Bakkafrost U/Adr

Good morning and welcome to the presentation of Backerfrost's results for the second quarter, 2026. My name is Hogni Jakobsen. I'm here today with our CEO, Regin Jakobsen. First disclaimer, which I will leave for self-study. We will follow the usual agenda today, beginning with an overview of the second quarter before we move into markets and sales, and then on to finance, operations, and finally outlook. So in the second quarter operational performance improved for Packer Frost with revenues increasing 16% year on year to 1.8 billion and operational EBIT of 273 million compared to 65 million last year. In the Faroes, we harvested more fish than we have ever done before in a quarter, 26,700 ton. And in Scotland, it was the opposite. It was less than half, 55% reduction, 3,100 ton harvested. This is a result of the de-risking strategy that we have been following while we await the new capacity to be fully utilized with large smalt in Scotland. At our fish meal, oil and feed division, feed sales were relatively stable at 37,000 ton. Meal sales were zero as we are preserving inventories to ensure that we are self-sufficient with fish meal for our own feed production. Currently, our stocks will enable us to produce into Q2 next year. Sourcing of marine raw material was lower this quarter, 32% reduction. We sourced 109,000 tons. Cash flow from operations were 273 million compared to minus 204 last year. And finally in May we also paid dividends of 3.45 DKK per share. Group all-inclusive margins improved from 2.82 Danish kroner per kilo to 9.12 supported by the stronger ferries operation. This took place in the market context with high supply, muted salmon prices and a reduced large fish premium. The farrows delivered 15.38 up from 13.15. Scotland, on the other hand, had a negative margin of minus 44.12, which was impacted significantly by reduced harvest volumes, negatively affecting the dilution of fixed cost. Moving on to market, according to the latest updates from Contali, global supply increased 7% in the quarter ahead of the harvest growth, which was 3%. A significant volume of inventories were released in the quarter, primarily from Chile. European harvest grew 5%. and Norway by three, with lower volumes in April and May, but a very strong growth in June with 15% volume growth, which also continued into July with 10% increase. Some of that volume growth is linked to biomass management within maximum allowed biomass limits. Biology in Norway was good, lower mortality, 2% higher harvest weights and 4% increase on feeding. The Faroes had a very strong quarter with volume growth of 29%, weights were up by 5% and feeding also increased by 2%. America has reduced their harvest around 1%. Chile dropped 4%. There is some increased competition between coho and Atlantic salmon. So coho is limiting production capacity for Atlantic salmon. In Canada, there was strong development, especially on the west coast, but also some accelerated harvest due to biological issues. Feeding in Chile and Canada were both down with 7% in this quarter. If we look at where the volumes were sold, sold volumes increased 7%. Demand is Solid across Europe, U.S. and Greater China with the sold volumes increasing 11%, 4% and 17% respectively. If we look at the U.S. market, the local supply increased in this quarter with around 30% to around or corresponding to around 8,000 ton of whole fish equivalents mainly supplied from Canada and North America. European exports to the US declined almost 10% in this quarter, while Chilean export increased by 5%. Latin America had also strong growth, with Brazil growing with 10%. The spot price in this quarter for superior 4-5 kg was 74.15, broadly stable year-on-year, but 16% lower compared to the first quarter. Prices have increased now from the beginning of the third quarter, which is a bit earlier than usual, and this also has continued into August, supported by strong European demand. The large fish premium has been more or less absent for the past three quarters, but we see that that is also starting to pick up again. With a tight supply ahead of us and a strong demand, we think that the market outlook in general looks constructive. If we then move on to the P&L, We had stronger revenues and operational EBIT as mentioned before. Revenues in this quarter 1.8 billion and 3.5 for the first half of this year. Operational EBIT year on year increased from 65 to 273 and fair value adjustments were minus 406 million versus minus 187 last year affecting the profit for the period which was negative with 161 million. Operational EBIT year-to-date 816 million close to the full year of last year and earnings per share came out at 2.31 in this quarter and 7.46 for the full year or year-to-date. On the balance sheet, we have a strong balance sheet, unchanged equity ratio of 58%. Property, plant and equipment has increased in this quarter by 123 million, amounting to 7.3 billion at the end of the quarter. Inventories have increased by 448 million and account to 1.2 billion at the end of the quarter, reflecting increased feed and raw material stocks. Especially fish meal inventories are high. As I mentioned before, we have security of self-sufficiency into the second quarter of next year. Biological assets were lower in this quarter due to harvest timing, salmon prices and overall biomass management. Cash flow from operations was 273 million and 727 million for the first half of this year. Operating cash flow covered investments and dividends during the first half of this year. Investments remain focused on capacity, biological resilience and efficiency at a similar cash flow level as in the second quarter last year. The cash at the end of the period was around 327 million. Our net debt has increased during the quarter from 3.8 billion to 4 billion. The increase reflects investments, working capital and dividend payments. Liquidity remains strong, supported by 1.3 billion in undrawn bank facilities and also we have an undrawn accordion option. Then I will hand over to our CEO Regin Jacobsen to go through the operations and outlook.

