Bakkafrost U/Adr

Good morning and welcome to the presentation of Bakker Frost's results for the fourth quarter. My name is Høgn Jakobsen, CFO of Bakker Frost. First I'll ask you to pay attention to our disclaimer regarding the forward looking statement which is included in the published presentation. This morning we will start by providing a summary of the fourth quarter before we move on to markets and sales. financials, and then our CEO, Rain Jakobsen, will take over and go through the operations in the segments and outlook. In the fourth quarter, Backer Frost had revenues of 1 billion 470 million, and group operational EBIT was 280 million. Faree's harvest was slightly higher than the same quarter last year, came out at 16,600 ton, approximately. And in Scotland, we harvested 3,840 ton, almost four times the volume the same quarter last year. Our FOF division had a relatively quiet quarter. Although feed sales were slightly down from last year, came out at 38,900 ton, especially the external sale of fish oil was reduced. to only 11 ton, compared to 5,400 ton in the fourth quarter of last year. And external fish mail sales also dropped significantly, 87%, down to 1,600 ton, compared to around 12,000 ton in the fourth quarter of last year. Hasbro sourced 42,000 ton of marine raw material in this quarter. down from 54,000 ton last year. Last year, as we have talked about before, was an exceptional year for half spring with more than 50% higher marine sourcing than in a normal good year. Cash flow from operations in this quarter were positive with 68 million, and all segments had positive EBIT, except for the Scottish freshwater segment, which is starting now to ramp up, as Rain will explain more about later, and also the Scottish farming segment. The board of directors will propose to the annual general meeting that a dividend payment of 8.44 Danish kroner per share will be paid in dividends. Moving on to markets and sales. I'm beginning with a price development in the global market. The average price for four to five kilos superior salmon was 80.74 NOK per kilo, a reduction of 3% compared to the same quarter last year, but an increase of 10% compared to the previous quarter, the third quarter. Prices were quite low in the beginning of the quarter, but towards the end of the quarter in late December, prices increased rapidly. We have seen a more than 50% reduction in the downgrade or production grade fish from Norway, which has affected market dynamics in this quarter. But despite that, there has been a shortage of large fish in the market, which has also added on to the price gap between small and large fish. According to the latest update from Contali, global sales volumes increased 5.2% in this quarter. The biggest increase in absolute volume was sales to the European market, which increased around 15,000 tons, followed by sales to China, which increased 10,000 tons, corresponding to a 30% increase. Sales to the U.S. market also increased by 2.2%, and there was strong demand from Japan, ASEAN countries, and also other markets like Israel, Thailand, and Taiwan. Global harvest in the quarter increased by 3.5%, including inventory movements. Then that increase in sales or supply to the market was 5.2%. The growth is delivered by Europe with a 7.6% volume growth. Norwegian harvest was up by 5.5%, partly driven by sea lice related harvesting, but also better growth with higher seawater temperatures. Average weights in Norway dropped to 3.99 kilo and field sales also dropped with 7%. Scotland delivered an impressive volume growth of 63% in the quarter. also increasing harvest weight by 15% to 4.5 kg. Bacchafrost harvested at 4.8 kg in this quarter, so we contributed to that increase. In the Faroes, harvest volumes dropped by 19%. Biological performance was good. Average weights were 7% up to 5.28 kilo. Feed sales were up by 16%. And the biomass increased with 14% in volume or 23% in number of fish. Iceland also had a good quarter with solid volume growth of 12%. In the Americas, on the other hand, harvest dropped by 5.8%, Chile delivering a 4.7% reduction in harvest volume. There was quite significant release of smalt in Chile in the second half of last year, an increase of around 15%. And that will affect harvest volumes coming from Chile later this year and next winter. Moving on to financials, starting with the group P&L. As mentioned, revenues came in at 1 billion 470 million, a reduction from last year's Q4. And operational EBIT reduced from 356 million to 280 million. We had positive fair value adjustments of 361 million, and the revenue tax was 18 million compared to 27 million the same quarter last year. Profit after tax was 477 million. Looking at the operation of EBIT for the full year, was 1 billion 550 million, slightly more than last year. And adjusted earnings per share for the full year were 16.87 million and 4.37 for this quarter. On the balance sheet, since year end 23, our property, plant and equipment have increased by 513 million to around 6.7 billion. Fair value of the biological assets at the end of the quarter amounted to 3.1 billion. Inventories have reduced with 478 million throughout the year to 671 million. A significant portion of that is the reduction in inventories at Hafsprum throughout the year. Receivables reduced 202 million and amounted to 649 million, and cash equivalents increased 69 million to 481 million. Equity ratio also increased to 63% by the end of the quarter. Moving on to cash flow from operations were positive with 68 million, which was an improvement of 180 million compared to same quarter last year. Investments of minus 291 million and financing minus 136 million. Our net debts during the quarter have increased with 290 million. 209 of those are related to the tax payments in the Ferris corporate tax, which are always due in the fourth quarter. And at the end of the quarter, we had a net interest-bearing debt of 3 billion and undrawn credit facilities of 2.4 billion. And speaking of tax, as we have announced to the markets previously, on 1 January the new changes on taxation for the Faroese salmon industry kicked in. It is based on a broad political agreement stretching across the government and opposition parties. It's a long-term agreement stretching to 2030-2032. And the main change is that the old revenue tax, which previously could go as high as 20%, is reduced to 7.5%. And instead, An extra corporate tax, so a bottom line tax, is added to the standard tax rate of 18%, which is applicable for all companies in the Faroes. But an extra 12% is added to the salmon farming activities in the marine environment only. So not across the value chain, only the activities in marine farming. There is also a change in the way the revenue tax is calculated. And the effect is illustrated in the top right corner of this slide. So at low salmon prices, there is an increased revenue tax compared to what was in effect before 1st of January. And at higher salmon prices, there is a lower revenue tax. And now I will leave it over to Jan Jakobsen.

