The sea lice problems recorded during the autumn marked the Q4 2023 results of Arnarlax's parent company, Icelandic Salmon.
Photo: Arnarlax / Icelandic Salmon.
"During the fourth quarter, we were reminded that we are working with nature." Bjørn Hembre, CEO of Icelandic Salmon, introduced his explanation of the difficulties the company faced during Q4 2023 with this sentence. The sea lice problems recorded during the autumn ultimately marked the results of the company, which had a high harvest volume partly because it was forced to bring it forward, but also a drop in operating profit due to the higher level of costs associated with the measures needed to deal with them.
But, despite the operational challenges and the key moment in Iceland's aquaculture - with the country embroiled in a debate over the future of open net pens -, the SalMar-owned company spoke optimistically about its prospects for both 2024 and the long term. "We are optimistic about Icelandic Salmon’s future growth, despite recent biological challenges and expected, not yet confirmed regulatory changes," the Icelandic Salmon CEO said.
In Q4 2023, Icelandic Salmon Group harvested 7,219 tons, up 20% versus 6,008 tons in Q4 2022, but also up versus Q3. However, as mentioned, this high harvest volume was partly the result of biological challenges that led the company to harvest early for animal welfare reasons.
However, this was not the only measure Arnarlax's owner Group was forced to take. "We experienced extraordinarily high lice levels on our sites and in Tálknafjörður so high that it resulted in significant mortality and culling of fish," explained CEO Bjørn Hembre during today's results presentation. "We were in a position where we had to delouse all our sites twice and also mitigate the situation by increasing the harvesting due to fish welfare."
Due to the good performance in generation 22, the average weight of the harvest was normal in 4Q 2023, but Hembre acknowledged that the situation will affect harvest volumes in 2024, although they hope the problem will not be repeated or, at least, it will not do so with the same intensity. "We have well evaluated the situation with our neighbour companies and the authorities to implement mitigating measures to limit the risk that this situation will happen again," he said.
In terms of financial results, in the fourth quarter of 2023, the Group recorded revenues of EUR 51.6 million (USD 55.6 million), compared with EUR 51.7 (USD 55.74 million) in the same quarter last year. EBIT was EUR 2 million (USD 2.15 million). This is an EBIT/kg of EUR 0.28 (USD 0.30) significantly lower than in Q4 2022, which was EUR 1.55 (USD 1.67). The main reason for this decline was precisely the higher level of costs related to the aforementioned biological challenges. In Q4 2023, Icelandic Salmon Group booked a one-time cost of EUR 5.2 million (USD 5.6 million); adjusted for this item, EBIT/kg was EUR 1 (USD 1.07).
Regarding sales in the quarter, the company increased them to Asia and Europe, while sales to the U.S. were reduced as markets were temporarily softer. "We still see a strong interest for Icelandic salmon in the market," Bjørn Hembre stated. "The product is known for its high quality, the sustainability features, and quite a few of our customers claim that the best-tasting salmon is the one from Iceland." In addition, although it took place in January, during the presentation he also highlighted the appointment of Linda Gunnlaugsdottir as Arnarlax's new CSO as a milestone within the sales and marketing department.
Moreover, Icelandic Salmon also used this presentation to report that in January 2024 it received a new license for its Gileyri smolt plant for an additional volume capacity of 1,000 tons, implying opportunities for increased production and potential for further expansion. It was also reported that the Group is awaiting approval for a new 10,000-tonne cultivation license at Ísafjarðardjúp, a 4,500-tonne MAB license at Arnarfjörður, and a new MAB utilization scheme for two sites at Arnarfjörður.
Despite being a presentation of last year's Q4 results, Arnarlax's owner Group talked a lot about the future. In the short-medium term, and in line with previous forecasts, the company expects to harvest 15,000 tons in 2024 as a whole. They claim that the 2022 spring generation is performing well and shows significant improvements in key parameters. In the long term, Icelandic Salmon continues to see growth potential of up to 26,000 tons with existing licenses. Moreover, they say, the promising performance of this year's smolt stocking supports this view.
Neither recent biological challenges nor future regulatory changes - expected but not yet approved - seem to dampen Icelandic Salmon's optimism about its future growth. They have learned from the challenges they have faced in recent months and now feel more prepared to act against them quickly and effectively. "I'm pretty sure that we have a much more robust system today than we had last year," Bjørn Hembre said.
"We have implemented effective measures with neighboring farmers to address the biological challenges and maintain an open dialogue with the Icelandic Government to navigate regulatory shifts. Our shared ambition is to grow the industry sustainably. We are committed to continue to deliver value for our shareholders, for our other stakeholders, and for Iceland," the Icelandic Salmon CEO concluded.
About Icelandic Salmon
Icelandic Salmon is the sole owner and parent company of Arnarlax ehf, Iceland's farming company based in Bíldudalur. Fully integrated, from egg to fish delivered to customers in the market, it controls all parts of the value chain. To this end, it has 4 smolt facilities and 7 sites in three fjords in the southern Westfjords of Iceland. All its harvested volume is ASC certified and it has a total maximum allowable biomass of 23,700 tons. Icelandic Salmon is listed on the Euro Next growth market in Oslo and the Nasdaq First North growth market in Reykjavik.