A quarter with satisfying margins
Glyvrar, Faroe Islands, 6th November 2012:
Bakkafrost quarterly operating EBIT came to a
satisfying result of DKK 86.2 million. The result
proved Bakkafrost's strong value chain and strategy.
All segments had positive margins, where especially
the farming segment showed strong performance. The
supply of salmon in the quarter was strong, which put
the prices under pressure.
Commenting on the result, CEO Regin Jacobsen said:
"The result for Q3 2012 was good, as the margins were
higher than we expended earlier. All segments had
positive results and thus contributed to the Group's
result. During the quarter we were able to utilize
the marked situation and had relatively large salmon
to harvest which gave a higher margin. The outlook
are also good as we expect Q4 to be the point, where
the market balance tips over for the benefit of the
supply site, resulting in salmon prices to increase."
The operating revenues amounted to DKK 457.1 million
in Q3 2012 (DKK 369.3 million). YTD 2012 the
operating revenue amounted to DKK 1,273.5 million
(DKK 923.9 million). The increase in the revenue is
due to higher harvested volumes at a lower price and
the acquisition of the Havsbrún Group in the summer
Operational EBIT was DKK 86.2 million in Q3 2012 (DKK
70.0 million). YTD 2012 operational EBIT was DKK
223.9 million (DKK 289.2).
A fair value adjustment of the Group's biological
assets has been recognised in Q3 2012 amounting to
DKK -32.4 million (DKK -14.6 million). YTD 2012, a
fair value adjustment has been recognised amounting
to DKK -23.1 million (DKK -131.9 million).
No provisions for onerous contracts are in Q3 2012
and YTD 2012 (DKK 0 million in Q3 2011 and a
provision DKK 2.9 million in YTD 2011).
Income from associated companies in Q3 amounts to
DKK -11.7 million (DKK -1.8 million). YTD 2012 it was
DKK -14.8 (DKK -1.8 million). The amount relates to
the result from Hanstholm Fiskemelfabrik in which
Bakkafrost has a shareholding of 34% and Faroe
Farming in which Bakkafrost holds 49%.
Net interest in Q3 2012 amounted to DKK -3.2 million
(DKK -3.5 million). YTD 2012 net interest amounted to
DKK -13.1 million (DKK -7.1 million). The increase in
the net interests is due to higher interest bearing
debt following the acquisition of Havsbrún in 2011.
Net taxes amounted to DKK -8.6 million in Q3 2012
(DKK -0.3 million). YTD 2012 net taxes amounted to
DKK -35.6 million (DKK -22.5 million).
The result for Q3 2012 for the continuing operations
was DKK 12.7 million (DKK 159.9 million). YTD 2012 it
was DKK 119.7 million (DKK 237.8 million).
The result after tax for Q3 2012 for the
discontinuing operations was DKK 13.1 million (DKK 0
million). For the first nine months of 2012 the
result was DKK 13.5 million (DKK 0 million).
Thus, the total result for Q3 2012 was DKK 25.8
million (DKK 158.9 million) and the result YTD 2012
was DKK 133.2 million (DKK 237.8 million).
During the quarter, Bakkafrost finally sold 51% of
the total shares in P/F Faroe Farming, a subsidiary
of P/F Bakkafrost. Therefore, Faroe Farming in this
report is a discontinuing operation and following the
sale classified as an associated company.
The Group had a net interest bearing debt at the end
of Q3 2012 amounting to DKK 769.5 million (DKK 816.8
million at year-end 2011) and had undrawn credit
facilities of DKK 208.5 million.
In March 2012, Bakkafrost purchased the non-
controlling shares in P/F Faroe Farming,
corresponding to 21.93% of the shares in the Company.
Consequently, Bakkafrost became the sole owner of the
shares in P/F Faroe Farming effective from 1st
January 2012. The transaction was an equity
transaction. Subsequent to the acquisition of the non-
controlling interests, Bakkafrost sold 51% of the
total shares in P/F Faroe Farming to the Faroese
based investment company P/F Tjaldur. The transaction
was, among other things, subject to authority
approval. After receiving the necessary approval, the
transaction was finalised. Therefore, Bakkafrost now
complies with the legal requirements stipulating a
maximum control of 50% of the licenses in the Faroe
Islands. The ownership of 49% of the shares in Faroe
Farming is presented as an investment in an
The cash flow from operations in Q3 2012 was DKK -
54.3 million (DKK 55.6 million). The Group's negative
cash flow from operations is primarily due to
seasonal increase in biological assets and increase
in receivables due to prolonged costumer payment.
