Bakkafrost P/f

Earnings Release • Feb 17, 2025

Strong biological performance but quiet quarter in the FOF segment

Strong biological performance but quiet quarter in the FOF segment

The Bakkafrost Group delivered a total operational EBIT of DKK 280 million (DKK

356 million) in Q4 2024.

(Figures in parenthesis refer to the same period last year unless otherwise

specified)

The performance in Q4 2024 per region was as follows:

· Faroe Islands             Revenues of DKK 1,184 million (1,478 million)

Operational EBIT of DKK 310 million (461

million)

· Scotland                    Revenues of DKK 286 million (84 million)

Operational EBIT of DKK -31 million (-104

million)

Commenting on the result, CEO Regin Jacobsen said:

"The Freshwater and Farming operations in Faroe Islands had a strong development

in this quarter. Biological performance remains robust, with solid growth,

effective sea lice management, and harvesting of large fish. We are also pleased

with the continued progress in our freshwater segment, which has set new

production records for the second consecutive quarter of producing large, high

-quality smolt. This improved efficiency is helping to reduce costs.

The FOF segment achieved record-high feed sales in 2024, marking the second-best

year after 2023. Despite good full-year financial results, fourth-quarter

performance was hurt by lower external fishmeal and oil sales due to reduced raw

material sourcing, which normalized following the record-high levels in 2023.

In Scotland, the transition to producing large, high-quality smolt at Applecross

has begun. As we scale up production this year and gradually replace legacy fish

from our marine farms with high-quality fish, we expect a fundamental

transformation of our farming operations from next year onwards. Overall, we are

pleased with the de-risking of our Scottish operations in 2024. Mortality has

decreased significantly, and fish harvested in the quarter was large,

contributing to the highest full-year EBITDA since the acquisition. As we await

the full replacement of legacy fish, we will continue a similar de-risking

strategy in 2025, before starting the journey to ramp up production from 2026.

Stronger supply growth contributes to downward price pressure. The market price

for salmon was weaker than expected this quarter, negatively impacting the

margin.

Three major projects are progressing well - the Applecross and Skálavík

hatcheries and the expansion of Havsbrún feed factory. These projects are

crucial to achieving our goals for 2028 and beyond with robust large smolt, best

feed and good fish welfare."

During Q4 2024, the FOF segment sourced 41,919 tonnes (53,552 tonnes) of raw

material. The Operational EBIT margin was 12% (25%), and fish feed sales

amounted to 38,853 tonnes (39,354 tonnes).

For the full year 2024, the FOF segment's operational EBIT margin was 18% (23%).

For the full year 2024, Havsbrún sourced 309,502 tonnes (467,037 tonnes) of raw

material.

In Q4 2024, the Freshwater segments in the Faroe Islands and Scotland

transferred a total of 7.1 million (6.8 million) smolts combined:

· Freshwater FO: 6.1 million (5.2 million),

· Freshwater SCT: 1.0 million (1.7 million).

In 2024, the freshwater segments have transferred a total of 23.1 million (23.2)

million smolts:

· Freshwater FO: 17.1 million (14.2 million),

· Freshwater SCT: 6.0 million (9.0 million).

In Q4 2024, the Freshwater FO segment made an operational EBIT per kg

transferred smolt of DKK 43.52 (DKK 26.75), corresponding to NOK 68.59 (NOK

41.78). The Freshwater SCT segment made an operational EBIT per kg transferred

smolt of DKK -181.48 (DKK -49.44), corresponding to NOK -286.01 (NOK -77.23).

The Farming segments achieved lower prices in Q4 2024 than in Q4 2023. The

Farming segments had higher volumes in Q4 2024 compared to Q4 2023. In Q4 2024,

the Farming SCT segment had incident-based costs of DKK 19 million (DKK 48

million).

The total combined harvest in Q4 2024 of the farming segments in the Faroe

Islands and Scotland was 20,478 tonnes gutted weight (17,067 tgw):

· Farming FO:               16,638 tgw (16,005 tgw),

· Farming SCT:              3,840 tgw (1,062 tgw).

