Earnings call transcript: Icelandic Salmon Q2 2025 highlights challenges

Icelandic Salmon reported its Q2 2025 earnings, revealing a mixed financial performance amid challenging market conditions. Currently trading at $8.53, near its 52-week low of $8.36, the stock has declined over 30% year-to-date. According to InvestingPro analysis, the company appears undervalued despite recent challenges. Key financial metrics include a total asset increase to €264 million and an operational EBIT of €8.3 million, with a significant decrease in the equity ratio to 47%.

Key Takeaways

• Icelandic Salmon’s equity ratio fell from 55% to 47%.
• Operational EBIT stood at €8.3 million, with EBIT per kilo at negative €2.1.
• Volume guidance for 2024 was reduced from 15,000 to 13,000 tons.
• The company plans to reach a 26,000-ton harvest in the coming years.
• Stock price declined by 4.46% post-earnings announcement.

Company Performance

Icelandic Salmon’s Q2 2025 performance was marked by a challenging market environment, with a global oversupply of salmon affecting prices. The company harvested 4,000 tonnes in Q2, with plans to fully harvest the 2023 generation in Q3. Despite these hurdles, Icelandic Salmon has maintained its strategic focus on increasing production capacity and achieving significant biomass growth in 2025.

Financial Highlights

• Total assets increased by €5 million to €264 million.
• Equity ratio decreased to 47%.
• Operational EBIT: €8.3 million.
• Net interest-bearing debt: €98 million.
• Available liquidity: €63 million.

Outlook & Guidance

The company revised its 2024 volume guidance downwards to 13,000 tons, citing market challenges and a planned break in Q3 harvesting. Analysts tracked by InvestingPro expect continued challenges, forecasting negative earnings per share of -$0.78 for FY2025. Despite these headwinds, Icelandic Salmon remains optimistic about achieving a 26,000-ton harvest in the coming years, driven by increased biomass and strategic investments in facilities like the post-smolt facility Laxobrut.

Executive Commentary

CEO Hambre emphasized the company’s role in the Icelandic economy, stating, "Salmon farming has become a significant contribution to the Icelandic economy and represented 6% of the value of all goods exported from Iceland in 2024." He also noted expected cost reductions, saying, "We expect a decrease in our cost level from quarter four this year and going forward."

Risks and Challenges

• Global oversupply of salmon impacting prices.
• Decreased volume guidance for 2024.
• Market uncertainties, particularly regarding US tariffs.
• Operational challenges due to BQD outbreak in the 2023 generation.
• Financial risks associated with high net interest-bearing debt.

Icelandic Salmon’s Q2 2025 earnings call highlighted the company’s resilience in the face of market challenges, while also underscoring the need for strategic adjustments to navigate future uncertainties. For comprehensive analysis including Fair Value estimates, financial health scores, and expert insights, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top stocks with actionable intelligence for smarter investing decisions.

Full transcript - Icelandic Salmon As (ISLAX) Q2 2025:

Hambre, CEO, Icelandic Salmon: So thank you, everyone, for taking your time to join us on this quarter two presentation for Icelandic salmon. I will now share our presentation. My name is Hambre. I’m the CEO of the company.

And with me today, I have Edvin Osprey, who is the CFO of the company. You see the presentation now, Edwin?

Edvin Osprey, CFO, Icelandic Salmon: Yes.

Hambre, CEO, Icelandic Salmon: Very good. So after the presentation, we will have a Q and A session. You can ask question by raising your hand. You will then be unmuted and can give us your question. You’re not able to unmute the microphone yourself.

First, a brief overview of Icelandic salmon. As you most of you probably know, we are a company that are listed on the Euronext growth market in Oslo and on the Nostak First North market in Reykjavik. The company is the sole owner and the parent company of Analogs AHF in Iceland. And all operational activities of the group are performed by ArnaLux AHF. We are present throughout the value chain.

We have our own small production with a capacity to produce between 25,030 ton in sea. We have our own seawater operations in the southern part of the West Yards with maximum allowed biomass of 23,700 tons. All our production in sea is ASE certified, and we are operating on eight sites in three fjords in that area. We have our own harvesting plant in Bildudalu in the Westfjords with a capacity of 30,000 ton on a yearly basis. The production there are BRC certified, which is food safety certification.

And then we have our own sales team that sells everything out in the global markets and also in the domestic market on Iceland. If you look at the quarter two

Edvin Osprey, CFO, Icelandic Salmon: Are you able to to change slides? Didn’t I?

Hambre, CEO, Icelandic Salmon: Sorry. Very sorry for this. So then we take a a a closer look at the highlights of the quarter. And quarter two was strongly affected by accelerated harvest due to a BQD outbreak, which is a bacterial disease on our 2023 generation. This led to higher volumes than anticipated, and we ended at 4,000 tonne harvest volume in the quarter.

