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Bakkafrost, the leading salmon producer, reported its third-quarter 2025 earnings, highlighting a strong operational performance despite some financial challenges. The company’s stock price increased by 2.16% following the earnings call to $46.32, reflecting investor optimism about its strategic initiatives and market expansion plans. Currently trading 32% below its 52-week high of $68.40, InvestingPro analysis suggests Bakkafrost is undervalued. The company reported revenues of DKK 1.7 billion and an operational EBIT of DKK 22 million. Notable operational improvements in the Faroe Islands and Scotland contributed to the positive market reaction.
Key Takeaways
- Bakkafrost’s stock rose by 2.16% post-earnings call.
- Q3 2025 revenues reached DKK 1.7 billion.
- The company plans to harvest 110,000 tons in 2025.
- Significant operational improvements observed in Scotland.
- Global salmon market growth positively impacts Bakkafrost.
Company Performance
Bakkafrost demonstrated resilience in Q3 2025, with revenues reaching DKK 1.7 billion. The company improved its operational efficiency, particularly in the Faroe Islands, where harvest increased by 17.5% to 25.4 kilotons. Despite a decrease in group margin from DKK 6.38 to DKK 0.72 per kilo, the company maintained a positive cash flow from operations at DKK 245 million. Bakkafrost’s integrated value chain and strategic expansion in the global market have positioned it well against competitors.
Financial Highlights
- Revenue: DKK 1.7 billion
- Operational EBIT: DKK 22 million
- Cash flow from operations: DKK 245 million
- Harvest increase in Faroe Islands: 17.5% to 25.4 kilotons
- Net interest-bearing debt: DKK 4 billion
Outlook & Guidance
Bakkafrost maintains a positive outlook, projecting a full-year harvest of 110,000 tons for 2025 and 112,000 tons for 2026. The company aims for a long-term harvest target of 162,000 tons by 2030. Management anticipates an improved market balance in Q4 2025 and early 2026, supported by a slowdown in global supply growth.
Executive Commentary
CEO Regin Jacobsen emphasized Bakkafrost’s readiness for future challenges, stating, "A calm sea has never made a skilled sailor. Bakkafrost is ready for the journey ahead." He also highlighted the company’s control over its value chain, ensuring quality and efficiency: "We control every step from feed to food, securing quality, efficiency, and biological resilience through the system."
Risks and Challenges
- Potential impact of Pasteurella disease outbreak in Scotland.
- Fluctuating global salmon supply affecting market balance.
- Rising operational costs despite efficiency improvements.
- Dependency on external smolt production.
- Macroeconomic pressures impacting global seafood demand.
Bakkafrost’s strategic focus on operational efficiency and market expansion appears to be paying off, with positive investor sentiment reflected in its stock price. With an overall financial health score rated as "FAIR" by InvestingPro, the company maintains a solid current ratio of 12.9 and moderate debt-to-equity ratio of 0.47. The company’s comprehensive plan to increase production and improve market balance positions it well for future growth, potentially helping it reach its Fair Value as identified in InvestingPro’s undervalued stocks list.
Full transcript - P/f Bakkafrost (BAKKA) Q3 2025:
Bakkafrost: By Regin Jacobsen, which will take over the presentation in a while. The agenda this morning, we will come to, but after paying a short notice to our disclaimer on forward-looking statements, you can read it entirely. It is included in the published version of the presentation. The agenda is the usual agenda. First, a summary of the quarter. Then we look into markets and sales, moving on to finance, operations, and then finally outlook. An overview of the third quarter for Bakkafrost. Our revenues in this quarter were DKK 1.7 billion. We had a group operational EBIT of DKK 22 million. The harvest in the Faroe Islands was up by 17.5% to 25.4 kiloton. In Scotland, we were on a similar level as in the same quarter last year, 5,300 ton. Fish meal, oil, and feed division at Havsbrún. The feed sales were up 18% to around 49,000 ton.
