Bakkafrost U/Adr

Welcome to the presentation of Backerfrost's results for the second quarter this year. Webcast is here from Oslo. My name is Høgne Jakobsen. I'm CFO of Backerfrost, and I'm joined here this morning by Rein Jakobsen, our CEO. First, please consider our disclaimer regarding forward-looking statements, which is included in the presentation. The agenda this morning is first an overview of the second quarter. Then we continue with market and sales, finance, operations and finally outlook. There are also some slides included in the appendix. Those will not be presented this morning. In the second quarter, we had revenues of 2 billion and 67 million, around 24% up from the same period last year. Group operational EBIT was 388 million, up from 353 last year. Fair reason harvest was 10,226 ton, around 1,600 ton more than the same period last year. The Far East harvest was significantly hampered by the four-week strike that we had in May and June, during which we could not do ordinary harvest. So this reduced the overall harvest for the second quarter with around 2,300 tons compared to our original harvest plans that we announced in the previous presentation. That harvest is then pushed into the second half of this year. In Scotland, we harvested 11,366 tonnes, which was around 4,000 tonnes more than the same period last year. FOF division had sales increased by 9% to around 33,000 tonnes of fish feed. The strike also affected the activity in the FOF segment, especially on the external sales and sourcing of raw material. Sale of fish oil was 6 ton in this quarter. Marine raw material sourcing dropped from 148,000 ton in the second quarter last year to 91,000 ton in this quarter. And external sale of fish meal was 16,000 ton compared to 21,000 ton last year. Cash flow from operations was positive with 1,036,000,000 up from 376,000,000 last year. and all segments had positive EBIT, except the Scottish freshwater segment and the sales and other segment. We also paid dividends in this quarter, $515 million. Moving on to markets and sales, and beginning with the global market, the average price for 4 to 5 kilos, superior Salmon, this quarter was 111.82 NOK per kilo, around 3% higher than the same quarter last year and 1% up compared to the first quarter. Prices were very strong at the beginning of the quarter but dropped fast and deep towards the end of May. The market was affected by a normalization of the volumes of large fish As the issues that previously was in Norway with downgraded fish and winter wounds eased off, that normalization came faster this year than we have seen in previous years. Consequently, the price gap between large and small fish reduced in the quarter. According to the latest update from Contali on sold quantities to the market, Global sales in this quarter has been quite stable compared to the same period last year, with only a 0.4% reduction in volumes. Demand in Europe has been strong. Global sales to Europe increased 3%, which is in line with the increased production volume coming from Europe. The US market was weaker, with a 7% drop in volume being sold to the US market. and lower Chilean volumes is one contributing factor to that development. Also to the development in sales to the Russian market, where lower supply from Chile contributed to a drop of 47 percent in volume sold to Russia in this quarter. China dropped 3 percent, partly also affected by the low supply from Chile, whereas the Asian market as a whole was quite stable. Sale to other markets increased by 12%. That was mainly to Australia, Middle East, and Canada. Global harvest in this quarter dropped by 1%, with an increase