Faroese salmon producer Bakkafrost Group delivered total operating earnings before interest and taxes (EBIT) of DKK 253.6 million (USD 38.8 million, EUR 34.1 million) in the first-quarter of this year, up from DKK 235 million (USD 36 million, EUR 31.6 million) in the corresponding period of 2015.
The fully integrated company harvested 10,934 metric tons (MT) of salmon in Q1 2016, an increase of 12 percent year-on-year, with its farming segment delivering an operational EBIT of DKK 261 million (USD 40.1 million, EUR 35.1 million), up 34 percent. This corresponds to NOK 30.45 (USD 4.68, EUR 4.09) per kg.
Also in the last quarter, Bakkafrost’s value added product (VAP) segment, which produced 3,160 MT in the quarter, suffered an operational EBIT of DKK -25 million (USD -3.8 million, EUR -3.4 million), down from DKK 22 million (USD 3.4 million, EUR 3 million) in Q1 2015. The group’s fishmeal, oil and feed segment delivered an operational EBITDA of DKK 69 million (USD 10.6 million, EUR 9.3 million).
“The expected decrease in supply of farmed salmon in 2016 and the stable increasing demand has resulted in high price increase for the past months. The first-quarter was overall satisfying for Bakkafrost, but when the salmon price increases sharply during a short period, the circumstances for the VAP segment become difficult,” said Regin Jacobsen, CEO of Bakkafrost.
Jacobsen added that the next six months will be an exciting time for Bakkafrost, as two of its major investments – a hatchery at Vidareidi and the combined harvest/VAP factory at Glyvrar – will be completed.
“These investments play an important role in strengthening the competiveness of the company and will improve Bakkafrost’s contingency plan, as well as the salmon farming in the Faroe Islands in general, significantly,” he said.
The harvest operation is expected to start in Q2 2016, while the VAP operation will start in second half of the year. Production at the expanded hatchery will also begin in Q2.
Bakkafrost expects to harvest a total of 48,000 MT of gutted weight salmon in 2016. It released 1.9 million smolts in Q1 2016, down from 2.2 million smolts in the same period of 2015. However, its forecast for smolt release in 2016 is 10.4 million pieces, the same as last year.
Its long-term strategy is to sell around 40 to 50 percent of the harvested volumes of salmon as value-added products on fixed price contracts. These contracts last for six to 12 months. Bakkafrost has signed contracts covering around 63 percent of the VAP capacity for the rest of 2016, which corresponds to around 25 percent of the expected harvested volumes for the rest of 2016.
Meanwhile, it’s expected that the North Atlantic blue whiting quotas will be reduced this year, which will see its fishmeal and fish oil production volumes fall in 2016, albeit from relatively high volumes in 2015.
