Lower salmon prices dent Bakkafrost profits
Bakkafrost Group delivered total operational earnings before interest and taxes (EBIT) of DKK 331.2 million (USD 54.9 million, EUR 44.5 million) in the fourth-quarter of 2017, down from DKK 349.6 million (USD 57.9 million, EUR 46.9 million) in the corresponding period of the previous year, with the company citing reduced salmon spot prices as the reason for the lower margin.
For the full year 2017, the Faroe Islands-based producer achieved an operational EBIT of almost DKK 1.4 billion (USD 232 million, EUR 188 million), up from DKK 1.2 billion (USD 199 million, EUR 161.1 million) in 2016.
As a result of the lower salmon spot prices, the company’s Farming segment achieved a reduced operational EBIT of DKK 228.8 million (USD 37.9 million, EUR 30.7 million) in Q4 2017, which corresponded to NOK 25.76 (USD 4.27, EUR 3.46) per kg. However, after three consecutive quarters of losses, its Value Added Products (VAP) segment posted an operational EBIT of DKK 36.5 million (USD 6.1 million, EUR 4.9 million).
At the same time, its fishmeal, oil and feed (FOF) segment delivered an improved earnings before interest, taxes, depreciation and amortization (EBITDA) of DKK 93.6 million (USD 15.5 million, EUR 12.6 million).
“Bakkafrost had an excellent performance in the quarter, considering that the salmon spot price has decreased over 25 percent, compared to the same quarter last year. The VAP segment had a positive margin in the quarter for the first time since 2015,” said Regin Jacobsen, CEO of Bakkafrost.
Looking forward, Jacobsen said the company is excited about a Faroese broodstock program agreement it has made with P/F Fiskaaling and Faroese Authorities. From 1 April 2018, Bakkafrost will take over the responsibility for the initiative from Fiskaaling and rent its existing broodstock facilities until 2021.
Over the next three years, Bakkafrost will examine the feasibility of the broodstock program and determine whether investments in a new facility are needed. According to the agreement, the genome rights in the program will be transferred to Bakkafrost in 2021.
“To develop the Faroese broodstock program will demand effort and resources for Bakkafrost, but we believe this might be an exciting project, which can benefit us in the long run,” said Jacobsen.
In total, Bakkafrost harvested 11,470 metric tons (MT) of fish (gutted weight) in the last quarter, down from 12,940 MT in Q4 2016 and 13,675 MT in Q4 2015. For the full year 2017, the company harvested 54,615 MT of salmon (gutted weight), up from 47,542 MT in 2016 and 50,565 MT in 2015.
It expects to harvest 51,000 MT gutted weight in 2018.