in Europe by 3%. Harvest in Norway was down 2%, especially driven by lower volumes coming in June. Incoming biomass in Norway was lower than normal and growth was moderate. However, that picked up significantly in July and also in August, which we can see in the 14 to 15 percent increase in the feed sales in July in Norway. And also we see an increase in that in August. Harvest weights in Norway increased 3 percent to 4.38 kilo. In Scotland and Faroes, there was good growth and also positive development in the harvest volume. Improved biology in Scotland with reduced mortality. We had increasing harvest weights as well from 4.25 kg to 4.4 kg in Scotland and an increase in feed sales in Scotland by 6%. In the Faroes, harvest weights increased from 4.78 to 5.01 kilo, and feed sales increased 11% in the Faroes. Harvest, again, in the Faroes was significantly hampered by the strike, but nonetheless increased 6% in the first quarter. Harvest in the US market, or in the Americas, dropped 7%. That was mainly driven by the 12% drop in Chilean harvest. Average weights in Chile were stable at 4.5 kilo. Moving on to finance. This picture, by the way, is taken a week ago, approximately from Loch Fyne, it is, in Scotland. A beautiful salmon. Starting with the P&L, revenues in this quarter increased from 1,670,000,000 to around 2,000,000,000. And EBIT, as mentioned previously, 388,000,000, which is a 10% increase from last year. For value adjustments, we're negative with 393,000,000. Our revenue tax amounted to 84 million in this quarter compared to 30 million in the same quarter last year, primarily driven by larger volumes in the Faroes, but also by the strong Selma prices we had, especially in the beginning of the quarter. Profit after tax was negative with 117 million compared to minus 123 million last year. Operational EBIT for the first half of this year, 1 billion and 98 million. Adjusted earnings per share year-to-date is 11.03 DKK, whereof 3.37 is delivered in this quarter. Moving on to the balance sheet, we see that property, plant and equipment amounted to roughly 6.5 billion, an increase of 227 million since year-end 23. Fair value of the biological assets in this quarter amounted to 2.9 billion, a reduction of 429 million since year-end, largely driven by lower forward prices. Inventory reduced in this quarter by 265 million to 884 million, and receivables also reduced by 188 million and amounted to 732 million by the end of the quarter. Cash and cash equivalents increased to 608 million, and equity ratio also ticked upwards with one percentage to 62%. Cash flow from operations, 1 billion and 36 million, minus 241 on investments. And cash flow from financing was minus 759 million. And as mentioned earlier, we paid dividends in this quarter of 515 million. This quarter, we have decreased our net interest bearing debt with 214 million. At the end of the quarter, it was just short of 3 billion in net interest-bearing debt, and we had undrawn credit facilities amounting to 2.4 billion. And of relevance to the future development in our net interest-bearing debt, our five-year investment plan, which we announced on the Capital Markets Day last year, is under constant review. And recently we have made changes in the prioritization of the projects and also the sequences on some of the projects. And consequently, we expect that CAPEX for this year will be around 300 million lower than previously announced. And next year it will impact with around 500 million reduction in the CAPEX compared to what we announced on the CMD. I will hand over to Ray now. You will provide more detail on this and also on the operations and outlook.

