Bakkafrost shares drop as Q4 profit falls amid Scottish losses

Investing.com -- Bakkafrost (OL:BAKKA), the Faroese salmon farming company on Monday reported a mixed set of results for the fourth quarter of 2024, with operational earnings down compared to the same period last year, sending its shares down by over 5%. 

Bakkafrost posted operating revenue of DKK 1.47 billion in the fourth quarter, a 5.9% decline from DKK 1.56 billion in the year ago quarter. 

The company’s operational EBIT stood at DKK 280 million, down from DKK 356 million in the same quarter last year, reflecting weaker margins across segments. 

Net profit, however, increased to DKK 477 million from DKK 392 million in the same quarter last year, largely driven by fair value adjustments of biological assets.

For the full year 2024, revenue rose to DKK 7.48 billion from DKK 7.14 billion in 2023. Operational EBIT for the year was relatively stable at DKK 1.55 billion compared to DKK 1.54 billion last year. 

However, full-year net profit dropped to DKK 645 million from DKK 955 million in 2023, reflecting higher costs and biological challenges in Scotland.

The Faroese farming operations showed solid growth, with harvested volumes reaching 16,638 tonnes gutted weight in Q4, a modest 4% increase from the previous year. 

Operational EBIT per kilogram improved to DKK 5.98 from DKK 4.01. Full-year harvest volumes increased 20% to 62,776 tonnes, with operational EBIT per kilogram reaching DKK 11.94, up from DKK 10.51 in 2023.

The Scottish operations continued to struggle, with the segment posting an operational EBIT loss of DKK 55 million in Q4, widening from a loss of DKK 48 million in the same quarter last year.

Harvested volumes surged to 3,840 tonnes from 1,062 tonnes last year, but costs remained high, leading to an EBIT per kilogram of DKK -14.44. 

Full-year harvest volumes in Scotland increased 35% to 27,880 tonnes, but the segment remained loss-making, with an EBIT per kilogram of DKK -3.56.

Revenue in the FOF segment fell sharply, down 42% year-on-year to DKK 565 million in Q4, as external sales of fishmeal and fish oil declined. 

Operational EBIT for the segment dropped 73% to DKK 66 million. Full-year revenue was down 22%, while operational EBIT declined 37% to DKK 502 million.

The sales segment, which includes logistics and value-added processing, saw Q4 revenue decline slightly to DKK 2.29 billion from DKK 2.35 billion. 

The segment's operational EBIT improved to DKK 120 million from DKK 101 million last year.

Bakkafrost faced lower salmon prices in Q4, with prices for 4-5kg superior salmon down 2.7% year-on-year. 

The increase in global salmon supply, particularly from Europe, put pressure on pricing. The company expects global supply to rise by around 5% in 2025, which could continue to impact market conditions.

The company remains focused on its long-term strategy, which includes expanding hatchery capacity in both the Faroe Islands and Scotland to produce larger smolt. 

This is expected to reduce biological risks and improve operational efficiency, particularly in Scotland. Bakkafrost plans to release 18.5 million smolts in the Faroe Islands and 10 million in Scotland in 2025.

Bakkafrost ended the year with total assets of DKK 17.63 billion, slightly down from DKK 17.84 billion at the end of 2023. 

The equity ratio improved to 63%, up from 61%. However, net interest-bearing debt stood at DKK 3 billion.