Earnings call transcript: Icelandic Salmon faces challenges in Q1 2025

Icelandic Salmon reported a challenging first quarter of 2025, with significant declines in financial performance compared to the previous year. The company faced a negative EBIT of €3 million, a sharp drop from the negative €200,000 reported in Q1 2024. According to InvestingPro data, the company’s revenue declined by 39.48% over the last twelve months, though analysts expect a return to profitability this year. Despite these setbacks, Icelandic Salmon is maintaining its production guidance for the year and is optimistic about future growth.

Key Takeaways

• Icelandic Salmon’s EBIT fell significantly to negative €3 million in Q1 2025.
• Production guidance for 2025 remains at 15,000 tons.
• New harvesting site expected to start operations in Q3 2025.

Company Performance

Icelandic Salmon’s performance in Q1 2025 reflected a challenging environment, with a considerable drop in harvested volume to 1,100 tons from 2,800 tons in the same quarter last year. With a market capitalization of $323.79 million, the company continues to face market challenges, including increased global salmon volumes and limited exposure to the North American market, which accounts for only 9% of its production. InvestingPro analysis suggests the stock is currently trading below its Fair Value, presenting a potential opportunity for investors seeking exposure to the seafood sector.

Financial Highlights

• EBIT: Negative €3 million, down from negative €200,000 in Q1 2024.
• Harvested volume: 1,100 tons, a decrease from 2,800 tons in Q1 2024.
• Net interest-bearing debt increased by €11 million to €97.8 million.
• Total assets decreased by €3.8 million.

Outlook & Guidance

Icelandic Salmon is maintaining its 2025 volume guidance at 15,000 tons, with expectations of higher volumes in the second quarter compared to the first. InvestingPro forecasts earnings per share of $0.23 for FY2025, with the next earnings report due on May 20, 2025. The company anticipates a back-loaded harvest profile for the second half of 2025 and expects lower cost levels this year compared to 2024. Additionally, the new Watneri site is set to begin harvesting in Q3 2025, potentially boosting production capacity.

Executive Commentary

CEO Bjorn Hambre expressed confidence in the company’s strategic position and its ability to support Iceland’s seafood industry. "We are confident in the solid position we have built and our ability to deliver and support Iceland in its efforts to become an even greater seafood nation," Hambre stated. He also emphasized the importance of enhancing the value chain to overcome challenges.

Risks and Challenges

• Increased global salmon market volumes could pressure prices.
• Limited exposure to the North American market restricts growth opportunities.
• Regulatory changes in Iceland could impact future expansion plans.
• Rising net interest-bearing debt may affect financial flexibility.
• Market conditions in 2025 are expected to remain challenging.

Q&A

During the earnings call, analysts inquired about Icelandic Salmon’s lice management strategies and the company’s progress on reaching the 6 million smolt target. The company highlighted preventive measures, including the use of lumpfish and Stingray lasers, as part of its lice management approach. Additionally, discussions are ongoing regarding Icelandic farming legislation, which could offer growth opportunities.

Full transcript - Icelandic Salmon As (ISLAX) Q1 2025:

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: Good morning, everyone. Thank you all for taking time to watch this quarter one presentation for Icelandic Zalmon. My name is Bjorn Hambre, and with me today I have Jonas Heidar Bergeson and Metuselamson. After the presentation, there will be a Q and A session, and you can send questions to the mail address questionsalnalax. Is anytime during the session.

First, a brief overview of Icelandic Salmon. As most of you probably know, the company is listed on Euronext growth market in Oslo and in Rejavik on the NASDAQ First North. The company is the sole owner and parent company of ArnaLux AHF. All operational activities of the group are performed in ArnaLux AHF. We are present throughout the value chain from smolt to sales.