Good morning. Looking at the performance per region, we see when we look at the operational EBIT, it increased 10 percent to 388 from 353 last year. This was mainly driven by 35 percent volume growth. The margin per kilo dropped by 19 percent to 17.96 versus 22.08 in the same quarter last year. In Scotland, the EBIT margin increased 2% to 996 from 973. In Faroes, the EBIT margin increased by 17.5% to DKK 26.86 versus 3256. If we convert the Faroes margin to NOC per kilo, the number is 4162 per kilo in this quarter. The farming segment, of course, delivers the largest share of the EBIT for the group, which we will touch on on the following pages. Looking at the FOF segment, the general strike, which closed the whole country from May 14th to June 9th, prevented our operation at the fish mill and oil plant. All imports and exports from Faroes was stopped, which also stopped our export of fish meal and oil. This was the first general strike in Faroes in 20 years. The impact of the strike was also on raw materials, where 60,000 ton of raw materials were lost. So also a significant impact on external sale of fish meal compared to last year. The marine raw material sourcing was 19,500 ton in second quarter versus 148,000 last year, a reduction of 58,000 ton. The record high sourcing of raw material in 23 to our FOF segment and the record high market price of fish meal and oil boosted our margins last year. 23 was an exceptional good year for our FOF segment. Although 24 is expected to be reasonable, we definitely will not see similar development as in 23. The feed sales were not affected by the strike and was up by 9% in this quarter compared with last year. The external sales of fish meal and oil was 15.7 thousand ton versus 21.3. External sales of fish oil was unchanged at 6,000. The operational EBIT was down by 7% to 112 million Danish kroner from 121%. We expect lower raw material intake in H2 compared to H2 last year. By end of August, our accumulated raw material intake this year is 250,000 tonnes. The market price on fish oil has dropped slightly since the peak in 23, but fish meal seemed to be tight, and recently prices have moved up again. Looking into the freshwater segment. In Faroes, we are ramping up production since the 50% increase of capacity last year with the Gliradalur north of the Rionveraia. In Q2 this year, we transferred 11% more fish, 4 million small versus 3.6. The size of the fish was marginally smaller, 391 gram versus 400. The operational effort in Q2 increased 124% to 74 million from 33. This was a result of good cost development as capacity utilization is increasing and general good biology. The operational output per kilo was 73 per kilo and a margin of 40% versus 21 last year. Ramping up production in the freshwater segment in Faroes is progressing well. The total capacity increased 50% last year. Now we see actual production in freshwater increase as we can see on the graphs below. Biomass is now up by 80% from the same time last year, from 1,250 to 2,250. The number of fish in the biomass in the freshwater is also increasing, and feeding monthly has doubled. This will lead to a further increase in transfer in coming quarters. And now the construction of Skalavik is progressing. That started early in Q2. This hatchery will add another 40% to our freshwater capacity in Faroes, bringing the total capacity to around 12,000 tonnes by 2027. The building time of this site is expected to be two years from now. Looking at the freshwater segment in Scotland, In Q2, the average weight of released smalt was 95 gram only, which is 23 percent lower than in last year. And the transfer volume was 52 percent lower, only 1.5 million versus 3.1 last year. The reduced average weight and delayed ramp-up of the production is a direct consequence of the startup issues at Apple Cross. This was described in previous presentation. It relates to the heating system or cooling system at Applecross where we have had issues in the fourth quarter and the first quarter. So a lot of the fish were lost and we needed to restart the whole system. Applecross is expected to supply large batches of smalt in the third quarter and especially in the fourth quarter where we expect to see the first batch of large fish. This is around nine to ten months delayed compared with the plan we had one year ago. The Applecross 5 expansion is completed in two months from now. Baccarat will have the capacity to produce all small in Scotland to around 200 to 300 gram. With the completion of Applecross 6 in first quarter next year, Applecross 6 is the fry and par unit. where we expand that number, that means that the apple cross will be able to supply all fish in Scotland and the biosecurity in that site will be further improved. As shown in the Faroe Islands, big and healthy smolt will face a lower risk in the marine environment in Scotland because of the shorter production cycles in the sea and a more robust salmon. Unfortunately, the development in Scotland, which is the main driver for the turnaround operation in our marine operation, has been delayed. Our strategy remains focused on fish welfare with large, healthy, robust smolt. The issues with the cooling system in the fourth and first quarter set us back so that the planned ramp-up was delayed. However, I was on the site a week ago, and I am confident that the site is now in a good position to start up the ramp-up journey and deliver a healthy, robust smolt. Current stages of the development at Davos Cross will be completed shortly, which AB5 in two months and that means that the capacity will be in place to run the operation. Work has now started to renewables the energy which is coming from hydro scheme so that the whole site will be powered by renewable energy. In 2025, the transition will be a transitional year for our marine stocks where we will have larger smalt, robust smalt delivered to our marine sites, and thereafter predominantly one summer cycles. 