The Bakkafrost Group delivered a total operating EBIT of DKK 70.5 million in Q3
2021. Total harvested volumes were 21.9 thousand tonnes gutted weight (tgw).
Faroe Islands (FO): 14.9 tgw, Scotland (SCT): 6.9 tgw. The combined FO farming
and VAP segments made an operational EBIT of DKK 146.2 million. The FO farming
segment made an operational EBIT of DKK 135.1 million. The SCT farming segment
made an operational EBIT of DKK -81.3 million. The VAP segment made an
operational EBIT of DKK 11.1 million. The EBITDA for the FOF segment was DKK
The Group made a profit for Q3 2021 of DKK 131.3 million (DKK 176.8 million).
For the first nine months of 2021, the profit was DKK 967.2 million (DKK 500.5
Commenting on the result, CEO Regin Jacobsen said:
"The results in this quarter have been weakened by several factors in Scotland
and in the Faroe Islands. In the Faroes, we made a deliberate decision to
advance harvest of the A72 Haraldsund farming site to regain synchronised
production plans with the neighbouring site A-72 Viðareiði. This resulted in
higher costs, lower harvest weights and price achievements in this quarter. This
is an once-off and going forward we will benefit from having the sites
synchronised with better control of biological risks and enhanced operational
The results have also been negatively affected by delays in the installation of
new delousing equipment on M/S Martin, which is our main delousing farming
supply vessel in the Faroes. These delays were in part caused by Covid-related
supply issues and caused loss of precious time and momentum in our preventive
delousing operation. In turn, this has led to higher mortalities in this
In Scotland we have had significant biological challenges at some of our farming
sites where the fish had reduced gill health. At the end of the quarter, sudden
biological issues occurred, such as blooms of micro-jellyfish, which caused
significant mortalities. It was to some relief that we in September could deploy
our new farming supply vessel, Bakkanes, into operation in Scotland to do
treatments. As we progress further with our planned investments in Scotland, the
biological risk will be reduced with more preventive and treatment vessel
capacity to protect gill health of the fish. Already in 2022, we will have more
freshwater treatment capacity available and once our new hatcheries will be
completed and produce large smolt this will be game-changing for the operation.
The improvements will be gradual, and it will take some years to achieve the
transformation, we are planning for.
Regarding the market, we have seen a further normalisation after the Covid-19
caused disruption. Compared to the same quarter last year, the global supply
increased around 6% in this quarter, prices have increased 14% and Bakkafrost
has increased the sale to the foodservice industry to 65% of the harvested
volume in the Faroe Islands, much in line with our strategy.
On the Capital Markets Day 14-15 September 2021, we announced our 6.2bn DKK
investment plan for 2022-2026. The main purpose of this is to reduce risk,
transform the operation in Scotland and to ensure sustainable growth in the
Faroe Islands and Scotland. In addition, our investment plan will create jobs in
rural areas in the Faroes and in Scotland."
Total harvested volumes for Q3 2021 were 21,851 tonnes gutted weight. FO: 14,937
tgw (11,135 tgw), SCT: 6,914 tgw (10,476). Total harvested volumes in the first
nine months of 2021 were 71,075 tgw (60,424 tgw). FO: 46,523 tgw (34,743 tgw),
SCT: 24,550 tgw (25,681 tgw).
In total, 7.0 million (6.2 million) smolts were transferred during Q3 2021. FO:
3.8 million (3.6 million), SCT: 3.2 million (2.6 million). In the first nine
months 2021, 16.2 million (15.2 million) smolts were transferred. FO: 9.3
million (8.7 million), SCT 7.0 million (6.5 million).
The combined FO farming and VAP segments made an operational EBIT of DKK 146.2
million (DKK 118.4 million) in Q3 2021. The operational EBIT per kg in Q3 2021
was DKK 9.79 (DKK 10.63), which corresponds to NOK 13.59 (NOK 15.24) for the
combined FO farming and VAP segments. For the first nine months of 2021, the
combined FO farming and VAP segments made an operational EBIT of DKK 712.9
million (DKK 444.9 million).