For the full year 2024, the farming segments have harvested a total of 90,656

tonnes gutted weight (73,006):

· Farming FO: 62,776 tgw (52,408 tgw),

· Farming SCT: 27,880 tgw (20,598 tgw).

In Q4 2024, the Farming FO segment made an operational EBIT per kg of DKK 5.98

(DKK 4.01), corresponding to NOK 9.43 (NOK 6.27). The Farming SCT segment made

an operational EBIT per kg of DKK -14.44 (DKK -44.97), corresponding to NOK

-22.76 (NOK -70.24).

The Services segment made an operational EBIT per kg of DKK 1.23 (DKK 0.76),

corresponding to NOK 1.93 (NOK 1.18). The operational EBIT margin for the

segment was 13% (7%).

The Sales & Other segment had a revenue of DKK 2,293 million (2,355 million) and

an operational EBIT margin of -5% (4%). The operational EBIT per kg was DKK 5.88

(DKK 5.94), corresponding to NOK 9.26 (NOK 9.27).

The long-term goal of the Board of Directors is that 30-50% of earnings per

share shall be paid out as a dividend. Bakkafrost's financial position is

strong, with a solid balance sheet, a competitive operation, and available

credit facilities. The Board of Directors proposes to the Annual General Meeting

that DKK 8.44 (NOK 13.17*) per share shall be paid out as dividend. The Annual

General Meeting will be convened on Wednesday 30[th] of April 2025.

* The dividend per share in NOK is subject to changes depending on the exchange

rate between NOK and DKK, which will be announced after the Annual General

Meeting.

OUTLOOK AND OPERATIONAL PERFORMANCE

Market

Supply increased in Q4 2024

The supply of salmon increased 5.2% in Q4 2024 compared to Q4 2023, incl.

inventory movements. Without inventory movements, the supply increase was 3.5%,

according to the latest estimate from Kontali Analyse.

Lower salmon prices in Q4 2024

Salmon reference prices (in NOK) for 4-5kg superior salmon were 2.7% lower this

quarter compared to Q4 2023. The price reduction was largely driven by increased

supply, especially from Europe where supply increased by around 8%.

5% growth in 2025

The global supply is expected to increase around 4% in H1 2025. In H2 2025, the

global supply is expected to grow around 6%, compared to H2 2024. For the full

year 2025, the global supply is expected grow around 5%, excluding inventory

movements.

The market dynamics are changing with a larger share of high-quality fish

expected to come to market this spring. This shift will alter the dynamics

slightly, but Bakkafrost has the flexibility and adaptability to adjust its

approach to these conditions. Bakkafrost has a strong focus on ensuring a well

-balanced flow to the different markets to increase diversification and mitigate

market risk. Bakkafrost operates in the main salmon markets, Europe, the USA,

and the Far East. Since the beginning of the war in Ukraine, Bakkafrost has

stopped all trading with Russia.

Farming

The biological performance in Q4 2024 in the Faroese farming operation was

strong with good growth, high harvest weights and continued strong control of

sea lice. The strong biological development is expected to continue, with large

fish and high survivability rates. These positive trends indicate strong future

performance as the fish are expected to thrive and contribute significantly to

the operation's success.

The Faroese freshwater operation is continuing to increase the production volume

of large high-quality smolt. The capacity utilization is expected to continue

growing, leading to increased production volume. The volume is projected to rise

slightly in 2025, with smolt weights a bit higher than in 2024. The current

hatchery capacity in the Faroes allows for an annual smolt production of 9,000

tonnes, equalling 18 million smolt of 500g. This will increase to 24 million

smolt of 500g when the ongoing construction of the new hatchery in Skálavík will

be finished late 2026.

