Faroe Islands-based Atlantic salmon farmer Bakkafrost Group delivered total operational earnings before interest and taxes (EBIT) of DKK 459.1 million (USD 72.6 million, EUR 61.7 million) in the second-quarter of this year, up from DKK 307.1 million (USD 48.6 million, EUR 41.3 million) in Q2 2016.
With higher activity and volumes in all segments in the last quarter, its operating revenues climbed to more than DKK 1.2 billion (USD 189.7 million, EUR 161.4 million), while its profit increased to DKK 398.1 (USD 62.9 million, EUR 53.5 million).
In total, Bakkafrost harvested 18,402 metric tons (MT) gutted weight of fish in the last quarter, up 42 percent from 13,004 MT in Q2 2016. Its total harvested volumes in the first half of this year were 31,560 MT, up from 23,938 MT a year ago, but the guidance for volumes for 2017 is unchanged at 53,500 MT.
Its forecast for smolt release in 2017 is 11.5 million, compared with 11.7 million last year and 11.3 million in 2015.
Bakkafrost’s farming segment delivered an operational EBIT of DKK 489.5 million (USD 77.4 million, EUR 65.8 million) in Q2 2017, which corresponded to NOK 33.50 (USD 5.29, EUR 4.50) per kg, while its value-added processing (VAP) segment, which produced 5,273 MT of products, posted an operational EBIT loss of DKK 54.5 million (USD 8.6 million, EUR 7.3 million).
The group highlighted that the salmon spot prices have been at record high levels since 2016 and this continued in Q2 2017, and while these are positive for the farming segment, they tend to result in negative margins for the VAP segment.
Bakkafrost has signed VAP contracts covering around 58 percent of the expected harvested volumes for the rest of 2017, which corresponds to an expected contract coverage of around 40 percent for the full year 2017. These contracts, which last from six to 12 months, are at fixed prices, based on the salmon forward prices at the time they are agreed and the expectations for the salmon spot price for the contract period.
Its long-term strategy is selling around 40 to 50 percent of the harvested volumes of salmon as VAP products at fixed price contracts because selling the products at fixed prices reduces the financial risk 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.
Meanwhile, Bakkafrost’s fishmeal, oil and feed (FOF) segment delivered earnings before interest, taxes, depreciation and amortization (EBITDA) of DKK 47.8 million (USD 7.6 million, EUR 6.4 million) in the last quarter, with its sales of fishmeal reaching 17,032 MT.
Because of higher quotas of key species like blue whiting, herring, and mackerel and better availability, it expects that its fishmeal and fish oil will increase further.
In terms of biological risks, sea lice is an area, which has “demanded much effort,” said Bakkafrost. The company focuses on using non-chemical methods in treatments against sea lice and its new service vessel, M/S Martin, which conducts lukewarm seawater treatments, started operation in Q1 2017. Bakkafrost has added a second service vessel, M/S Róland, which is expected to start operation next month. It will also increase the use of lumpfish in its farming activities this year.