2025 will again be a year of de-risking strategy with inconsistent harvesting with slightly lower than overall volumes. Due to marine stocking being driven by smaller smalt and the flow-through production smalt, there will be still some third-party deliveries in our biomass for some months more to come. But all smalt stocked are now being vaccinated with the latest antivirals targets to marine risk and time to reduce to summer risk. Looking at the Faroe Islands marine sites, the volume increased 18% in this quarter to 10,226 ton from 8,658 last year. The average harvest weight increased 13% to 4.9 from 4.3. The operational lipid was 206 million from 150 last year. The EBIT increased 15% to 31.23 versus 27.15 last year. But this segment was also impacted by the general strike, which prevented us to harvest for these four weeks. This was the first general strike in 20 years, but there was an agreement made in 2008 which excluded marine farming operation and freshwater farming operation from the strikes. So, therefore, we were able to feed our fish and to nourish our fish, daily activities such as stocking, feeding, taking care of the fish continued during the strike. So, with around... with around 4,000 tons of fish postponed during the strike. That meant that there was a lot of fish which was moved from a higher price segment to a lower price segment. The breakdown of the ferry's harvest volumes in the second quarter was 31% from the north region. at a size of 4.8, 39 from west at 4.9, and 30% from south at an average of 5 kilo. That included the Isar fish, which was harvested at 2.5 kilos. The temperature in the Faroese farming fjords were marginally warmer in Q2 than versus the last 20 years, the deviation was around 0.5 degrees Celsius. And we see a strong biology and good growth across all farms in Faroes. And then just some notes about the ISA fish. On May 26th, during the strike, we detected two pens in A19 in the south in Faroes with ISA virus. No increased mortalities, but tests were taken and there was a presence of this ISA virus in two pens. The full site had one million fish with an average weight of 2.6 kilos. Strict measures were implemented to contain the virus and prevent further spread. The two affected pens were harvested out immediately within a week. and the site will be empty tomorrow. Tomorrow the last fish will be harvested. Weekly veterinarian testing in all pens every week, PCR tests every week, has not detected any virus in any of the other pens on that site. nor of any other pens in the Faroes. So we are happy with our surveillance program and also that we were able to take the fish out early. Also, we can see on this overview that the majority of the fish was harvested out in the third quarter. 436 ton in the second quarter, which were these two pens. And the other 2,864 ton has been harvested out from end of July until tomorrow, 27th of August, which was the last date. This is exactly three months after the incident. And you have also the average weights there. of the fish that was harvested. Moving to Farming Scotland, the total harvest in this quarter was 55% up to 11,366 ton versus 7,300 last year. The average weight was, however, 12% down to 4.1 kilo from 4.6 last year. The operational EBIT was 146% up to 133 million versus 52 last year. The operational EBIT was 64% up to 18% from 11% last year. The margin increased 6%. By the end of the second quarter, we harvested 75% of the planned harvest this year. 75% in the first half of 2024 as part of our de-risking strategy. Also, the de-risking plans means that our volumes will be lower during the transitional period. Therefore, measures are taken now to align our costs, both fixed costs, capacity costs, and other direct costs to our actual production. The health situation in Scotland in biomass is much better now than we have seen now for a number of years. The majority of the fish that we are harvesting, we are looking at size. Some cases are still with health indicators, the driver to take them out. Now, by mid-August, we see a better development in our fish on the KPIs than for years. So we hope that the third quarter will... The third quarter is always where there are issues, but it looks good at the moment. There are no sea lice, no gill issues, less issues with jellyfish and plankton. And hopefully this will continue during September. Thereafter, we should be out of the high-risk season. The de-risk strategy has helped to protect our business while we are working on the largest malt. We still need to see the impact from the healthy, robust, large malt in Scotland. Hopefully that journey will give us some indicators by this time of next year. As I said, we are in a transitional period in Scotland. Have been so for too long time. At the moment, we are focusing on de-risking. We are now reducing some costs due to the reduced volume in Scotland. We have, in the second quarter, we have mothballed one of our processing sites in Marybank and Stornoway. meaning that we reduce stuff. We are also reducing capacity cost, taking out well boats. We are subchartering and reducing costs where possible. Overhead costs will come down, direct costs will come down. There are a lot of initiatives which have been mapped where we can focus to minimize the direct cost and indirect cost all over the line. When we look at the service segment, We see an increase in operational EBIT, 12 million versus one last year. This is 87 euro per kilo. The most important is reducing sea lice. This includes