Cash flow from operations YTD 2012 amounted to DKK
178.8 million (DKK 323.2 million).
The cash flow from investment activities in Q3 2012
amounted to DKK 14.6 million (DKK -657.6 million). In
the quarter, Bakkafrost received DKK 46.8 million
from the sale of a subsidiary. On the other hand, DKK
32.2 million was paid for investments in fixed
assets. The first nine months of 2012 the Group made
investment of DKK 69.1 million (DKK -696.4 million)
in fixed assets. Net cash flow from investments YTD
2012 is DKK -22.2 million (DKK -696.4).
Cash flow from financing activities totalled DKK 0.6
million in Q3 2012 (DKK 643.8 million) and relates
first of all to increased debt offset by financing of
an associated company. YTD 2012 cash flow from
financing amounted to DKK -163.7 million (DKK 410.4
million) and comprise increased debt, acquisition of
minority shares, payment of net interests, dividend
to shareholders and financing of an associate.
Net change in cash flow in Q3 2012 amounted to DKK -
39.1 million (DKK 41.9 million) and YTD 2012 DKK -7.2
million (DKK 37.3 million).
At the end of 3rd quarter 2012 Bakkafrost had unused
credit facilities of DKK 208.5 million of which DKK
12.7 is restricted.
The Group's total assets as of 30th September 2012
amounted to DKK 2,389.9 million compared to DKK
2,301.8 million at the end of 2011.
As the activities in Faroe Farming are sold in Q3
2012, significant changes are in most of the line
items in the balance sheet compared to end 2011.
The Group's intangible assets amounted to DKK 293.7
million (2011: DKK 370.0 million) and comprise
primarily the fair value of farming licences. The
decrease is due to the sale of Faroe Farming.
Property, plant and equipment have decreased from DKK
828.5 million at the end of 2011 to DKK 791.8 million
at the end of September 2012. The decrease is due to
the sale of Faroe Farming.
Non-current financial assets amounted to DKK 83.8
million at the end of September 2012 compared to DKK
35.9 million at the end of 2011. The increase in the
financial assets relates to the sale of the majority
shares in Faroe Farming as they from Q3 2012 are
accounted for as an investment in an associate.
The Group's book value (fair value) of biological
assets (fish in the sea) amounted to DKK 629.1
million at the end of September 2012, compared to DKK
700.3 million at the end of 2011. Included in the
booked value of the biological assets is a fair value
adjustment amounting to DKK 67.4 million compared to
DKK 86.0 million at the end of 2011. The decrease in
the booked value of the biological assets is also due
to the sale of Faroe Farming.
The Group's total inventories amounted to DKK 201.6
million as of 30th September 2012, compared to DKK
179.2 million at year-end 2011. 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
The Group's total receivables amounted to DKK 380.2
million as of 30th September 2012 compared to DKK
171.1 million at the end of 2011. The increase is due
to seasonally high sale of feed in addition to,
prolonged payments on debtor's and receivables from
The Group's equity as at 30th September 2012 is DKK
1,114.5 million compared to DKK 1,061.0 million at
the end of 2011. The change in equity in 2012
primarily consists of the profit for the period, the
acquisition of the non-controlling interests in Faroe
Farming, the sale of 51% in Faroe Farming and
dividend to the shareholders.
The Group's total non-current liabilities amounted to
DKK 951.9 million at the end September 2012 compared
to DKK 989.7 million at the end of 2011. Deferred and
other taxes amounted to DKK 272.7 million compared to
DKK 256.0 million at the end of 2011. Long-term debt
decreased from DKK 733.7 million at the end of 2011
to DKK 679.2 million at the end of September 2012.
Bakkafrost interests bearing debt consists of two
loans: one instalment loan of DKK 425 million,
payable with DKK 25 million each quarter, and one
loan payable after five years with the full amount of
DKK 553 million.
At the end of September 2012, the Group's total
current liabilities are DKK 323.5 million compared to
DKK 251.0 million at the end of 2011. 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 223.5
million compared to DKK 151.0 million at the
beginning of the year.
Bakkafrost equity ratio is 47% compared to 46% at the
end of 2011. Bakkafrost aims at increasing the equity
ratio to have a strong financial position to enable
the Group to follow a strategy of pursuing further
growth and profitability. The Board of Directors will
continue to attach great importance to this going
The combined farming and VAP segment made an
operational EBIT of DKK 78.5 million (DKK 53.9
million) in Q3 2012. Year to date the combined
farming and VAP segment made an operational EBIT of
DKK 215.2 million (DKK 273.1 million)
The farming segment made an operational EBIT of DKK
75.0 million (DKK 20.7 million). On a year to date
basis, the farming segment made an operational EBIT
of DKK 189.7 million (DKK 237.2 million).
