Bakkafrost Q1 2024: uneven performance in the Faroe Islands and Scotland

Although positive overall thanks to good results in the Faroe Islands, jellyfish and startup issues in a smolt facility in Scotland have weighed down Bakkafrost's results.
Bakkafrost salmon farm in Funningsfjørður, Faroe Islands. In its results presentation today, the company said its Faroe Islands segment performed better than Scotland in Q1 2024.

Bakkafrost salmon farm in Funningsfjørður, Faroe Islands. In its results presentation today, the company said its Faroe Islands segment performed better than Scotland in Q1 2024.

Photo: Heinesen Myndir / Bakkafrost.

Bakkafrost Group presented its report for Q1 2024. While pleased with what it described as "strong results," the company also acknowledged an uneven performance between the Faroe Islands and Scotland. In the first quarter of the year, Bakkafrost achieved total operating earnings before interest and taxes (EBIT) of DKK 710 million (EUR 95.1 million / USD 102.4 million), an increase of 25.6% compared to Q1 2023.

Despite this, profit fell by 14.1% to DKK 401 million (EUR 53.7 million / USD 57.8 million), compared to DKK 467 million (EUR 62.6 million / USD 67.4 million) in the same period last year. This breaks the trend from Q4 2023 when Bakkafrost saw its profits increase even after the decline in harvest volumes following its betting on focusing on improving biology in the long term.

Faroe Islands performed better than Scotland

Unlike in Q1 2023 when Scotland's operation boosted Bakkafrost's results, at the start of 2024, the Scottish part of the business weighed down Bakkafrost's overall results. While the Faroe Islands segment posted revenues of DKK 1,594 million (EUR 213.7 million / USD 230.1 million) - this is 18.8% more than in the same quarter last year - in Scotland DKK 612 million (EUR 82 million / USD 88.3 million) was earned, 13.5% less than in Q1 2023.

Regarding the harvest, although a lower volume than in Q1 last year was obtained in Scotland, in the Faroe Islands it was higher than in 2023, compensating for the final result that finally reached 21,557 tonnes of gutted weight (TGW). This represents an increase of 12.8% over last year - 2,459 TGW more -, which also had the advantage of higher prices than in the same period last year.

In his comments on the results, CEO Regin Jacobsen emphasized that much of the company's success in the salmon market is due precisely to Bakkafrost's One Company strategy for producing premium high-quality salmon.

"We are satisfied with our strong results in the first quarter 2024 – especially in the Faroe Islands. Good biological performance in the Faroe Islands and improved biology in Scotland has enabled us to harvest large fish of superior quality and benefit from a salmon market marked with low availability superior quality and large fish," he said.

Challenges in the Scottish operation

"In Scotland the biology has been good at most sites, except for one site with fish previously weakened by a jellyfish encounter," Regin Jacobsen continued to explain the challenges the company has faced in its Scottish operation in the first quarter of the year.

The Faroe Islands-based salmon farmer has not been the only one affected by this problem. Harmful jellyfish had previously been a major problem also in Norway, involving companies such as SalMar or Lerøy Seafood in the fourth quarter of 2023.

As for Bakkafrost freshwater development, in Q1 20214 the performance and quality of the smolts were good in the Faroe Islands, but in Applecross, Scotland, there were some start-up problems in parts of the facility, which still has not been finally commissioned by the company.

"This impacts the ramp-up pace of the overall smolt release this year and the average weights which are is now expected to reach 200g in Q4," explained Bakkafrost CEO. "As we continue to follow our de-risking strategy in Scotland, we plan to harvest around three quarters of the 2024 volume in H1."

Betting on large salmon of superior quality continues

In June last year, Bakkafrost Group announced its intention to radically transform its Scottish business between then and 2028. Bakkafrost Scotland, formerly The Scottish Salmon Company until it was acquired by Bakkafrost in 2019, had faced significant survival challenges over the previous two years. However, while biology was the root cause of its problems, the new management also saw it as the key to its recovery.

Bakkafrost has adopted a 'large smolt' strategy to achieve better survivability and higher production, and as part of that strategy the company aims to have a hatchery capacity of 15 million 500 g smolts by 2027, and it intends to move its entire smolt production to its Applecross plant.

Despite the challenges encountered in the start-up of this plant, and how this will affect its planning, the company remains confident in its commitment to the production of large salmon of superior quality. "The outlook for the salmon market is tight and supportive for continued strong salmon prices in Q2, especially large salmon of superior quality, which both the Faroe Islands and Scotland are able to provide," said Bakkafrost CEO, Regin Jacobsen.

Moreover, in the financial outlook included in the Q1 2024 results presentation, the company states that, given its long value chain and cost-efficient production of high-quality salmon products, the long-term balance of the global salmon market is expected to favor Bakkafrost, which is likely to help it maintain its financial flexibility in the future.

About Bakkafrost

Fully integrated from feed production to smolt, farming, VAP, and sales, Bakkafrost is the largest salmon farmer in the Faroe Islands and the second largest in Scotland. The Group operates sea farming and broodstock operations in both, the Faroe Islands and Scotland, and has production of fishmeal, fish oil, and salmon feed in the Faroe Islands and primary and secondary processing in the Faroe Islands, Scotland, and Denmark. With 1,686 employees , it is headquartered in the Faroe Islands.

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