a lot of things, but having a good health in our fish is, of course, the most important priority. Costs are, of course, important to keep low. But we see that with the new innovative resources of freshwater system, Bacarfrans currently see more or less no sea lice. So this has moved significantly down on our risk agenda. We very efficiently keep out sea lice. So we keep our salmon clear of sea lice and our farms are safe from spreading sea lice between farms. And we see the numbers here, which clearly give a good indication of a very low pressure. So coming to the sales and other segment, which includes also the WAP. In this quarter, we have reduced our WAP operation. But we must remember that the strike in Faroes was from mid-May to early June. So a lot of the raw material that we took into the WAP in this quarter was in the beginning of the quarter, when raw material prices were fairly high. By the end of the quarter, they were lower, but that was when that period was finished. The operational EBIT was minus 78 million Danish kroner versus 15 plus last year. The WAP share was 25% of the volume in the quarter. down from 57 last year. When we look at the market spread in the quarter, we see that the European market grew more in Q2 than the other large markets. So more of our fish was sold in Europe than previously. We think that both the U.S. and Asia will improve or recover as we go into the second half of the year. But it's good that European markets are strong and are able to continue to increase the volume of purchase. Some of the negative developments for the sales and other activity in this segment are, number one is the general strike, which contributed to reduced sales in the quarter and increased relative cost base. Number two is the ice outbreak in Vavor, where we harvested the fish. But of course, during this period, we could not sell the fish. So they were in stock by the end of the quarter, or inventory. So costs have been taken. Another is that 4,000 ton is moved from the beginning of the period, when prices were high, to the end of the period, when they were low. So revenues are moved to lower prices. And in this segment is also where we have taken provisions of 9 million kroner for the mothballing of Marybank in Stornoway, which is provision for costs relating to redundancy. Outlook for the sector and for Bacchafrost. We expect moderate supply. in the second half, moderate supply growth in the second half. In the third and fourth quarter, we expect, and these are Cantalia numbers, we expect growth to be between 4% and 6%, relatively speaking, compared to last year. Chilean farmers see reduced volumes next two quarters, which means that some markets will be more affected than others. as we heard also earlier. The expectations of 25 looks to continue with muted growth, which probably again will make tight markets conditions during the first half of 25. The dotted lines are the expectations that we had a quarter ago. In the second quarter, we... We have had a challenging period. Looking for the whole operation in 24, we expect a harvest of 88,500 in volume of harvest for Baccarat Frost as a whole. 63.5 in Faroe Islands, 25 in Scotland. This is the Faroese downgraded number due to the ISA in Vauer. The small release is 25.2%. This 7.7 was moved a bit down. 25.2 is not moved down. So it is 24.7, not 25.2. And the reason for the Scottish number to come slightly down is this issue, which were in the end of the fourth quarter and moved slightly into the second quarter, where half a million fish has been lost in Applecross. So 24.7 all in all. The contracts are, we have a low contract volume, only 9% of harvest volumes totally for the year. We expect lower raw material sourcing for our FOF segment. 250,000 ton has been reached. There will be some additional in the second half of the year, so it will be much lower than last year at least. The market price on fish oil has dropped slightly since the peak in 23, but fish meal seems to be tight, and recently prices have moved up again. As we heard about earlier, we have... We have a strategy to build a capacity of 200,000 tons by 28 and an actual production of 165 by 28. With the amendments in our investment plan by reprioritization, there will be some further changes in how we achieve that target. We will... make changes in apple crust so that our actual production in apple crust will be at something like 250 grams small, which means that with around 3,500 tons of capacity, we should be able to do around 14 million fish. So there will be more details coming on that a bit later. However, we are still working on our plan. And there will be a new capital market day next year where we will go further in those details. But the investments in 2024 and 2025 have been reduced by 800 million as a direct consequence of this changed plan. And... As we are in this phase of lower volumes in Scotland, we are continuously revisiting our strategy, especially now looking on the cost side. We are very much looking to reduce the risk side, especially with the de-risking strategy. That seems to have worked very well in 24, with significantly lower loss in our marine operation. So this will continue next year. The high focus on cost with strategic decisions and optimization of the operation will continue during the year and next year. And then from the fourth quarter and into next year, we will see larger smalt come into the farming environment, which will boost our operations from next year. Twenty-six, we expect to see all harvest production from larger one-summer smalt, which should significantly contribute to our operations. So I think that was everything for now. Thank you very much. And if there are any questions, you are welcome.

