P/F Bakkafrost (OTCPK:BKFKF) This autumn 2022 Earnings Convention Name February 21, 2023 2:00 AM ET
Hogni Jakobsen – Chief Monetary Officer
Odd Eliasen – Managing Director of Havsbrun
Convention Name Members
Christian Nordby – Kepler Cheuvreux
Henrik Knutsen – Carnegie
[Starts Abruptly] fourth quarter. My title is Hogni Jakobsen, I’m CFO of Bakkafrost. At present I’m joined by Odd Eliasen, Managing Director of Havsbrun. We’re one particular person brief this morning. Regin Jacobsen is not going to be becoming a member of us at the moment. He needed to cancel resulting from sudden sickness within the household. So, he has chosen to remain at residence, however I can guarantee you Regin is okay and the scenario can be below management.
In order that mentioned, a brief abstract of the quarter. This quarter has been all-time excessive in terms of revenues and in addition in terms of operational EBIT per kilo. We had additionally an all-time excessive full 12 months in  (ph) with revenues exceeding DKK7.1 billion and an operational EBIT of DKK1.74 billion for the 12 months. Operational EBIT within the fourth quarter was DKK376 million.
And if we take a look at the operation, we now have had comparable ranges as we had in the identical quarter the 12 months earlier than, comparable volumes in terms of harvest and in addition feed gross sales; nonetheless, greater volumes in terms of sourcing of uncooked materials the place we sourced 46,000 tonne of fabric within the fourth quarter in comparison with 27,000 tonne the 12 months earlier than.
Money move from operations was constructive with DKK382 million, and we had constructive margins within the quarter for all segments besides the Scottish farming section.
The Board of Administrators has proposed to the Annual Normal Assembly that DKK10.00 per share shall be paid as dividend and the Annual Normal Assembly is on the twenty eighth of April.
International markets within the fourth quarter had been robust. We had considerably greater salmon costs than the identical quarter final 12 months, roughly 22% up and a roughly 5% worth improve in comparison with the third quarter. There was a robust demand and a slight lower in world provide of salmon.
Meals inflation might be additionally a reason for the upper costs. We all know, in Bakkafrost, as an example, we now have secured greater contract costs for this 12 months. So, the outlook on the pricing facet seems additionally good for the remaining a part of the 12 months.
If we take a look at harvest numbers, world harvest dropped round 2% and all producing areas had decrease harvest weights this quarter in comparison with the quarter earlier than.
General, Europe had unchanged world — harvest volumes, whereas within the Americas, the provision lowered with round 6%. Norway was barely up with 0.8%. We didn’t see important impact from early tax-related harvest as we thought we’d see within the fourth quarter. Harvest weights in Norway dropped round 5% to 4.2 kilo. In Scotland, provide lowered 3%. There have been important organic challenges in Scotland and harvest weights dropped 3% in Scotland. Iceland was the one area with a major improve in manufacturing, 50% up, however nonetheless, additionally there we now have a discount of 4% in harvest weights. The Faroes was down 11% and three% down on harvest weights. Chile, 3.8% down, additionally barely decrease harvest weights. Feed gross sales in Chile lowered by round 5% on this quarter. And US and Canada provide dropped with 18% and 16%, respectively. Feed gross sales down 14%.
Gross sales of salmon to Europe was steady on this quarter, however there was a robust progress in gross sales to the US market. Chilean provide was a foremost contributor to the elevated sale to Chile on this quarter, however we additionally see rising volumes of fillets coming from Europe into the US market. In fact, the US customers have benefited from a robust foreign money. In order that helps on the sale to the US market. Russia and Ukraine had been down 46% on volumes as a result of sanctions and extra. And Japan and Chile — and China additionally had been decrease on volumes on this quarter, whereas gross sales to the ASEAN markets had been up with 9%.
If we then take a look at the financials for Bakkafrost, as talked about, roughly DKK1.9 billion in revenues on this quarter, a rise of 30% in comparison with the identical quarter final 12 months and a rise of 214% in terms of operational EBIT to DKK376 million. Honest worth of our biomass was minus DKK426 million, and revenue after tax, minus DKK154 million.
Our margins improved throughout the road besides the FOF section, which had an EBITDA margin of 14%, down from 20.6%. Margins within the Faroes farming section had been NOK27.56 per kilo and the VAP section had NOK16.67 in margin.
Farming margin in Scotland was minus NOK39.96, which is an enchancment from the minus NOK50 — nearly NOK56 that we had in the identical quarter the 12 months earlier than. In Scotland, we had distinctive mortality prices on this quarter of DKK81 million in comparison with DKK179 million in the identical quarter the 12 months earlier than. We additionally had distinctive prices related to the restoration operation of the sunken feed barge that we now have in Scotland. We booked round DKK26 million in prices within the fourth quarter related to that.