We have four smolt facilities with a current capacity to produce 25,000 to 30,000 tons of head on gutted salmon. We have farming operations in eight sites in three fjords in the Westfjords Of Iceland, and all our production in sea is AIC certified. The total maximum allowed biomass for the company is 23,700 tons. We also have our own harvest plant in Bildudallur in the Westfjords Of Iceland with a capacity of 30,000 tonne per year. The production there is BRC certified.

And then we have our own internal sales team that sells our products both in the domestic and global markets. Now let’s take a closer look on the highlights from the quarter. We faced a challenging biological situation in seawater in first quarter twenty twenty five. This was mainly related to infectious diseases in combination with low temperatures. We continued to harvest from the 2023 generation.

In the quarter, we harvested 1,100 tons compared to 2,800 tons in first quarter last year. There was a superior share of the harvested volume of 82%, with downgrades mainly related to smaller wounds on the fish. The average rate was low on the harvested fish due to that harvest was initiated to safeguard the fish welfare. The EBIT for the quarter ended at negative €3,000,000 down from negative €200,000 first quarter last year. The cost level reflects the low harvest volume, which gives low capacity utilization in addition to biological challenges that was faced in the first half twenty twenty four that resulted in lower overall production and thereby a higher cost per kilo.

To mitigate further cost increase, we paused harvesting and temporarily removed most employees at the harvest plant from the payroll. The remaining employees in the harvest plant was focusing on necessary maintenance and contributed in other departments of the company to catch up on projects that previously have been delayed. The temporary layoffs is now ended and the harvest plant is in operation again. We saw a satisfactory performance in our smolt production and was in a good steady state production there and are on track to deliver all time high smolt output in 2025, both when it comes to number and average weight. And again, a good biological development in the smolt stations over the first quarter.

Our biggest smolt this year will be around 800 grams, and the average weight of the smolt output will be two forty grams. If you look at the license situation, so a 10,000 ton license for sterile salmon in East Of Yarajuv was revoked in the quarter three last year by the Environmental and Natural Resources Board of Appeal. Both the authorities and the company ourselves are working on mitigating measures to get the license approved according to the feedback from the before mentioned Board. We have good expectations that this will be in place, but do not have a clear time line for this. Then we have applications in approval process.

We have been in the process to establish larger sites for better MIB utilization in Einofjordur. The application was put through environmental assessment and is the report is under review by the governmental agencies now. This process has taken longer time than anticipated and we do not expect a final decision before end of year twenty twenty five. We hopefully have the approval in place then, but full utilization of these sites will take a bit longer time. Our application for 4,500 tonnes in Eijnefurder was also put through the environmental assessment and is still under review by the authorities.

However, there is a risk that biomass could be auctioned out by the government, and then we will be in a good position to take part in that process with a finalized environmental assessment for the growth. The new government have expressed its intention to introduce an updated version of the new law proposal in Altinge during September 25. That will have a focus on ensuring a sustainable development of the salmon industry and a sustainable growth. The signals from the government is that they want growth in the salmon farming in sea to strengthen the value creation in Iceland. Until a new law is in place, we and other companies in our industry will continue, of course, to operate according to current legislation.

Salmon farming has become a significant contribution to Icelandic economy and represented 6% of the value of all goods exported from Iceland in 2024. The new law proposal will be crucial to ensuring continued sustainable growth of the industry. An update on sales and marketing. We had a low volume harvested in quarter one and the market was very different than we saw over the quarter first quarter the recent years due to significant more volume into the market globally. We harvested in January before the prices dropped fully, but our average weight was 3.6 kilos on the harvested volume and prices were lower on the smaller sizes.

Due to low average weight, we had a low part of the volume going into the North American market that was approximately 9% and into the Asian market with only 2% of our production. But for the North American market, we are still able to utilize sea transport of the fish, so 91% of the exported volume to North America was transported by boat. The contract share in the quarter was 10% and the contracts gave a positive contribution to the price achievement. We are, of course, concerned about the new toll tariffs implemented by The United States. We, with our low volumes in quarter one, did not experience challenges for the present sales, but are very concerned about how this will affect the salmon consumption and price achievement in The U.