Christian Obia, Arctic Securities. I see that you have very much lower mortalities in Scotland until today. Can you comment on how much you have booked of exceptional mortality in Scotland in Q3 so far?

Yeah. In Q3 so far, I think it is 2 million compared with, was it? 31, if I remember correctly. 13? 31. Oh, 31. Yes. Yeah. So in the marine phase last year in July and August, exceptional mortality was wasn't it 14 million pounds sterling 14 and now we are less than one so it's a huge difference

And in the Faroes, is the biological situation in terms of harvest weights very strong so far in Q3 as well, based on the metrics that you're showing?

Yeah, except the ISA fish that has been harvested now in August, all the other biomass are very strong. Because of our good resources with fresh water, we now have ability to produce large and healthy fish. And because of the strike, we have had huge biomass of large fish. I think right now, as we stand today, we have something like 10,000 tons of fish, about 6.2 kilos in the water, which is exceptionally high. So we will have a lot of large fish coming out as we continue.

And for the group, do you see any particular negative one, of course, in Q3 as of today? No.

We have taken provision for whatever we see, which was the mothballing, not anything else. Thank you.

On Scotland, can you say something what has led to the improved biology sort of decomposing what's better weather conditions and temperatures and what's improved smolt quality? Can you repeat it? to give us a picture of what has improved the biology compared to last year in Scotland, how much is related to better conditions and how much is related to improved quality on the smalt?

On the smalt, nothing yet, because we have not seen the Apple Cross journey starting yet. So it is very much to this de-risking strategy where we are in a much better position with our resources, but also that we have fish on sites where we have selected specifically. because the fish is still too summer in the water. So I would say that is the main driver. The water temperatures in Scotland was a bit strange. They were a bit strange this year. I didn't comment on this, but you can see on this graph here, the water temperature in May, they spiked quite a lot. But then in June, the water temperature in Scotland developed flat compared to last year. Whether or not that has been having any part of this, I don't know. It was kind of a rare development on the temperature. There were higher plankton issues or higher plankton numbers during... July and into mid-August, but over the past two weeks it looks like the water has cleared more up. and the plankton level has come down. This can, of course, change from week to week, so this is not a guarantee. But some of the farmers I spoke to last week said that normally when the water clears up at this time of the year, it will remain clear further. But, of course, this is just from experience, so it's difficult to say. But we have very good fish in the water in Scotland, where our majority of the fishes, the gills are very nice and in good shape, and the fish seems to be healthy. So I think it's very much related to the de-risking strategy that we put in place by the end of last year.

Thanks.

You take a 20 million approximately one off in fresh water in Scotland in Q2. Is this also related to the cooling situation on Apple Cross or is it something else?

Yes, yes. So maybe I can just give a bit of flavor to that problem. So what happened was that the cooling system which was installed, the system is making sure that the temperature in the water, when it's very warm, they can cool the water down. If it's very cold in the winter, they can heat it up. So this system is taking sea water from outside into a system and using this as a driver to cool or heat. And this is also the same way we do it, for example, in Strand and Faros. But because of some strange thing, seawater was mixed with the freshwater, meaning that seawater from the loch or from the fjord entered into the freshwater system inside in the hatchery. We did not realize that in the fourth quarter. This has been from the start of the implementation, which was around August, September last year. And that means that until we discovered this failure in around February, this has continued. So we had to take all that fish out, because it seemed that the fish was affected by viruses and bacterias. We could not find out the source of this, but when we discovered this, we had to take all fish out. And that is a major setback, because we need to take the biomass out and refill, and even the biomedia needed to be refilled. So that's a major setback. You need to take the whole biomass out and refill again. And we had diseases in the freshwater side, which is very abnormal. We never have diseases inside when you have a closed system. So that has been totally removed, and there are no viruses or bacteria now in the system. All systems are now in operation again. and now we are ramping up with healthy fish. So that's why this issue is causing so much pain. We had to take fish out, and it sets us back by nine months.

Thank you. And the last one, can you comment on demand, how you see it across markets like North America, Asia, Europe, and also across channels like food service and retail?