Good morning. Let me start with what fundamentally differentiates bakkarfrost. We believe that Backerfrost has one of the most integrated value chain in the salmon industry from feed, fresh water, to farming, harvesting, processing and sales. This gives us in-house expertise and the ability to coordinate decisions across the business. And I think this is especially valuable now with the current feed market where prices have risen sharply and some raw materials are less available. Through Havsbrun, our sourcing formulation and production expertise supported by a strong inventory position gives us greater flexibility to adapt and secure supply while protecting fish health and product quality. Knowledge is shared across the value chain to improve biological performance, quality and long-term costs. All our farming sites in the Faroe Islands and Scotland have obtained ASC certification and the second quarter shows both sites as strong performance in the Faroe Islands demonstrates the potential of this model while Scotland requires further improvements. This integrated operational model supports our resilience, adaptability and long-term competitivity. If you then look to the FOF segment, we see another strong quarter. The feed sales were broadly unchanged year on year, 37.4 thousand ton. For the first half of the year, feed sales increased approximately 6% to 72.8 thousand ton, reflecting the strong biology growth in our operations. All feed sold during the quarter was sold internally. And this illustrates the increased strategic importance of Hafsbrunn and the farming operations, which continues to grow. Marine raw materials accounted for 109,000 tons, 32% below the second quarter last year. And for the first half, we sourced 161,000 tons compared to 269 last year. Consequently, there were no external fish meal or oil sold during the quarter. Everything went to internal use and inventory buildup. Despite the lower sourcing, the operational EBIT increased by 30 million Danish kroner to 119 and the operational EBIT margin increased from 13 to 20 percent. We are, however, seeing a clear increase in the price of marine feed ingredients and therefore we We don't see that our operation is insulated from this inflation. It gives us flexibility in half sprung, in sourcing formulation, in inventory management and the timing of production than most other farmers have. So our current fish meal inventory from sourcing in the first half is expected to support feed production into Q2 27. Freshwater, Scotland. The key priority at Appelkross remain to control, ramp up the operation. The number of smalt increased in this quarter from 0.9 million last year to 3.9 this year. For the first half of 26, 4.9 million smalt have been transferred compared with 1.5 last year. The average transfer weight at all Scottish malt was 137 g, while smalt produced at Applecross was 219 g. The difference reflects the mix between internally produced and externally sourced smalt. The Applecross operation is now stable. Biosecurity has improved and is strong. and both the number of fish in the hatchery and the quarterly production are at their highest level so far. Capacity, however, is capacity utilization, however, is still not reached target. We are at around 35% at the moment, expected to reach full production of full stock around second quarter next year. The operational loss was reduced from 72 million last year to 30 million this quarter. The key focus is consistent production, smalt robustness and post transfer performance. We remain on track for total Scottish smalt transfer of 10 million this year. Uppercross is expected to produce smalt with between 200 and some batches up to 400 gram this year, while the average for all Scottish malts transferred this year is expected to reach 179 gram. The continued ramp up at Applecross is fundamental to reduce biological risk in Scotland. Larger and more robust malt will shorten the marine production cycle and progressively improve both biology and costs. The overall biological performance in Scotland was stable during the quarter. Generally good growth and improved survivability and feed conversion year on year. Most sites developed well. However, a specific batch of externally supplied smalt caused biological challenges at Skien Doob and in-locks driven. Incident-based cost amounted to DKK 31 million compared with DKK 39 million last year. Although the absolute incident cost was lower, the financial impact per kilo was significant because of the lower volume harvested in this quarter. Harvest volume