Interim / Quarterly Report • Aug 23, 2016
Interim / Quarterly Report
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Condensed Consolidated Interim Report for Q2 2016 and H1 2016
| Highlights 2 | |
|---|---|
| Summary of the 2nd Quarter 2016 and H1 2016 3 | |
| Financial Review 5 | |
| Statement of Financial Position 6 | |
| Cash Flow 7 | |
| Farming Segment 8 | |
| VAP Segment 9 | |
| FOF Segment 10 | |
| Outlook 11 | |
| Risks 13 | |
| Events after the Date of the Statement of Financial Position 14 | |
| Consolidated Income Statement 15 | |
| Consolidated Statement of Comprehensive Income 16 | |
| Consolidated Statement of Financial Position 17 | |
| Consolidated Cash Flow Statement 19 | |
| Consolidated Statement of Changes in Equity 20 | |
| Notes to the Account 21 | |
| Contacts 27 |
| DKK 1,000 2016 2015 2016 2015 INCOME STATEMENT Group - Operating revenue 789,690 799,947 1,694,240 1,413,144 Group - Operational EBIT 307,092 303,419 560,662 538,290 Group - EBIT 277,636 254,581 559,405 431,649 Group - Profit for the period 223,760 191,069 437,072 323,494 Operational EBIT (Farming and VAP)(DKK) 289,458 279,893 525,425 496,741 Operational EBIT/kg (Farming and VAP)(DKK) 22.26 19.74 21.95 20.78 Operational EBIT/kg (Farming and VAP) (NOK) 27.88 22.62 27.76 24.07 Farming - Operating revenue 751,616 608,993 1,453,476 1,080,291 Farming - Operational EBIT 357,852 248,402 618,635 443,386 Farming - Operational EBIT margin 48% 41% 43% 41% Farming - Operational EBIT/kg (DKK) 27.52 17.52 25.84 18.55 Farming - Operational EBIT/kg (NOK) 34.47 20.07 32.68 21.49 VAP - Operating revenue 187,446 190,752 366,950 379,847 VAP - Operational EBIT -68,394 31,491 -93,210 53,355 VAP - Operational EBIT margin -36% 17% -25% 14% VAP - Operational EBIT/kg (DKK) -14.66 6.22 -11.91 5.56 VAP - Operational EBIT/kg (NOK) -18.37 7.13 -15.07 6.45 FOF - Operating revenue 219,543 283,521 507,551 488,449 FOF - EBITDA 45,409 53,004 114,431 115,568 FOF - EBITDA margin 20.68% 18.69% 22.55% 23.66% DKK/NOK (average) 79.83 87.26 79.08 86.31 FINANCIAL POSITION AND CASH FLOW Total Assets 4,342,732 3,920,386 4,342,732 3,920,386 Equity 2,633,996 2,580,482 2,633,996 2,580,482 Equity ratio 61% 66% 61% 66% Net interest bearing debt 603,037 391,471 603,037 391,471 Cash flow from operations 248,463 325,551 492,639 406,553 Cash flow from financing -197,204 -372,832 -103,415 -337,595 PROFITABILITY Basic earnings per share (DKK) 4.61 3.91 9.00 6.67 Diluted earnings per share (DKK) 4.61 3.91 9.00 6.67 ROE 8.2% 8.8% 16.1% 14.9% ROCE (for the last quarter) 7.9% 9.3% 14.5% 16.5% ROCE (for the last 4 quarters) 32.5% 35.8% 28.5% 32.3% ROIC (for the last quarter)*** 9.8% 11.5% 19.7% 19.9% ROIC (for the last 4 quarters) 41.2% 46.1% 41.2% 46.1% VOLUMES Harvested volume (tgw) 13,004 14,182 23,938 23,908 VAP produced volume (tgw) 4,664 5,064 7,824 9,589 Sold feed tonnes 16,295 17,657 30,749 32,057 Internal feed sale tonnes 14,260 15,551 27,509 27,961 Smolt released thousand 1,946 1,415 3,872 3,623 |
Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|
* Aligned for fair value adjustment of biomass, onerous contracts provisions, income from associates and revenue tax
** Comparing figures from end 2015
*** Return on average equity based on profit or loss for the period
**** Return on average invested capital based on operational EBIT
***** Return on average invested capital based on EBITA
(Figures in parenthesis refer to the same period last year)
The Bakkafrost Group delivered a total operating EBIT of DKK 307.1 million in Q2 2016. Harvested volumes were 13.0 thousand tonnes gutted weight. The combined farming and VAP segments made an operational EBIT of DKK 289.5 million. The farming segment made an operational EBIT of DKK 357.9 million and the increased salmon spot prices had a positive effect on the farming segment. The high salmon spot prices affected the VAP segment negatively, and the VAP Segment made an operational EBIT of DKK -68.4 million. The EBITDA for the FOF segment was DKK 45.4 million.
The Group made a profit for the second quarter 2016 of DKK 223.8 million (DKK 191.1 million). For H1 2016, the profit was DKK 437.1 million (DKK 323.5 million).
The total volumes harvested in Q2 2016 were 13,004 tonnes gutted weight (14,182 tgw). Total harvested volumes in H1 2016 were 23,938 tonnes gutted weight (23,908 tgw). The guidance for volumes for 2016 is unchanged.
Bakkafrost transferred 1.9 million smolts in Q2 2016 (1.4 million), which is in line with the company's plans. Transferred smolts in H1 2016 were 3.9 million smolts (3.6 million).
In accordance with Bakkafrost's dividend policy and the resolution of the Annual General Meeting 2016, Bakkafrost paid out DKK 8.25 (NOK 10.37) per share in April 2016. The total dividend payment was DKK 403.1 million (NOK 506.6 million).
On 14 July 2016 Bakkafrost announced suspicion of pathogenic ISA virus in farming site A-73 Hvannasund Norður on the basis of regularly ISA tests results, carried out by the Veterinary Authorities according to the Faroese veterinary system. Consequently, Bakkafrost prepared to take necessary actions and the Veterinary Authority undertook further tests in order to confirm the suspicion of pathogenic ISA virus. After a week of extensive testing, all the results were negative and did not prove the presence of pathogenic ISA virus.
After that, the Veterinary Authority increased surveillance at the farming site A-73 Hvannasund Norður and carried out extra tests on neighbouring farming sites, which will be carried out for the next half year. This procedure is stipulated in the Faroese veterinary farming regime with the purpose of securing and maintaining good biology in the Faroese farming industry.
Bakkafrost acquired the remaining outstanding shares (51%) of P/F Faroe Farming, effective from 1 July 2016. The Faroese Registry and the Competition Authorities have approved Bakkafrost's acquisition of P/F Faroe Farming. Simultaneously, Bakkafrost filed (relinquished) two farming licenses to the Faroese Authorities. Following these two transactions, Bakkafrost has 14 licenses for farming salmon in the Faroe Islands.
The combined farming and VAP segments made an operational EBIT of DKK 289.5 million (DKK 279.9 million) in Q2 2016. For H1 2016, the combined farming and VAP segment made an operational EBIT of DKK 525.4 million (DKK 496.7 million).
The farming segment made an operational EBIT of DKK 357.9 million (DKK 248.4 million) in Q2 2016. The harvested volumes are lower, while the average spot price is higher in Q2 2016, compared with Q2 2015. For H1 2016, the operational EBIT was DKK 618.6 million (DKK 443.4 million).
The VAP segment made an operational EBIT of DKK -68.4 million (DKK 31.5 million) for Q2 2016. The high spot prices in Q2 2016 had a negative effect on the operational EBIT in the VAP segment. There is normally a time lag between the changes in the spot prices and the changes in the contract prices. The spot prices have increased significantly in 2016 from the level in 2015. Therefore, the VAP result for Q2 2016 has decreased, compared to last year. For H1 2016, the operational EBIT was DKK -93.2 (DKK 53.4 million).