If we take a look at the operational EBIT and adjusted earnings per share on a historic perspective, it is one of the best fourth quarter since 2019 for Bakkafrost. Adjusted earnings on this quarter had been DKK3.42 and DKK19.02 for the entire 12 months.
And as talked about, the Board has proposed to the AGM that we pay DKK10.00 to — in dividend, which is a bit greater than the dividend coverage that claims 30% to 50% of adjusted earnings to be paid as dividends.
The stability sheet: property, plant and gear elevated with DKK758 million on this quarter to roughly DKK5.6 billion. Organic belongings elevated with DKK490 million, whereof round DKK1.3 billion are honest worth changes. Stock elevated to nearly DKK1.1 billion. And money and money equivalents additionally elevated with DKK210 million and amounted to DKK720 million by the tip of the quarter. Fairness ratio dropped to 62% from 64%.
Money move from operations had been constructive with DKK382 million; from investments, minus DKK570 million; and from financing, DKK339 million.
Through the quarter, we now have elevated our interest-bearing debt from DKK2.4 billion to DKK2.664 billion, and we had undrawn credit score services of DKK2.5 billion on the finish of the quarter. We now have exercised extension choice on our finance settlement in order that we now have prolonged that with one 12 months. So, we nonetheless have 5 12 months forward of us in — on our monetary settlement, for the financial institution funds.
Some headlines from — associated to ESG. On this quarter, December, we lastly acquired our new massive 10,000 cubic meter wellboat within the Faroes. It arrived simply after New 12 months. We had a big reception there. Bakkafossur is supplied with freshwater therapy know-how. It is a new functionality that we now have not had within the Faroes and would have a constructive affect on fish well being and can assist us to cut back the organic threat and efficiency much more within the Faroes. It additionally will put together us for offshore farming sooner or later as a result of sheer measurement of the vessel. It’s geared up with the hybrid know-how, which signifies that it’s round 20% extra gasoline environment friendly in comparison with conventional vessels.
We additionally had a Provider Day on this quarter within the Faroes the place we engaged with native suppliers. We now have set bold targets to cut back our CO2 emissions and we can’t try this alone. So due to this fact, we now have engaged with native suppliers within the Faroes, in order that we will collectively construct strong partnerships to cut back the carbon footprint.
After which the barge that I discussed earlier than, we now have demonstrated on this quarter that we take our duty severely in terms of defending the setting the place we function and ensure that we do not make — do any hurt to try this. So, on this quarter, we now have carried out an advanced rescue operation to elevate the feed barge that sunk after the Storm Arwen final winter. We ensured that no oil or feed escaped from the barge, was lifted up. We now have eliminated the three,000 tonne of sludge and feed stays and introduced that for biogas. And I believe it was yesterday the barge was towed away once more and will probably be refitted and repurposed.
After which, Odd Eliasen will undergo the segments’ efficiency.
Yeah, good morning. I am going to take you thru the section. First, we now have a pleasant image of the wellboat Bakkafossur along with our — a few of our service vessels and ferries exterior our manufacturing unit in Glyvrar.
Harvest quantity within the Faroes got here down 7%, all the way down to 19,276 tonne from 20,694. In Scotland, it was roughly the identical, [almost 5,200] (ph) tonne in contrast with 5,122. The typical weight in Faroe Islands dropped 4% from 4.9 to 4.7, and that was the alternative in Scotland that elevated from 3 to three.2 kilo. Smolt switch in Faroes got here at 5 million smolt in contrast with 5.1 million This autumn ’21. And in Scotland, we had 3.5 million of smolt enter the ocean in contrast with 4.2 million. The typical weight of smolt in Faroe Islands was 304 gram in contrast with 371 gram. And in Scotland, it elevated from 105 gram as much as 115 gram.
We had a really robust efficiency within the farming sector in Faroe Islands. The operational EBIT went from DKK282 million as much as DKK380 million, a rise of 34%, whereas in Scotland, it was destructive. This autumn ’21, it was minus DKK214 million, and this This autumn 2022, it was minus DKK149 million. The operational EBIT in Faroes got here at 32% in contrast with 25% final 12 months. And in Scotland, it went from minus [88%] (ph) all the way down to 50%. The operational income was roughly the identical in Faroe Islands, DKK1.139 billion in contrast with DKK1.11 billion. And in Scotland, it elevated from [DKK180 million] (ph) as much as [DKK292 million] (ph).
We had enhancements in each area. In Faroes, we had an operational EBIT of NOK27.56, a rise of NOK9.22. In Scotland, it was destructive in This autumn ’21, NOK55.95 and it was — this quarter This autumn ’22, it was NOK39.96. So really, we had a really robust organic improvement in Faroe Islands. We had all-time low sea lice degree in Faroes, and we now have improved our organic KPIs in — particularly in H2 in Faroe Islands. And that goes for organic FCR, which for ’22 ended at 1.06, and in This autumn, the FCR was 1.03. So that’s fairly good.
