Scotland boosted Bakkafrost’s results in Q1 2023

Bakkafrost's One Company strategy for producing premium high-quality salmon has materialized in its sales and branding and created extra value.
Farmed salmon from Bakkafrost Scotland. Photo: Bakkafrost Scotland.
Farmed salmon from Bakkafrost Scotland. Photo: Bakkafrost Scotland.

Significant improvements in the Bakkafrost farming segment in Scotland boosted the company's results in Q1 2023. The good results from the Scottish operation offset the difficulties in the Faroe Islands and this, together with the high salmon prices achieved in this first quarter, led the group to achieve operating revenue of DKK 2.05 billion (EUR 275.2 million / USD 300.6 million). "Overall, we are satisfied with the results in this quarter but especially with the improved results in Scotland", said CEO Regin Jacobsen.

According to results presented this week by the company, Bakkafrost Group delivered total operating EBIT of DKK 565 million (EUR 75.85 million / USD 82.82 million) in Q1 2023 and made a profit of DKK 467 million (EUR 62.69 million / USD 68.45 million), both higher than the same quarter last year.

Scotland increased volume by 104%

As mentioned, the significant improvements in Scotland are what drove Bakkafrost Group's results in the first quarter of the year. The company, which acquired Scottish Salmon Company (SSC) in 2019 and renamed it Bakkafrost Scotland in June last year – already saw the first signs of improvements in the fourth quarter.

The application of best practices then significantly improved operations and the trend has continued in Q1 2023. Total volumes harvested in this first quarter were 8,093 TGW (Tons of Gutted Weight) compared to 3,973 TGW last year. This represents a variation in volume of 104%.

"Through this quarter and so far this year, we have maintained strong operations in Scotland. Premium high-quality salmon with our One Company strategy has materialized in our sales and branding and created extra value. Our customers recognize the high quality of our fish, whether it is farmed in Faroese or Scottish origin", stated Regin Jacobsen, CEO of Bakkafrost Group.

The Faroe Islands reduced its volume by 37%

In contrast to Scotland, Bakkafrost's operation in the Faroe Islands had low harvest volumes, which affected the financial results. Total volumes harvested in the first quarter of 2023 were 11,005 TGW compared to 17,459 TGW last year. This change in volume represents a total decrease of 37%.

The company's CEO said this was as expected and emphasized that, on the other hand, biological performance has been good and exceptionally strong in terms of growth rates and feed conversion. "We have had lower average harvest weights in the quarter due to our strong effort to push mortality levels down, as we also have done with sea lice levels. This led to earlier harvest at a lower weight", he claimed.

Nevertheless, Regin Jacobsen, is optimistic about the future. "With the new capabilities gained with our new FSV, Bakkafossur, we expect to increase harvest weights while we continue to secure good fish welfare and low sea lice levels", he said.

VAP segment, pending the possible Faroese 'salmon tax'

The VAP segment also performed well for Bakkafrost in the first quarter of 2023, with positive margins despite high salmon prices. "Salmon prices have been unusually high this quarter, and the supply lower than in the first quarter of 2022. We expect higher supply growth in the second half of 2023 and lower salmon prices", said Jacobsen.

As the CEO of Bakkafrost Group explains, for many years, the company has had a strategy of using around 40% of the harvest volume for value-added production in the VAP segment. However, this could change if the Faroese government ends up approving its proposal to increase the maximum land rent tax rate from 5% to 20%.

If this were to happen, salmon producer Bakkafrost would be one of the hardest hit. That is why Regin Jacobsen said that its strategy of using that 40% of the harvest volume for VAP production, "will be revised depending on the outcome of the Faroese Government's proposal to adjust the revenue tax". He added that this also applies to the previously announced 5-year investment plan. "On our Capital Market Day in Scotland on 6 June 2023, we will present our new 2024-2028 investment plan", he concluded.

About Bakkafrost Group

Bakkafrost is the largest salmon farmer in the Faroe Islands and the second-largest salmon farmer in Scotland. The Group is fully integrated from feed production to smolt, farming, VAP, and sales. It operates sea farming and broodstock operations in both the Faroe Islands and Scotland. Moreover, it 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 1,778 employees and headquartered in the Faroe Islands, the Group has sales and administration offices in Grimsby (UK), Edinburgh (Scotland), Boulogne-Sur-Mer (France), New Jersey (US), and Munkebo (DK).

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