Bakkafrost Faces Challenges But Remains Optimistic for 2025

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Bakkafrost Faces Challenges But Remains Optimistic for 2025

Bakkafrost (BAKKA.OL), a salmon farming company based in the Faroe Islands, reported a challenging third quarter with declines in revenue and operational EBITDA compared to the previous year. The company's revenue was 1.737 billion NOK, while operational EBITDA stood at 173 million NOK, both showing a decrease.

Despite facing various operational challenges including a significant drop in external fish oil sales and declining global salmon prices, Bakkafrost remains optimistic about the future by focusing on increasing smolt resilience and effectively managing costs. The company has postponed its investment expansion plans while maintaining its long-term production targets.

Key Highlights:

  • Bakkafrost's Q3 revenue and operational EBITDA declined year-on-year.
  • Harvest volumes increased in both the Faroe Islands and Scotland.
  • Feed sales rose by 16%, while external fish oil and fish meal sales fell sharply.
  • Global salmon prices affected earnings negatively.
  • The company reduced its net interest obligations and increased investments in property, plant, and equipment.
  • Operational challenges in Scotland led to negative operational EBITDA.
  • Bakkafrost anticipates improvements in feed prices and an increase in stocking in Q4.

Company Outlook:

  • Bakkafrost plans to maintain a forecasted harvest of 89,600 tons for 2024.
  • The group aims for 100,000 tons in 2025 and a long-term goal of 165,000 tons by 2028.
  • The company is transitioning to larger smolts to enhance fish resilience and health.
  • Investment expansion plans have been postponed, with reductions of 800 million DKK in investments this year and next.

Negative Points:

  • Operational EBITDA decreased significantly due to negative fair value adjustments.
  • Post-tax profit was 160 million DKK negative.
  • Scotland's farming margin remains negative, with ongoing operational challenges.

Positive Points:

  • The farming margin in the Faroe Islands has risen due to biomass growth.
  • The company expects stable developments in the FOF segment due to lower fish oil costs.
  • Optimism for positive margins in Scotland by 2025 thanks to cost management and improved fish health.

Performance Below Target:

  • External fish oil sales dropped from 8,000 tons the previous year to 8 tons.
  • Fish meal sales also saw a significant decline.

Q&A Highlights:

  • CEO Regin Jacobsen expressed optimism for the market outlook in Scotland.
  • Significant reductions in feed costs are expected due to falling oil prices.
  • A gradual decrease in cost prices and stable market conditions are anticipated in Q4.

Amid a challenging quarter marked by declines in revenue and operational EBITDA, Bakkafrost strategically focuses on enhancing smolt resilience and managing costs, showcasing its commitment to long-term production targets despite postponing investment expansion plans. With an optimistic outlook for Scottish operations and expectations of decreasing feed costs contributing to margin improvements, Bakkafrost aims to navigate these challenges and achieve stable growth in the coming years.