S. Market over time. This tariff will increase the price to the end consumer in United States and thereby potentially reduce the consumption. I will then give the word to our CFO, Jonas Heder Birgessen, for a financial update. Jonas?

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Thank you, Will.

Jonas Heder Birgessen, CFO, Icelandic Salmon: So good morning, everyone, and I will now provide a quick overview of our key operational and financial developments for the first quarters. Following a quiet period with low harvesting volume, the balance sheet developed largely as expected, with continued buildup of biological assets and steady investment activities. During the first quarter, total assets decreased by €3,800,000 The main driver was a reduction in the fair value of our biological assets by 3,500,000.0 and a drop in trade receivables after a low harvesting period. At the same time, biological assets at cost increased, reflecting biomass buildup in the period and mortality impact for reduction. Prepaid expense prepaid expenses increased and was mainly related to operational services at Seawater, including Stingray that was taken into operation during the period.

Investments in the quarter totaled up to €4,400,000 and were mainly related to site preparation for two of our sites and continued improvements of our freshwater capacity. The group liability remained the group’s liability remained stable during the quarter. Net interest bearing debt increased, in line with ongoing investments and biological buildup. The equity ratio was broadly unchanged during the quarter. The primary reason for increase in our net interest bearing debt is driven by our continued investment to support further growth.

The investments we made this quarter are primarily aimed at expanding our production capacity. We are currently preparing the Hingstadel site for our fish output, and we have finalized the freshwater facility at Laxapritt. The Laxapritt facility is now in operational state, and we plan to start transporting fish there this summer. In the quarter, we also paid €2,100,000 in resource taxes related to last year harvest volume, and we saw €2,100,000 increase in our working capital as we have been building up our biological assets. The period was affected by mortality of €1,600,000 which affected the group’s EBITDA.

Our net interest bearing debt, including lease liability, amounted for €97,800,000 at the end of the quarter, reflecting an increase of €11,000,000 I will now hand the presentation back over to Bjorn Henbre to go over outlook updates. Hugo?

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Thank you, Jonas.

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: In 2025, it’s planned a significant buildup of biomass over the year. This is due to better MIB utilization, especially on our 12,200 ton license in Patrijks and Taknafjordur. Because we took a new site into operation there, Watneri, that was started last year. And we expect to start harvesting there in quarter three because we reached the maximum allowed biomass in the license. It is always exciting to start operations on a new site, and we see very satisfying biological results on Watney so far and expect a reduced cost of production when the harvest starts there.

For full year 2025, we expect a lower cost level than 2024, and this is driven by increased volume and lower feed cost. The spring in Iceland has been a normal warm, and we see a good effect on the growth of the fish. The temperature is and have been over the last month approximately one degree above normal. The volume guidance for 2025 is maintained at 15,000 ton, and we expect higher volume in quarter two than in quarter one. But our harvest profile for the year will be back loaded into second half.

We expect the contract share for the year to be approximately 10% The expectation is a continued more challenging market in 2025 compared to 2024 due to good biological performance in several regions that are producing salmon. But we don’t expect the impact on second half to be as strong as in first half. We are confident in the solid position we have built and our ability to deliver and support Iceland in its efforts to become an even greater seafood nation. Our long term ambition and potential is to increase the production within existing licenses and current regulatory framework to 26,000 tonne per year. In 2025, we expect a significant increase in biomass over the course of the year, followed by a much better MIB utilization.

This can be achieved because we are building a company with a robust corporate culture and with a committed and highly competent staff. We have also patiently enhanced our value chain to address and overcome challenges related to spot capacity, production in sea, harvesting capacity and sales. Although the market is characterized by global uncertainty and increased volumes, Icelandic salmon continues to experience strong demand for our product and expect lower global supply growth in the second half of twenty twenty five compared to what we have experienced so far. I will then thank you all for taking time to join this presentation together with us. We will now shortly head over to the Q and A session, and you can still send questions to questionsainalax.