dropped 55% to 3.1 compared with 7,000 ton last year. The lower volume is a consequence of our de-risking strategy while we establish sufficient production of large, high-quality smolt. The average weight of harvested fish in Scotland, however, in this quarter was 5.2 kilogram. So the operational EBIT was minus 139 million this year compared with minus 127 last year. If you turn to page 30, I can demonstrate the bridge. If you look at the Scottish numbers, The operational output per kilogram declined from minus 18 to minus 44. Price and sales mix improved by DKK 2.6. but was more than offset by higher ringside cost, mortality impact, fallow costs. We have a lot of sites that are not being used, so fallow costs are important. So with 55% lower volume means that fixed costs, vessel costs, and harvesting costs are quite high compared with the volume. Although the incident-based costs were lower in absolute terms, the negative impact per kilo is very high. And then the biological challenges in this LOX-driven smolt patch also play a significant role. So going back to page 20, then we go to... The biomass in the sea as we see on this graph on the bottom of the chart is developing steady with the red curve going down. So survivability is good at the moment. So hopefully we can see a more steady development. However, the volume will be low this year, 20,000 ton. Next year we will see a much better volume and with a better small size we expect that will be a change in our operation in Scotland from 27. So going to freshwater in the Faroe Islands. The Faroese freshwater operation continued to scale and remains the foundation for the future marine growth. We transferred 5.6 million smolt in the second quarter, 4% up from last year. First half of 26 transfers increased by approximately 10% to 9.5. The average transfer weight in the quarter was 427 gram compared with 464 last year. However, the average for the full first half increased to 467 from 447 last year. The operational EBIT was broadly stable at 82 million and the operational EBIT margin remained strong at 30%. Post-transfer survivability continues to track at high level and close to the upper end of the historical range. This is an important indication of high quality smolt and a good focus with our teams. We remain on track with our guidance of 20 million to be transferred this year. Operation in the new hatchery in Skalaveg has been started. We started in June with the first eggs and we expect to release the first smalt by the end of next year. This increases our smalt capacity in the Faroes from 18 to 24.4 million smalt of 500 grams. So the focus is large smalt, robust smalt, shorter production cycles at sea, which lower the biological exposure and more efficient utilization of farming sites, which we also now see start to evolve in the Faroes. So turning to farming Faroes, the Faroese farming operation delivered a strong operational quarter. Volume increased by 67% to 26.7 thousand ton, compared with 16.000 ton last year. The average weight increased 11% to 5.5 kilos. The operational EBIT increased from 4 million last year to 109 this quarter. The operational EBIT per kilo was NOK 5.96 compared with NOK 0.37 last year. Ringside costs were reduced by approximately 4% from 31.10 to 29.96 per kilo. The Ebit Bridge on page 30 shows lower ringside cost of 266 and price impact of 115. Strong biology, higher harvest weights and 67% higher volume provided better throughput and more efficient cost absorption. So that is the bridge from 024 to 406 in the Pharos. The biomass in the Pharos is around steady at 51.5, but quarterly feeding is increased by 5%. Sea lice are well controlled, mortality remains low and improved planning of stocking and following periods is contributing to shorter cycles and more efficient farming operation. So in the first half we have harvested 51.9 thousand ton which is 54% of the full year guidance of 97,000. The services in the Faroes had a high activity and delivered a strong financial result increasing to 35 million from 17 last year and 15% margin up from 8% last year. The segment includes fish transport, freshwater treatment, farming support, harvesting, packaging and waste to biogas production. These activities are not only standalone services, they are essential enablers for the biological operational performance of our farming operation. Our dual freshwater treatment vessels continue to provide efficient treatment of sea lice and gill related challenges. As biomass activity increase, utilization of these vessels are also improved. So