The FOF segment (fishmeal, oil and feed) made an operational EBITDA of DKK 45.4 million (DKK 53.0 million) in Q2 2016 and the EBITDA margin was 20.7% (18.7%). The operational EBITDA was DKK 114.4 million in H1 2016 (DKK 115.6 million), corresponding to an EBITDA margin of 22.6% (23.7%).
In Q2 2016, Havsbrún sourced 83,971 tonnes (86,012 tonnes) of raw material, and in H1 2016, Havsbrún sourced 155,539 tonnes (161,015 tonnes) of raw material.
The Bakkafrost Group's net interest bearing debt amounted to DKK 603.0 million at the end of Q2 2016 (DKK 391.5 million at year-end 2015) including deposits and losses on financial derivatives relating to the interest bearing debt.
Bakkafrost had undrawn credit facilities of approximately DKK 642.8 million at the end of Q2 2016.
Bakkafrost's equity ratio was 61% at 30 June 2016, compared to 66% at the end of 2015.
(Figures in parenthesis refer to the same period last year)
The operating revenues amounted to DKK 789.7 million (DKK 799.9 million) in Q2 2016, and for H1 2016, the operating revenues amounted to DKK 1,694.2 million (DKK 1,413.1 million). Despite higher spot prices, the revenue in Q2 2016 is lower than in Q2 2015. The reason is lower volumes harvested and lower volumes of FOF products sold.
Operational EBIT was DKK 307.1 million (DKK 303.4 million) in Q2 2016. The margin in the farming segment is higher in Q2 2016 than in Q2 2015, while the margin in the FOF segment is at the same level, but lower in the VAP segment. For H1 2016, the operational EBIT was DKK 560.7 million (DKK 538.3 million).
The fair value adjustment of the Group's biological assets amounted to DKK -29.4 million (DKK -38.0 million) in Q2 2016. The adjustment is due to lower biological assets at the end of Q2 2016, compared with the beginning of the quarter. For H1 2016, the fair value adjustment amounted to DKK 78.3 million (DKK -93.0 million).
Change in provisions for onerous contracts amounted to DKK 22.8 million (DKK 0.0 million) in Q2 2016. The provisions for onerous contracts reflects the difficult market situation for the VAP segment. Since late 2015, the salmon spot prices have increased relatively much, and the contracts negotiated for the VAP products do not reflect the same price increase. Part of the provisions have been recognised in Q2 2016 due to the high salmon spot price in the quarter. For H1 2016, the change in provisions of onerous contracts amounted to -37.2 DKK million (DKK 0 million).
In Q2 2016, the result from associated companies amounted to DKK 6.7 million (DKK -10.8 million). For H1 2016, the result from associated companies amounted to DKK 9.8 million (DKK -13.7 million).
The Faroese Parliament changed the taxes on salmon farming in the Faroe Islands in December 2015. The tax changes are effective from 1st January 2016. The new revenue tax is not classified as taxes, but is classified as costs and is included in EBIT. The revenue tax amounted to DKK -29.5 million (DKK 0 million). For H1 2016, the revenue tax was DKK -52.1 million (DKK 0 million).
Net interests in Q2 2016 were DKK -5.9 million (DKK -17.4 million), whereof an unrealised exchange rate adjustment of DKK -4.2 million (DKK 4.8 million), relating to the bond loan of NOK 500 million, is posted in Q2 2016. For H1 2016, net interests were DKK -27.3 million (DKK -28.3 million).
Net taxes in Q2 2016 amounted to DKK -48.0 million (DKK -46.1 million). For H1 2016, net taxes amounted to DKK -95.1 million (DKK -79.9 million).
The result for Q2 2016 was DKK 223.8 million (DKK 191.1 million) and for H1 2016, the result was DKK 437.1 million (DKK 323.5 million).
(Figures in parenthesis refer to end last year)
The Group's total assets amounted to DKK 4,342.7 million (DKK 3,920.4 million) at the end of Q2 2016.
The Group's intangible assets are unchanged, compared to the beginning of the year, and amounted to DKK 294.7 million. Intangible assets comprise primarily the fair value of acquired farming licences. No licences in the North region are recorded with a value in the Bakkafrost accounts.
Property, plant and equipment amounted to DKK 1,792.9 million (DKK 1,531.5 million) at the end of Q2 2016. In Q2 2016, Bakkafrost made investments in PP&E amounting to DKK 199.5 million in Q2 2016 and DKK 318.7 million for H1 2016.
Non-current financial assets amounted to DKK 136.1 million (DKK 130.9 million) at the end of Q2 2016, and are nearly unchanged from the end of 2015.
The Group's carrying amount (fair value) of biological assets amounted to DKK 1,036.5 million (DKK 1,060.3 million) at the end of Q2 2016. Included in the carrying amount of the biological assets is a fair value adjustment amounting to DKK 335.5 million (DKK 257.3 million). The increase is due to higher salmon prices at the end of Q2 2016, compared to end 2015.
The Group's inventories amounted to DKK 485.2 million (DKK 422.0 million) as at end Q2 2016. The inventory primarily represents Havsbrún's inventory of fishmeal, fish oil and fish feed in addition to feed at the feed stations, finished products, packing materials and other raw materials.
The Group's total receivables amounted to DKK 423.6 million (DKK 379.2 million) as at end Q2 2016.
The Group's equity amounted to DKK 2,634.0 million (DKK 2,580.5 million) at the end of Q2 2016. The change in equity consists primarily of the positive result for Q2 2016 and dividend payment of gross DKK 403.1 million in Q2 2016.
The Group's total non-current liabilities amounted to DKK 1,296.0 million (DKK 925.9 million) at the end of Q2 2016.
Deferred and other taxes amounted to DKK 445.0 million (DKK 349.6 million) at the end of Q2 2016.
Long-term debt was DKK 736.6 million (DKK 447.6 million) at the end of Q2 2016. Derivatives amounted to DKK 114.4 million (DKK 128.8 million).
Bakkafrost's interests bearing debt consists of a bank loan and a bond loan. The bank loan is a multicurrency revolving credit facility totalling DKK 850 million for a five-year period and is payable in December 2020. The bond loan of NOK 500 million has a five-year maturity and is payable 14 February 2018. The interest rate of the bonds is NIBOR 3m + 4.15%. Following the issuance of the bonds, Bakkafrost has entered into a currency/-interest rate swap, hedging the exchange rate, and has switched the interest rate from NIBOR 3m to CIBOR 3m. Bakkafrost has entered the swap due to its exposure to DKK, as a large part of the income and costs are in DKK and EUR.
At the end of Q2 2016, the Group's total current liabilities were DKK 412.7 million (DKK 414.0 million). The current liabilities consist only of accounts payable.
Bakkafrost's equity ratio was 61% (66%) at the end of Q2 2016.
(Figures in parenthesis refer to the same period last year)
The cash flow from operations in Q2 2016 was DKK 248.5 million (DKK 325.6 million). The increase in inventory had a negative effect on the cash flow from operations in Q2 2016, as well as higher receivables affected the cash flow negatively in the quarter. For H1 2016, the cash flow from operations was DKK 492.6 million (DKK 406.6 million).
The cash flow from investment activities in Q2 2016 amounted to DKK -198.2 million (DKK -71.7 million). The amount relates to investments in property, plant and equipment. For H1 2016, the cash flow from investments amounted to DKK -317.3 million (DKK -178.2 million).
Cash flow from financing activities totalled DKK -197.2 million in Q2 2016 (DKK -372.8 million). This is mainly because of the DKK 400,6 million paid out as net dividend and a change of interest bearing debt on DKK 244.3 million. Likewise, financing of an associated company had a negative effect of DKK -37.1 million. For H1 2016, cash flow from financing amounted to DKK -103.4 million (DKK -337.6 million).
