Salmon farmer Bakkafrost Group said its “One Company” strategy appears to be paying off as the company posted all-time-high Q4 and full-year revenue in 2022.
Bakkafrost posted all-time-high Q4 and full-year revenues in 2022 of DKK 1.9 billion (USD 272.9 million, EUR 255 million) and DKK 7.13 billion (USD 1 billion, EUR 956.8 million) respectively. These were alongside operational earnings before interest and taxes (EBIT) of DKK 376 million (USD 54 million, EUR 50.5 million) for the quarter and a record DKK 1.7 billion (USD 244.1 million, EUR 228.1 million) for the full year.
The Faroe Islands-headquartered company saw a Q4 2022 loss of DKK 154 million (USD 22.1 million, EUR 20.7 million) versus a loss of DKK 3 million (USD 430,932, EUR 402,958) a year previously. The full-year, profit exceeded DKK 1.34 billion (USD 192.5 million, EUR 179.8 million), up from DKK 964 million (USD 138.5 million, EUR 129.4 million) in 2021.
Bakkafrost is the largest salmon farming company in the Faroes and the second largest in Scotland, and while there are stark differences between the biological performances of the two operations – with the Faroes reporting all-time low sea lice levels and historically low mortality in Q4 2022, and Scotland continuing to be beset by challenges, particularly in October and November – there are signs the implementation of the producer’s “One Company” strategy merging the Faroese and Scottish organizations and builds on their strengths is starting to pay off.
Delivering the latest results in Oslo, Norway, Bakkafrost CFO Høgni Dahl Jakobsen said last year’s Q4 farming conditions in Scotland followed the normal seasonal pattern, with more biological challenges compared to the first-half of the year, but he added it’s now much better equipped to overcome these risks.
The company introduced a new 4,000-cubic-meter wellboat in Scotland with dual treatment and freshwater capabilities. This lowered sea lice levels and reduced exceptional mortalities in the quarter, the company reported.
Overall, Scottish mortality in Q4 2022 was lower than the year before, and Jakobsen said towards the end of the year mortality reduced even more, so Bakkafrost decided to reduce its harvest – letting the fish grow and gain both weight and value. As a result, it harvested its biggest fish in January, and the company’s harvest sizes in both January and February rose above 5 kilograms compared to an average of 3.3 kilograms a year ago.
“We tap into a higher price band in Scotland with larger fish. That’s a significant improvement,” Jakobsen said.
In the Faroe Islands, the company also introduced a new 10,000-cubic-meter capacity wellboat, which Jakobsen said is one of the largest in the world. The new wellboat, dubbed Bakkafossur, adds freshwater treatment capabilities to the Faroese operations, and according to Jakobsen will improve the biological performance and prepare the company for future offshore farming in the Faroe Islands.
With regards to the price premiums achieved, he said that Bakkafrost integrated its brands and is now selling the fish as “Bakkafrost fish” both in Scotland and in the Faroes.
“It’s fed with the same feed, we are operating more and more alike, so over time, the margins will also develop more singularly,” Jakobsen said. “We have customers that are willing to switch one for the other if we don’t have the particular size that they require – we can supply from the Faroes or vice-versa.”
Bakkafrost said it expects to further mitigate challenges in Scotland through the implementation of a large-smolt strategy. In the Faroes, its large smolt have a lower risk exposure in the marine environment due to shorter production cycles in the sea. Therefore, Bakkafrost’s has made it its top priority in Scotland to invest in its hatcheries.
Meanwhile, the company said the expansion of its Applecross hatchery is progressing well, with Applecross 4 set to be operational with 125-gram fish added to the tanks next month. As such, the first batch of large smolt delivered to its Scottish sites from Applecross 4 is planned for Q2 2023.
The full capacity of Applecross, including the next expansions, will be in operation in mid-2024, bringing the overall annual production capacity from the hatchery to around 10 million smolts of around 500 grams.
