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Bakkafrost Reports All-round Good Results Contributing to a Strong Second Quarter

26 August 2014

FAROE ISLANDS - Bakkafrost has delivered a total operating EBIT of DKK 212.1 million in the second quarter of 2014. The combined farming and Value Added Processing (VAP) segment made an operational EBIT of DKK 180.0 million in Q2 2014.

The Farming segment made an operational EBIT of DKK 159.5 million. The salmon spot prices decreased during the quarter, while the VAP contract prices stayed on a record high level.

Because of the decreasing spot prices, the performance in the VAP segment improved during the quarter, and the operational EBIT came to DKK 20.5 million in Q2 2014. The EBITDA for the FOF segment was DKK 57.0 million in Q2 2014.

Commenting on the results, CEO Regin Jacobsen said: "We are very satisfied with the result for Q2 2014, as all segment made profit. The biological development has been positive and our sales prices for VAP products are on a level where we again see positive margins. The spot price, on the other hand, have decreased some lately due to the increase in supply of fresh salmon. For our fish meal, fish oil and fish feed department the quarter was good."

The Group made a profit for the quarter of DKK 126.2 million (DKK 184.2 million). For H1 2014, the profit was DKK 213.4 million (DKK 251.7 million).

The total volumes harvested in Q2 2014 were 11,212 tonnes gutted weight (10,540 tgw). The total harvested volumes in H1 2014 were 20,481 tonnes gutted weight (18,836 tgw). The reason for the increase in the harvested volumes year on year is that Bakkafrost will harvest higher volumes this year compared to the year before.

Bakkafrost transferred 1.9 million smolts in Q2 2014 (1.8 million), which is in line with the company’s plans. Year to date 4.9 million have been transferred (3.9 million). The smolt release is higher in 2014 compared to 2013, due to available sites for smolt release.

In Q2 2014, the associated company P/F Faroe Farming harvested 47 tonnes gutted weight (943 tgw). In H1 2014, Faroe Farming harvested 2,212 tonnes gutted weight (3,298 tgw).

On the 24 April 2014, Bakkafrost – via its 100 per cent owned subsidiary Havsbrún – acquired an addition-al 41.15 per cent in Hanstholm Fiskemelsfabrik. After the acquisition, Bakkafrost owned 81.01 per cent of the company. The 9 May 2014, Bakkafrost divested all its shares in Hanstholm Fiskemelsfabrik to FF Skagen A/S. In return, Bakkafrost, via its subsidiary P/F Havsbrún, received a 17% share interest in FF Skagen A/S. The investment is a strategic investment and part of the consolidation of the fishmeal and fish oil industry.

In accordance with the Group’s dividend policy, Bakkafrost paid out DKK 4.50 (NOK 4.98) per share in April 2014. The amount corresponds to approximately DKK 219.9 million (NOK 243.3 million).

In February 2014, a routine surveillance test detected a possible pathogenic ISA-virus at Bakkafrost’s farming site A-80. There was no increase in mortality, and no impact on fish health or fish welfare, however. Bakkafrost decided to activate the ISA-contingency plan immediately and hence enforced slaughtering of the last cage at the farming site A-80 Selatrað. The detected site, together with all the neighbouring sites are now empty. No signs of ISA have been observed since, and no cost increase was related to the detection.

The farming companies and the authorities have put a lot of work into maintaining the good biological status in the Faroe Islands. Regular surveillance tests for ISA-viruses have been performed at all farms during the last approx 10 years at sea sites in the Faroes. Bakkafrost and the other farmers in the Faroe Islands will work with the Faroese Food and Veterinary authority to avoid the introduction of AGD and ISA.

The combined farming and VAP segment made an operational EBIT of DKK 180.0 million (DKK 157.8 million) in Q2 2014. For H1 2014, the combined farming and VAP segment made an operational EBIT of DKK 356.7 million (DKK 259.0 million).

The farming segment made an operational EBIT of DKK 159.5 million (DKK 199.5 million) in Q2 2014. The reason for the decrease is lower spot prices in Q2 2014, as the harvested volumes are higher. For H1 2014, the operational EBIT was DKK 345.7 million (DKK 324.1 million).

The VAP segment made an operational EBIT of DKK 20.5 million (DKK -41.8 million) for Q2 2014. The improved result is primarily due to a combination of improved contract prices and lower raw material prices. There is normally a time lag between the changes in the spot prices and the changes in the contract prices. The contract prices have increased significantly from the level in 2013, due to the high salmon spot prices. When the spot prices decreased during the quarter, the contracts became profitable, compared to selling the salmon on the spot market. For H1 2014, the operational EBIT was DKK 11.0 million (DKK -65.0 million).

The third segment – FOF (fishmeal, oil and feed), made an operational EBITDA of DKK 57.0 million (DKK 30.9 million) in Q2 2014, and for H1 2014, the operational EBITDA amounted to DKK 79.1 million (DKK 55.7 million). The increase in the EBITDA is primarily due to higher production of fishmeal and fish oil, as the raw material intake has increased significantly.

In Q2 2014, Havsbrún sourced 107,372 tonnes of raw material (42,782 tonnes) and in H1, Havsbrún sourced 151,531 tonnes of raw material (73,519 tonnes).

The Bakkafrost Group had a net interest bearing debt at the end of Q2 2014 amounting to DKK 555.0 million (DKK 638.6 million at year-end 2013) including deposits and losses on financial derivatives relating to the interest bearing debt. Bakkafrost had undrawn credit facilities of approximately DKK 738.0 million, of which DKK 16.0 million were restricted at the end of Q2 2014.

Bakkafrost’s equity ratio is 53 per cent, compared to 54 per cent at the end of 2013.

Further Reading

You can view the full report by clicking here.

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