“Challenging” quarter hurts profits, harvests at Bakkafrost

Published on
May 5, 2020

Glyvrar, Faroe Islands-headquartered Atlantic salmon producer Bakkafrost Group delivered total operating earnings before interest and taxes (EBIT) of DKK 248.1 million (USD 36.1 million, EUR 33.3 million) in the first quarter of this year, down from the DKK 267.7 million (USD 38.9 million, EUR 35.9 million) that it posted for the corresponding period of 2019, with the COVID-19 coronavirus contributing to the decrease.

The company also said it was dealing with “significant” market shifts in announcing its group loss for the three-month period ending 30 March was DKK 148 million (USD 21.5 million, EUR 19.8 million), falling from a profit of DKK 212.8 million (USD 30.9 million, EUR 28.5 million) in Q1 2019, while operating revenues climbed by DKK 291.5 million (USD 42.3 million, EUR 39.1 million) to almost DKK 1.26 billion (USD 183.1 million, EUR 168.9 million).

The salmon harvest in the quarter amounted to 17,935 metric tons (MT) gutted weight, with 10,667 MT from the Faroes (down from 13,707 MT in the first quarter of last year), and 7,268 MT from Scotland (8,725 MT in Q1 2019). It acquired a majority shareholding in the Scottish Salmon Company (SSC) in October 2019.

Its Farming segment achieved an operational EBIT of DKK 202.9 million (USD 29.5 million, EUR 27.2 million) in the Faroes, down from DKK 229.7 million (USD 33.4 million, EUR 30.8 million), and DKK 29.7 million (USD 4.3 million, EUR 4 million) in Scotland.

The Value-Added Products (VAP) segment achieved an EBIT loss of DKK 10.8 million (USD 1.6 million, EUR 1.4 million) in the last quarter, compared to a gain of DKK 1.3 million (USD 188,813, EUR 174,232) in Q1 2019. VAP production was up 15 percent year-on-year to 5,408 MT.

Its FOF segment’s (fishmeal, oil, and feed) performance declined with operational earnings before interest, taxes, depreciation, and amortization (EBITDA) of DKK 40.2 million (USD 5.8 million, EUR 5.4 million), down 23 percent on the corresponding period of last year.

“Overall, we are satisfied with the results from this challenging quarter. In times like these, we see the strength in our integrated value chain and in particular having significant production capacity and flexibility in our VAP segment. Swiftly, we have been able to shift volumes from the spot-oriented market towards the VAP segment for the retail market and hereby maintaining a high production.” Bakkafrost CEO Regin Jacobsen said. “The challenges this quarter have been: An unusually stormy January, which reduced the fishery of species, used as raw material by (fish feed plant) Havsbrún, hence reducing production – a severe storm in the end of February, causing a loss of around 1.2 million fish – and then the outbreak of the COVID-19 pandemic." 

Jacobsen said the company is watching the rapidly changing consumer trends in the seafood marketplace to see how it can best respond.

“Since February, COVID-19 has disrupted the salmon market resulting in a drastic drop in the salmon spot price and imposing logistical problems with air transport. Over a few weeks, the demand for salmon has changed in favor of products for the retail segment, but at great harm to the fresh-oriented HORECA (hotel, restaurant, and café) segment,” he said. “It will be interesting to see if the huge number of new consumers, buying salmon from the supermarkets, will be a part of an increased demand for salmon, when the HORECA segment re-opens during the next coming weeks and months.”

The fish losses in February have led the group to revise downwards the Faroese production projection for the year. It now forecasts a harvest of 50,000 MT gutted weight salmon, while Scotland’s harvest is expected to increase to 39,000 MT.

It also anticipates releasing 15 million smolts in the Faroe Islands, compared to 12.7 million smolts in 2019 and 12.6 million smolts in 2018. The smolt release in Scotland is expected to be 10.7 million smolts, compared to 12.4 million smolts in 2019 and 8.6 million smolts in 2018.

Depending on external sales, Bakkaforst also anticipates selling 110,000 MT of fish feed this year.

Photo courtesy of Bakkafrost

Contributing Editor reporting from London, UK

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