The FO farming segment made an operational EBIT of DKK 135.1 million (DKK 96.6
million) in Q3 2021. The harvested volumes were higher, and the achieved prices
were higher in Q3 2021, compared to Q3 2020. For the first nine months of 2021,
the operational EBIT was DKK 621.5 million (DKK 385.3 million).
The SCT farming segment made an operational EBIT of DKK -81.3 million (DKK -28.4
million) in Q3 2021. Costs of DKK 68.6 million relate to incident-based
mortality in Q3 2021. For the first nine months of 2021, the operational EBIT
was DKK -35.7 million (DKK 30.1 million).
The VAP segment made an operational EBIT of DKK 11.1 million (DKK 21.8 million)
for Q3 2021. For the first nine months of 2021, the operational EBIT was DKK
91.4 million (DKK 59.6 million).
The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 111.2 million
(DKK 69.5 million) for Q3 2021, and the EBITDA margin was 20.0% (14.4%). The
EBITDA was DKK 216.9 million (DKK 159.6 million) for the first nine months of
2021, corresponding to an EBITDA margin of 17.7% (15.1%).
During Q3 2021, Havsbrún sourced 17,224 tonnes (24,101 tonnes) of raw material,
and in the first nine months of 2021, Havsbrún sourced 125,060 tonnes (211,420
tonnes) of raw material.
The Group has been impacted by the market disruption from Covid-19 from late Q1
The net interest-bearing debt amounted to DKK 1,986 million at the end of Q3
2021, compared to DKK 1,753 million at year-end 2020. Undrawn credit facilities
amounted to DKK 1,439 million at the end of Q3 2021.
The equity ratio was 67% on 30 September 2021, compared to 66% at the end of
The global harvest of Atlantic salmon was 4.4% higher in Q3 2021, compared to Q3
2020, according to the latest estimate from Kontali Analyse. Combined with
released inventories of salmon the supply to the market increased 5.7% in Q3
2021, compared to Q3 2020. Salmon prices were higher in this quarter compared to
Q3 2020. Overall, market conditions have continued to improve during this
In Q4 2021, the global harvest growth of Atlantic salmon is expected to be
negative with around 4%, compared to Q4 2020. Overall, the market supply of
salmon in 2021 is expected to increase around 8%, compared to 2020, when
including expected inventory movements. In 2022, the global harvest growth of
Atlantic salmon is expected to be flat in H1 and around 9% in H2.
Bakkafrost operates in the main salmon markets, Europe, USA, the Far East and
Russia and has a strong focus on ensuring a well-balanced flow to the different
markets to increase diversification and mitigate the market risk. During this
quarter, the market has continued to normalise following the disruption caused
by the Covid-19 pandemic.
In this quarter the feed conversion ratio in the Faroe Islands has been very
low. However, the farming operation in the Faroe Islands has in general been
more challenging than normal, partly due to a deliberate decision to harvest one
of the farming sites, A-72 Haraldssund, early despite having smaller fish at the
site. The purpose of this was to regain synchronised production plans for this
site and the adjacent site, A-73 Viðareiði. Synchronising production plans will
have a positive impact on future operational efficiency and will reduce the
biological risk. However, as short-term consequence in this quarter, the average
harvest weight was reduced, and revenue and farming costs were affected
negatively by this deliberate decision.
In Q2 2021 Bakkafrost replaced the mechanical delousing equipment on M/S Martin,
which is the FSV primarily used for mechanical delousing in the Faroe Islands.
Unfortunately, the installation of the new equipment was delayed, in part due to
supply issues linked to Covid-19. Bakkafrost’s sea lice treatment strategy is a
preventive strategy, which has shown to be efficient. Due to delays in the
replacement of the new delousing equipment, Bakkafrost’s sea lice treatment
efforts become more reactive in Q3 2021, which had a negative impact on
mortality and farming costs. During the quarter, the new equipment came in
successful operation and the mechanical delousing and treatment capabilities
will be further strengthened in mid-2022 by the delivery Bakkafrost’s new 7,000
m3 wellboat with freshwater treatment capabilities.