We had a considerable improve within the TGC. So, we had excellent progress. We had low mortality within the Faroe Islands additionally and in addition the economical FCR was lowering, that means that the hole is closing in and the performing is best. So, we had a really, very robust organic enhancements in Faroes. And superior charges got here additionally in greater in 2022.
In Scotland, it was a bit more difficult resulting from organic challenges. And particularly in October and November, it was difficult whereas December was extra in keeping with our expectation, though we had low sea lice ranges in Scotland, and that is because of freshwater therapy as effectively. We had additionally an elevated harvest weight in Scotland.
Once we take a look at our numbers in Scotland and historic numbers, we will see that the efficiency haven’t been that robust. We now have had challenges with the mortality, however we now have seen now and in 2020 that this proportion of mortality in contrast with our friends in Scotland, it has decreased. So, hopefully, we’re on the proper path.
We are able to additionally possibly clarify it with this graph the place we had our new freshwater twin therapy boat coming in motion in September, October and November as effectively. And we will see a drop within the distinctive mortalities in This autumn and ending on the 4 weeks in December at fairly low degree, and we will see that this has continued right here within the first six weeks in January as effectively.
So, what does this imply? On the higher graph right here, we will see that sometimes in Q3 and in addition This autumn, we now have a low harvest weight. Though this 12 months, in November and December, our harvest weight elevated. And we will see for the primary six week in January and February, the harvest weight is now over 5 kilo in Scotland. So that’s fairly necessary for us.
And on the decrease graph right here, we harvested the identical quantity of fish, 570,000 fish within the first six weeks in ’22 versus ’23. And that — this 12 months, in ’23, it quantities for 1,000 tonne extra of quantity, and that’s as a result of harvest weight was 5 kilo in contrast with 3.3 kilo. And if we then take a look at the worth, the gross sales worth, it has elevated from DKK110 million as much as DKK280 million in ’23. So, there’s a substantial distinction once we can harvest massive fish — massive and wholesome fish in contrast with small fish.
One other milestone is, after all, the freshwater and the large smolt. We’re aiming for One Summer time cycles, One Summer time, One Loch, One Operator and One Generator — Era, that means that we’ll purpose for manufacturing cycles that’s 12 months within the loch. And we now have seen this materialize within the Faroes and it is working fairly good. So, we strongly imagine that that is the proper option to take care of it in Scotland.
That is the place we got here from. There have been 11 hatcheries once we took over SSC in Scotland, and there was an enormous want of funding, as you may see. We now have carried this on and invested some huge cash. Right here, we will see some footage of our new hatchery in Applecross. We’ll, inside a brief interval, switch smolt from AP 2, our hatchery in Applecross. Roughly 125 grams will probably be transferred into the brand new tanks, 60-meter tanks, and we’ll ship the primary massive, high-quality smolt 200-300 gram in the long run of Q2 to our farms in Scotland.
This — yeah, I’ll — this has been our journey in Faroe Islands. As you may see, we additionally had a mean weight of 100 grams to start with — in 2011 the place we ended at 350 grams for 2020. And this 12 months, we’re aiming for 400 grams in Faroe Islands resulting from — we may have — Glyvradal will probably be prepared for manufacturing, or is prepared. We may have fish popping out for Glyvradal subsequent quarter. Norotoftir has simply delivered the primary massive smolt out of their new tanks and Vioareioi will even be prepared. So, we imagine that we’ll be round 400 grams in Faroe Islands in ’23.
In Scotland, it is going to be back-end loaded. So, we hope that we will improve our smolt weight from 110 as much as 175 gram beginning with the brand new supply from Applecross in finish of June, I might say, at 200 to 300 gram. So, this will probably be a milestone for us, taking the manufacturing time down from 22 months, 20, 22 months, all the way down to hopefully 14 after which decrease once more once we can attain the 400 grams in Scotland in two occasions — two years from now.
Shortly, I’ll go to the value-added merchandise as effectively. We elevated the amount from 6,600 tonne as much as 7,231 tonne. The income elevated from DKK359 million as much as [DKK443 million] (ph) in This autumn ’22. The operational EBIT elevated from DKK28 million as much as DKK86 million. It was in all probability a bit back-end loaded with the brand new contract and new costs for the contracts. The EBIT per kilo elevated additionally from NOK5.71 as much as NOK16.67. Within the Faroe Islands, 36% of the amount went for value-added merchandise. And in Scotland, it was fairly restricted volumes that went for VAP.