We sold no fish oil. Fish meal sale was down by 45% to around 5.1 thousand ton. Sourcing of marine raw material was on the same level as last year, around 40,000 ton. Cash flow from operation were positive with DKK 245 million compared to DKK 575 million last year. We had positive EBIT in the fish meal, oil, and feed segment, the freshwater segment in the Faroe Islands, services and sales, and other. If we look at margins on a high level and regional level. These are all-inclusive margins, by the way. The margin for the group was DKK 0.72 per kilo compared to DKK 6.38 the same quarter last year. In the Faroe Islands, the margins were DKK 8.93 per kilo compared to DKK 14.35 per kilo last year. In Scotland, margins were negative with DKK 38.72 per kilo.
Moving on to markets and sales and beginning with the price development. The salmon prices in this quarter were affected by a large increase in the overall supply. Average prices for 4-5 kilo superior salmon dropped to NOK 63.73, which is 13% lower than the same quarter last year, 15% lower than in the previous quarter, or corresponding to a drop from the previous quarter of around NOK 11 per kilo. Since late August, prices have been trending upwards again. We expect stronger salmon prices as we look ahead into coming quarters where the supply is expected to reduce. In this quarter, we also saw that the price premium for large fish is starting to increase again after having dropped quite sharply from the peak in the fourth quarter last year.
According to the latest update from Kontali, global sales increased 12% in the quarter compared to last year and actually increased to all markets except for the Middle East. The European market had an increase of 4%, which was lower than the other markets. Like in previous quarters, this is significantly below the European harvest, which means that a larger share of the European harvest has been exported to other markets. Sales to the US increased 13%. Kontali estimates that there was a 10% increase in the supply from Europe. Chilean export to Russia increased quite significantly. There might be some inventory build-up in that market as well. Strong growth in sales to China and to Japan and also to the ASEAN countries. The same goes for Latin America, which grew 12%.
If we look at the harvest in the quarter, it increased by 12.2%, slightly more than the increased sold volumes. Again, some inventory build-up. All producing origin increased their supply except for the U.K., Ireland, and the US. Europe as a whole increased by 12%, mainly driven by Norway, which was up 15%. Supply from Norway was especially strong in July and in August. Norway had a high incoming biomass to the quarter after a strong second quarter, generally good biology, high seawater temperatures. We saw also some accelerated harvest in the quarter, partly driven by sea lice pressure. In September, the strong growth in Norway eased off. We also see that the overall feed sale, which was very high in the beginning of the quarter, dropped quite significantly. The biomass at the end of the quarter in Norway is also lower than last year.
In Scotland, harvest dropped by 5%. However, feed sales were up by 4-5%. Average weights increased slightly, 2.5-4.5 kilo. In Bakkafrost’s case, we increased 13% on our average weights to 4.8 kilo. Biomass is low at the end of the quarter in Scotland, so we expect that there will be lower volumes coming from Scotland in the fourth quarter. In the Faroes, harvest increased 3%. This was driven by Bakkafrost, with a 17.5% volume increase from Bakkafrost alone. Very strong biology. For Bakkafrost, it has been the strongest quarter ever recorded when it comes to biology. Average weights for the Faroes as a whole, 5.38 kilo. Bakkafrost was a bit lower on average weight in this quarter, which Regin will present in more details. By the activities in our fish meal, oil, and feed division, receivables increased by DKK 145 million to DKK 286 million. Equity ratio dropped to 57%.
Moving on to cash flow, DKK 245 million positive cash flow from operations. We spent DKK 311 million on investments, and we had a positive cash flow from financing of DKK 147 million. Net change in cash during the quarter was DKK 81 million. During the quarter, our net interest-bearing debt has increased to DKK 4 billion. The main driver are the investments, net investments of DKK 311 million. At the end of the quarter, we had undrawn credit facilities of around DKK 1.4 billion. With those words, I will hand it over to our CEO, Regin Jacobsen.
Regin Jacobsen, CEO, Bakkafrost: Good morning, everyone. Thank you. I will start with the value chain, which is our pride in Bakkafrost. The power of our fully integrated value chain is what defines us. In Bakkafrost, we produce salmon from raw material to healthy premium salmon, which are enjoyed by our customers around the world. In 2025, we produce around 3.5 million meals per day. That will increase over the next five years to 5.6 million of healthy salmon, 5.6 million meals of healthy salmon per day. We control every step from feed to food, securing quality, efficiency, and biological resilience through the system. The integration is not just about efficiency. It is also very much about knowledge, control, and responsibility, ensuring that every step and every stage supports the next. Our value chain transforms low-value marine proteins to high-value sustainable nutrition efficiently, responsibly, and with full traceability.