Good morning. First we will go through the numbers from the feet segment and the operation in Havsbrunn. In the fourth quarter 24, we have sold less fish meal and fish oil. However, during 24, the FOF segment achieved record high feed sales. This is the second best year after 2023 for the feed division. Despite good full-year financial result, fourth quarter was hurt by lower external fish oil and meal sales due to reduced raw material sourcing, especially earlier in the year. The marine raw materials sourced in this quarter was 42,000 tons versus 54 last year. a reduction of 22%. The feed sales were unchanged at 39,000. External sales of fish meal was reduced 87%, so only 1,600 tons versus 12,000 the year before. External sales of fish oil were reduced from 5,400 down to close to zero. the operational EBIT decreased 72% to 66 million versus 239 the previous year. The market price for fish oil and fish meal also dropped significantly. Fish meal prices have also trended down, and that has, of course, a positive effect on the cost of farming salmon. The outlook with lower cost on marine ingredients in feed recipes will have a positive impact for bakkarfrost going forward. The freshwater segment in Faroe Islands continue to ramp up operations since the capacity expansion in 23, where Nordhofter and Gliwra Dallur started the new sites. New production records were delivered for the second consecutive quarter in a row, with large, high-quality smalt. This improved efficiency is helping to reduce costs. In the fourth quarter, total transfer to marine sites increased to 6.1 million versus 5.2 the year before. and the size of fish was 413 gram versus 375 the year before. The operational EBIT more than doubled to 110 million from 52 the year before. Some fish originally planned to be stocked in the fourth quarter were postponed to January due to optimalization of the operation. This will impact harvest positively in first half 26. In Scotland, the transition to produce large, high-quality smalted apple crust has begun. As we scale up the production this year and gradually replace legacy fish from our marine farms with high-quality fish, we expect a fundamental transformation of our farming operations from next year and onwards. Segment in Scotland transferred 1 million in the fourth quarter versus 1.7 the year before. The average weight was 152 gram from 109 the year before. The operational EBIT was minus 28 million versus 9 million, minus 9 the year before. The capacity utilization has not yet been optimal as we are building a lot of capacity and there is a time lag in the utilization. Therefore, we will see capacity cost to be better utilized when the transfers increases during the second half of 2025. During 2025, we expect to stock 10 million smalt with average size above 200 gram. And the chart to the right bottom shows this transformation in the marine farms. The farming in the Faroe Islands harvested 16,600 from 16,000 the year before. Average weight increased 11% to 5.3 versus 4.7 the year before. The operational EBIT was 100 million versus 64. And the operational EBIT increased to 9.43 from Norwegian 6.27 the year before. Biological performance in Faroes remains robust, with solid growth, effective sea life management, and large fish production. across all farms in the quarter. The breakdown of fairways harvested volume was 55% from the west region, average 5.4, and 45 from the north, average 5.2. See what the temperatures in the fairways fjords were marginally warmer in the fourth quarter versus last year. only around 0.1 to 0.2 degrees in difference. And as mentioned, we see good growth and strong biology across all farms in Faroes. That was also the reason why we postponed some harvests from December to January, which has led to an increase in harvests in January this year to 6,700 tons compared with 3,300 last year. This is an overview of what the robust, healthy smolt, what are the differences between high quality and reduced quality smolt. We have just finalized the harvest from Kunianess during December and January. When we stocked Kunianess in the fourth quarter, 2013, There were 25 percent of the fish with reduced quality. Seventy-five percent of the fish were fish group with robust high quality. The sizes of these two batches were quite similar. In fact, the reduced quality small were slightly larger, 285 gram versus 268. The background for the reduced quality was because this batch had gone