Salmon Evolution, on track for profitable farming operations in Q2 2023

"2022 was a year of radical change for Salmon Evolution," the land-based salmon producer says following its Q4 results. Photo: Salmon Evolution.
"2022 was a year of radical change for Salmon Evolution," the land-based salmon producer says following its Q4 results. Photo: Salmon Evolution.

The Norwegian land-based salmon farming company this morning presented its Q4 results for 2022. Salmon Evolution closed its start-up year with a turnover of NOK 47.68 million and operating profit before biomass value adjustment was NOK -74.67 million. After completing its first harvest with solid results, the company has assured that it is on track for profitable farming operations in Q2 2023 and steady state production from late Q3 2023.

Biological performance exceeded expectations

"2022 was a year of radical change for Salmon Evolution". This is how the land-based salmon producer sums up its fiscal year last year. Following the marked timeline, it began with the smolt release of batch 1 in March and was capped off with the full harvest of its first batch in early November with excellent results.

"Through this great achievement, the Company has demonstrated that it is possible to produce salmon on land, up to full harvest weight, on an industrial scale, with strong biological performance and with the end result of an excellent quality product", they now say when presenting the results. Proof of concept demonstrated for them, as Trond Håkon Schaug-Pettersen, CEO, then told WeAreAquaculture.

"Although starting up a facility like this is a huge task that involves a lot of learning and fine-tuning at the beginning, the biological performance has exceeded expectations. In addition, the company is pleased to note that mortality levels have been very low, with the latest batches outperforming even batches 1 and 2", the statement continues. Throughout the past year, the company has gradually increased production and a total of four batches have been stored at Indre Harøy, the last of which, in December, was a 'full size' batch.

Salmon Evolution's first smolt release, March 2022. Photo: Salmon Evolution.

The next smolt release is scheduled for this February. During 2023 Salmon Evolution will release smolt every two months ensuring that regularity in harvest volumes will gradually increase in the coming quarters. The target is to harvest Batch 2 during the second quarter and reach stable production levels from the end of the third quarter, with an annualized production of 7900 tons of HOG from Indre Harøy Phase 1.

Q4 highlights

As mentioned in Q4 Salmon Evolution fully harvested its Lot 1. Harvest volume was ~340 tonnes HOG at avg. weight of ~3.75 kg HOG (~4.5 kg LW), according to the company with "excellent product quality confirmed by industry leading superior share of 96%". Batch 2 is scheduled for harvest in Q2 2023, and the production ramp-up continues as planned for them with batches 3 and 4 stored in October and December.

The company – which in this Q4 also appointed new CEO and new CFO – has also reported that preparations continue for phase 2 of its Indre Harøy facility. All buildings and structural installations are now complete and construction work during the fourth quarter focused on equipment installation, piping, systems integration, and commissioning. As the project is nearing completion, they expect the remaining capital expenditure for phase 1 to be moderate, and, concerning phase 2, the company has made no contractual commitments and maintains full flexibility on timing and capex.

Moreover, Salmon Evolution has reported that it is in advanced discussions with banks for phase 2 debt financing. "The feedback from banks has been very positive and the company expects both significantly higher leverage for phase 2 compared to phase 1 as well as improved overall terms and cost", the release states.

"Going into 2023 most analysts expect low single digit global supply growth which should support a scenario with strong salmon prices", it continues. "With Salmon Evolution now in the process of ramping up production, the Company should be in a good position to benefit from this over the course of 2023".

Growth plan continues

With the completion of phase 1 during the first quarter of 2023 and after almost a year of successful farming operations, Salmon Evolution ensures that it is uniquely positioned to execute its growth plan and consolidate its position as a world leader in land-based salmon farming. That growth will include Indre Harøy in Norway, but also Yangyang in South Korea, and later in North America.

For the K Smart project in South Korea, activities during the fourth quarter continued to focus on design and engineering activities. Work is also actively underway with permitting processes and significant resources have been dedicated to documenting the environmental impact of the project. "Contrary to Norway, land-based salmon farming is a new industry in South Korea and regulatory processes takes time, but the company is continuing to experience strong support from both local, regional and national stakeholders and expect clarification on several key permits over the coming months, allowing for construction start of grow-out facility during 2023", they explain.

Regarding North America, the company continues to evaluate selected potential production sites on both the U.S. and Canadian sides of the border and will use the coming quarters for site selection and initial site verifications. "It is expected that the site verification and relevant regulatory approval processes will take around three years, allowing for construction start in 2025 or 2026, upon which the plan is to build a full scale 31.5 tonnes HOG 'Indre Harøy' facility drawing on the experiences learned in both Norway and Korea", they report.

Following its Q4 2022 results, Salmon Evolution is optimistic about the future. Photo: Salmon Evolution.

In summary, this is how Salmon Evolucion sees its future after Q4 results: "Looking further ahead, the Company continues to see a significant demand growth potential for salmon and the Company remains firm in its belief that land-based farming will need to play an important role alongside conventional farming for the industry to be able utilize the demand potential", they say.

About Salmon Evolution

Salmon Evolution is a Norwegian land-based salmon farming company targeting a production capacity of 100,000 tonnes HOG by 2032. The company's core focus is on extending the ocean's potential by transferring the best preconditions offered by the sea to farm fish on land through its chosen hybrid flow-through system technology (HFS). Its first production facility is located at Indre Harøy on the Norwegian west coast. The company has also entered into a joint venture with Dongwon Industries where the parties will develop, construct and operate a land-based salmon farming facility in South Korea. In addition, Salmon Evolution has initiated a process to establish a land-based salmon farming operation in North America.

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