This is what creates high value, and this is what will make the difference for Bakkafrost and our competitive advantage also in the future. When we look into the third quarter, the FOF segment has stable operations and an improving cost base with the volumes that we produce. The FOF segment delivered a solid operational performance with higher feed production, but reduced external sales of fish meal. Marine raw material sourcing was unchanged compared to last year, around 40,000 ton. The feed sales, however, increased 18% year on year, up to 49,000 ton, driven by strong demand of our own salmon feeding both in the Faroe Islands and in Scotland.
External sales of fish meal were down 45% compared with last year as inventories continued to be built up ahead of 2026, when raw material availability is expected to tighten following the 41% reduction of the blue whiting quotas for next year. The operational EBIT was DKK 91 million compared with DKK 147 million last year, 38% down, corresponding to a margin of 12% versus 20% last year. The fish meal prices remain firm through the quarter, supported by limited global supply. Fish oil prices have stabilized after a prolonged decline from record levels earlier in 2024. Vegetable ingredients continue a slight upward trend, but overall input cost decreased, improving cost balance for feed and farming in H2. The planned expansion of the capacity at Hafsbrunn remains on schedule and will be finalized within the next six months.
The new silos and process lines will increase flexibility in raw material sourcing, enabling also more efficient feed logistics across both geographies. The FOF segment remains a cornerstone of Bakkafrost’s integrated model, ensuring nutritional quality, cost control, and supply stability across the value chain. The freshwater segment is strong. In the Faroe Islands, it is stable and continuously improving quality and survivability for the marine operation. The Faroe Islands freshwater operations maintain strong biological performance and stable financial result in the third quarter. The smolt production continues to operate at high levels following expansion in Glyra Dal, north of the Ranvier Reye, with all sites now in steady operation. A total of 4.8 million were transferred during the quarter versus 4.9 million last year. The average weight was 427 grams, up from 423 grams last year. Year to date, 13.4 million smolt have been transferred versus 11 million last year.
The average weight and robustness of the smolt continue to improve, reducing biological risk and strengthening the fish welfare at sea. The operational EBIT was DKK 83 million versus DKK 84 million last year, corresponding to a 36% margin. The post-transfer survivability remains at 97-98% during the first 90 days at sea, which are among the best levels in the industry. In parallel, of course, the feeding and the hatcheries have increased significantly, which we can see on the graph below. It is a utilization of the new hatcheries, which have been increased significantly over the last quarters. That is also the driver of the reduced cost in this segment. The full year stocking plan remains 18.5 million and is expected to go up to 20 million next year. The capacity utilization and biological efficiency continue to strengthen with clear cost benefit from larger and more robust smolt.
The Faroe Islands freshwater division continues to deliver consistent high-quality smolt with strong survivability, providing the biological foundation for long-term sustainable growth across Bakkafrost. Coming to freshwater Scotland. The third quarter, the transfer number was 3.6 million versus 1.9 million last year. The internal transfer from own hatcheries was 2.7 million versus 1.2 million last year. The average weight of the internal transfer smolt was 229 grams versus 88 grams last year. The margin was, however, minus DKK 38 million versus minus DKK 6 million last year. The negative result is primarily driven by losses from the disease in Q2, where fish were culled to clear up the impacted batches. This also affected the third quarter. Following the organizational change in August in the freshwater division, Bakkafrost has reviewed all operational procedures and technical systems and implemented a plan for safe and stable production.
This includes revised production strategy, optimizing capacity use, and biological performance. Uppercross is therefore now a fully closed production, where only eggs are brought in and all water is cleared and disinfected and recycled. This ensures a high level of biosecurity and full control of water quality, enabling the production of robust large smolt of a higher quality. Since August, the production has been stable without major challenges. Under the new plan, Uppercross will produce 200-400 gram fish in the future. We will have a more flexible approach to the production plan in order to optimize the production facility. Experience from the Faroe Islands confirms that this is the key foundation for achieving a strong biology in the marine operation. Cost per smolt, also at Uppercross, will come down significantly over the next 12 months.