Net change in cash flow in Q2 2016 amounted to DKK -146.9 million (DKK -119.0 million) and for H1 2016, DKK 71.9 million (DKK -109.3 million).
At the end of Q2 2016, Bakkafrost had unused credit facilities of approximately DKK 642.8 million (DKK 720.7 million).
The farming segment produces high quality Atlantic salmon from juveniles to harvest size salmon. The salmon is sold to fresh fish markets globally and to the internal VAP production. The farming sites are located in the central and northern part of the Faroe Islands.
| Farming Segment 1,000 DKK |
Q2 2016 |
Q2 2015 |
Increase | H1 2016 |
H1 2015 |
Increase |
|---|---|---|---|---|---|---|
| Total revenue | 751,616 | 608,993 | 23% | 1,453,476 | 1,080,291 | 35% |
| Operational EBIT | 357,852 | 248,402 | 44% | 618,635 | 443,386 | 40% |
| Farming - Operational EBIT/kg (DKK) | 27.52 | 17.52 | 57% | 25.84 | 18.55 | 39% |
| Harvested volume (tgw) | 13,004 | 14,182 | -8% | 23,938 | 23,908 | 0% |
The total volumes harvested in Q2 2016 were 13,004 tonnes gutted weight (14,182 tgw) – a decrease in volume of 8%. Total harvested volumes for H1 2016 were 23,938 tonnes gutted weight (23,908 tgw), which is in line with the forecast for 2016.
Bakkafrost transferred 1.9 million smolts (1.4 million) in Q2 2016. In H1 2016, 3.9 million smolts (3.6 million) were transferred. This is in line with Bakkafrost's smolt transfer plan for 2016.
In Q2 2016, the operating revenue for Bakkafrost's farming segment was DKK 751.6 million (DKK 609.0 million). The operating revenue for the farming segment for H1 2016 was DKK 1,453.5 million (DKK 1,080.3 million).
Operational EBIT amounted to DKK 357.9 million (DKK 248.4 million) in Q2 2016, which corresponds to an increase of 44%. In H1 2016, operational EBIT was DKK 618.6 million (DKK 443.4 million).
Operational EBIT/kg for the farming segment was DKK 27.52 (NOK 34.47) in Q2 2016, compared with DKK 17.52 (NOK 20.07) in Q2 2015. The higher margin is mainly due to higher salmon prices in Q2 2016, compared to Q2 2015. Operational EBIT/kg for H1 2016 was DKK 25.84 (NOK 32.68), compared with DKK 18.55 (NOK 21.49) for H1 2015.
| Q2 | Q2 | H1 | H1 | |
|---|---|---|---|---|
| Harvested volumes | 2016 | 2015 | 2016 | 2015 |
| Farming North | 8,904 | 11,681 | 10,413 | 18,866 |
| Farming West | 4,100 | 2,501 | 13,525 | 5,042 |
| Total harvested volumes (tgw) | 13,004 | 14,182 | 23,938 | 23,908 |
| Smolt transfer | |||||
|---|---|---|---|---|---|
| 1,000 pieces | 2011 | 2012 | 2013 | 2014 | 2015 |
| Farming North | 5,000 | 6,500 | 7,200 | 3,000 | 7,100 |
| Farming West | 2,600 | 4,200 | 2,300 | 7,400 | 4,200 |
| Viking | 1,000 | 0 | 0 | 0 | 0 |
| Total | 8,600 | 10,700 | 9,500 | 10,400 | 11,300 |
The VAP (value added products) segment produces skinless and boneless portions of salmon. The main market for the VAP products is Europe with increasing sales in other markets. The VAP products are sold on long-term contracts.
| Value added products 1,000 DKK |
Q2 2016 |
Q2 2015 |
Change | H1 2016 |
H1 2015 |
Change |
|---|---|---|---|---|---|---|
| Total revenue | 187,446 | 190,752 | -2% | 366,950 | 379,847 | -3% |
| Operational EBIT | -68,394 | 31,491 | -317% | -93,210 | 53,355 | -275% |
| VAP - Operational EBIT/kg (DKK) | -14.66 | 6.22 | -336% | -11.91 | 5.56 | -314% |
| VAP produced volume (tgw) | 4,664 | 5,064 | -8% | 7,824 | 9,589 | -18% |
36% (30%) of the total harvested volumes in Q2 2016 went to production of VAP products. In addition to this, Bakkafrost also sourced some salmon from a third party, as in previous quarters. 30% (36%) of the total harvested volumes in H1 2016 went to production of VAP products.
The VAP production in Q2 2016 was 4,664 tonnes gutted weight (5,064 tgw). The decrease in production in Q2 2016 is 8%, compared to Q2 2015. In H1 2016, the VAP production was 7,824 tgw (9,589 tgw).
The operating revenue for the VAP segment amounted to DKK 187.5 million (DKK 190.8 million) in Q2 2016. The decrease in revenue is due to lower volumes sold in Q2 2016, compared with Q2 2015.
Operational EBIT amounted to DKK -68.4 million (DKK 31.5 million) in Q2 2016, corresponding to an operational EBIT of DKK -14.66 (NOK -18.37) per kg gutted weight in Q2 2016, compared with DKK 6.22 (NOK 7.13) per kg gutted weight in Q2 2015. The decrease in the operational EBIT margins is due to higher raw material prices. The VAP segment purchases its raw material (fresh salmon) at spot prices each week. For H1 2016, operational EBIT amounted to DKK -93.2 million (DKK 53.4 million), corresponding to an operational EBIT of DKK -11.91 (NOK -15.07) per kg gutted weight in H1 2016, compared with an operational EBIT of DKK 5.56 (NOK 6.45) per kg gutted weight in H1 2015.
| Distribution of harvested | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|
| volumes (tgw) | 2016 | 2015 | 2016 | 2015 |
| Harvested volume used in VAP production | 36% | 30% | 30% | 36% |
| Harvested volume sold fresh/frozen | 64% | 70% | 70% | 64% |
| Harvested and purchased volumes (tgw) | 100% | 100% | 100% | 100% |
Sold Feed Q2 2016 16,295 tonnes EBITDA Q2 2016 45.4 mDKK
The FOF (fishmeal, -oil and feed) segment produces fishmeal, fish oil and fish feed. The majority of the production is used for fish feed, which is used internally in the farming segment. The quality of the fish feed is important to the quality of the salmon from Bakkafrost. Fishmeal, fish oil and fish feed is also sold externally.
| Fishmeal, Fish Oil and Fish Feed | Q2 | Q2 | H1 | H1 | ||
|---|---|---|---|---|---|---|
| 1,000 DKK | 2016 | 2015 | Change | 2016 | 2015 | Change |
| Total revenue | 219,543 | 283,521 | -23% | 507,551 | 488,449 | 4% |
| EBITDA | 45,409 | 53,004 | -14% | 114,431 | 115,568 | -1% |
| FOF - EBITDA margin | 20.7% | 18.7% | 11% | 22.5% | 23.7% | -5% |
| Sold feed tonnes | 16,295 | 17,657 | -8% | 30,749 | 32,057 | -4% |
In Q2 2016, Havsbrún received 83,970 tonnes (86,012 tonnes) of raw material for the production of fishmeal and fish oil. The raw material intake depends on the fishery in the North Atlantic and available species of fish. In H1 2016, Havsbrún received 155,539 tonnes (161,015 tonnes) of raw material.
The production of fishmeal in Q2 2016 was 17,839 tonnes (17,600 tonnes). For H1 2016, Havsbrún produced 33,745 tonnes (32,888 tonnes) of fishmeal.
The production of fish oil in Q2 2016 was 1,087 tonnes (489 tonnes). The production of fish oil varies, depending on the species of fish sourced for production and timing of catch. For H1 2016, Havsbrún produced 3,682 tonnes (2,637 tonnes) of fish oil.