In Q4 2022, the average weight of released smolt in Scotland was 115 grams, which was 10 percent higher than a year previously.
Bakkafrost plans to build three large hatcheries in Scotland, which will increase the total annual production capacity to around 18 million smolts of around 500 grams in 2026.
According to Bakkafrost’s Q4 2022 report, the company’s Farming Faroe Islands (FO) segment achieved an operational EBIT of DKK 380 million (USD 54.6 million, EUR 51 million) in the three-month period, up 35 percent from the corresponding period of 2021. This equated to DKK 19.73 (USD 2.83, EUR 2.65) per kilogram. For 2022, FO’s operational EBIT was DKK 1.9 billion (USD 272.9 million, EUR 255 million), more than double that posted for 2021.
The Farming Scotland (SCT) segment achieved a 30 percent improved operational EBIT, losing DKK 149 million (USD 21.4 million, EUR 20 million) in Q4, of which the cost of incident-based mortality was DKK 81 million (USD 11.6 million, EUR 10.9 million). This led to DKK 28.61 (USD 4.11, EUR 3.84) per kilogram. However, SCT’s operational EBIT for the full-year decreased 19 percent, losing DKK 297.6 million (USD 42.7 million, EUR 39.9 million).
There were exceptional Q4 costs in Scotland of around DKK 26 million (USD 3.7 million, EUR 3.5 million) related to the recovery of a sunken feed barge.
Going through the numbers, Bakkafrost COO Feed Odd Eliasen said that historically, the performance in Scotland hasn’t been that strong, with challenges with mortality, but the company is seeing its mortality decrease compared with the company’s peers.
“Hopefully we are on the right path,” he said.
The group harvested a total 24,500 MT of salmon (gutted weight) in the last quarter, which was 1,300 MT less than a year previously. Of its Q4 total, 19,300 MT was produced in the Faroes and 5,200 in Scotland. For 2022 as a whole, 90,600 MT was harvested (down from from 96,900 MT in 2021), with 66,700 MT from the Faroes and Scotland’s contribution amounting to 23,900 MT.
Bakkafrost forecasted a 2023 harvest of 98,000 MT gutted weight, with 68,000 MT coming from the Faroe Islands and 30,000 MT from Scotland. It also expects to release around 16 million smolts in the Faroe Islands,compared to 14.5 million smolts in 2022, and 9.6 million in Scotland, compared to last year’s 10.8 million.
“We will release less smolt in Scotland this year to focus on stabilizing the operation,” Jakobsen said.
Meanwhile, the VAP (value-added products) segment posted an operational EBIT of DKK 86.3 million (USD 12.3 million, EUR 11.6 million) for the final quarter of 2022, a year-on-year increase of 207 percent. But for the full-year, this fell 143 percent to a loss of DKK 50.8 million (USD 7.3 million, EUR 6.8 million). Q4 VAP production in the Faroe Islands increased 10 percent to 7,231 MT gutted weight, and for the full-year of 2022 grew 21 percent to 26,747 MT.
In the Fishmeal, Oil and Feed (FOF) segment, revenues increased 83 percent to DKK 791.3 million (USD 113.7 million, EUR 106.2 million) in Q4, and its earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 24 percent to DKK 110.4 million (USD 15.9 million, EUR 14.8 million). For 2022, FOF’s EBITDA increased 42 percent to DKK 436.2 million (USD 62.7 million, EUR 58.5 million).
FOF produced 10,909 MT of fishmeal in Q4 2022, and 65,395 MT for the full year. Fish oil production in Q4 and the full year 2021 totaled 5,634 MT and 23,862 MT respectively.
Bakkafrost expects its 2023 fishmeal and fish oil production to be similar to last year, while Havsbrún’s sales of fish feed expected to rise 2,000 MT to 130,000 MT. The major market for Havsbrún’s fish feed are the internal Faroese and Scottish Farming segments.
Photo courtesy of Bakkafrost