The financial performance of the freshwater division in Scotland this year, the target is to stock around 7 million, all in Scotland, and next year, we lift that to 10 million. Several challenging years, Bakkafrost Scotland is now in a phase where we feel that. In the freshwater, we are more in control, and we shift from stabilization to sustainable growth. The Scottish business will continue to replicate the integrated Faroe Islands model with full value chain control, strong biosecurity, and sustainable growth. The long-term goal is to build a resilient, competitive Scottish salmon operation capable of producing premium large fish with high biological stability and profitability, fully aligned with Bakkafrost’s mission to produce the best salmon in the world. Sustainably and responsibly. The focus is on biological risk management through the large production mirroring the proven model in the Faroes.
The Uppercross hatchery is now scaling up to produce healthy, robust smolt to about 200 grams. This shift will shorten the marine cycle, strengthen the fish health, and reduce the mortality, with clear improvement expected from 2026. Coming to the farming operation in the Faroe Islands. Exceptional biological performance. Record efficiency. But low market prices. The Faroes farming operation continued to deliver outstanding biological results in the third quarter, marking the best performance ever recorded in Bakkafrost. The total harvest reached 25,400 ton, 70% up quarter on quarter and 33% higher year to date compared to 2024. Reflecting strong growth and high biomass in the water. The average weight of harvested fish was 5.2 kilos versus 5.3, slightly lower but solid. Biological excellence was driving the efficiency. Ring cost reduced 14% in the quarter year on year.
14% year on year, reflecting improved site efficiency, high survivability, and strong feeding performance. Quarterly feeding increased 32% versus last year, with new all-time feeding record set in October. Biomass growth is up 33% year on year, showing the cumulative impact of larger, more robust smolt and stable sea temperature throughout the summer. The operational EBIT landed at minus DKK 29 million, as the benefit from lower cost and strong biology was offset by the lower salmon prices during the quarter. The EBIT was NOK 178 versus minus NOK 207 last year, confirming solid biology performance despite the market headwinds. The biological situation in the Faroes remains among the best in the global salmon industry, characterized by record high survivability, highest in more than 10 years, strong growth rates, and feeding efficiency, and excellent fish welfare.
In Scotland, the farming operation volume is down 2% to 5.3, 5,300 ton versus 5.4 last year. The average weight was 4.8 kilos versus 4.2 kilos last year, so 600 grams up. The operational EBIT was minus DKK 191 versus minus DKK 179 last year. The negative result was impacted by mortality cost, DKK 70 million, and also driven by lower volume and significantly lower market price. The Pasteurella disease impact was the main driver for the huge deviation. During September, Pasteurella experienced elevated mortality in the smolt, driven by the Pasteurella disease, which was confirmed through screening. We had to take all fish out. The site is empty. It was emptied within around four weeks. This Pasteurella is. Driving a huge mortality, so we decided to harvest everything as soon as possible.
The fish was only 2.6 kilos at the time, 1 million fish, so we lost, of course, a lot of volume and had to harvest the fish at a low weight. Performance on this site was expected to be good. As we harvest the fish at a low size, they will not give any value. The risk of disease in aquaculture is one of the industry’s most critical biological challenges. Fish are exposed to a complex mix of pathogen, environmental stress, and handling factors that can quickly escalate if not managed properly. Effective biosecurity, robust smolt, and early detection are essential to minimize the disease risk. Bakkafrost works continuously to improve our procedures and systems for fish health and biosecurity. The experience and methods developed in the Faroe Islands serve as an important model for our operation in Scotland.
The Pasteurella outbreak reduces the harvest, but larger smolt and improved freshwater performance point out a recovery for our operations from 2026. We are constantly gaining new insight both in the Faroe Islands and in Scotland, which is used to strengthen our practices and to ensure better biology results over time. For Pasteurella, I can say that these batches were impacted already in freshwater. They were large, and they were performing good in the first six months, but they were impacted. The input mortality was 19% within the first 90 days. Even so, they performed good. They did not have the capability to handle the stress events that they were going through, and they caught this Pasteurella virus, which is something we do not see in our farms normally. This can give a lot of disease, and that is what we have seen in Pasteurella.