through some stressful events on the hatchery. The stress related to reduced water quality and some mechanical issues. When we compare these two batches, we see that During around 13 months growth time, both batches had the same growth time. In fact, the reduced quality batch had 396 days compared with 380 days for the higher quality batch. The harvest size of the higher quality batch was 5.2 kilo gutted and the reduced quality batch 4.4 kilo. So despite the lower quality batch had longer growth time, and they were larger when they were transferred, there was 800 gram in difference at harvest. Also, looking at mortality, there was 3.2% mortality with the higher quality batch versus 7% on the lower quality batch. This is measured in biomass. The harvest yield per input smolt was five kilo for the high quality batch versus 3.3 kilo for the lower quality batch, a big difference. Feed conversion ratio was 1.07 for the high quality batch and 1.13 for the lower quality batch. So the idea is to give an indication what a good quality means compared with a lower quality despite they were similar in size. The importance of a good environment in the hatcheries is really, really important. This is crucial for the operations in the marine environment to produce a high quality fish with good fish welfare and a competitive cost. So looking at the farming operation in Scotland, the total harvest in this quarter, fourth quarter, was tripled to 3,840 ton versus 1,062 ton the year before. The average weight was 68% up. to 4.8 kilo from 2.8 the year before. The operational epit was more or less flat at minus 55 compared with minus 48, which was around 23 Norwegian kroner per kilo minus. There was slightly elevated mortality in the fourth quarter in Scotland. in two of the three months. This related to matured large fish. Overall, we are pleased with the de-risking of our Scottish operations in 24. Mortality has decreased significantly and fish harvest in the quarter was large and contributed to the highest full year EBITDA since the acquisition. As we await the full replacement of legacy fish, we will continue a similar de-risking strategy in 25, before starting the journey to ramp up production in 25. In 26, sorry. The temperature in the Scottish fjords were around 0.2 degrees warmer in the quarter compared with the average the last 20 years. Just to mention on the farming segment in Scotland that we continue in January harvest of large fish above five kilo from our Scottish farms. The service segment reduced ñ the service segment increased the EBIT from 13 to 25 million Danish kroner. main objective with the service segment is to treat the fish, to transport fish for harvest and smolt. And then we also have the biogas operation in this segment. We have really good operations in Pharos because of our high quality operation in the service segment. So that is probably the biggest contribution from the service segment. Sales and marketing operation. In this quarter, we had less volume for VAP, for ready-to-eat products, due to our change strategy last year. We transferred 42% less volume to the VAP segment, 3,299 ton versus 5,735 last year. That meant, however, that more fish was sold as hog, whole gutted, head-on gutted, 55% increase, up to 17,180 from 11,000 the previous year. The volume was 20% up to 20,478 from 17,000 before. the operational EBIT increased 19% to 120 million versus 101 the year before. The largest market share is Western Europe, with 54% of the sales from Faroes and 66% of the sales from Scotland. However, both origins reduced the market share to Europe compared with the previous year Second most important market is Northern America with 28% market share from Faroes and 14% from Scotland. Both regions increased their share this quarter compared with the year before. Asia also had a similar development, increasing to 14% from Faroe Islands and 19% from Scotland, which was a huge change from zero last year. As we produce larger fish in Scotland, more of this fish is benefiting from overseas markets. In this quarter, when we look at the performance per region, we see that Faroe Islands reduced the operational EBIT to 310 from 460 million Danish kroner the year before. And this was mainly as mentioned before driven by the development in the fish meal and oil. Scotland significantly improved year on year. And the beta for Scotland in 24 is record high, 249 million Danish kroner, 89% up from 2020, indicating that