Bakkafrost Group delivered total operational earnings before interest and taxes (EBIT) of DKK 230.5 million (USD 34.9 million, EUR 30.9 million) in the fourth quarter of 2018, down from DKK 331.2 million (USD 50.1 million, EUR 44.4 million) in the corresponding period of the previous year, with the company citing flat salmon spot prices as a key reason for the lower margin.
Its losses for the last quarter were DKK 6.6 million (USD 998,772, EUR 884,300), an improvement on the DKK 21.9 million (USD 3.3 million, EUR 2.9 million) in losses it recorded in the fourth quarter of 2017.
For 2018, the Faroe Islands-based producer achieved an operational EBIT of almost DKK 1.1 billion (USD 166.5 million, EUR 147.4 million), down from around DKK 1.4 billion (USD 211.9 million, EUR 187.6 million) in 2017. The annual profit climbed from DKK 511.4 million (USD 77.4 million, EUR 68.5 million) to DKK 960.3 million (USD 145.3 million, EUR 128.7 million).
Despite harvesting higher volumes, the company’s Farming segment achieved a reduced operational EBIT of DKK 204.4 million (USD 30.9 million, EUR 27.4 million) in Q4 2018, which corresponded to NOK 21.56 (USD 3.26, EUR 2.89) per kilogram. For 2018, Farming’s operational EBIT was DKK 965.7 million (USD 146 million, EUR 129.4 million), down from DKK 1.3 billion (USD 196.6 million, EUR 174.2 million).
The Value-Added Products (VAP) segment posted an operational EBIT of DKK 3.3 million (USD 499,100, EUR 442,209), down from DKK 36.5 million (USD 5.5 million, EUR 4.9 million). At the same time, the Fishmeal, Oil, and Feed (FOF) unit delivered reduced earnings before interest, taxes, depreciation and amortization (EBITDA) of DKK 60.4 million (USD 9.1 million, EUR 8.1 million), down from DKK 93.6 million (USD 14.2 million, EUR 12.5 million).
Bakkafrost explained that as its market strategy for sales in 2018 was primarily focused on fresh whole salmon to the high-end spot market, volumes to the VAP segment were exceptionally low throughout 2018.
Consequently, the company was temporarily vulnerable and limited in flexibility to mitigate certain disruptions, it said. These include banned access to the Russian market for its harvesting plant in Glyvrar in Q4, and disrupted deliveries to other high-end markets from the new harvest plant in Suðuroy, due to delay in the issue of certificates for these markets.
It added that the market disruptions are more or less solved as volumes to VAP contracts have now increased, while the certificates to the harvest factory in Suðuroy are in place and access to the Russian market is expected shortly.
Commenting on the results, Bakkafrost CEO Regin Jacobsen confirmed that difficult market conditions and limited market access for a period resulted in a weaker- than-expected result in the farming segment for the fourth quarter. There was, however, more activity in the VAP segment due to increased contracts for these products.
“2018 was an eventful year with different challenges, but all things considered we are satisfied with the operation and the results for 2018. A lot of effort has also been put on our expansion activities in 2018, and we have now started operation in our new harvesting plant in Suðuroy. In 2019, we plan to further expand our farming operation in Suðuroy,” he said.
In total, Bakkafrost harvested 12,234 metric tons (MT) of salmon (gutted weight) in the last quarter, up from 11,470 MT in Q4 2017. For the full year 2018, the company harvested 44,591 MT of fish, down from 54,615 MT in 2017 and 47,542 MT in 2016.
With 1,500 MT of harvest moved from 2018 to 2019, it expects this year’s harvest to total 54,500 MT (gutted weight).
