Faroese salmon and feed producer Bakkafrost Group suffered a fall in earnings in the second quarter due in large part to lower salmon prices.

Earnings before interest, tax, demortization and amortization (EBITDA) fell 13 percent to DKK 397 million (€53.2 million/$59.2 million), while revenues crept down 1 percent to DKK 947 million (€126.9 million/$141.1 million).

"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," said CEO Regin Jacobsen. He added that Bakkafrost is on track with its strategic plan, which includes investments of around DKK 3 billion (€402 million/$447 million) during the period 2018-2022, an important part of which are investments in the company's capacity to produce larger smolts.

"We now have clear indications from our operation that our larger-smolt strategy -- together with the use of lumpfish and mechanical (non-medical) sea lice treatments -- is working as intended. We are very pleased about not having a single site above the threshold level for sea lice during the quarter."

The combined farming and value-added processing (VAP) segments of the group made operational earnings before interest and tax (EBIT) of DKK 303.4 million (€40.7 million/$45.2 million) in the second quarter, down 19 percent year on year.

The operational EBIT per kilo in the quarter was down 18 percent to DKK 24.06 (€3.2/$3.6), which corresponds to NOK 31.31 (NOK 37.41) for the combined farming and VAP segments.

The farming segment also saw operational EBIT fall by 23 percent to DKK 303.4 million (€40.7 million/$45.2 million). While achieved prices were higher, harvested volumes were lower, down to 12,609 metric tons gutted weight. However, 3.6 million smolts were transferred during the quarter, a 29 percent increase year on year.

The VAP segment made an improved operational EBIT of DKK 0.0 million (€0/$0), up from a loss of 16.9 million.

Meanwhile, the FOF segment (fishmeal, oil and feed), Havsbrun, made EBITDA of DKK 58.4 million (€7.8 million/$8.7 million), down 12 percent on the second quarter of 2018.

It sourced 110,109 tonnes (118,387 tonnes) of raw material in the quarter.

Shifting markets

The group also continued to see a significant shift in sales distribution with the EU market increasing from 27 percent to 42 percent; the United States from 15 to 25 percent; and Asia from 25 percent to 26 percent year on year; with the Eastern European market plummeting to a 7 percent share from 33 percent the same quarter last year.

Growth in these markets also drove value added processing for the group, with 32 percent of its harvest volume used in its VAP segment in the quarter, compared to just 15 percent in the second quarter of 2018.

Aquaculture

Lower salmon prices push down Bakkafrost Q2 earnings