Bakkafrost is the largest salmon farmer in the Faroe Islands and the second-largest salmon farmer in Scotland.
Photo: Bakkafrost.
Although the good forecasts of its latest trading update seemed to indicate otherwise, Bakkafrost CEO, Regin Jacobsen, was straightforward as he began his comments on the results of the Faroese company's Q3 2024 report this week: "We are not satisfied with our financial results this quarter, primarily impacted by low salmon prices," he said.
In the third quarter of 2024, the operating revenue of the salmon producer with operations in the Faroe Islands and Scotland amounted to DKK 1,737 million (EUR 232.9 million / USD 250.5 million), which is a decrease of 6.5% compared to the same period last year when it amounted to DKK 1,859 million (EUR 249.2 million / USD 268.1 million).
Meanwhile, the Group's operating EBIT was DKK 173 million (EUR 23.1 million / USD 24.9 million), down 35.6% from the DKK 269 million (EUR 36 million / USD 38.8 million) Bakkafrost achieved in Q3 2023.
After deducting taxes and other expenses, the company said the final result for Q3 2024 was DKK -116 million (EUR -15.5 million / USD -16.7 million), a poor result especially when compared to the same period last year, Q3 2023 when it reached DKK 219 million (EUR 29.3 million / USD 31.6 million).
Looking back over the first nine months of the year, the figures are slightly better in some indicators, although not all are positive.
Talking about operating revenue, from January to September it amounted to DKK 6,010 million (EUR 805.9 million / USD 867.3 million), 7.7% higher than in Q3 2023; operating EBIT was 6.9% higher, DKK 1,270 million (EUR 170.3 million / USD 183.3 million); and the final result was DKK 168 million (EUR 22.5 million / USD 24.2 million), a decline of more than 70%.
As mentioned above, Bakkafrost thinks its poor third-quarter financial results were mainly due to low salmon prices. However, looking at the full year 2024, its CEO, Regin Jacobsen, added other reasons that also contributed to this.
"The strike in May combined with unplanned harvest of A-19 impacted negatively our ability to adapt to market needs to optimize market value for our products," he said. "The early harvest of remaining fish from farming site A-19, where the ISA virus was detected in two pens back in May had a negative financial impact."
Jacobsen added that nevertheless, the company is pleased with the effective response and strong procedures, which successfully contained the virus. "This challenge is now behind us, allowing us to focus forward," he stated.
As already happened in Q1 2024, the performance in the two regions where Bakkafrost operates was also uneven in Q3 2024. In its home country, the Faroe Islands, revenues were DKK 1,420 million (EUR 190.4 million / USD 205.4 million), -12.3% compared to Q3 2023, while operating EBIT was DKK 310 million (EUR 41.5 million / USD 44.8 million), -42.8% than in the same period last year.
Meanwhile, in its Scottish operation, Bakkafrost achieved revenues of DKK 317 million (EUR 42.5 million / USD 45.8 million), this means an increase of 36.3% over the third quarter of last year while operating EBIT was DKK -138 million (EUR -18.5 million / USD -19.9 million), which, even in red, means an improvement of 47.5% over Q3 2023.
"In the Faroe Islands, we have seen very good biological performance. This is evident in the strong growth, low mortality, and increased harvest weights. Our hatcheries have also delivered excellent operational results, enabling us to increase our smolt transfer expectations for this year, with further increases planned for next year," CEO Regin Jacobsen explained.
"In Scotland, we conclude that our de-risking strategy has worked. Exceptional mortalities have reduced by more than 80% compared to last year, harvest weights have increased, and sea lice levels are all-time low — just like in the Faroes," he continued.
"We are making steady progress in ramping up production at the Applecross hatchery to produce large high-quality smolt and expect start transfer of 200g smolt in Q4," Jacobsen added. "Hereafter, we expect to only transfer high-quality smolt above 200g."
Regarding the outlook, Bakkafrost's CEO said that, in order to maintain a strong competitive position, the company is prioritizing cost management and aligning its capacity with operational needs.
"In line with this, we have implemented several cost-saving measures and capacity adjustments in Scotland, including the closure of the processing facility at Marybank in July 2024," Jacobsen said, cautioning, however, that the full effects of these measures were not yet visible in this third quarter.
As said at the beginning, low salmon prices have affected Bakkafrost's Q3 financial results, however, Regin Jacobsen was also optimistic about the trend in the coming months.
"The salmon market has been weaker in this quarter with low salmon prices throughout the quarter, but we look forward to a more favorable price environment – especially in H1 2025, where the supply will be weaker of high-quality salmon," he stated.
"Our expected harvest next year is 100,000 tonnes, of which we plan to allocate around 15% for VAP contracts," Bakkafrost CEO concluded.