Bakkafrost posts "satisfactory" Q3 results amid falling salmon prices
Faroese salmon farmer Bakkafrost Group delivered total operational earnings before interest and taxes (EBIT) of DKK 251.8 million (USD 39.7 million, EUR 33.8 million) in the third quarter of this year, down from DKK 254.7 million (USD 40.1 million, EUR 34.2 million) in Q3 2016.
Bakkafrost’s farming segment delivered an operational EBIT of DKK 216.7 million (USD 34.1 million, EUR 29.1 million) in Q3 2017 – down from DKK 294.3 million (USD 46.4 million, EUR 39.6 million) a year previously. Its value-added processing (VAP) segment, which produced 5,209 metric tons (MT) of products, posted an operational EBIT of DKK -4.5 million (USD -708,883, EUR -604,810), up from DKK -46.7 million (USD -7.4 million, EUR -6.3 million) in Q3 2016.
The company said the reduced salmon spot prices over the three-month period had a negative effect on its farming segment’s profits but had improved the fortunes of its VAP segment.
“Although the price of salmon decreased in the quarter, Bakkafrost had a satisfactory result. The salmon spot price in the third quarter this year was significantly lower than in the same quarter last year. We still have a good outlook for the salmon market, but there is a risk for lower salmon prices in the future,” Bakkafrost CEO Regin Jacobsensaid.
In total, Bakkafrost harvested 11,585 MT gutted weight of salmon in the last quarter, up from 10,664 MT in Q3 2016. Its total harvested volume for the first nine months of this year was 43,145 MT, up from 34,602 MT a year ago. Its harvest guidance for 2017 as a whole has been increased by 1,000 MT to 54,500 MT, and in 2018, it expects to harvest 51,000 MT.
Bakkafrost has signed VAP contracts covering around 53 percent of the expected harvested volumes for the rest of 2017, and is now negotiating new contracts for 2018.
Its long-term strategy is selling around 40 to 50 percent of the harvested volumes of salmon as value-added products at fixed price contracts to reduce the financial risk associated with fluctuating salmon prices.
The price level on long-term contracts is higher than ever before, but there are no indications that this should decrease significantly, it said.
Bakkafrost’s fishmeal, oil and feed (FOF) segment delivered earnings before interest, taxes, depreciation and amortization (EBITDA) of DKK 79.5 million (USD 12.5 million, EUR 10.7 million) in the last quarter, with its sales of fishmeal reaching 22,320 MT. Some 20,398 MT of feed was used internally.