Faroe Islands-based salmon farmer Bakkafrost reported an increase in revenue and operating earnings before interest and taxes (EBIT) during the first quarter of 2023, partly due to improved conditions at its Scottish operations.
The group reported an operating EBIT of DKK 565 million (€75.9 million/$83.3 million) and revenue of DKK 2 billion (€268.6 million/$294.9 million), corresponding to an increase of 35 percent and 25 percent respectively, compared with the same period last year.
"Overall, we are satisfied with the results in this quarter but especially with the improved results in Scotland, and through this quarter we have maintained strong operations in Scotland," Bakkafrost CEO Regin Jacobsen said.
The group's Scottish farming segment reported operational EBIT of DKK 155 million (€20.8 million/$22.9 million), up from a loss of DKK 53 million (€7.1 million/$7.8 million) during the same time last year. The Scottish farming segment also achieved higher prices and had a higher volumes.
"It was the best quarter ever for Scotland and the best in five years in terms of fish health and survival," Bakkafrost CEO Regin Jacobsen told IntraFish.
Theses improvement is mainly due to high salmon prices and better fish health, said.
Improved fish health is partly linked to its two new wellboats with dual treatment and freshwater capabilities, Jacobsen said.
The first of these boats was commissioned in 2020, and the secondwas delivered earlier this year.
However, Bakkafrost Scotland is still subject to higher biological risks compared with the Faroe Islands and it remains to be seen if the positive development can be maintained during the more challenging periods in the fall, the company cautioned.
It is therefore a priority to build new modern hatcheries in Scotland, as large high-quality smolt will have a lower risk exposure in the marine environment.
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.
The ongoing expansion of the Applecross hatchery is progressing but slightly delayed, and the Applecross-4 expansion is expected to be operational with fish in the tanks in May 2023, two months behind schedule.
"There are often delays with large building projects, and we have the pandemic and unfortunately some delays from the builders. The costs have also increased somewhat from what we envisioned four years ago, but are still within the budget," Jacobsen said.
Lower volumes, sea lice
During the quarter, the group has had low harvest volumes in the Faroe Islands and lower average harvest weights due to its efforts to push mortality levels down, as it has also dealt with sea lice.
Total harvested volumes during the quarter amounted to 19,100 metric tons, down 11 percent from 21,400 metric tons harvested during the same period last year.
Out of the 19,100 metric tons of fish, 11,000 metric ton came from the Faroe Islands and 8,100 metric ton from Scotland.
In 2023, Bakkafrost expects to harvest around 68,000 metric tons in the Faroe Islands and 30,000 metric tons in Scotland, giving a total of around 98,000 metric tons.
For 2023, Bakkafrost has signed contracts covering around 23 percent of the expected harvest volumes in the Faroe Islands and Scotland combined.
Value-added products, tax
The group's value added products (VAP) division also performed well during the quarter with positive margins despite high salmon prices.
For many years Bakkafrost has had the strategy to use around 40 percent of the harvest volume for value-added production in the VAP segment, but this strategy may be revised depending on the outcome of the Faroese Government's proposal to adjust the revenue tax in the country.
The group will present a new investment plan in early June during its capital markets day in Scotland.