Bakkafrost Q4 results: profits up, harvest volumes down

The Faroe Islands-based salmon farmer reports disparities in performance between its Faroese and Scottish operations during 2023, as the company reduced harvest volumes to focus on improving biology over the longer-term.
Bakkafrost publishes its fourth-quarter results for 2023.

Bakkafrost publishes its fourth-quarter results for 2023.

Photo: Bakkafrost.

Faroe Islands-based salmon farming giant Bakkafrost has seen improvements in profits, although harvest volumes reduced during the fourth quarter of 2023.

Presenting the quarterly results, CEO Regin Jacobsen said "Bakkafrost delivered strong results in the fourth quarter 2023 with improved operating margin."

"Markets have been strong, with high demand in all regions. Bakkafrost salmon was well appreciated with good premium in the market, especially strong development in North America, which increased to 25% of the salmon from Bakkafrost Faroe Islands," Jacobsen noted.

Increase in profits for 2023, despite downturn in Q4 operational revenue

Bakkafrost achieved an operating revenue of DKK 1.562 billion (USD 231.6 million / EUR 216.16 million), for Q4 2023, marking a 90% decrease year-on-year, compared with DKK 1,705 million (USD 255.75 million / EUR 238.7 million) in Q4 2022.

However, the company reached a full-year revenue of DKK 7,141 million (USD 1,071.15 million / EUR 999.74 million) in 2023.

Operational EBIT, meanwhile, stood at DKK 356 million (USD 53.4 million / EUR 49.84 million), down 17% year-on-year, impacted by reduced harvest volumes in the Faroe Islands and Scotland, partly due to deliberate decisions by the company to enhance fish quality and biomass.

Lower harvest volumes overall, with 80% drop in Scotland

In 2023, harvest volume in the Faroe Islands reached 16,000 tonnes, a decrease from 19,000 tonnes in the previous year. This reduction aligns with Bakkafrost's strategy to improve biological conditions, resulting in a temporary reduction in harvest to achieve higher weights and values in future sales.

In Scotland, Bakkafrost's harvest was drastically reduced to 1,000 tonnes from 5,200 tonnes.

Commenting on the company's change of strategy, Jacobsen said he was proud of the progress made by focusing on fish health and welfare in Bakkafrost's Faroe Islands operations, noting that the average monthly survivability for the full year was 99,39% with average harvest weight of 4.6 kg HOG and 90% superior grade.

"In Scotland our journey to robust operation is still in progress - last year the monthly survivability was 98,29% with average harvest weight of 4.2 kg HOG and 89% superior grade," Jacobsen said.

"After a troublesome third quarter in Scotland with biological challenges, the fourth quarter gave opportunities with good biological development to grow the fish, resulting therefore in reduced harvest volumes, concentrating on growing into H1 2024 to larger sizes," he added.

Mixed market environment in Q4

Bakkafrost faced a mixed market environment in Q4 2023, with global salmon prices showing variability. The average price for superior salmon increased by 12% in Norwegian Kroner, though when adjusted for currency, prices remained relatively stable.

Market supply was lower than expected, with high availability of smaller and downgraded fish impacting margins, especially for larger fish due to consumer resistance against high pricing.

Sales to China surged by 29%, continuing a trend of increased market share, while sales to Japan and other Asian markets declined by 20% due to high air freight costs and consumer price sensitivity. By contrast, Latin America, particularly Brazil, showed a 14% increase in supply uptake.

Bakkafrost continues with CAPEX and sustainability projects

Cash flow from Bakkafrost's operations stood at DKK -112 million during Q4 2023 (compared with DKK 382 million in Q4 2022), and DKK 1,023 million for the full year - down from last year's DKK 1,202 million.

However, the company's investment activities remained robust during the fourth quarter, expending DKK -302 million towards future growth and operational efficiency, including primary investments in hatchery expansion and a new feed line. For 2023 as a whole, the cash flow from investments amounted to DKK -1,044 million, compared to DKK -1,255 million in 2022.

Presenting the results, CFO Høgni Dahl Jakobsen highlighted Bakkafrost's ambitious CO2 reduction targets, approved by the Science Based Targets initiative (SBTi), aiming for a 50% reduction in scope 1 and 2 emissions by 2030.

"It's a huge challenge - a challenge that we feel is best solved in collaboration with suppliers [...] to join forces and find solutions together," commented Jakobsen.

After the "huge success" achieved by engaging with Faroese suppliers in 2022, the company held a further Supplier Day in Scotland in 2023, involving 42 of its largest suppliers from Scotland, the rest of the UK, and Norway, Jakobsen said.

"Now this collaboration has kickstarted, and we already see some positive outcomes of the engagements," the CFO added.

Bakkafrost's current sustainability collaborations include a partnership with Faroese energy company SEV for a wind farm project, and participating in the first transatlantic flight powered by 100% sustainable aviation fuel.

Improved outlook for 2024's harvest volumes

Looking ahead, Bakkafrost anticipates stable supply and prices in the salmon market, with a 2% growth expected in 2024. The company said it is focused on diversifying its market presence and has ceased trading with Russia following the outbreak of war in Ukraine.

During 2024, significant investments are planned for both the Faroe Islands and Scotland to enhance operational efficiency and sustainability, including hatchery expansion.

The company indicates a "strong outlook" for its Faroese farming operation, and says it expects to continue increasing harvest weights and improving farming KPIs during the next quarters. In its Scottish operations, the company minimised its Q4 2023 harvest volume, allowing fish to grow larger for harvest at higher harvest weights and value in 2024.

Bakkafrost thus expects to harvest around 91,000 tonnes of gutted weight in 2024, with a strategic focus on increasing smolt release sizes and improving farming operations.

Jacobsen said that the company's strong financial position has led the Board of Directors to propose a dividend of DKK 8.70 per share at the upcoming Annual General Meeting.

Related Stories

No stories found.