MARKET CHALLENGES HIT BAKKAFROST FOURTH QUARTER EARNINGS
Market challenges hit Bakkafrost fourth quarter earnings. The Faroese Bakkafrost Group delivered a total operating EBIT of (Danish) DKK 230.5 million in 2018. Harvested volumes were 12.2 thousand tonnes gutted weight. The combined farming and VAP segments made an operational EBIT of DKK 207.7 million. The farming segment made an operational EBIT of DKK 204.4 million. The development of the salmon spot price in the quarter was nearly flat, compared to the previous quarter. Bakkafrost’s achieved prices in this quarter decreased and thus had a negative effect on the operational EBIT. The VAP (value added product) segment made an operational EBIT of DKK 3.3 million. The EBITDA for the FOF segment was DKK 60.4 million.
The Group made a profit for Q4 2018 of DKK -6.6 million (DKK -21.9 million). For 2018, the profit was DKK 960.3 million (DKK 511.4 million). (Figures in parenthesis refer to the same period last year unless otherwise specified).
Commenting on the result, CEO Regin Jacobsen said: “Difficult market conditions and limited market access for a period resulted in a weaker than expected result in the farming segment for the fourth quarter. We are pleased, however, to experience more activity in the VAP segment, due to increased contracts for our VAP products.
“2018 was an eventful year with different challenges, but all things considered we are satisfied with the operation and the results for 2018. A lot of effort has also been put on our expansion activities in 2018, and we have now started operation in our new harvesting plant in Suðuroy. In 2019, we plan to further expand our farming operation in Suðuroy.”
The total volumes harvested in Q4 2018 were 12,234 tonnes gutted weight (11,470 tgw). Total harvested volumes for 2018 were 44,591 tonnes gutted weight (54,615 tgw). 1,500 tonnes of harvest were moved to 2019, and consequently expected harvest volumes for 2019 are increased from 53,000 to 54,500 tonnes gutted weight.
3.3 million (3.4 million) smolts were transferred during Q4 2018. During 2018, 12.5 million (9.9 million) smolts were transferred.
The revenue in the farming segment for Q4 2018 was negatively affected by a combination of various circumstances. As the market strategy for sales in 2018 was primarily focused on fresh whole salmon to the high-end spot market, volumes to the VAP segment were exceptionally low throughout 2018. Consequently, Bakkafrost was temporarily vulnerable and limited in flexibility to mitigate the following disruptions: Bakkafrost’s harvesting plant in Glyvrar was banned access to the Russian market in Q4 2018 and had a disruption in delivery to other high-end markets from the new harvest plant in Suðuroy, due to delay in issuance of certificates to these markets.
The market disruptions are more or less solved as volumes to VAP contracts now have increased, the certificates to the harvest factory in Suðuroy are in place and access to the Russian market is expected shortly.
The combined farming and VAP segments made an operational EBIT of DKK 207.7 million (DKK 265.4 million) in Q4 2018. The operational EBIT per kg in Q4 2018 was DKK 16.98 (DKK 23.14), which corresponds to NOK 21.91 (NOK 29.88) for the combined farming and VAP segments. For 2018, the combined farming and VAP segments made an operational EBIT of DKK 943.2 million (DKK 1,232.8 million).
The farming segment made an operational EBIT of DKK 204.4 million (DKK 228.8 million) in Q4 2018. The harvested volumes were higher, but the achieved price was lower in Q4 2018, compared to Q4 2017. For 2018, the operational EBIT was DKK 965.7 million (DKK 1,308.2 million).
The Faroese Parliament changed the revenue tax for farming operations in the Faroe Islands from 4.5% to 5.0% in December 2018. The change will be effective from 1 January 2019.
The VAP segment made an operational EBIT of DKK 3.3 million (DKK 36.5 million) for Q4 2018. For 2018, the operational EBIT was DKK -22.4 million (DKK -75.4 million).
The FOF segment (fishmeal, oil and feed) made an EBITDA of DKK 60.4 million (DKK 93.6 million) for Q4 2018, and the EBITDA margin was 21.0% (25.5%). The EBITDA was DKK 254.3 million for 2018 (DKK 266.1 million), corresponding to an EBITDA margin of 20.0% (20.4%).
During Q4 2018, Havsbrún sourced 46,478 tonnes (50,852 tonnes) of raw material, and for 2018, Havsbrún sourced 302,465 tonnes (342.456 tonnes) of raw material.
Bakkafrost aims at giving the shareholders a competitive return on their investment, both through payments of dividends and by value growth of the equity through positive operations.
The long-term goal of the Board of Directors is that 30-50% of earnings per share shall be paid out as dividend. The financial position of Bakkafrost 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 8.25 (NOK 10.70*) per share shall be paid out as dividend. The Annual General Meeting will be convened on Friday the 5th of April 2019.
The net interest-bearing debt amounted to DKK 495.5 million at the end of Q4 2018 (DKK 258.1 million at year-end 2017). Undrawn credit facilities amounted to DKK 997.7 million at the end of Q4 2018.
The equity ratio was 70% at 31 December 2018, compared to 70% at the end of 2017.
*The dividend per share in NOK is subject to changes depending on the exchange rate between DKK and NOK, which will be announced after the Annual General Meeting.