In Q4 2024, the average weight of transferred smolt in the Faroe Islands was

413g, which is 10% higher than in Q4 2023

The farming operation in Scotland performed better in Q4 2024, than during the

same period past years. Mortality levels reduced, sea lice levels were all-time

low and average harvest weights were good. Overall, the de-risking strategy for

the Scottish farming operation has been successful, however some sites had

elevated mortality in this quarter due to early maturation. This is believed to

be linked to issues with the smolt quality of these fish when transferred early

in 2023. To reduce the risk further, Bakkafrost chose to harvest more fish in Q4

2024 than originally planned, increasing the total harvest volume for 2024.

Despite advanced harvest the average harvest weights have were good.

As earlier announced, Bakkafrost will follow a similar de-risking strategy for

the Scottish marine farming in 2025. In the beginning of 2025, the biological

performance has been good and Bakkafrost expects to be able to harvest around

62% of the annual volume in H1 2025 with good average weights. Ahead of Q3,

harvest weights will probably reduce as some sites are emptied to reduce risk.

The biomass is gradually improving as the operation transitions to a higher

share of high-quality smolt. This strategic shift is expected to enhance overall

fish health and growth rates, leading to a more robust and sustainable

aquaculture environment.

In the Scottish freshwater operation, the main priority is to ensure a steadily

growing output of large high-quality smolt from Applecross which is currently in

the ramp-up phase to deliver fish above 200g in 2025. Production volume will

increase throughout the year and into 2026. With the new Applecross 5 module now

being completed, the production capacity has increased around 50% enabling

Applecross to produce around 3,500 tonnes of smolt annually. This capacity will

be utilised to make Bakkafrost self-sufficient with around 14 million high

-quality smolt of 250g.

Another priority in 2025 is the completion of the Applecross phase 6 and 7,

which will improve the biosecurity in the smolt production and add flexibility.

In Q4 2024, the average weight of transferred smolt in Scotland was 152g, which

is 35% higher than in Q4 2023.

Smolt transfer

Bakkafrost's expected smolt transfer in 2025 in the Faroe Islands is around 18.5

million smolts with an average weight of around 430g. In Scotland, the smolt

transfer in 2025 is expected to be around 10.0 million smolts with an average

weight of above 200g. The number and average weight of smolts transferred are

key elements of predicting Bakkafrost's future production.

Million smolt transferred '25e '24 '23 '22 '21 '20

FO 18.5 17.1 14.2 14.4 14.4 14.7

SCT 10.0 6.0 9.0 11.0 11.1 10.4

Avg. weight (g)

FO 430 410 396 345 376 320

SCT 200 109 117 107 95 88

In 2025, Bakkafrost expects to harvest around 77,000 tonnes gutted weight in the

Faroe Islands and 20,000 tonnes gutted weight in Scotland, giving a total of

around 97,000 tonnes gutted weight. The Scottish harvest volume is reduced

compared to previously guided volumes, due to more volumes being harvested in Q4

2024. The quarterly harvest profile is outlined in in the table below.

Biological, environmental and market conditions can affect the expected harvest

profile.

Expected harvest profile in 2025 as a % of total harvest pr. region:

Region Q1 Q2 Q3 Q4

FO 24% 21% 31% 24%

SCT 28% 33% 16% 23%

The estimates for harvest volumes and smolt transfers in both geographies are

dependent on biological development.

Sales & VAP (Value added products)

Bakkafrost's highly flexible value chain includes state-of-the-art VAP

processing capacity, which enables the company to adapt effectively to rapidly

changing market situations.

As a result of changes in the Faroese revenue tax, Bakkafrost has adjusted the

strategy for contracted VAP (Value-Added Products) to reduce contract exposure.

For 2025, Bakkafrost intends to sign contracts covering around 15% of the

expected harvest volumes in the Faroe Islands and Scotland combined.

FOF (Fishmeal, oil and feed)

The outlook of fishmeal and fish oil production is dependent on the availability

of raw materials.

The ICES 2025 recommendation for blue whiting is 1,447 thousand tonnes, which

represents a -5.4% decrease from the recommendation for 2024.

In 2025 Bakkafrost expects similar production volumes of fishmeal and fish oil

as in 2024.