despite low volumes operation, de-risking have been successful in 24 in Scotland. The table on the right shows the differences, and we can see that in Faroes, especially the negative change is in the FOF segment. Looking at the outlook for the company and for the industry as a whole, we see now expected 5% overall growth on the supply in 2025. Norway reported higher biomass than anticipated by the end of the year. Higher shear of small, about 250 gram have been transferred. Good growth in December, which seems to continue in January 25 in Norway. Scotland also increased the harvest estimates, better biology. And in Faroe Islands, harvest expectations are driven by a higher number of transverse malt and good and robust biology, large fish, and lower harvest in December to keep some fish to 25. Iceland is also increasing their harvest. So stronger supply in many regions in Europe contribute to some downgrade or downward price pressure. We saw in January that the average price in January was close to 4 Norwegian kroner in average down compared with the year before. And also in the fourth quarter as a whole we saw lower or weaker prices than anticipated or expected. In Chile There are lower growth expected for the first half of 25. And this has also been slightly lifted compared with our previous expectations. And this is driven by 15% increased stocking in small transfer in H2-24, where farmers have moved from Coho Trout to Atlantic. So stocking in the second half of 2024 has been reported to 98 million fish, compared with 85 million fish the year before. So an increase in number of stocked fish in Chile, which will increase supply in H2-25, probably around 50,000 ton extra fish coming from Chile during next winter. So global supply looks a bit higher now than three months ago. And that will slightly lift up the global supply from expected maybe 3% to maybe 5%. But when you look at the global number, it looks quite flat from H2 24 to H1 25 and H2 25, around 5% global supply increase. So for Baccafrost, this means that we expect a total harvest of 97,000 tonnes in 2025 versus 91 in 2024, or 90.6. As mentioned before, we moved some harvest in Scotland to the fourth quarter. ...because of this elevated mortality, but the fish was large, 4.8 kilo. So that means that we moved 3,000 tons from 25 to 24. So that's the rationale behind the change from 100 to 97 in 25. In Faroes... If you look at Faroe Islands, the supply growth from 24 to 25 is 22%. So 22% more fish in Faroes. But in Scotland, we reduced the harvest from 28 to 20. So that's a combination of the numbers. In Scotland, the de-risking strategy continues, which means that a bit more than 60% of the harvest in Scotland is expected in H1, first half of the year. And in Faroe Islands, we expect to increase the stocking to 18.5%, and in Scotland to 10 million fish. So combined, 28.5%. versus 23.1% last year. So I increased stocking of 23%. Contracts, we stick to around 15% contracts here. And we expect a similar development in fish, meal, and oil. There should be no strike this year, so that should be positive. Prices are expected to be lower on fish, meat and oil. Feed sales are going to continue to increase year on year for many years. We are expanding the feed factory in Hafsbrunn, which will be in operation around one year from now, doubling the capacity. We are continuing our growth track according to the plan communicated on our capital market day in 23, to reach 165,000 ton in 28, to grow sustainably with high focus on utilizing our competitive advantage and value chain. There are three major projects under construction, and they are progressing well. It's the Apple Cross, actually, which are about to finalize and will be finished this year. Skalaveg started a year ago and is progressing well. We hope to start operation in the first half next year. The whole site will be finished two years from now. And then the Hafsbrunn feed factory. So these are three major projects. There are other smaller projects ongoing as well. But these projects are crucial for our goal for 28 to achieve the growth. There are also more capacity in some of these projects, especially feed, to deliver more growth also beyond 28, with robust large malt, the best feed. and good fish welfare. And as you are aware of, the Cap Lamaca Day will be in June this year, next Cap Lamaca Day, the 17th and 18th. That was all for now. Thank you very much, and we are open for some questions.