Sales of feed amounted to 16,295 tonnes (17,657 tonnes) in Q2 2016, of which the farming segment internally used 14,260 tonnes (15,551 tonnes) or 92% (88%). For H1 2016, Havsbrún sold 30,749 tonnes (32,057 tonnes) of feed.
The operating revenue for the FOF segment amounted to DKK 219.5 million (DKK 283.5 million) in Q2 2016 of which DKK 149.3 million (DKK 158.7 million) represents sales to Bakkafrost's farming segment, corresponding to 68% (56%). For H1 2016, the revenue amounted to DKK 507.6 million (DKK 488.4 million) of which DKK 287.8 million (DKK 280.7 million) represents sales to Bakkafrost's farming segment and corresponds to 56.7% (57.4%).
Operational EBITDA was DKK 45.4 million (DKK 53.0 million) in Q2 2016, and the operational EBITDA margin was 20.7% (18.7%). Havsbrún sources raw pelagic fish for the fishmeal and fish oil production, which are part of the recipe for the production of salmon feed. For H1 2016, the operational EBITDA was DKK 114.4 million (DKK 115.6 million), corresponding to an EBITDA margin of 22.5% (23.7%).
| Sales FOF | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|
| volume (tonnes) | 2016 | 2015 | 2016 | 2015 |
| Feed Internal sold (tonnes) | 14,260 | 15,551 | 27,509 | 27,961 |
| Feed External sold (tonnes) | 2,035 | 2,106 | 3,240 | 4,096 |
| Total Feed sold (tonnes) | 16,295 | 17,657 | 30,749 | 32,057 |
| Fishmeal external sold (tonnes) | 4,063 | 9,900 | 15,779 | 15,251 |
| Fish oil external sold (tonnes) | 0 | 4 | 5 | 5 |
The global demand in the salmon market continues with strong growth rates. The market balance will be tighter in 2016, compared to 2015. Global supply of Atlantic salmon is expected to decrease by approximately 4% in volume during 2016, compared to 2015. The decrease is expected to be 8-9% in the second half of 2016. Production capacity is close to full utilization and further expansion relates to high investments.
The market place is one of Bakkafrost's most significant risk areas. Bakkafrost has a geographical and a market price approach. These approaches reduce the exposure to the market risk. To diversify the geographical market risk, Bakkafrost sells its products to some of the largest salmon markets in the world, USA, the Far East, Europe and Russia.
The Russian ban on EU and Norwegian salmon, implemented in August 2014, gave temporary challenges to move volumes between markets. The markets have more or less adapted to the new market balance.
The outlook for the farming segment is good. The estimates for harvesting volumes and smolt releases are as always dependent on the biological situation.
Bakkafrost has acquired the remaining outstanding shares in P/F Faroe Farming, effective from 1 July 2016. P/F Faroe Farming is a salmon farming company and operates in the southern part of the Faroe Islands, Suðuroy. P/F Faroe Farming holds three farming licenses in Suðuroy, Faroe Islands, and the total harvested volumes for 2015 were 4,681 tonnes and for H1 2016 were 2,054 tonnes. P/F Faroe Farming will be consolidated into Bakkafrost Group from 1 July 2016. P/F Faroe Farming expects to harvest 1,000 tonnes in the second half of 2016.
Together with Bakkafrost's unchanged expected harvest (excl. Faroe Farming) of 48,000 tonnes gutted weight, the total harvest for Bakkafrost Group in 2016 will be 49,000 tonnes gutted weight.
The number of smolts released is one key element of predicting Bakkafrost's future production. Bakkafrost forecasts a release of 10.4 million smolts in 2016, compared with 11.3 million smolts released in 2015 and 10.4 million smolts released in 2014.
The biological situation is Bakkafrost's most important risk area. The suspicion of possible pathogenic ISA virus in on of Bakkafrost's farming sites on 14 July 2016 draws the attention to the importance of good animal welfare and biology, to reduce the biological risk. Bakkafrost is focusing on biological risk continuously and has made several new investments and procedures to diminish the risk.
Sea lice is an area, which has demanded more effort and is a part of the biological risk. Bakkafrost's new live fish carrier, M/S Hans á Bakka, is tripling its freshwater treatment capacity within August 2016. M/S Hans á Bakka's operation using freshwater has shown to be effective against sea lice, and therefore Bakkafrost will continue to invest in sustainable treatment methods and anticipates these operations to be an important part of Bakkafrost's treatment against sea lice.
Bakkafrost has signed contracts covering around 79% of the VAP capacity for the rest of 2016. This corresponds to around 39% of the expected harvested volumes for the rest of 2016. The remaining 21% are expected to be committed during the period. Bakkafrost has already signed contracts covering approximately 50% of the VAP capacity for 2017. In connection with the negotiation and signing of the new contracts for 2017, Bakkafrost has renegotiated the prices for part of the remaining quantities from end of Q3 2016 in line with the forward price picture.
The VAP contracts are at fixed prices, based on the salmon forward prices at the time they are agreed and the expectations for the salmon spot price for the contract period.
The long-term strategy is to sell around 40-50% of the harvested volumes of salmon as VAP products on fixed price contracts. Selling the products at fixed prices reduces the financial risk with fluctuating salmon prices. The market price for contracted VAP products follows a more stable pattern with trends instead of short-term fluctuations as in the spot market.
The outlook for the production of fishmeal and fish oil is dependent on the availability of raw material. The quotas for catching blue whiting in the North Atlantic are expected to be reduced, and therefore the production of fishmeal and fish oil are most likely to reduce in volume in 2016 from relatively high volumes in 2015.
The major market for Havsbrún´s fish feed is the local Faroese market including Bakkafrost's internal use of fish feed.
Havsbrún's sales of fish feed in 2016 are expected to be at 80,000 tonnes.
In June 2016, Bakkafrost announced a five-year investment plan from 2016 to 2020. The total investments for the period is DKK 2.2 billion, including maintenance CAPEX.
The purpose of the investment plan is to continue to have one of the most cost conscious value chains in the farming industry, carry out organic growth, increase flexibility and reduce the biological risk to meet the future consumers' trends and to be more end-customer orientated.
Bakkafrost has a goal to be self-supplied with smolts at a size of 500g each. The benefits are a shorter production time at sea as well as reduced biological risk. To reach this goal, approximately half of Bakkafrost's total investments over the next five years will be in hatcheries.
The investment of the new harvest/-VAP factory will be finalised in 2016. The harvest operation has started and the VAP operation is expected to start in Q4 2016. There will be some extra costs during the start-up period, but the investment is expected to result in operational savings of DKK 70-90 million per year with gradual effect from 2017.
Bakkafrost plans to increase value of offcuts from salmon harvested and processed in the new harvest/- VAP factory. Bakkafrost will invest in a new salmon meal and salmon oil plant, located in Fuglafjørður and operated by Havsbrún. The FOF segment will also invest in a new feed line, which will increase the capacity of the feed production.
Free cash flow from operations, existing financing facilities and partly new financing if advantageous will finance the investments. The dividend policy will be unchanged.
Improved market balances in the world market for salmon products and cost conscious production will likely improve the financial flexibility going forward. A high equity ratio together with Bakkafrost's bank financing and the issuance of bonds makes Bakkafrost's financial situation strong. This enables Bakkafrost to carry out its investment plans to further focus on strengthening the Group, M&A's, organic growth opportunities and fulfil its dividend policy in the future.
In addition to the risks described in the 2015 Annual and Consolidated Report and Accounts, a routine surveillance test in July 2016 detected a possible pathogenic ISA-virus at a Bakkafrost farming site. A further description of this is under Events After the Date of the Statement of Financial Position.
The Annual Report 2015 is available on request from Bakkafrost and on Bakkafrost's website, www.bakkafrost.com.
Bakkafrost is, as explained in the Annual Report 2015, exposed to the salmon price. A limited decrease in supply is expected in 2016 and therefore a tight market balance.