Bakkafrost is well on track in pursuing the large-smolt strategy in the Faroe
Islands with the goal to reach average smolt weight of 500g in 2022. In Q3 2021,
the average weight of the transferred smolt was 334g (314g in Q3 2020). To meet
future demand for large smolt, the existing hatcheries at Norðtoftir and
Glyvradalur are currently being expanded. In addition, Bakkafrost plans to
construct a new hatchery at Ónavík, enabling Bakkafrost to produce more than 23
million smolts of 500g in the Faroe Islands in 2026.
As historical performances from previous years have demonstrated, second half of
the year, and especially 3rd quarters, are the most challenging periods for the
Scottish farming operation. By the end of this quarter, the mortality has been
very high due to combinations of biological issues across several sites.
Underlying gill-health issues combined with other biological threats such as
micro-jellyfish, have led to very high mortalities in several sites, especially
at sites at Ghia. During this quarter, Bakkafrost has strengthened the treatment
capacity in Scotland with the introduction of a new farming supply vessel (M/S
Bakkanes) and an additional 4,000 m3 wellboat with freshwater treatment capacity
has also been ensured.
This pattern of challenging 3rd quarters may be expected for the next couple of
years or so but with gradually reduced severity as the large-smolt strategy is
being implemented in the Scottish farming operation. Once fully implemented, the
large-smolt strategy will be a game changer for the farming operation. To
achieve this, Bakkafrost plans to invest in 3 large hatcheries in the coming
years to become self-sufficient with large smolts of 500g. The Applecross
hatchery is the first of the 3 future hatcheries and is now being expanded. The
hatchery expansion is expected to be finalised by the end of 2022.
Bakkafrost focuses on reducing biological risk continuously and has over the
past years made significant investments to diminish this risk, but also to
improve efficiency and ensures sustainable growth. The large-smolt strategy
occupies a central role in this in the Faroe Islands as well as in Scotland.
Bakkafrost expects to release around 14.5 million smolts in 2021 in the Faroe
Islands, compared to 14.3 million smolts in 2020, 12.7 million smolts in 2019
and 12.6 million smolts in 2018. The smolt release in Scotland is expected to be
11.0 million smolts in 2021, compared to 10.4 million smolts in 2020, 12.4
million smolts in 2019 and 8.6 million smolts in 2018. Bakkafrost expects to
release 15.0 million smolts in 2022 in the Faroe Islands and 10.8 million smolts
in Scotland. The number and average weight of smolts released are key elements
of predicting Bakkafrost’s future production.
Bakkafrost’s has previously announced expected harvest volumes for 2021 to be
66,000 tonnes gutted weight in the Faroe Islands and 40,000 tonnes gutted weight
in Scotland. Due to the exceptionally high mortality in Scotland during this
quarter, Bakkafrost is lowering the expected harvest volume for Scotland to
30,000 tonnes gutted weight. Hence the total harvest volume for 2021 is expected
to be 96,000 tonnes gutted weight, compared with 85,686 tonnes harvested in
2020. Harvest volumes for 2022 in the Faroe Islands are expected to reach 68,000
tonnes gutted weight and 35,000 tonnes gutted weight in Scotland, giving at
total of 103,000 tonnes gutted weight.
The estimates for harvest volumes and smolt releases in both geographies are
dependent on the biological development.
VAP (Value Added Products)
Bakkafrost has made large investments in building a highly flexible value chain
which includes a state-of-the-art VAP factory with high capacity. This enables
Bakkafrost to adapt well to the rapidly changing mar¬ket situations.
For 2021 Bakkafrost has signed contracts covering around 34% of the expected
harvest volumes in the Faroe Islands and Scotland combined. Bakkafrost’s long
-term strategy is to sell around 40% of the harvested volumes of salmon as VAP
products at contracts. Contracts for 2022 are negotiated in November and
December, and so far 21% of the harvest 2022 volume has been contracted.
The 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 production of fishmeal and fish oil is dependent on the
availability of raw material.