Yeah, I think that there has been in the first and second quarter big issues with a spot market price which were all-time high, but also a situation where you had all-time high volumes of fillets which were on a much, much lower price. So there were more or less two markets because of these issues with downgraded fish. There were a fillet market also coming to export markets like the U.S. and China. So therefore, especially retailers are focusing very much on these volumes coming in. So these were giving clashes, and I think this has caused a lot of disruption for many customers. But one of the drivers which also Hakne mentioned was that Chile reduced their supply significantly. And the markets they have been serving, which are the U.S. and Asia market mainly, have less access to volumes. So that's also one of the drivers. These are just some of the thoughts that we have at the moment where we see that those markets have been affected. But now, as prices are more or less harmonized, there are not these issues with different types of prices, different types of products. It looks like the market is now accepting the conditions and are climbing again all over the line. There is a lot of demand. But, of course, customers are in the back of their head psychologically looking to next year if this is going to continue. And, therefore, this is a problem, I think, for the market that if this continues next year, it is a disruption with downgrades.

Thank you. Could you say something more about the reasons why you put the fairly small facility on hold? Is it because you expect to see the strongest improvement moving from 100 grams mold to 250, so that you don't see the same need to move it all the way to 500?

So, as we clearly all see, our journey so far in Scotland has been more challenged than we expected when we started the journey. So, therefore, we need to change and to reprioritize, as we phrased it, also to save our cash flow. And then when we will see, because we very strongly believe that we will see upside from the apple cross, then the time is more right to do the next step. I think it is very risky to have all eggs in one basket, so to say, in one hatchery. So I think the next hatchery will definitely be built. But we need to see stronger operations so that the cash flow can protect what we are doing. So reprioritization, retiming. But while waiting, or while we are working, for now, as we will wait for some years for the second hatchery, the original plan with Applecross was to build around 8 million fish at 500 gram capacity. 8 million at 500, something like 3,500, 4,000 ton. But now, when we only have one site, it is more wise to build that facility at something like 13, 14 million fish at 250 gram. We think that the cycle time in Scotland with 250 gram fish might only be 12 months, meaning that we can grow them to 5 kilo in 10 months, following the sites, so 12 months. But we need to prove that first. The additional investment for a second site is both to have not everything in one basket, but also to be able to reduce that further down to maybe eight months. But the time is not right now because of the development so far. We need to get this done right and to prove that it works and to see the results of this investment before we take the next step.

Yeah, makes sense. And then is it possible to quantify some of the cost savings that you initiate in Scotland, for example, as a percentage of the cost paid? Sorry.

We don't have a specific number. We have reduced the rolls in Scotland significantly. We had at the peak something like 600-650 rolls and now we are at something like 400. So that's quite a lot. Now we take also some capacity out. One harvesting plant, one processing plant, boats and then of course we we have a very high focus on the cost in general in the operation. So I don't think we can give a certain number, no. Hagen says no.

And on timing, is it that we graduate from two, three years onwards on the most recent initiatives, or is it that we fall in back-up over time?

There will be some already from the third quarter, and then there will be more from the fourth quarter. As we said, we have already taken provisions for this redundancy cost on the processing and harvesting side. Then we will subcharter some of the vessels, which also will then sequentially come into numbers.

Just a quick question on Scotland. Of course, we know quite a lot about the details of the issues that happened in Q1. But how do you see the risk of further delays as we stand now? Do we still have an elevated level of risk that we will have a... delay in smolt release, or do you see that as fully taken account for now?

I strongly believe that we have a much safer start of large smolt now in Scotland than one year ago. We have a site now, we have built a similar site in Faroes, which is the same technology, the same builder, the same provider, In Gliradeller, we did not have this cooling system with seawater. In Gliradeller, the cooling system is with air. So, therefore, no risk of contamination from seawater. But this has been solved. Now, there are two separate systems which don't have any access to each other. So, therefore, that problem has been solved. And we have, of course, a very close eye on this now... now that we know that this problem was there from the beginning. But that has been solved. And the operations and the systems in general seem to work well. And we are operating them also in Pharos, and the teams are working closely together. So I think we are in a more robust situation now, a more robust place. As I said before, having all eggs in one basket is not the ideal way, but with six systems running in Faroes, one exactly the same system, we think that we have a good opportunity to make sure that the We can take the point of lessons learned also in Faroes and transfer that knowledge to Scotland with a large molt. So I believe it should be quite safe now.