The VAP segment made an operational EBIT of DKK 3.4
million, which is less than the operational EBIT for
Q3 2011, when the VAP segment made an operational
EBIT of DKK 33.2 million. The reason for the stronger
result in Q3 2011, was the sharp decrease in the
salmon price during mid 2011, while the contract
prices were on a high level. Year to date, the VAP
segment made an operational EBIT amounting to DKK
25.5 million (DKK 35.9 million).
The 3rd segment - fishmeal, oil and feed - made an
EBITDA of DKK 41.3 million (DKK 39.8 million) in Q3
2012 and DKK 66.1 million for the first nine months
The total harvested volume in Q3 2012 for the
continuing operations was 9,730 tonnes gutted weight
(9,243 tgw). The first nine months of 2012,
Bakkafrost continuing operations harvested 31,297
tonnes gutted weight (22,794 tgw).
Bakkafrost transferred 3.6 million smolts in Q3 2012,
which is in line with the Company's plans. For the
first nine months of 2012, Bakkafrost transferred 8.4
The number of fish in cages (continuing operations)
is 8% higher at the end of Q3 2012 than at the same
time last year and the biomass is 8.3% higher.
The market outlook for our products is good. In the
short term, the supply increases compared to one year
ago, resulting in spot salmon prices under pressure.
However, we expect Q4 to be the point, where the
market balance tips over for the benefit of the
supply site, resulting in salmon prices to increase.
The market price for contracted products follows a
more stable pattern with trends instead of short-term
fluctuations. Bakkafrost has contracted all the
production capacity for the rest of 2012 and have
committed some contracts for 2013.
Bakkafrost expects to harvest 45,000 tonnes gutted
weight in 2012, compared to previously estimated
42,000-44,000 tonnes gutted weight.
The number of smolts released is one key element of
predicting the future production for the Group.
Bakkafrost's forecast for the smolt release is
unchanged at 10.6 million smolts in 2012.
The raw material situation for Havsbrún is expected
to continue to be volatile, affecting the production
of own fishmeal and oil. Alternatively, Havsbrún
purchases fishmeal and oil on the world market. The
raw material prices will likely increase in the near
future, affecting Bakkafrost's as well as the total
farming industry with increased production costs. The
outlook concerning Havsbrún's sales of fish feed is
increased to around 90,000 tonnes in 2012.
Improved market balances on the world market for
salmon products will likely improve the financial
flexibility going forward. Bakkafrost will also in
the future focus on further strengthening of the
financial position, M&A and organic growth
The most significant risks for Bakkafrost are the
biological/veterinary- and the market risks. Our
strategy is to control these risks with our
biological/veterinary and business model.
However, despite aiming to control our own
biological/veterinary risk, we also depend on the
overall development in the biological/veterinary
situation the Faroe Islands as a whole. Therefore,
the farming companies in the Faroe Islands, together
with the authorities, are monitoring the development
of the biological/veterinary situation and from time
to time taking the necessary precautions to secure a
sustainable farming industry. The
biological/veterinary situation in the Faroes is
good, even if the number of sea lice has increased.
To reduce the risk from sea lice, Bakkafrost and the
other farmers in the Faroe Islands have improved the
pest management in order to mitigate the risk.
The other significant risk is the market risk. To
reduce this risk, Bakkafrosts has a combined market
strategy, consisting of sale of VAP products sold on
long-term contracts at fixed prices, and sale of
fresh whole salmon sold on the spot marked. This
market strategy has proved to be sustainable over
time and accordingly Bakkafrost aims at producing 40-
50% of the harvested volumes as value added products.
Bakkafrost has increased the harvested volumes in the
recent years and will further increase the harvest,
although moderate, the coming years. The share sold
as VAP is already below the threshold of 40-50% and
will be further reduced in the future. Therefore,
Bakkafrost intends to make investments to increase
the VAP capacity the coming years.
Bakkafrost sees possibilities for optimising the
Groups value chain, following the acquisition of a
number of companies the recent years. Consequently
Bakkafrost plans to invest DKK 170 million in 2013.
The presentation and the Condensed Consolidated
Report for Q3 2012 will also be available for
download on www.bakkafrost.com.
Regin Jacobsen, CEO of P/F Bakkafrost: +298 235001
Teitur Samuelsen, CFO of P/F Bakkafrost: +298 235111
This information is subject of the disclosure
requirements acc. to §5-12 vphl (Norwegian Securities
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 550 employees.
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