The ICES 2022 recommendation for blue whiting is 753 thousand tonnes, which is a
19% reduction from the recommendation for 2021.
In October 2021, the North East Atlantic Blue Whiting Fishery Improvement
Project (FIP) fishery was accepted onto the MarinTrust Improver Programme
following an application submitted by the North Atlantic Pelagic Advocacy
(NAPA). This should pave the way for the non-conformance identified by the MSC
to be lifted and the blue whiting being accepted again in production of ASC
Bakkafrost expects a decrease in production volumes of fishmeal and fish oil in
2022, compared to 2021.
Havsbrún’s sales of fish feed for 2021 is expected to be around 130,000 tonnes,
depending on external sales. Havsbrún’s sales of fish feed for 2022 is expected
to be around 130,000 tonnes.
The major market for Havsbrún´s fish feed is the local Faroese market, primarily
Bakkafrost FO’s internal use of fish feed, and the feed used in the Scottish
On the Capital Markets Day on 14-15 September 2021, Bakkafrost announced a 6.2bn
DKK investment plan for 2022-2026. The investments will enable transformation of
the operation in Scotland and provide sustainable growth in the Faroe Islands as
well as Scotland.
The main purpose of the investments in Scotland is to replicate Bakkafrost’s
successful operation in the Faroe Islands. Bakkafrost will build 3 large energy
-efficient hatcheries in Scotland, enabling the implementation of Bakkafrost’s
large smolt strategy and giving an annual production capacity above 18 million
smolt at 500g. Having large smolt in Scotland will transform the performance,
lower the biological risk and increase harvest volumes. In addition to building
hatchery capacity, Bakkafrost plans to build a new processing plant to
strengthen processing capabilities and Bakkafrost will also invest in more
treatment vessel capacity to improve mitigation of biological risk. Further,
Bakkafrost will make investments in marine site development.
The investments in the Faroe Islands include increasing annual hatchery
production capacity to above 23 million smolt at 500g, investments in a
broodstock facility and expansion of feed production capacity. Also, the
investment plan includes a new 7.000m3 wellboat with hybrid technology to reduce
carbon emission and new farming technology that will enable volume growth beyond
100,000 tonnes gutted weight in the Faroe Islands.
With the investment plan Bakkafrost expects to sustainably grow total annual
harvest volumes to 150,000 tonnes in 2026. Over the same period, the total
annual production capacity in Bakkafrost’s value chain will reach 180,000 tonnes
The long-term market balances in the global market for salmon products will most
likely remain favourable for Bakkafrost. Bakkafrost has a long value chain and a
cost-efficient production of high-quality salmon products and will likely
maintain the financial flexibility going forward.
During Q4 2019, Bakkafrost refinanced its bank facilities amounting to 352
million EUR with a further accordion option of 150 mEUR. In addition, bank
facilities amounting to 100 million GBP were ensured to refinance The Scottish
Salmon Company. In 2020 the two facilities were merged into one new EUR 463
million facility agreement (plus 150 million accordion option)
A high equity ratio together with Bakkafrost’s bank financing, makes
Bakkafrost’s financial situation strong. This enables Bakkafrost to carry out
its investment plans in the Faroe Islands as well as in Scotland, hereby
strengthening the Group, enabling M&A’s and organic growth opportunities as well
as to fulfil its unchanged dividend policy in the future.
Please find the Company’s Q3 2021 report and the Q3 2021 presentation enclosed.
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.
Bakkafrost is the largest salmon farmer in the Faroe Islands and the second
largest salmon farmer in Scotland. 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 the Faroe Islands and primary and
secondary processing in the Faroe Islands and Scotland. The Group operates sea
farming and broodstock operations in both the Faroe Islands and Scotland. The
Group has built a biogas plant in the Faroe Islands, which started operation in
Q2 2020. The headquarter is located in the Faroe Islands, and the Group has
sales and administration offices in Grimsby (UK), Edinburgh (Scotland) and in
New Jersey (US). The Bakkafrost Group has 1,644 employees (full-time
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