Second-quarter profits slip for Bakkafrost, but sea lice strategy is paying off

Published on
August 20, 2019

Bakkafrost CEO Regin Jacobsen said in the company’s second-quarter earnings report the company is on track for growth.

Bakkafrost Group delivered total operating earnings before interest and taxes (EBIT) of DKK 338.8 million (USD 50.4 million, EUR 45.4 million) for the second quarter of this year, down from DKK 407.9 million (USD 60.6 million, EUR 54.7 million) in the corresponding period of 2018. 

The Faroe Islands-based Atlantic salmon farmer’s operating revenues fell to DKK 947 million (USD 140.7 million, EUR 127 million) for the last quarter, but increased to DKK 1.9 billion (USD 282.4 million, EUR 254.8 million) for the first-half of the year. Its Q2 profit was down from last year’s DKK 338.8 million to DKK 188.6 million (USD 28 million, EUR 25.3 million), and its profit for H1 2019 was down by almost DKK 210 million (USD 31.2 million, EUR 28.2 million) to DKK 401.4 million (USD 59.7 million, EUR 53.8 million). 

Bakkafrost recorded 12,609 metric tons (MT) gutted weight of fish in the last quarter, representing a 2 percent decrease or 293 MT compared with Q2 2018. Its total harvested volume for the first half of this year was 26,316 MT, up from 25,139 MT in H1 2018. The guidance volume for the full year is 54,500 MT.

Its forecast for smolt release in 2019 is 13.5 million, compared with 13.9 million last year and 9.9 million in 2017.

“Even though the salmon price was 9 percent lower in the second-quarter of 2019, compared to Q2 2018, the result for Bakkafrost was good for the second quarter,” Jacobsen said in a press release.

Jacobsen also said the company was “well on track” with its DKK 3 billion (USD 445.9 million, EUR 402.3 million) investment plan for the period 2018-2022, aimed at minimizing the company’s biological risk, increasing efficiency, and creating sustainable organic growth. 

“An important part of the plan is investments in capacity to produce larger smolts. We now have clear indications from our operation that our large-smolt strategy – together with the use of lumpfish and mechanical (non-medical) sea lice treatments – is working as intended. Our salmon is only treated with lumpfish, pressurized sea water showers, and with fresh water. We are very pleased of not having a single site above the threshold level for sea lice during the quarter,” he said.

The investment program also includes the construction of a biogas plant. Construction of this facility is well underway, and it is expected to be in operation by the first-quarter of next year. At the same time, its new hatchery at Strond is now up and running and has just released its first batch of large smolts.

With lower volumes but higher prices in the quarter, Bakkafrost’s farming segment delivered a lower operational EBIT of DKK 303.4 million (USD 45.1 million, EUR 40.7 million), which corresponded to DKK 31.31 (USD 4.65, EUR 4.20) per kg. The value-added processing (VAP) segment, which produced 4,088 MT of products, increased its EBIT and revenues. 

For H1 2019, its farming segment’s operational EBIT was DKK 533.2 million (USD 79.3 million, EUR 71.5 million), down from DKK 621.6 million (USD 92.4 million, EUR 83.4 million), while the VAP segment’s operational EBIT climbed into the black with DKK 1.3 million (USD 193,203, EUR 174,361).

The group has signed VAP contracts covering around 35 percent of the expected harvested volumes for the rest of 2019. Fifteen percent of the harvest volumes in Q2 2019 were used in the VAP segment.

Meanwhile, its Fishmeal, Oil and Feed (FOF) segment delivered lower earnings before interest, taxes, depreciation and amortization (EBITDA) of DKK 58 million (USD 8.6 million, EUR 7.8 million) in the last quarter, with its sales of fishmeal climbing to 18,872 MT. Overall, it expects lower production volumes of fishmeal and fish oil in 2019 due to lower raw material quotas.

Photo courtesy of Bakkafrost

Contributing Editor reporting from London, UK

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