Biological risk has been and will be a substantial risk for Bakkafrost. The Annual Report 2015 gives more explanation on the biological risk and Bakkafrost's risk management regarding this.
References are made to the Outlook section of this report for other comments to Bakkafrost's risk exposure and to Note 3.
Bakkafrost announced on the 14th of July 2016 a suspicion of a possible pathogenic ISA-virus at Bakkafrost farming site A-73 Hvannasund Norður, as a result of a routine surveillance test by the Veterinary Authority. The suspicion arose after the result in one cage indicated that the fish was infected by the so called HPR-del ISA-virus.
Farming site A-73 Hvannasund Norður contains 1.2 million fish with an average weight of approximately 0.54 kg wfe. The total biomass was approximately 665 tonnes wfe medio July 2016.
Bakkafrost immediately prepared to take necessary actions.
The following week, the Veterinary Authority carried out two more extensive tests at the farming site A-73 Hvannasund Norður with the purpose of confirming the suspicion of pathogenic ISA virus. The results were all negative and did not prove the presence of pathogenic ISA virus.
The farming site A-73 Hvannasund Norður has no signs of any disease and the biological performance has been good, both before the routine surveillance test by the Veterinary Authority and afterwards.
As these tests did not confirm the suspicion, the Veterinary Authority has increased surveillance for at least six months at the farming site and carries extra tests on neighbouring farming sites as well. This procedure is stipulated in the Faroese veterinary farming regime, which has the purpose of securing and maintaining good biology in the Faroese farming industry. The farming companies and the Faroese 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 approximately 12 years in sea sites in the Faroe Islands.
On the 29th of June 2016, Bakkafrost purchased 51% of the shares in P/f Faroe Farming. With this purchase, Bakkafrost will become the owner of 100% of the shares in P/F Faroe Farming effective from 1 July 2016. The transaction is approved by the authorities.
Simultaneously with the agreement of acquiring 51% of the shares in P/F Faroe Farming, Bakkafrost has filed (relinquished) two licenses to the Faroese Authorities. The licenses filed are Svínáir (A-03) and Hovsfjørður (A-17/18).
Following these two transactions, P/F Bakkafrost has 14 licenses for farming salmon in the Faroe Islands.
Apart from the above, from the date of the statement of financial position until today, no events have occurred which materially impact the information provided by this report.
Glyvrar, August 22nd 2016
The Board of Directors of P/F Bakkafrost
Rúni M. Hansen Johannes Jensen Øystein Sandvik Chairman of the Board Deputy Chairman of the Board Board Member
Virgar Dahl Annika Frederiksberg Teitur Samuelsen Board Member Board Member Board Member
For the period ended 30 June 2016
| Q2 | Q2 | H1 | H1 | |
|---|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| Operating revenue | 789,690 | 799,947 | 1,694,240 | 1,413,144 |
| Purchase of goods | -158,754 | -263,099 | -605,821 | -567,183 |
| Change in inventory and biological assets (at cost) | -45,275 | 28,169 | 25,045 | 196,088 |
| Salary and personnel expenses | -83,542 | -76,606 | -156,097 | -140,681 |
| Other operating expenses | -165,935 | -158,667 | -339,396 | -310,501 |
| Depreciation | -29,092 | -26,325 | -57,309 | -52,577 |
| Operational EBIT * | 307,092 | 303,419 | 560,662 | 538,290 |
| Fair value adjustments on biological assets | -29,379 | -38,042 | 78,267 | -92,978 |
| Onerous contracts | 22,778 | 0 | -37,181 | 0 |
| Income from associates | 6,665 | -10,796 | 9,752 | -13,663 |
| Revenue tax | -29,520 | 0 | -52,095 | 0 |
| Earnings before interest and taxes (EBIT) | 277,636 | 254,581 | 559,405 | 431,649 |
| Net interest revenue | 616 | 479 | 1,169 | 1,413 |
| Net interest expenses | -6,609 | -6,187 | -12,989 | -13,926 |
| Net currency effects | 1,163 | -8,630 | -13,327 | -11,201 |
| Other financial expenses | -1,045 | -3,040 | -2,111 | -4,576 |
| Earnings before taxes (EBT) | 271,761 | 237,203 | 532,147 | 403,359 |
| Taxes | -48,001 | -46,134 | -95,075 | -79,865 |
| Profit or loss for the period | 223,760 | 191,069 | 437,072 | 323,494 |
| Profit or loss for the year attributable to | ||||
| Non-controlling interests | 0 | 0 | 0 | 0 |
| Owners of P/F Bakkafrost | 223,760 | 191,069 | 437,072 | 323,494 |
| Earnings per share (DKK) | 4.61 | 3.91 | 9.00 | 6.67 |
| Diluted earnings per share (DKK) | 4.61 | 3.91 | 9.00 | 6.67 |
*EBIT before fair value on biomass, onerous contracts, income from associates and revenue tax
For the period ended 30 June 2016
| Q2 | Q2 | H1 | H1 | |
|---|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| Profit for the period | 223,760 | 191,069 | 437,072 | 323,494 |
| Fair value adjustment on financial derivatives | 5,182 | -683 | 13,913 | 24,339 |
| Income tax effect | -790 | 104 | -2,122 | -3,713 |
| Reserve to share based payment | 593 | 276 | 783 | 462 |
| Currency translation differences | 2,848 | 2 | 2,358 | -128 |
| Adjustment treasury shares | -2,094 | 0 | -1,703 | 0 |
| Net other comprehensive income to be reclassified | ||||
| to profit or loss in subsequent periods | 5,739 | -301 | 13,229 | 20,960 |
| Net other comprehensive income not to be reclassified | ||||
| to profit or loss in subsequent periods | 0 | 0 | 0 | 0 |
| Other comprehensive income | 5,739 | -301 | 13,229 | 20,960 |
| Total other comprehensive income for the period | 229,499 | 190,768 | 450,301 | 344,454 |
| Comprehensive income for the period attributable to | ||||
| Non- controlling interests | 0 | 0 | 0 | 0 |
As at 30 June 2016
| 30 June | 31 Dec | |
|---|---|---|
| DKK 1,000 | 2016 | 2015 |
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | 294,675 | 294,675 |
| Property, plant and equipment | 1,792,855 | 1,531,493 |
| Financial assets | 136,134 | 130,893 |
| Total non-current assets | 2,223,664 | 1,957,061 |
| Current assets | ||
| Biological assets (biomass) | 1,036,553 | 1,060,273 |
| Inventory | 485,187 | 421,966 |
| Total inventory | 1,521,740 | 1,482,239 |
| Accounts receivable | 240,698 | 199,263 |
| Other receivables | 182,900 | 179,971 |
| Total receivables | 423,598 | 379,234 |
| Cash and cash equivalents | 173,730 | 101,852 |
| Total current assets | 2,119,068 | 1,963,325 |
| TOTAL ASSETS | 4,342,732 | 3,920,386 |
As at 30 June 2016
| 30 June | 31 Dec | |
|---|---|---|
| DKK 1,000 | 2016 | 2015 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Share capital | 48,858 | 48,858 |
| Other equity | 2,585,138 | 2,531,624 |
| Total equity | 2,633,996 | 2,580,482 |
| Non-current liabilities | ||
| Deferred and other taxes | 445,033 | 349,546 |