Can you say something on the reasons behind the maturation issues in Scotland in Q4? And secondly, could you say something on the cost development during the beginning of 2025? Thanks.

The reason for the higher maturity in our farming operation relates very much to the small quality. Our hatcheries in Scotland have not had full control on temperatures. So where temperatures are fluctuating a lot, up to maybe 18 degrees in the summer and cold in the winter. So there have been batches produced where water quality has not been controlled as we do in modern hatcheries today. This will obviously be changed now so that smalt will be of high quality and we should have better control on maturation. So now as we have produced large fish, some of this fish, if the fish had been harvested before, we had avoided that. But producing large fish is also where we get extra value, but it's really important when we produce large fish that we have good and robust smalt so that we can take them through that cycle up to large size. And when that's not the case, then we have an elevated share of maturation. The mature fish has a lower value, and they are very weak when they are exposed for stress, especially during these periods in late fall, during the winter. And it's difficult to... Yeah, we can see that there is some maturation already in August, September, on the appearance of the fish. If you check the fish in June, you could have seen inside the fish, but the... the level of maturation was a bit higher than we had expected. So that was the maturation. And the second question was on the cost development. Costs are coming down because of the feed. And in Scotland, the costs have come significantly down because of the de-risking strategy. around 60 kroner per kilo. And faroes prices are also coming slightly down. The cost price will continue to to go down during 25 because as as feet the fish that we harvest right now has had some more expensive feet earlier as we go forward there will be less of that expensive feet so so there will be a further decrease in the cost development during 25. thanks

