Strong biological performance in the Faroe Islands and successful de-risking in Scotland

05 Nov 2024 06:00 CET

The Bakkafrost Group delivered a total operational EBIT of DKK 173 million (DKK
269 million) in Q3 2024.

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

The performance in Q3 2024 per region was as follows:

· Faroe Islands             Revenues of DKK 1,420 million (1,628 million)

                                   Operational EBIT of DKK 310 million (542
million)

· Scotland                    Revenues of DKK 317 million (232 million)

                                   Operational EBIT of DKK -138 million (-263
million)

Commenting on the result, CEO Regin Jacobsen said:

"We are not satisfied with our financial results this quarter, primarily
impacted by low salmon prices.  The strike in May combined with unplanned
harvest of A-19 impacted negatively our ability to adapt to market needs to
optimize market value for our products. The early harvest of remaining fish from
farming site A-19, where the ISA virus was detected in two pens back in May had
a negative financial impact. We are, however, very pleased with the effective
response and our strong procedures, which successfully contained the virus. This
challenge is now behind us, allowing us to focus forward.

In the Faroe Islands, we have seen very good biological performance. This is
evident in the strong growth, low mortality, and increased harvest weights. Our
hatcheries have also delivered excellent operational results, enabling us to
increase our smolt transfer expectations for this year, with further increases
planned for next year.

In Scotland, we conclude that our de-risking strategy has worked. Exceptional
mortalities have reduced by more than 80% compared to last year, harvest weights
have increased, and sea lice levels are all-time low - just like in the Faroes.
We are making steady progress in ramping up production at the Applecross
hatchery to produce large high-quality smolt and expect start transfer of 200g
smolt in Q4. Hereafter, we expect to only transfer high-quality smolt above
200g.

To maintain a strong competitive position, we are prioritizing cost management
and aligning our capacity with operational needs. In line with this, we have
implemented several cost-saving measures and capacity adjustments in Scotland,
including the closure of the processing facility at Marybank in July 2024. The
full effects of these measures were not visible in Q3.

The salmon market has been weaker in this quarter with low salmon prices
throughout the quarter, but we look forward to a more favorable price
environment - especially in H1 2025, where the supply will be weaker of high
-quality salmon. Our expected harvest next year is 100,000 tonnes, of which we
plan to allocate around 15% for VAP contracts"

During Q3 2024, the FOF segment sourced 40,134 tonnes (109,685 tonnes) of raw
material. The Operational EBIT margin was 20% (30%), and fish feed sales
amounted to 41,513 tonnes (35,903 tonnes).

For the first nine months of 2024, the FOF segment's operational EBIT margin was
20% (22%). During the first nine months of 2024, Havsbrún sourced 267,583 tonnes
(413,485 tonnes) of raw material.

In Q3 2024, the Freshwater segments in the Faroe Islands and Scotland
transferred a total of 6.8 million (5.8 million) smolts combined:

· Freshwater FO:   4.9 million (3.3 million),
· Freshwater SCT: 1.9 million (2.5 million).

For the first nine months of 2024, the freshwater segments have transferred a
total of 16.0 (16.3) million smolts:

· Freshwater FO: 11.0 million (9.0 million),
· Freshwater SCT: 5.0 million (7.3 million).

In Q3 the Freshwater FO segment made an operational EBIT per kg transferred
smolt of DKK 40.67 (DKK 34.67), corresponding to NOK 64.11 (NOK 53.04). The
Freshwater SCT segment made an operational EBIT per kg transferred smolt of DKK
-34.82 (DKK 59.79), corresponding to NOK  54.89 (NOK 91.46). In Q3 2024, the
Freshwater SCT segment had incident-based cost of DKK 0 million (DKK 6 million).

The Farming segments achieved lower prices in Q3 2024 than in Q3 2023. The
Farming segments had higher volumes in Q3 2024 compared to Q3 2023. In Q3 2024,
the Farming SCT segment had incident-based costs of DKK 34 million (DKK 178
million).

The total combined harvest in Q3 2024 of the farming segments in the Faroe
Islands and Scotland was 27,029 tonnes gutted weight (20,840 tgw):

· Farming FO:            21,618 tgw (16,740 tgw),
· Farming SCT:             5,411 tgw (4,100 tgw).

For the first nine months of 2024, the farming segments have harvested a total
of 70,178 tonnes gutted weight (55,939):

· Farming FO:   46,138 tgw (36,403 tgw),
· Farming SCT: 24,040 tgw (19,536 tgw).

In Q3 2024, the Farming FO segment made an operational EBIT per kg of DKK -1.31
(DKK 6.47), corresponding to NOK -2.07 (NOK 9.90). The Farming SCT segment made
an operational EBIT per kg of DKK -33.14 (DKK -68.70), corresponding to NOK
-52.25 (NOK -105.09).

The Services segment made an operational EBIT per kg of DKK 0.70 (DKK 0.99),
corresponding to NOK 1.11 (NOK 1.52). The operational EBIT margin for the
segment was 8% (10%).

The Sales & Other segment had a revenue of DKK 2,488 million (2,188 million) and
an operational EBIT margin of -6% (4%). The operational EBIT per kg was DKK 5.48
(DKK 3.73), corresponding to NOK 8.64 (NOK 5.70).

The performance related to the Faroe Islands and Scotland as a region can be
found in the Appendix.

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.

OUTLOOK AND OPERATIONAL PERFORMANCE

Market

Supply increased in Q3 2024

The supply of salmon increased 4.9% in Q3 2024 compared to Q3 2023, incl.
inventory movements. Without inventory movements, the supply increase was 4.7%,
according to the latest estimate from Kontali Analyse.