In order to prevent this, it is really important for us to have this robust smolt, to have fish which have not been exposed to stress levels during the freshwater phase. That is the key for avoiding these kinds of issues. The strategy remains the same for our operations in Scotland to reduce the risk for these kinds of events. Coming to the services segment, the fleet performance continues to drive biological success in our farming operation. Operating EBIT doubled to DKK 38 million versus DKK 19 million last year, corresponding to NOK 2 and a margin of 15%. The integrated vessel operation’s cornerstone of biological control is driven by the freshwater treatment. Bakkafrost in the Faroe Islands has been pivotal in improving biological stability in the Faroe Islands.
Together with Martin and Bacanes, which are now fully integrated into smolt transport in the Faroe Islands and Scotland, the two FSVs are dedicated to smolt transfer, ensuring nearly 98% survivability. Increased vessel utilization across treatment, smolt transfer, and harvesting. Record low smolt transfer mortality is the best ever recorded. The segment also includes other farming service vessels to ensure the highest quality of farming operation. The service fleet led by Bakkafrost continues to underpin Bakkafrost biological excellence, operational efficiency, and sustainable growth in the Faroe Islands and Scotland. Controlling these vessels for us is also key to drive the operational updates and also, in some cases, also deliver new technology, for example, the freshwater treatment, which was started in Bakkafrost. Coming to sales and other operating as one, Bakkafrost continued to deliver solid results with strong volume growth and high-quality product supply across both regions.
The total volumes from harvest were 14% up year on year to 30,678 ton, distributed to 15% higher HOG sales and 7% in the volumes transferred to up. The EBIT declined to DKK 73 million as higher volumes were offset on spot market at low prices and stronger supply of superior fish in the market generally. The EBIT per kilo was NOK 3.75 compared with NOK 8.64 last year, reflecting high global supply and tighter price achievement. Western Europe remains the largest market. North America continues to see strong demand and increased its share to 24% from Faroe Islands and 14% from Scotland. Asia continues to grow, now accounting for 15% from Faroe Islands and 18% of Scottish shares, driven by the rising demand in China.
All in all, I think the one company approach, commercial platform, is strong and continue to strengthen our global reach and brand presence for Bakkafrost. The lower premium in this quarter is driven by our high exposure in the spot sales, which also was from our side, driven by the change in taxation in Faroe Islands, where we feel it’s necessary for us to be more in spot sales than we used to be. The outlook for Bakkafrost and for the industry as general, I think, can be described as tightening supply and an improving market balance. The global supply slowly shows that the supply is coming down in Norway and Chile, with reduced harvest following a strong first half in 2025 and also a strong first half of the third quarter.
The market balance is expected to improve into the fourth quarter and early 2026 as global supply growth continues to moderate. We see declined volumes from Norway through this quarter due to biological challenges and MEB restrictions and fewer fish in the sea. Supply growth in 2025 is now estimated to be below 4% and expected to flatten in 2026. Faroe Islands remain above last year, supported by record biological performance and falling production costs. Full-year harvest guidance for Faroe Islands is expected to be around 110,000 ton, all-time high, reflecting stable operations and continued high survival. For the industry in general, in Scotland, volumes are expected to increase gradually as a new generation of large, high-quality smolt enters marine sites. For Europe overall, the strong growth phase is behind us.
Europe harvests are expected to be flat, slightly up, maybe 2% in the second half of this year and close to 0 in 2026, supporting a tighter supply-demand balance. Chilean harvest increased in the third quarter after a weak 2024, but growth will normalize towards 2026. North America remains stable with regular seasonal patterns. Overall, 2025 supply is up, but growth has slowed sharply in the second half of the year. Looking ahead, 2026 global growth is projected at around 2%, indicating a more balanced market and potential price support in the new year. If we look at Bakkafrost and our own numbers, our roots in the Faroe Islands are strong, and they continue to drive steady growth across the group. Faroe Islands volumes are revised up to 82,000 this year, which brings us up to 104,000 combined versus 97,000 previously.