| Long-term interest bearing debts | 736,572 | 447,559 |
| Financial derivatives | 114,425 | 128,804 |
| Total non-current liabilities | 1,296,030 | 925,909 |
| Current liabilities | ||
| Accounts payable and other debt | 412,706 | 413,995 |
| Total current liabilities | 412,706 | 413,995 |
| Total liabilities | 1,708,736 | 1,339,904 |
| TOTAL EQUITY AND LIABILITIES | 4,342,732 | 3,920,386 |
For the period ended 30 June 2016
| Q2 | Q2 | H1 | H1 | |
|---|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| Earnings before interest and taxes (EBIT) | 277,636 | 254,581 | 559,405 | 431,649 |
| Adjustments for write-downs and depreciation | 29,092 | 26,325 | 57,309 | 52,577 |
| Adjustments for value adjustments on biomass | 29,379 | 38,042 | -78,267 | 92,978 |
| Adjustments for income from associates | -6,665 | 10,796 | -9,750 | 13,663 |
| Adjustments for currency effects | 2,130 | -6,190 | -11,946 | -8,761 |
| Taxes paid | 0 | -3,953 | 0 | -3,953 |
| Adjustments for provision for onerous contracts | -22,778 | 0 | 37,181 | 0 |
| Received dividend | 0 | 0 | 3,186 | 0 |
| Change in inventory | -50,617 | 22,144 | 38,765 | -133,444 |
| Change in receivables | -8,509 | -9,498 | -40,347 | -15,870 |
| Change in current debts | -1,205 | -6,696 | -62,897 | -22,286 |
| Cash flow from operations | 248,463 | 325,551 | 492,639 | 406,553 |
| Cash flow from investments | ||||
| Payments made for purchase of fixed assets | -199,478 | -73,041 | -318,671 | -179,538 |
| Sale/Purchase of shares | 1,325 | 0 | 1,325 | 0 |
| Change in long-term receivables | 0 | 1,314 | 0 | 1,314 |
| Cash flow from investments | -198,153 | -71,727 | -317,346 | -178,224 |
| Cash flow from financing | ||||
| Change of interest bearing debt (short and long) | 244,327 | -52,083 | 289,465 | -56,345 |
| Financial income | 616 | 479 | 1,168 | 1,413 |
| Financial expenses | -7,972 | -9,227 | -15,417 | -18,502 |
| Net proceeds from sale of own shares | 3,523 | 2,049 | 3,231 | 2,742 |
| Financing of associate | -37,075 | -23,065 | 18,761 | 24,081 |
| Dividend paid | -400,623 | -290,985 | -400,623 | -290,985 |
| Cash flow from financing | -197,204 | -372,832 | -103,415 | -337,596 |
| Net change in cash and cash equivalents in period | -146,894 | -119,008 | 71,878 | -109,267 |
| Cash and cash equivalents – opening balance | 320,624 | 414,851 | 101,852 | 405,110 |
| Cash and cash equivalents – closing balance total | 173,730 | 295,843 | 173,730 | 295,843 |
As at 30 June 2016
| DKK 1,000 | Share Capital |
Share Premium Reserve |
Treasury Shares |
Share- based Payment |
Currency translation differences |
Derivatives | Proposed Dividend |
Biomass Fair value adjust- ments |
Retained Earnings |
Total Equity |
|---|---|---|---|---|---|---|---|---|---|---|
| Equity 01.01.2016 | 48,858 | 306,537 | -19,679 | 1,085 | 2,034 | -105,621 | 403,079 | 257,277 | 1,686,912 | 2,580,482 |
| Consolidated profit | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -78,267 | 519,174 | 440,907 |
| Other comprehensive income: | ||||||||||
| Fair value adjustment on financial derivatives | 0 | 0 | 0 | 0 | 0 | 13,913 | 0 | 0 | 0 | 13,913 |
| Income tax effect | 0 | 0 | 0 | 0 | 0 | -2,122 | 0 | 0 | 0 | -2,122 |
| Share-based payment | 0 | 0 | 0 | 783 | 0 | 0 | 0 | 0 | 0 | 783 |
| Currency translation differences | 0 | 0 | 0 | 2,358 | 0 | 0 | 0 | 0 | 2,358 | |
| Total other comprehensive income | 0 | 0 | 0 | 783 | 2,358 | 11,791 | 0 | 0 | 0 | 14,932 |
| Total comprehensive income | 0 | 0 | 0 | 783 | 2,358 | 11,791 | 0 | -78,267 | 519,174 | 455,839 |
| Transaction with owners: | ||||||||||
| Treasury shares | 0 | 0 | -1,703 | 0 | 0 | 0 | 0 | 0 | -1,703 | |
| Paid-out dividend | 0 | 0 | 0 | 0 | 0 | -403,079 | 0 | 2,457 | -400,622 | |
| Proposed dividend Total transaction with owners |
0 0 |
0 0 |
0 -1,703 |
0 0 |
0 0 |
0 | 0 -403,079 |
0 0 |
0 2,457 |
0 -402,325 |
| Total changes in equity | 0 | 0 | -1,703 | 783 | 2,358 | 11,791 | -403,079 | -78,267 | 521,631 | 53,514 |
| Total equity 30.06.2016 | 48,858 | 306,537 | -21,382 | 1,868 | 4,392 | -93,830 | 0 | 179,010 | 2,208,543 | 2,633,996 |
| Equity 01.01.2015 | 48,858 | 306,537 | -25,557 | 161 | 1,458 | -95,882 | 293,148 | 284,855 | 1,250,075 | 2,063,653 |
| Consolidated profit | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 92,978 | 230,516 | 323,494 |
| Other comprehensive income: | ||||||||||
| Fair value adjustment on financial derivatives | 0 | 0 | 0 | 0 | 0 | 24,339 | 0 | 0 | 0 | 24,339 |
| Income tax effect | 0 | 0 | 0 | 0 | 0 | -3,713 | 0 | 0 | 0 | -3,713 |
| Share-based payment | 0 | 0 | 0 | 462 | 0 | 0 | 0 | 0 | 0 | 462 |
| Currency translation differences | 0 | 0 | 0 | 0 | -128 | 0 | 0 | 0 | 0 | -128 |
| Total other comprehensive income | 0 | 0 | 0 | 462 | -128 | 20,626 | 0 | 0 | 0 | 20,960 |
| Total comprehensive income | 0 | 0 | 0 | 462 | -128 | 20,626 | 0 | 92,978 | 230,516 | 344,454 |
| Transaction with owners: | ||||||||||
| Treasury shares | 0 | 0 | 4,141 | 0 | 0 | 0 | 0 | 0 | 0 | 4,141 |
| Paid-out dividend | 0 | 0 | 0 | 0 | 0 | 0 | -293,148 | 0 | 2,163 | -290,985 |
| Proposed dividend Total transaction with owners |
0 0 |
0 0 |
0 4,141 |
0 0 |
0 0 |
0 0 |
0 -293,148 |
0 0 |
0 2,163 |
0 -286,844 |
| Total changes in equity | 0 | 0 | 4,141 | 462 | -128 | 20,626 | -293,148 | 92,978 | 232,679 | 57,610 |
| Total equity 30.06.2015 | 48,858 | 306,537 | -21,416 | 623 | 1,330 | -75,256 | 0 | 377,833 | 1,482,754 | 2,121,263 |
| Equity 01.01.2015 | 48,858 | 306,537 | -25,557 | 161 | 1,458 | -95,882 | 293,148 | 284,855 | 1,250,075 | 2,063,653 |
| Consolidated profit | 0 | 0 | 0 | 0 | 0 | 0 | 0 | -27,578 | 837,753 | 810,175 |
| Other comprehensive income: | ||||||||||
| Fair value adjustment on financial derivatives | 0 | 0 | 0 | 0 | 0 | -11,492 | 0 | 0 | 0 | -11,492 |
| Income tax effect | 0 | 0 | 0 | 0 | 0 | 1,753 | 0 | 0 | 0 | 1,753 |
| Share-based payment | 0 | 0 | 0 | 924 | 0 | 0 | 0 | 0 | 0 | 924 |
| Currency translation differences | 0 | 0 | 0 | 0 | 576 | 0 | 0 | 0 | 0 | 576 |
| Total other comprehensive income | 0 | 0 | 0 | 924 | 576 | -9,739 | 0 | 0 | 0 | -8,239 |
| Total comprehensive income | 0 | 0 | 0 | 924 | 576 | -9,739 | 0 | -27,578 | 837,753 | 801,936 |
| Transaction with owners: | ||||||||||
| Treasury shares | 0 | 0 | 5,878 | 0 | 0 | 0 | 0 | 0 | 0 | 5,878 |
| Paid-out dividend | 0 | 0 | 0 | 0 | 0 | 0 | -293,148 | 0 | 2,163 | -290,985 |
| Proposed dividend Total transaction with owners |
0 0 |
0 0 |
0 5,878 |
0 0 |
0 0 |
0 0 |
403,079 109,931 |
0 0 |
-403,079 -400,916 |
0 -285,107 |
| Total changes in equity | 0 | 0 | 5,878 | 924 | 576 | -9,739 | 109,931 | -27,578 | 436,837 | 516,829 |
| Total equity 31.12.2015 | 48,858 | 306,537 | -19,679 | 1,085 | 2,034 | -105,621 | 403,079 | 257,277 | 1,686,912 | 2,580,482 |
P/F Bakkafrost is a limited company incorporated and domiciled in the Faroe Islands.
