Bakkafrost’s Q1 profits up despite ‘eventful’ start to the year

Published on
May 24, 2017
Bakkafrost salmon processing

High prices and a rise in the volume of salmon harvested helped Bakkafrost Group deliver total operational earnings before interest and taxes (EBIT) of DKK 335.5 million (USD 50.5 million, EUR 45.1 million) in the first-quarter of 2017, up from DKK 254 million (USD 38.2 million, EUR 34.1 million) in the corresponding period of the previous year. 

The Faroe Islands-based Atlantic salmon producer’s harvest increased to 13,158 metric tons (MT) gutted weight in the last quarter from 10,934 MT in Q1 2016, while the average price for Q1 2017 was up 18.3 percent year-on-year to EUR 7.28 (USD 8.15) per kg. This price was, though, 1.5 percent less than in Q4 2016.

Consequently, Bakkafrost’s Farming segment achieved an operational EBIT of DKK 373.2 million (USD 56.1 million, EUR 50.1 million) for Q1 2017 – up 43 percent year-on-year from DKK 261 million (USD 39.3 million, EUR 35.1 million) – and which corresponded to NOK 34.27 (USD 4.09, EUR 3.65) per kg. 

Meanwhile, its Value Added Products (VAP) segment’s operational EBIT made an operational EBIT loss of DKK 53 million (USD 8 million, EUR 7.1 million) in the last quarter, thereby doubling its loss of DKK 25 million (USD 3.8 million, EUR 3.4 million) in Q1 2016. 

Although the sales prices in the VAP segment increased it continued to have negative results, primarily due to the high salmon spot prices, the company said. 

The performance of its FOF segment (fishmeal, oil and feed) also declined with operational earnings before interest, taxes, depreciation and amortization (EBITDA) of DKK 45.1 million (USD 6.8 million, EUR 6.1 million) for Q1 2017, down from DKK 69 million (USD 10.4 million, EUR 9.3 million) a year previously.

“The first quarter of 2017 was an eventful quarter for Bakkafrost in many ways. In January, Bakkafrost started the VAP production in the new combined harvest/VAP factory at Glyvrar, which was the last of three operations to start up at the premises at Glyvrar since 2014. The two previous are the packaging operation and the harvest operation, which started up in 2014 and 2016 respectively. There were challenges in the farming operation in this quarter, as ISA-virus (infectious salmon anaemia) was confirmed on one farming site. Since ISA suspicion arose in July 2016, Bakkafrost has monitored the development at the farming site closely together with the authorities. Timely action has been taken and all fish harvested immediately,” said Regin Jacobsen, CEO of Bakkafrost.

In January this year, Bakkafrost chose to harvest the two cages at farming site A-73 Hvannasund Nordur with suspected pathogenic ISA-virus. Then in mid-March, it elected to harvest the whole site early as a precautionary action. 

At the end of March, the presence of ISA at the site was confirmed, so Bakkafrost accelerated the harvest.

The harvesting of the afflicted site ended on 12 April 2017 and the average size of the resultant salmon was just below 3 kg gutted weight.

Bakkafrost expects to harvest 53,500 MT of gutted weight salmon in 2017. It also expects to release 11.5 million smolts, compared with 11.7 million smolts in 2016 and 11.3 million smolts in 2015.

Contributing Editor reporting from London, UK

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