For 2026, the harvest plan is 112,000: 92,000 from the Faroe Islands and 20,000 from Scotland. The breakdown in 2026 between the quarters is in the report, but I can mention them. In the Faroe Islands, in the first quarter next year, it is 24%. Second quarter is 24%, third is 25%, and the fourth is 28%. These numbers on this graph are for 2025, but in the report, you can see 2026. In Scotland next year, the breakdown is 30% in the first quarter, 14% in the second, 18% in the third, and 38% in the fourth. You can see those numbers in the report. In 2025, as said, 18.5 million to be transferred to marine and 7 million in Scotland, so 25.5 million all in all, which is around 10% up from last year.
Next year, 20 million in the Faroe Islands and 10 million in Scotland, which is then 30 million, which is another increase from this year. We continue the growth in Bakkafrost, and we have high focus on cost reduction. We have high focus on the operation in Scotland, and I think that we are getting there. We are getting there. The raw material outlook is, for the FOF segment on the fish meal and oil, a bit challenged next year. The quotas for blue whiting are down 41% to 851,000 ton. With the new expansion of Hafsprung, we have very good flexibility. We can manage any recipe, so we will not have a problem to produce feed. Of course, it might be challenging with the external sales of fish meal, which can drop slightly, but we will manage. On the contracts, we say around 15%-20%.
We are open to negotiate contracts, but we need contracts also, of course, to reflect the expected prices also. Therefore, we have to wait a bit. We are getting to the last slide here. Just to repeat that our target for Bakkafrost is to grow to 162,000 ton by 2030. We remain focused on growth still. We are also very focused on cost reduction. As mentioned earlier, our costs are down in the Faroe Islands, around 4 kroner this quarter compared with last year, 4 kroner from 34. Actually, 5 kroner from 34 to 29 Danish. In Scotland, they are down 2 kroner from around 50 to 48. This remains a key focus for us. To get cost prices down. As volumes are increasing, utilization of assets is improving, and that helps significantly. That will be the main driver for Scotland over the next two years.
We also have a lot of projects, which include the feed capacity, which will be finalized within the next six months. Larger smolt capacity in the Faroe Islands and Scotland. Now, Applecross is about to be finished. Now, it is about scaling up. In the Faroe Islands, we still have Skálavík, which will be starting operation already in the second quarter next year. We will have the first eggs in. It will be a gradual build-up then over the next two years in Skálavík. We remain firmly on track with robust operations, a clear strategy, and investments needed to secure sustainable growth and long-term value creation. Challenging quarters test us. They also make us better. A calm sea has never made a skilled sailor. Bakkafrost is ready for the journey ahead. Thank you very much. If there are any questions, now is the time.
Christian of Arctic Securities, can you comment on how much extraordinary mortality you have in Scotland, freshwater, and farming in Scotland so far in Q4? So far in Q4, in freshwater, there should not be any. In marine, there will be some mortality. In Scotland, what you account for as extraordinary is everything which is above 4%. There will be some. Do we have a number on that, Tegna? Not in the report. October? No. Probably. In marine, if we look at Q3, 71% of the mortality was Portree. 71% of the mortality, of the cost, in Q3 was from Portree. Portree was harvested out in the second or third week, I think, in October. There is some mortality. I think the number in the fourth quarter was 3.7 million pounds. So far in the fourth quarter, 3.7.
Based on that, do you expect positive EBIT from freshwater in Scotland in Q4? No. Because the capacity utilization is really a driver. We have built a mega structure there, which will be really, really good. It will be really, really good when it is in full operation. Just as in the Faroe Islands, the utilization of the costs takes time. You need a full production before you have a big operation but produce a low production. As we scale this up over the next 12 months, we will see costs come down. The cost price in the Faroe Islands to produce one smolt of 500 grams is less than the cost in Scotland to produce a smolt of 80 grams. We will match that in Scotland, but it will take us probably two years before we will match that. At the moment, we are far off.
