BAKKAFROST: Operational EBIT of DKK 606 Million for the First Half of 2019
The Bakkafrost Group delivered a total operating EBIT of DKK 338.8 million in Q2 2019. Harvested volumes were 12.6 thousand tonnes gutted weight. The combined farming and VAP segments made an operational EBIT of DKK 303.4 million. The farming segment made an operational EBIT of DKK 303.4 million. Achieved prices in this quarter increased and thus had a positive effect on the operational EBIT. The VAP segment made an operational EBIT of DKK 0.0 million. The EBITDA for the FOF segment was DKK 58.4 million
(Figures in parenthesis refer to the same period last year unless otherwise specified)
The Group made a profit for Q2 2019 of DKK 188.6 million (DKK 338.8 million). For H1 2019, the profit was DKK 401.4 million (DKK 611.1 million).
The total volumes harvested in Q2 2019 were 12,609 tonnes gutted weight (12,902 tgw). Total harvested volumes in H1 2019 were 26,316 tonnes gutted weight (25,139 tgw).
3.6 million (2.8 million) smolts were transferred during Q2 2019. In H1 2019, 5.3 million (5.9 million) smolts were transferred.
Commenting on the result, CEO Regin Jacobsen said:
“Even though the salmon price was 9% lower in the second quarter of 2019, compared to Q2 2018, the result for Bakkafrost was good for the second quarter. Bakkafrost is well on track with the investment plan, which includes investments of around DKK 3 billion during the period 2018-2022. An important part of the plan is investments in capacity to produce larger smolts. We now have clear indications from our operation that our large-smolt strategy - together with the use of lumpfish and mechanical (non-medical) sea lice treatments - is working as intended. Our salmon is only treated with lumpfish, pressurized sea water showers and with fresh water. We are very pleased of not having a single site above the threshold level for sea lice during the quarter.”
The combined farming and VAP segments made an operational EBIT of DKK 303.4 million (DKK 376.3 million) in Q2 2019. The operational EBIT per kg in Q2 2019 was DKK 24.06 (DKK 29.17), which corresponds to NOK 31.31 (NOK 37.41), for the combined farming and VAP segments. For H1 2019, the combined farming and VAP segments made an operational EBIT of DKK 534.5 million (DKK 593.1 million).
The farming segment made an operational EBIT of DKK 303.4 million (DKK 393.2 million) in Q2 2019. The harvested volumes were lower, but the achieved prices were higher in Q2 2019, compared to Q2 2018. For H1 2019, the operational EBIT was DKK 533.2 million (DKK 621.6 million).
The VAP segment made an operational EBIT of DKK 0.0 million (DKK -16.9 million) for Q2 2019. For H1 2019, the operational EBIT was DKK 1.3 million (DKK -28.5 million).
The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 58.4 million (DKK 66.0 million) for Q2 2019, and the EBITDA margin was 20.6% (20.2%). The EBITDA was DKK 123.6 million in H1 2019 (DKK 152.5 million), corresponding to an EBITDA margin of 21.8% (24.3%).
During Q2 2019, Havsbrún sourced 110,109 tonnes (118,387 tonnes) of raw material. In H1 2019, Havsbrún sourced 225,639 tonnes (248,491 tonnes) of raw material.
In accordance with Bakkafrost’s dividend policy and the resolution of the Annual General Meeting 2019, Bakkafrost paid out DKK 8.25 (NOK 10.65) per share on 26 April 2019. The total dividend payment was DKK 403.1 million (NOK 520.3 million).
In Q2 2019, Bakkafrost’s full-time employees from 2018, still employed in Bakkafrost, have received bonus shares with the value of 2% of their salary in 2018. In total, Bakkafrost allocated 14,348 shares to its employees. The total allocation amounted to DKK 5.1 million and was based on the closing share price on the allocation day, 6 June 2019.
The net interest-bearing debt amounted to DKK 743.6 million at the end of Q2 2019 (DKK 495.5 million at year-end 2018). Undrawn credit facilities amounted to DKK 742.1 million at the end of Q2 2019.
The equity ratio was 65% at 30 June 2019, compared to 70% at the end of 2018.
OUTLOOK
Market
The latest update from Kontali Analyse estimates that the global supply of Atlantic salmon increased around 8% in Q2 2019, compared to Q2 2018. The growth comes primarily from Norway and Chile, which have increased their harvest during the quarter due to biological issues with algae outbreak and sea lice. This will most likely affect the global harvest in Q3, which is expected to be around 5% higher than Q3 2018, which is lower than previously expected. The global harvest growth is expected to be around 5-6% in 2019, compared to 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.
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 and ensure a capacity across the value chain of 100.000 tonnes. The aim of the investment program is to minimize the biological risk, increase efficiency and create sustainable organic growth. Bakkafrost’s commitment to sustainability is reflected in the investment program, which also includes the construction of a biogas plant. The construction is well under way, and the biogas plant is expected to be in operation by Q1 2020.
The planned investments in hatcheries is also well on track – e.g. the construction of the new hatchery at Strond. This hatchery is in operation, and the first batch of large smolts were released from the hatchery last week.
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 comply with this strategy.
Bakkafrost expects to harvest 54,500 tonnes gutted weight in 2019.
Bakkafrost expects to release 13.5 million smolts in 2019, compared with 12.6 million smolts in 2018 and 9.9 million smolts released in 2017. 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 35% of the expected harvested volumes for 2019. 32% (15%) of the harvest volumes in Q2 2019 were used in the VAP segment.
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 2019 recommendation for blue whiting is 1,143 thousand tonnes, which is 18% less than the recommendation for 2018. Bakkafrost expects lower production volumes of fishmeal and fish oil in 2019.
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 2019 are expected to be at 85,000 tonnes, depending on external sales.
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 Q2 2019 report and the Q2 2019 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. 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 Group has broodstock operations in Streymoy and Sandoy and is building a biogas plant in Streymoy. The headquarter is located in Glyvrar, and the company has 1.055 employees.
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