Fishmeal oil and feed, the FOF section, additionally had an excellent 12 months. We had a fairly substantial improve within the income from DKK1.66 billion as much as DKK2.43 billion. We elevated EBITDA from [DKK81 million] (ph) as much as DKK110 million, though the margin decreased from 21% to 14% in This autumn 2022. We bought quite a lot of our items and fish meal out of Faroe Islands, 12,000 tonne in contrast with — 12,500 tonne in contrast with 3,400 tonne. And if we take a look at the amount for the entire 12 months, we exported greater than half of our — the manufacturing of fishmeal primarily to our opponents in Norway, Scotland, and Denmark.
We had good sources of uncooked materials. It elevated as much as 46,000 tonne. Primarily it was resulting from off-costs from the pelagic factories. Feed gross sales got here in fairly steady, 32,600 tonne. And our exterior gross sales elevated with 300 tonne and that’s — it is not a giant quantity, however that is because of, we now have a limitation of our manufacturing capability within the feed crops. So, primarily we’re promoting in to Bakkafrost and to Bakkafrost Scotland.
That was my numbers.
Shifting onto the outlook for 2023, in keeping with the most recent knowledge from Kontali, we noticed that volumes in This autumn, the provision from — in This autumn was decrease than initially anticipated. Particularly in Norway, there was a drop in provide in comparison with what was anticipated.
For 2023, we imagine there will probably be a flat provide improvement within the first half of the 12 months, after which within the second half of the 12 months, extra volumes will come, 4% to five% improve within the second half of the 12 months, which sums as much as roughly 2% improve for the entire 12 months. Provides subsequent 12 months additionally seems to be tight. So, total, we now have a good market in entrance of us.
So, to sum up, world harvest in This autumn roughly 2% down; 2.3% provide improve for 2023 to be anticipated. We maintain on to our quantity steerage for 2023. We count on to reap 98,000 tonne for the group; 68,000 tonne within the Faroes and 30,000 tonne in Scotland. And we’ll launch round 25.6 million smolt throughout the group, 16 million within the Faroes and 9.6 million in Scotland. We now have lowered the variety of smolt in Scotland as we’ll focus extra on stabilizing the operation, and due to this fact, the smolt numbers in Scotland are decrease than they’ve been up to now.
We now have secured 23% of the amount on fastened worth contracts, VAP contracts. That is primarily out of the Faroes. Fishmeal and fish oil or feed gross sales will probably be roughly 130,000 tonne this 12 months, and the volumes of fishmeal and oil are anticipated to be on the identical degree this 12 months as they had been in 2022.
After which we may have the Capital Markets Day on the sixth and seventh of June, this time in Scotland, and we’ll look into the tanks that Odd confirmed you footage of earlier than and hopefully see for ourselves that we now have lastly some massive smolt in Scotland.
Thanks. And I believe we’ll open up for questions.
Thanks. Christian Nordby, Kepler Cheuvreux. You’ve reported now a number of quarters with distinctive mortalities in Scotland after which the feed barge this quarter, as effectively after which January now seems so much higher with greater weights. Are you able to remark slightly bit on what meaning in your worth premium in Scotland, as a result of Scottish salmon often has a worth premium, and in your underlying value improvement on fish into Q1 now in Scotland?
Having elevated our common weight, as Odd confirmed you on the comparability of the primary six weeks this 12 months in comparison with final 12 months clearly demonstrates the advantages of accelerating the typical weight. We faucet into a better worth band in Scotland with bigger fish. So that could be a important enchancment.
So, regarding the premium itself, we’re integrating the manufacturers. We’re promoting the fish as Bakkafrost Fish now, each in Scotland and within the Faroes. It is fed with the identical feed. We’re working increasingly alike. So, over time, the margins will even, we count on, develop extra comparable. We now have prospects which can be prepared to change one for the opposite, if we do not have that individual measurement that they require in per week, and we will provide from the Faroes or vice versa. They’re usually prepared to try this.
And with regard to prices, basically, there’s an elevated value. We see that uncooked supplies, as an example, for feed, each greens but in addition the marine content material, have elevated in prices. You additionally noticed the worth improvement of fishmeal and fish oil. And naturally, that drives prices up within the business as a complete. I might say if we take a look at particularly the Faroese operations, a lot of the prices are comparatively steady. Nonetheless, the feed is growing.
Henrik Knutsen, Carnegie. Might you touch upon the decrease common harvest weights within the Faroe Islands? Give some further taste to why it is lowering year-over-year?
Odd, will you touch upon that?
Yeah. We now have been harvesting from completely different websites within the Faroes. And with a view to maximize and — an excessive amount of and to be able to put fish out once more, then we now have harvested, you would say, a few of the websites out. On a few of the cages, there have been an elevated degree of lice. So, we now have simply harvested resulting from this, so — however 0.2 kilo, it comes and goes. That is — you’ll at all times have this fluctuation. And so, it is — I might say it is a form of within the degree what we will count on going ahead.
Okay. Thanks very a lot.