In your sales and market segment, if you compare this quarter to Q2, you have quite similar EBIT, but the spot prices were much lower. I would have assumed that you would have had a bigger contract gain in Q3 than you had in Q2. Is it price premiums that hurt the sales and market segment, or why is the EBIT not higher in the third quarter? Yeah. I think one of the big drivers there is that Bakkafrost has a much lower contract share than what is reported in Fish Pool. When you look at Fish Pool or Sea Salmon or whatever you call it now, it is a certain inclusion of contracted fish. As Bakkafrost has a much lower contract share, our average price is lower. We used to have around 30-40% in contracts. Now we are 15-20%.
That means that our variation in EBIT follows more closely to the spot price. When we look at our sales in the market, we are gaining good prices, but compared to the average sale of companies which have a higher contract share, we lose in quarters where spot price goes through the bottom. Last question, do you expect farming costs in the Faroe Islands to be stable next quarter to this quarter? Yes. I think they will be stable. There has been a push down in cost price. Feed prices are expected to go slightly up maybe next year, but there is still a push down because of the lag effect. This driver applies for all the different cost items because it is driven by a good biology, a very low mortality, and a good feed efficiency, and generally a good efficiency in the operation.
Of course, feed costs account for the biggest deviation. Of the five, feed is around one of the difference. The other four are other items. Thank you. Hi, Lisa De Arlo from DNV. Could you elaborate a little bit more on your investments this year? Is it on the operational side or production lines or investments this year? Yeah. The big projects include the feed facility where we expand. We more than double our feed capacity so that we can produce. We are really stretched at the moment. We are producing everything. In order to match our growth in farming next year, we are expanding the feed capacity. We are also expanding our flexibility in the feed operation, so that is a big part of this year. Then it is the hatchery in Skálavík, which is this year, and that will also go next year.
That investment is quite large, around DKK 1 billion, and it goes maybe over probably three years. That is quite big. What else? In Scotland, of course, Applecross is about to be finished now. This year, that is quite a lot. Then we have some farming investments, both in Scotland and Faroe Islands, too. Support the increased operation. We are looking at a bit more exposed sites in the Faroe Islands. Within our licenses, within around 15 licenses, we have 24 sites, but we can set up some new sites. In our project over the next five years, we have five sites that we have identified that we can create new sites, but within the existing licenses. That is the way we are growing our farming capacity in the Faroe Islands at the moment. Also in Scotland, we have identified new sites where we can go more exposed.
This is also already part of the investments this year. Is there anything else, Tegna? That is the big things. Yeah. I think that is the big things. Henrik Knutson from Pareto Securities. Just following up on your comment on new sites in Scotland, how easy is it for you to get approval for just moving to less shallow waters? Not easy, but it takes time. We think that we have a good dialogue with authorities, but there is a lot of work that needs to be done, and it takes plenty of time. At the moment, we do not have enough space, but in some areas, we would like to move a bit further out because some of the areas are probably not the best for the future. Now, the FOF segment. Less quota for next year, less production, but you are probably selling more internally.
How do you envision the overall margin or the overall EBIT contribution from the FOF segment in 2026 compared to 2025? Yeah. As you said, feed will continue to increase. When it comes to fish meal and intake of fish or raw material, that will, of course, have a negative effect. It is a bit difficult to give specific guidance. At the moment, we can only say that the quota looks to go down. There are also other aspects in this which are a bit difficult to comment. I can say that normally the blue whiting catch is not all supplied to the Faroe Islands. A part of the catch is landed in other countries. As the quota comes down, that is, of course, an opportunity for us to try to get our share of that. I guess the prices will also go up.
For us to have this new feed plant where we will increase our flexibility with raw materials, where we can basically do everything, is also important. Having the flexibility is really important also to be able to mitigate potential higher raw material costs in the future so that we potentially can use all opportunities. Thank you. Also for the farming cost in the Faroe Islands, you mentioned stable into Q4, but looking ahead into 2026. Have you reached a stable level, or is it more to come? Yeah. Giving guidance on costs in 2026 is stretching it a bit, but at the moment, it looks stable. At the moment, it looks stable. We will, of course, see how feed costs will develop, but I am pretty sure that other costs at the moment are quite safe. Yeah. Thank you. Thank you very much. Okay. One more question.