The Group's Annual Report as at 31st December 2015 is available upon request from the company's registered office at Bakkavegur 8, FO-625 Glyvrar, Faroe Islands, or at www.bakkafrost.com.
This Condensed Consolidated Interim Report is presented in DKK.
This Condensed Consolidated Interim Report has been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 Interim Financial Reporting as adopted by the EU. It does not include all of the information required for the full Annual and Consolidated Report and Accounts and should be read in conjunction with the Annual and Consolidated Report and Accounts for the Group as at 31st December 2015.
This interim report has not been subject to any external audit.
The accounting policies applied by the Group in this Condensed Consolidated Interim Report are the
The preparation of financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting principles and recognised amounts of assets, liabilities, income and expenses. The most significant estimates relate to the valuation of biological assets and some financial instruments, which are measured at fair value. Estimates and underlying assumptions are reviewed on an on-going basis and are based on the management's best assessment at the time of reporting. All changes in estimates are reflected in the financial statements as they occur.
same as those applied in the Annual Report as at and for the year ended 31st December 2015.
The accounting estimates are described in notes to the financial statements in the Annual Report 2015.
For other risk exposures, reference is made to the Management Statement in the Annual Report for 2015, where Bakkafrost's operational and financial risks are described, as well as to Note 21 (Financial risk management) in the same report.
The risks and uncertainties described therein are expected to remain.
| 30 June | 30 June | 31 Dec | |
|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2015 |
| Biological assets carrying amount 01.01 | 1,060,274 | 1,013,959 | 1,013,959 |
| Increase due to production or purchases | 538,285 | 525,891 | 1,267,200 |
| Reduction due to harvesting or sale (costs of goods sold) | -630,691 | -538,942 | -1,201,426 |
| Fair value adjustment at the beginning of the period reversed | -257,278 | -284,855 | -284,855 |
| Fair value adjustments at the end of the period | 335,544 | 191,878 | 257,278 |
| Reversal of elimination at the beginning of the period | 43,224 | 51,342 | 51,342 |
| Eliminations | -52,805 | -56,749 | -43,224 |
| Biological assets carrying amount at the end of the period | 1,036,553 | 902,524 | 1,060,274 |
| Cost price biological assets | 730,643 | 752,525 | 825,101 |
| Capitalised interest | 23,171 | 14,870 | 21,119 |
| Fair value adjustments at the end of the period | 335,544 | 191,878 | 257,278 |
| Eliminations | -52,805 | -56,749 | -43,224 |
| Biological assets carrying amount | 1,036,553 | 902,524 | 1,060,274 |
| Biomass < 1 kg on average (tonnes) | 2,391 | 3,003 | 2,215 |
| Biomass 1 kg < 4 kg on average (tonnes) | 11,713 | 12,805 | 14,312 |
| Biomass > 4 kg on average (tonnes) | 13,488 | 16,066 | 17,297 |
| Volume of biomass at sea (tonnes) | 27,592 | 31,874 | 33,824 |
| Numbers of fish < 1 kg on average (thousand) | 5,005 | 5,549 | 5,259 |
| Numbers of fish 1 kg < 4 kg on average (thousand) | 6,403 | 5,077 | 5,624 |
| Numbers of fish > 4 kg on average (thousand) | 2,622 | 2,679 | 3,233 |
| Total numbers of fish at sea (thousand) | 14,030 | 13,305 | 14,116 |
| Smolt released in Farming North (thousand pcs.) | 0 | 576 | 7,059 |
| Smolt released in Farming West (thousand pcs.) | 1,946 | 839 | 4,202 |
| Total smolt released (thousand pcs.) | 1,946 | 1,415 | 11,261 |
| Farming Segment | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| External revenue | 527,530 | 484,361 | 1,098,530 | 825,551 |
| Internal revenue | 224,086 | 124,632 | 354,946 | 254,740 |
| Total revenue | 751,616 | 608,993 | 1,453,476 | 1,080,291 |
| Operating expenses | -374,016 | -343,476 | -796,102 | -602,678 |
| Depreciation and amortisation | -19,748 | -17,115 | -38,739 | -34,227 |
| Operational EBIT | 357,852 | 248,402 | 618,635 | 443,386 |
| Fair value adjustments on biological assets | -29,379 | -38,042 | 78,267 | -92,978 |
| Income from associates | 7,638 | -147 | -43 | -4,856 |
| Revenue tax | -29,520 | 0 | -52,095 | 0 |
| Earnings before interest and taxes (EBIT) | 306,591 | 210,213 | 644,764 | 345,552 |
| Net interest revenue | -1,238 | -1,070 | -2,777 | -1,868 |
| Net interest expenses | 446 | 914 | 286 | -511 |
| Net currency effects | 503 | -7,240 | -14,898 | -12,214 |
| Other financial expenses | -993 | -2,980 | -2,006 | -4,442 |
| Earnings before taxes (EBT) | 305,309 | 199,837 | 625,369 | 326,517 |
| Taxes | -50,427 | -35,426 | -104,690 | -55,355 |
| Profit or loss for the period | 254,882 | 164,411 | 520,679 | 271,162 |
| Value Added Products | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| External revenue | 187,446 | 190,752 | 366,950 | 379,847 |
| Internal purchase of raw material | -216,085 | -124,632 | -389,885 | -254,740 |
| Operating expenses | -38,118 | -32,776 | -67,006 | -68,097 |
| Depreciation and amortisation | -1,637 | -1,853 | -3,269 | -3,655 |
| Operational EBIT | -68,394 | 31,491 | -93,210 | 53,355 |
| Provision for onerous contracts | 22,778 | 0 | -37,181 | 0 |
| Earnings before interest and taxes (EBIT) | -45,616 | 31,491 | -130,391 | 53,355 |
| Net interest revenue | 1,748 | 1,432 | 3,720 | 3,007 |
| Net interest expenses | 0 | 0 | -5 | -2 |
| Net currency effects | -1 | 0 | -2 | -3 |
| Other financial expenses | -4 | -4 | -8 | -8 |
| Earnings before taxes (EBT) | -43,873 | 32,919 | -126,686 | 56,349 |
| Taxes | 7,897 | -5,926 | 22,803 | -10,143 |
| Profit or loss for the period | -35,976 | 26,993 | -103,883 | 46,206 |
| Fishmeal, Fish Oil and Fish Feed | Q2 | Q2 | H1 | H1 |
|---|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| External revenue | 70,226 | 124,834 | 219,777 | 207,746 |
| Internal revenue | 149,317 | 158,687 | 287,774 | 280,703 |
| Total revenue | 219,543 | 283,521 | 507,551 | 488,449 |
| Purchase of goods | -129,988 | -181,231 | -307,229 | -281,499 |
| Operating expenses | -44,146 | -49,286 | -85,891 | -91,382 |
| Depreciation and amortisation | -7,707 | -7,357 | -15,301 | -14,695 |
| Operational EBIT | 37,702 | 45,647 | 99,130 | 100,873 |
| Income from associates | -973 | -10,649 | 9,795 | -8,807 |
| Earnings before interest and taxes (EBIT) | 36,729 | 34,998 | 108,925 | 92,066 |
| Net interest revenue | 106 | 117 | 226 | 274 |
| Net interest expenses | -7,055 | -7,101 | -13,270 | -13,413 |
| Net currency effects | 661 | -1,390 | 1,573 | 1,016 |
| Other financial expenses | -48 | -56 | -97 | -126 |