going to the sales and other segment, WAP, we had a strong quarter, revenues increased 30%, or the volumes increased 30% to 29.9 thousand ton, whole fish are 21%, while volumes to WAP in Faroes increased by 71% to 6.6 thousand ton. The WAP share of the fairways volumes increased slightly to 25 compared with 24% last year. Revenues increased 34% to almost 3 billion and operational EBIT increased 17 million to 114. Operational EBIT per kilo declined from 6.55 to 5.60. This reflects the higher global availability of superior quality and large salmon, which continue to put pressure on prices, on premiums. Our geographical diversification continued. For ferry salmon, the share of sales to the North American market increased to 31% this year, which is probably the highest. And this year to Asia increased to 15%. The share in Western Europe declined from 52 to 47. The Scottish sales mix was more concentrated in Europe during this quarter. This reflects also the drop in volume in Scotland in this quarter. So going to outlook, we see limited supply growth going forward. Global harvest volumes increased in this quarter approximately 3%, while the volume supplied to the market increased by 7%. The difference was mainly related to inventory movements. The supply growth comes on top of the 18% last year. So this is a quarter with a high volume, especially because of the 18% last year. The supply outlook is now more balanced with only 1% growth in global harvest volumes in the second half of 26 versus last year. Especially the Americas harvest volumes are expected to decline by around 10% in the second half of the year, mainly reflecting the development in Chile. Global supply is expected to remain limited in 27, constrained by biological regulation capacity limitations. Small transfer in Norway seems to be going slightly down this year compared with last year. Together with continued demand growth, this should gradually tighten the market balance and provide stronger support for summer prices. Demand remains strong and broad-based across markets. particularly in Asia and Europe, but we also see a strong demand in the US. Lower salmon prices are stimulating consumption while underlying structural demand continues to grow. Combined with moderate supply growth, this supports a progressive tighter market balance. So with supply growth normalizing and demand remaining strong, the market balance is expected to tighten progressively and support more price, stronger prices going forward. Our guidance for this year remains on 117,000 ton. 97 from Faroes and 20 from Scotland. We have in the first half delivered 61.2, corresponding to 52% of this volume. So 48% remains. The fairways operation at 51.9. The remaining fairways harvest is relatively evenly distributed in the third and fourth quarter. A bit more in the fourth. Scotland harvested 9.3 in the first half. and therefore a bit more in the second half. At the moment, 6.8 are planned for fourth quarter. We also maintain the small guidance of 20 million in Faroes and 10 in Scotland. For 26, we intend to have contracts covering approximately 15 to 25% expected combined harvest volume. This provides some We expect lower production volumes for fish meal and fish oil compared with last year, primarily due to lower availability of raw materials. Feed production is expected around 175, which is up from last year. The guidance remains dependent on biological environment and market developments. Based on the strong ferries performance, the Uppercross ramp up on the biomass development in Scotland, we currently maintain the volume guidance. Our 5 million investment program remains unchanged. There are some delays in some of the plans also because of the market development in 26 and 25, which has been a bit weaker than expected. But our target remains at 145,000 tons in 28 and 162,000 by 2030. The program includes 2.2 billion investment in farrows, 1.3 in Scotland, and 1.6 of shared farming services. In the farrows, the main components remaining are the sculler catcheries and the feed capacity. In Scotland, the investments are covering investments in increased capacity of processing and general farming assets. So for the full period, we remain our guidance on investment. Thank you. That's all. And then we are open for questions.

Hi, Alex Ochner, D&B Carnegie. So in terms of the meal inventory you have until Q2 2027, is the volume significantly higher than normal? Or is it because of the changed formulation that you now have a longer runway? And also what's the status on the fish oil as well?