Two more questions, okay? Yes. Go ahead. Wilhelm from Danske Bank. With the change in strategy in smolt in Scotland, with 200-400 grams, the expected average weight for 2026 is not that high. Of course, I would expect quite a share of external smolts. Just wondering if you can comment on how long you will be reliant on external smolts currently, and sort of how that share has changed with the new strategy. Yeah. That’s a good question. It’s difficult to answer. Of course, we hope that our ability to manage our operation will improve because the track record so far has not been too good. With the new management in place and now the building process finished, we are quite sure that we will be better in the future than in the past.
Therefore, we have made this new strategy where we have a more flexible approach because with the systems now installed in Applecross, there is a better flexibility or better possibility to produce a part of the fish to 400 grams and a part of the fish to 200 grams. That said, that means also that in order to reach the number, we will be a bit reliant on having some external smolts for a bit longer. How big part? Maybe 20%. That could be a number, but it’s a bit, there is probably some variation in that number. That’s maybe what we are looking at at the moment. And that’s 2026, right? Yes. For 2026, yes. Thanks. Hey, Heather Jossen with ProFront. I’d like to talk a little bit about the Pasteurella event.
I understand that it’s mainly the smolt that is the problem and that there was some weakness with the small smolt. Can you please try to explain what was wrong with the smolt and how you’re going to solve it? Also, if you made any consideration about if the bacteria could spread to other sites. Finally, if you or either in addition, if you have any quarantine for the site, so it will be out of business for a while. Some comments about if there are any specific things that increase the risk for this bacteria event, if there are any special things you’ve noticed that makes, if it could be something with wrong checks or if it’s something with the temperature or. Yes, please. Yeah, this is a good question. Past this event, we have checked now all our sites in Scotland.
We have checked fish in all our sites. We have checked dead fish in all sites for Pasteurella and confirmed that this was a one-site event. We have also checked the sites where our treatment vessels have gone after. Portray to see if we have spread the disease to other sites. Other sites have been confirmed. No detection. No detection. That means that the measures we have had in place with cleaning and disinfection of vessels, both treatment vessels and service vessels, have been working. That is good. As I have understood this, disease or this bacteria or virus is a virus which is not normal and has not been seen very often, but it can cause big mortalities. Why did we get this disease? I do not know. Our veterinarians say that if you have a very strong fish group, then this should not have caused this big mortality.
If you have a weaker fish group, so a weaker and a stronger, what does that mean? We have seen in Faroe Islands also that a robust smolt handles things much better. When we look at our history in Faroe Islands, we saw that, for example, when we talk about water quality, for example, in the hatcheries, for example, just temperature is really important. Being able to control the temperature through the whole operation from egg to transfer is really important. In Scotland, even in Applecross, we have not had that control to a full extent yet, or at least for that fish group. Now, we are controlling the temperature. We are controlling the temperature in Applecross now. This fish was transferred in December, January last year, and the control on temperature was not optimal. It was much better than it used to be, but not optimal.
We know that we had also some diseases in Applecross, and this fish had also gone through some of these issues. There have been some issues. We saw that when this fish was transferred, the mortality in the first 90 days was 19%, which is an indicator that, despite that, this fish performed really well in the first six months. From January to August, they grew to 2.6 kg. We were expecting to harvest them in coming January at more than 5 kg. That was our expectations, which we have talked about. They caught this disease, and the mortality increased really, really rapidly. We decided just to harvest everything in order not to lose too many. That is somehow the explanation. I can add that we had freshwater treatment in July, which the fish handled good. Then we had a new one in August, and then started some mortality.
We had a new one in the beginning of September, so three treatments. When you have these treatments, there will be maybe some scratch in the skin, or maybe some fish have some gill issues. These are open doors for bacteria in the sea. If you have a weaker fish, then they can catch a disease. If you have a strong fish. Which has a good immune system, they maybe would handle it much differently. That is the best answer I can give at the moment. Thank you. Thank you very much for today. Thank you for coming.
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