Bakkafrost expects the feed production at Havsbrún to be around 150,000 tonnes

in 2025. Close to all of this will be sold internally to Bakkafrost's Faroese

and Scottish Farming segments.

Investments

On the Capital Markets Day on 6 June 2023, Bakkafrost announced a 6.3bn DKK

investment plan for 2024-2028. The investments will enable a transformation of

the operation in Scotland and provide sustainable growth in the Faroe Islands as

well as Scotland.

The main purpose of the investments in Scotland is to replicate Bakkafrost's

successful operation in the Faroe Islands. A part of this is to implement

Bakkafrost's large smolt strategy in Scotland, which is achieved through

building sufficient and energy-efficient hatchery capacity. The 2024-2028

investment plan includes projects to build hatchery capacity to produce above 15

million large smolts annually. Having large smolt in Scotland will transform the

performance, lower the biological risk and increase harvest volumes. In addition

to building hatchery capacity, Bakkafrost plans to strengthen the processing

capabilities and increase flexibility in operation. Bakkafrost will also invest

in more service vessel capacity to improve the mitigation of biological risk and

improve the cost of operation. Further, Bakkafrost will make investments in

marine site development.

The investments in the Faroe Islands include increasing annual hatchery

production capacity to around 24 million smolts at 500g, cost-efficient

repurposing of old hatcheries into broodstock operation, expansion of feed

production capacity and obtaining growth through optimization of existing sites

and new technology.

With the investment plan, Bakkafrost expects to sustainably grow the total

annual harvest volumes to 165,000 tonnes in 2028. Over the same period, the

total annual production capacity in Bakkafrost's value chain will reach 200,000

tonnes gutted weight.

Update on the 2024-2028 investment plan

Since the announcement of the 2024-2028 investment plan, Bakkafrost has decided

to change the priority of some of the investment projects in Scotland, including

the second planned hatchery at Fairlie and new processing facility.

Consequently, the capex spend in 2024 and 2025 is expected to reduce around 800

mDKK in total, compared to the investment levels announced in the 2024-2028

investment plan.

Bakkafrost will host the next Capital Markets Day on 16-17 June 2025 in the

Faroe Islands.

Financial

The global salmon product market's long-term balance is likely to favor

Bakkafrost. Bakkafrost has a long value chain and a cost-efficient production of

high-quality salmon products and will likely maintain financial flexibility

going forward.

In March 2022, Bakkafrost secured a 700 mEUR sustainability-linked credit

facility (expandable by 150 mEUR) with a 5-year term and 2-year extension

options which have been executed. This facility, along with Bakkafrost's strong

equity ratio, bolsters the Group's financial strength for organic growth and

cost reduction in Scotland, while also facilitating M&A and future organic

growth opportunities, and upholding an unchanged dividend policy.

Please find the Company's Q4 2024 report and the Q4 2024 presentation enclosed.

Contacts:

· Regin Jacobsen, CEO of P/F Bakkafrost: +298 235001 (mobile)

· Høgni Dahl Jakobsen, CFO of P/F Bakkafrost: +298 235060 (mobile)

This information is subject of the disclosure requirements pursuant to section 5

-12 of the Norwegian Securities Trading Act.

About Bakkafrost:

Bakkafrost is the largest salmon farmer in the Faroe Islands and the second

-largest salmon farmer in Scotland. The Group is fully integrated from feed

production to smolt, farming, VAP and sales. The Group has production of

fishmeal, fish oil and salmon feed in the Faroe Islands and primary and

secondary processing in the Faroe Islands, Scotland and Denmark. The Group

operates sea farming and broodstock operations in both the Faroe Islands and

Scotland. The Group has built a biogas plant in the Faroe Islands. The

headquarter is located in the Faroe Islands, and the Group has sales and

administration offices in Grimsby (UK), Edinburgh (Scotland), Boulogne-Sur-Mer

(France), New Jersey (US) and Munkebo (DK). The Bakkafrost Group has 1,686

employees (full-time equivalents).

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