Just to follow up on that, because it's maybe for Høgny. You've added a chart on ringside cost development, where feed cost in the Faroe seems to be ticking up in Q4. So does that mean that the drop in cost you just mentioned is temporary and we're going to start seeing an increase in cost? And the second question is on the changing industry dynamics. As you mentioned, there will be more superior fish. So how do you plan to sustain the price premium in this segment? Yes, that's the slide.

So this chart is to demonstrate that there is a time lag. So you have a feed cost development, and then there's a time lag. There is a... So if you see the longer trend, you see that there is a downward trend in feed cost. There might be some ups and downs. It depends a bit on the types of feed that have been used, etc. But the raw materials are trending down, so that will take the cost down on feed. And that will then, as the time lag is increasing, a couple of months, then cost on farmed salmon will come down. That is both for Scotland and for the Faroe Islands. Any further update, any further question on feed?

We can go into more depth afterwards.

Yeah. So on the premium, The premium in the fourth quarter and also in 24 was weaker for Backer Frost than in previous years, especially in 23 where we had a very good premium. 24 had a lot of disruptions for ourselves. We had the strike, and then we had the ISA, and then we had... Because of these interruptions our planning was interrupted so that during the year we had not the optimal breakdown of sizes as we normally would have. And with interruptions in the markets it takes a bit of time to stabilize this operation again. So that's at least an impact. There might be other drivers. behind this. One of the drivers could also be that because we have reduced our WAP operations, we have much more volume of HOG. So that could also be one of the drivers. But at least you can see the result is that we have a lower margin compared with before. I would also say that we have had a larger share of large fish because of this development. And that could also have a negative impact on the margin. But when we compare the margin, we compare margin on the actual size. So it will always be valuable for us to produce larger fish because more fish will be moved from the lower price category to a higher price category. Despite that, the extra margin will maybe not be the same as before. We still have the benefit of moving fish from a lower category price to a larger category price.

Okay, thank you.

Christian, Christian, Arctic Securities. You initially guided around 17 million smolt stocking in the Faroes, and last quarter you took it up by 600,000, 700,000 tons, and 600,000 smolt, and then now you ended up at 17.1. What happened there?

Yeah, so, yes, it's not... So the rationale from that was that during the end of the fourth quarter, we saw that because of the weather situation and because of the temperature, et cetera, it was better for this fish to be stocked in January rather than December. So that's why we took this down to 17.1 again. The fish is still being stocked a few weeks later.

And so are you now stocking more fish than planned in 2025?

Yes, we have kept the initial numbers still on our guidance, but that gives us a better confidence, at least in the numbers.

And in terms of your FOFE bit, what should we expect going into Q1, given that it fell so much now in Q4 already, Q on Q?

Yeah, so... In the fourth quarter, it is mainly the sales of fish oil and meal which are reduced significantly because the inventories were really low because of the low intake during the summer and during the strike. Now we are in the season again, so that means that in the first quarter we normally should have a good sourcing of fish meal and oil. But, of course, as we have low inventories, there probably will be low external sales in the first quarter. But we are producing now again, and at some point we might sell some external. Of course, this helps us to produce at least our feet with own room materials.

But broadly speaking, we should think of an EBIT then in line with this quarter in the Q1.

EBIT is difficult for me to guide on, but we say that we expect similar raw material levels this year as last year. So 23 was exceptional good. 460,000 or something like that, while 24 was much lower. So we expect that 23 was exceptionally good. 24 was still the second best year for the full year. And we expect similar numbers in volume for Hasbro.

Thank you.

Just to follow up on Scotland, when it comes to the early maturation, how much do you see this as a risk going forward? How much should it impact? And the second question is on the U.S. market. You increased the market share into the U.S. Just broadly, how do you see the market going forward and just the development?

So there is a risk with maturation in Scotland when we produce large fish. If we harvested all the fish at three kilo, it wouldn't be a risk for maturation. But when we take the sizes up to large fish, the maturation takes place during August, September. That's the critical point. Ideally, we could grade all the fish in August, but that's quite difficult. But that could have been possible. So there is a risk that there will be a share of higher maturation, especially in the fourth quarter every year. But when you have a good quality smalt operation... when we are able to control all the environmental factors such as light, temperature, etc., then that risk will be significantly taken down and there should not be a high maturation. So that's also solved with the new hatchery in Uppercross. But this year, we might see an elevated maturation in Forkwater if we again produce large fish. When it comes to the U.S. market, as you see in the numbers, we have increased our market share in the U.S. market. More fish is sold to the U.S. This is also, as mentioned, driven by larger fish. The U.S. market and the Asian market primarily takes large fish. And Scotland did not use to sell so much to those markets because the fish was very small. We see a good development in these markets. We see strong demand, and that's also an indication that we are increasing our sales to those markets. So there is an underlying high demand in the U.S. market, an unplugged potential market. The US market has been underdeveloped for a long time. In recent years, it has been more developed, but it takes a long time to develop a huge market like the US. So we think that this is a big potential for us. The political things, I cannot comment. I don't know, but we are working as everything is normal, and we hope that that will be the case.

Thank you.

Okay, no further questions. Thank you very much for the questions, and thank you very much for coming. Thank you.