| Earnings before taxes (EBT) | 30,393 | 26,568 | 97,357 | 79,817 |
| Taxes | -5,471 | -4,782 | -17,525 | -14,367 |
| Profit or loss for the period | 24,922 | 21,786 | 79,832 | 65,450 |
| Reconciliation of reportable segments | ||||
|---|---|---|---|---|
| to Group earnings before taxes (EBT) | Q2 | Q2 | H1 | H1 |
| DKK 1,000 | 2016 | 2015 | 2016 | 2015 |
| Farming | 305,309 | 199,837 | 625,369 | 326,517 |
| VAP (Value Added Products) | -43,873 | 32,919 | -126,686 | 56,349 |
| FOF (Fishmeal, Fish Oil and Fish Feed) | 30,393 | 26,568 | 97,357 | 79,817 |
| Eliminations | -20,067 | -22,121 | -63,892 | -59,324 |
| Group earnings before taxes (EBT) | 271,762 | 237,203 | 532,148 | 403,359 |
| Assets and liabilities per segment | 30 June | 30 June | 31 Dec |
|---|---|---|---|
| DKK 1,000 | 2016 | 2015 | 2015 |
| Farming | 3,961,242 | 3,438,096 | 3,976,007 |
| VAP (Value Added Products) | 169,874 | 239,900 | 261,835 |
| FOF (Fishmeal, Fish Oil and Fish Feed) | 917,667 | 821,556 | 793,774 |
| Eliminations | -706,051 | -1,001,852 | -1,111,230 |
| Total assets | 4,342,732 | 3,497,700 | 3,920,386 |
| Farming | -593,673 | -988,033 | -1,148,144 |
| VAP (Value Added Products) | -60,192 | -17,504 | -50,788 |
| FOF (Fishmeal, Fish Oil and Fish Feed) | -722,143 | -650,761 | -572,846 |
| Eliminations | -332,728 | 279,861 | 431,874 |
| Total liabilities | -1,708,736 | -1,376,437 | -1,339,904 |
The Group had capital expenditure committed but not provided in these accounts at the date of the Statement of Financial Position of approximately DKK 669
Note 26 in Bakkafrost's Annual Report for 2015 provides detailed information on related parties' transactions.
Faroe Farming, an associated company of Bakkafrost, purchased for DKK 21.6 million from Bakkafrost in Q2 2016. At the end of Q2 2016, Faroe Farming owed DKK 51.3 million to the Bakkafrost Group.
All assets/liabilities, for which fair value is recognised or disclosed, are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities.
Level 2: Valuation techniques (for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable).
Level 3: Valuation techniques (for which the lowest level input that is significant to the fair value measurement is unobservable).
For biological assets, the fair value calculation is done using a valuation model (level 3 in the valuation hiermillion. DKK 555 million relate to the building of a new hatchery station.
Transactions between P/F Bakkafrost and its subsidiaries meet the definition of related party transactions. As these transactions are eliminated on consolidation, they are not disclosed as related party transactions.
archy) where the value is estimated based on observable market prices per period end.
For more information on these calculations, please refer to Note 14 in the Annual Report 2015.
For assets/liabilities that are recognised at fair value on a recurring basis, the Group determines, whether transfers have occurred between Levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement).
There have been no transfers into or out of Level 3 fair value measurements.
As at 30 June 2016, the Group held the following classes of assets/liabilities measured at fair value:
| DKK 1,000 | Cost | ||||
|---|---|---|---|---|---|
| Assets and liabilities measured at fair value | Fair value | amount | Level 1 | Level 2 | Level 3 |
| Biological assets (biomass) | 1,036,553 | 706,087 | 0 | 0 | 1,036,553 |
| Assets measured at fair value 30/6-2016 | 1,036,553 | 706,087 | 0 | 0 | 1,036,553 |
| Liabilities measured at fair value 30/6-2016 | 0 | 0 | 0 | 0 | 0 |
| Financial assets | 197 | 500 | 221 | 0 | 0 |
| Biological assets (biomass) | 902,525 | 752,525 | 0 | 0 | 902,525 |
| Assets measured at fair value 30/6-2015 | 902,722 | 753,025 | 221 | 0 | 902,525 |
| Liabilities measured at fair value 30/6-2016 | 0 | 0 | 0 | 0 | 0 |
| Financial assets | 31 | 500 | 31 | 0 | 0 |
| Biological assets (biomass) | 1,060,274 | 846,220 | 0 | 0 | 1,060,274 |
| Assets measured at fair value 31/12-2015 | 1,060,305 | 846,720 | 31 | 0 | 1,060,274 |
| Liabilities measured at fair value 31/12-2015 | 0 | 0 | 0 | 0 | 0 |
On the 29th of June 2016, Bakkafrost purchased 51% of the shares in P/f Faroe Farming. With this purchase, Bakkafrost becomes the owner of 100% of the shares in P/F Faroe Farming effective from 1 July 2016. The transaction is approved by the authorities.
Simultaneously with the agreement of acquiring 51% of the shares in P/F Faroe Farming, Bakkafrost has filed two licenses to the Faroese Authorities. The licenses filed (relinquished) are Svínáir (A-03) and Hovsfjørður (A-17/18).
Following these two transactions, P/F Bakkafrost has 14 licenses for farming salmon in the Faroe Islands.
Prior to the acquisition of P/F Faroe Farming, Bakkafrost had approximately 50% of the licenses on the Faroe Islands. Regulations limit the number of licenses controlled by one company to 50% of the total licenses. With the purchase of P/F Faroe Farming, Bakkafrost has filed (relinquished) two licenses and fulfils the legal requirements.
The payment is paid in cash and financed by existing facilities.
The management and the key employees of P/F Faroe Farming will continue in the company.
The following fair values have been determined on a provisional basis:
The fair value of intangible assets (Faroe Farming holds 2 farming licences) has been determined on an estimated fair value. Fair value has been identified in farming licenses by employing generally accepted valuation techniques. The market value of the licences is measured to DKK 82 million.
The fair value of biological assets has been determined based on the same accounting principles as in Bakkafrost.
The fair value of property, plant and equipment has been provisionally determined based on the booked value in P/F Faroe Farming's financial statements. The fair value of property, plant and equipment is pending a completion of an independent valuation. It is expected that there will not be a material fair value adjustment of property, plant and equipment.
Accounts receivable consists of receivables from VAT.
Accounts payable and other taxes comprise amounts payable to Bakkafrost of DKK 51.3 million.
| DKK 1,000 | 30 June 2016 |
|---|---|
| Intangible assets | 82,000 |
| Property, plant and equipment | 56,486 |
| Financial assets | 50 |
| Biological assets (biomass) | 119,112 |
| Receivables | 2,546 |
| Deferred taxes and other taxes | -41,830 |
| Accounts payable and other debt | -51,661 |
| Total net identifiable assets | 166,700 |
P/F BAKKAFROST Bakkavegur 8 FO-625 Glyvrar Faroe Islands Telephone: +298 40 50 00 Fax: +298 40 50 09 Email: [email protected] Website: www.bakkafrost.com
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