Bakkafrost Q1 down, but outlook good

THE Bakkafrost Group, the largest salmon farming company in the Faroe Islands, today unveiled a first quarter operating profit (EBIT) of 268.2 million Danish kroners (£31.7 million) for the first three months of this year.
The figure is down on the Q1 performance for same period in 2017 when the EBIT was DKK 335.5 million, but that was at a time when salmon prices were at a record high level.
Harvested volumes reached 12,200 tonnes gutted weight, 1,000 tonnes lower than last year. The harvest total for 2018 is expected to be 51,000 tonnes gutted weight.
The farming segment made an operational EBIT of DKK 228.4 million during Q1 2018, which corresponds to NOK 24.15 per kg.
The VAP segment made an operational EBIT of DKK -11.6 million for Q1 2018. The VAP production was 2,100 tonnes, compared to 3,600 tonness in Q1 2017.
Bakkafrost said the lower activity level, together with increased salmon spot prices, had a negative effect on the VAP segment’s performance in this period.
The combined farming and VAP segments made an operational EBIT of DKK 216.8 million for Q1 2018, which corresponds to NOK 22.92 per kg.
The FOF segment (fishmeal, oil and feed) made a strong operational EBITDA of DKK 86.4 million for Q1 2018.
Chief executive Regin Jacobsen (pictured) said: ‘In the previous quarter, Bakkafrost had very good performance in all three segments.
‘In comparison, Bakkafrost harvested fish from farming sites with weaker performance in the first quarter of 2018, affecting the production costs negatively in the quarter.
‘On the other hand, the salmon prices have been strong, and we have seen a sharp increase of the salmon price during a relatively short period.
‘Havsbrún [Bakkafrost’s fish meal, feed and oil site] had good raw material sourcing again and had a strong performance.’
Compared with Q1 2017, the average salmon spot price dropped by around NOK 6.00 per kg during the first three months of this year, but prices are now picking up again. The latest update from Kontali Analysis estimates that the global supply of Atlantic salmon increased around 10 per cent during the start of the year.
‘Going forward, both Norway and Chile will regain similar harvest volumes in 2018, and the global harvest growth is expected to be around four per cent in 2018,’ the company said.
‘For the rest of the year the harvest growth is expected to be around two per cent.’
Bakkafrost said the outlook for the farming segment was good. It added: ‘Bakkafrost focuses on reducing biological risk continuously and has made several new investments and procedures to diminish this risk.
‘We focus on using non-medical methods in treatments against sea lice and have invested in new technology to comply with this strategy.’
Bakkafrost expects to release 13.9 million smolts this year, compared to 9.9 million smolts in 2017 and 11.7 million smolts in 2016. The number of smolts released is a key element of predicting future production.
The company operates in the main salmon markets of Europe, the US, 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,’ today’s statement added.