAP factory at
Glyvrar.
Investments
Bakkafrost's investment program for the period from 2018 to 2022 will amount to
DKK 3 billion, including maintenance capex, and will reinforce Bakkafrost's
integrated business model. The aim of the investment program is to minimize the
biological risk, increase efficiency and create sustainable organic growth.
Bakkafrost's strategy and investment program will be presented at Bakkafrost's
Capital Markets Day on 12 June 2019 in the Faroe Islands.
Financial
Favourable market balances in the world market for salmon products and cost
-conscious production will likely maintain the financial flexibility going
forward.
A high equity ratio together with Bakkafrost's bank financing, which was renewed
for five years in Q1 2018, makes Bakkafrost's financial situation strong. This
enables Bakkafrost to carry out its investment plans to further focus on
strengthening the Group, M&A's, organic growth opportunities and to fulfil its
dividend policy in the future, which is unchanged although a new investment
program is announced.
Please find the Company's Q3 2018 report and the Q3 2018 presentation enclosed.
Contacts:
Regin Jacobsen, CEO of P/F Bakkafrost: +298 235001 (mobile)
Gunnar Nielsen, 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. 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 Fuglafjørður. The Group has
primary processing in Glyvrar and Vágur, and secondary processing (VAP) in
Glyvrar. The Group operates sea farming in Norðoyggjar, Eysturoy, Streymoy and
Suðuroy. The headquarters are located in Glyvrar, and the company has 960
fulltime employees.
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