Lower salmon prices in Q3 2024

Salmon reference prices (Sisalmoni/Nasdaq Norway, EUR) were 12% lower this
quarter compared to Q3 2023. The price reduction was largely driven by increased
supply, especially from Europe where supply increased by around 9%. A high share
of European supply was small sized fish supporting the price premium for large
fish.

1% growth in 2024

The global supply is expected to increase around 3% in Q4 2024, compared to Q4
2023. In H2 2024, the global supply is expected to grow around 4%, compared to
Q3 2023. For the full year 2024, the global supply is expected grow around 1%,
excluding inventory movements, and in H1 2025 the global supply growth is
expected to be around 3%.

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 Q3 2024 in the Faroese farming operation was
strong with good growth, continued high harvest weights and continued strong
control of sea lice. However, in August Bakkafrost harvested out the remaining
fish from the farming site A-19, where ISA virus had been detected in Q2 2024 in
two pens. This was done to comply with the Faroese ISA regulation and marked the
end of the ISA incident, which was effectively contained and did not spread
outside the two pens. As 2.9 thousand tonnes were harvested from the site with
an average weight of only 3.3 kg (HOG), this had a significant negative impact
on the Q3 results for the Faroese farming segment.

Having a strong biological performance with a lot of healthy large fish in the
water, Bakkafrost will seek to maximise the market value of the fish. Hence, the
harvest target for 2024 of 63,500 tonnes in the Faroe Islands is maintained, in
favour of expected stronger salmon prices in Q1 2025.

In the Faroese freshwater operation, the main focus for Bakkafrost is to
continue to increase the production volume of high-quality large smolt,
utilising the >50% increased hatchery capacity obtained in 2023 (Glyvradalur and
Norðtoftir). The current hatchery capacity in the Faroes allows for an annual
smolt production of 18 million smolt of 500g and in Q1 2024, Bakkafrost started
the construction of the new hatchery in Skálavík, Faroe IsIands, which will
further increase the production capacity by around 7 million smolt at 500g. Late
2026, when the Skálavík hatchery is complete, the annual smolt production
capacity in the Faroe Islands will be 24 million smolts of 500g, as targeted in
the 2024-2028 investment programme. In Q3 2024 5.2 million (3.3 million) smolt
were transferred to marine in Faroe Islands with an average weight of 425g
(405g).

The farming operation in Scotland has performed considerably better in Q3 2024,
than during the same period past years. Mortality levels have reduced, sea lice
levels were all-time low and average harvest weights have increased. Though some
challenges have been faced, the de-risking strategy Bakkafrost developed one
year ago, has significantly contributed to improved biological performance and
reduced overall risk exposure. Consequently, the exceptional mortality costs
have reduced around 80% in Q3 2024, compared to Q3 2023. Looking ahead into Q4
2024, Bakkafrost will focus on building up the biomass and increase the size of
fish in the water for harvest in H1 2025.

In 2025, Bakkafrost will apply a similar de-risking strategy as followed in
2024. In the meantime, in 2025, the farming operation will undergo the
transition into using large high-quality smolt, which is paramount to turnaround
the performance in the Scottish farming operation.

In the Scottish freshwater operation, the main focus lies on ramping up the
production of large high-quality smolt in the Applecross hatchery. In Q4 2024,
the first large batch of 200g smolt is planned to be transferred, and all smolt
in 2025 are planned to be larger than 200g. The operation of the new Applecross
phase 5 module will commence in Q4 2024 which increases the hatchery capacity
with around 50%. This enables Applecross to produce around 3,500 tonnes of
smolt. As announced in Bakkafrost's Q2 2024, this capacity will be utilised to
make Bakkafrost self-sufficient with around 14 million high-quality smolt of
250g.

With the completion of the Applecross phase 6 and 7 in 2025, the biosecurity in
the smolt production will be further improved.

In Q3 2024, the average weight of transferred smolt in Scotland was 86g, which
is 23% lower than in Q3 2023. The reduced average weight was a result of the
previously announced startup issues at Applecross, experienced in Q1 2024.

As shown in the Faroe Islands, large high-quality smolt will face lower risks in
the marine environment because of shorter production cycles in the sea and more
robust salmon.

Smolt transfer

Bakkafrost's expected smolt transfer in 2024 in the Faroe Islands is increased
to around 17.7 million smolts with average weight of 410g. In Scotland, the
smolt transfer in 2024 is expected to be around 6.2 million smolts with an
average weight of 114g. The number and average weight of smolts transferred are
key elements of predicting Bakkafrost's future production.

Million smolt transferred '25e '24e '23 '22 '21 '20
FO 18.5 17.7 14.4 14.5 14.4 14.3
SCT 10.0 6.2 10.5 10.8 11.1 10.4
Avg. weight (g)
FO 430 410 396 345 376 320
SCT 200 114 117 107 95 88

In 2024, Bakkafrost expects to harvest around 63,500 tonnes gutted weight in the
Faroe Islands and 26,100 tonnes gutted weight in Scotland, giving a total of
around 89,600 tonnes gutted weight.

In 2025, Bakkafrost expects to harvest around 77,000 tonnes gutted weight in the
Faroe Islands and 23,000 tonnes gutted weight in Scotland, giving a total of
around 100,000 tonnes gutted weight. 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 33% 36% 9% 22%

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 is expected to reduce around 300 mDKK in 2024
around 500 mDKK in 2025, 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 Q3 2024 report and the Q3 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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Copies of this announcement are not being made and may not be distributed or
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631204_2024_Q3_Presentation.pdf
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