Is. So I hopefully see you in a few moments.

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Good morning, everyone, and thank you for joining this Q and A session for this quarter. My name is Jotir Metzundson, and I’ll be managing the questions that come in today. You can still send in questions to questionsartalax. Ish and we will do our best to answer the ones that are sent in. Can you comment on the lice situation and the toolbox and capacity Arthnalax has to fight lice this summer?

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: Yes, I can do that. We feel that we are well prepared. We are first of all using preventive measures like lye skirts on all smolts put into seed this year. We will use lumpfish, which we saw quite good results of last year on one of our sites, where we think it would be very suitable to use lumpfish. And we also have started to use Stingray lasers on one site with positive development on the lice levels there.

And then we also have access to a wellboat with Optilizer, which is a thermal treatment in a cooperation with or a neighbor farming company. So we have a good capacity on the non medical treatment side. And we also have the option to use medical treatment, which is, of course, the last option we use. But if we need, we can use medical treatment as well. So I feel that we are very well prepared into the season with controlling the lice.

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Okay. That’s good. Here’s a question from Christopher Hoglund. Is it reasonable to expect a smolt release of 6,000,000 smolt this year?

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: We will not reach 6,000,000 smolt this year. We have adapted the production plans in the smolt station to get a better biology in sea. So we have increased the average rate more than we anticipated for maybe two, three years ago. So we have continuously increased the average rate and also limited the time period we put put smolts into sea so that we reach a sufficient average rate on the fish going into the winter to mitigate this challenging that we obviously faced again this first quarter. So this is an important part.

We have also reduced the input of eggs to optimize the production in the smolt facilities to be sure that we have a really good quality on the smolts. And as it looks now, the smolt quality this year, it looks very promising. So we have the big expectations. We actually start to put out smolts today. And we see a good temperature in sea, so it should be very good.

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Yes. Excellent, excellent. Another question from Christopher. You’re guiding on harvest for Q2 to be higher than the quarter two twenty twenty four harvest of 700 tons. How will Q2 harvest be compared to quarter one this year?

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: We expect to have approximately double volume in quarter two compared to quarter one.

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: And one question here more from him. Are you expecting the harvest rates in quarter two to be at the same level as it was in quarter four?

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: No. Of course, no, we are in quarter two and I know the numbers. So we will have an increased average rate of the fish in quarter two and expect an further increase in the average rate in second half of the year.

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Have one question here to Jonas. Can you comment on the CapEx plan this year and next?

Jonas Heder Birgessen, CFO, Icelandic Salmon: Yes. We have been emphasizing on the smolt production and we reached the capacity there now. So going forward, the focus will be on seawater production on-site preparation, light sketches and bed off for yeah

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: increased capacity. Okay. And one question here back to you Bjorn. What changes are we expecting in the Icelandic farming bill this autumn? Is there anything?

Bjorn Hambre, Company Presenter/CEO, Icelandic Salmon: So of course the law proposal that was on the table last year is the one that is coming up again with some modifications. But kind of the core of that proposal was that there should be room for growth in the industry if the performance when it comes to no or low escapes, control on the lives and the mortality in sea. And if you kind of perform within some key performance indicators there, that should initiate growth. So I think that will be the core of the message this year as well. What concerns us the most is, of course, how things develop with the tax, which is a challenging issue in a quite young industry that is still growing and still investments needed.

So that is kind of one of the main messages, of course, to the politicians and the government know that we need to let the industry build up and keep the tax level so we are compatible in a global market with salmon when it comes to cost.

Jonas Heidar Bergeson/Jotir Metzundson, CFO/Q&A Moderator, Icelandic Salmon: Well, I think these are very good final words. It looks like we’ve covered most of the questions. So thank you all for being here with us and have a lovely day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.