The cost base of the 2023 generation is high due to biological challenges in quarter two, but also earlier in the production. The market price in the quarter was significantly lower than for same period previous years. The combination of these parameters led us to an operational EBIT of EUR 8,300,000.0, which gives an EBIT per kilo of negative EUR 2.1. We expect to harvest all the 2023 generation in quarter three this year. We, on the other hand, see a good development on our twenty twenty four generation and expect to start harvest from that early in Q4.

That will be the first time we reached a maximum allowed biomass on our license of 12,200 tonnes in Patriks and Taknafjorde. This is an important step toward increased harvest volumes going forward for the company. The small output that is done so far this year looks promising, and we see a good biological performance on the twenty twenty five generation. During the quarter, we did some organizational changes in key management and have implemented a financial transformation program with measures to improve financial flexibility. Both CapEx and OpEx have been strongly reviewed and a plan made to reduce both.

So in total, they reduce so in total, reduce the cost base for the company going forward. We also see a significant increase in production tax for first half twenty twenty five compared to first half twenty twenty four. The increase is partly because of higher tax level, but also due to the higher volume. Even though we see that revenues for first half twenty twenty four was €2,000,000 higher due to higher prices and even though we had lower volume. I will then give the word over to you, Evan, and take the next slide.

Edvin Osprey, CFO, Icelandic Salmon: Thank you, and good morning, everyone. Just some brief comments on the group balance and the most important numbers there. The total assets increased by EUR 5,000,000 to $264,000,000 in the quarter. And at the same time, the equity ratio went down from 55% to 47%. The biggest contributing factors there are operating loss in the quarter, but also we had a fair value adjustment on the negative side of EUR 9,500,000.0 in addition to that we withdraw EUR 13,000,000 from our credit facilities.

The net interest bearing debt, excluding leasing, was around EUR 98,000,000 in the quarter. Available liquidity was EUR 63,000,000, where the majority of that is related to our revolver facilities. And if you look at the next slide, we have the changes in net interest bearing debt also here. Then the big contribution is from the operational loss overall over the quarter. It increased by 15,600,000.0.

And another big factor was related to to new lease agreements where the majority comes from our new Stingray lasers, which we put into operation in April. And also for the CapEx in the quarter, we invested around $1,200,000 into the seawater operations. And also a big portion was related to our post malt facility, Laxobrut, which will be in operation this second half. Over to you, Gern.

Hambre, CEO, Icelandic Salmon: Thank you, Edwin. I will give you an update on our license portfolio. We got 10,000 ton license for Stera Salmon in Isafjall Group last year, and that was revoked by the Environmental and Natural Resources Board of Appeal. The main reasons for the revocation was due to two things: first, that the Icelandic food and veterinary authorities did not provide a comprehensive weighted assessment of the potential increased risk of spread of fish diseases and parasites. And the second thing was the the maritime safety for sailing in the in the fjord.

We have re towards those reasons by reducing the the sites so that we have a distance of five kilometers to other unrelated parties that have farming in the area and are continuously working with the authorities to look into mitigating measures so the for the maritime safety in the area to get a new approval for this license. Other applications in in process is, we have been in quite a long time, had an application for bigger sites in in that will give us more flexibility and better MIB utilization. And this is, still in in process with with the authorities. It’s a bit unclear when when this will be be finalized. It’s basically the same with our application for 4,500 tons more biomass in in which we have put through the environmental assessment, and it’s under review by the authorities.

And there is a risk that this biomass this 4,000 to 500 tons, might be auctioned out, but we are in a good position to to take part in in that with a finalized environmental assessment of that biomass. Then the government expressed earlier this year that they had an intention to propose a new law for Altinge in September. That seemed to be delayed. We don’t have a clear picture. We are hoping for second half this year, or it might be the first half next year according to the signals we have heard from from the ministry.

It is, by the way, positive that the signals from the sitting government is that they want growth in in salmon farming in in sea, and they want to strengthen the value creation in in Iceland. So so overall, the signals are positive and that they want growth in the industry, but, of course, within a sustainable framework. Until the new law is in place, we and other companies, of course, operate according to the current legislation. And and salmon farming has become a significant contribution to the Icelandic economy and represented 6% of the value of all goods exported from Iceland in 2024. So the new law proposal will be crucial to ensure continued sustainable growth for our industry.

If we look at sales and marketing, the market in quarter two above strongly affected by high volumes in the global supply for for salmon. For the ’25, the sea salmon prices for three to six kilo fish was €2.55 lower than for same period in 2024. Our contract share was very low, 1%. This is due to that we were not planning to harvest for a period and haven’t made any contracts. And as I said earlier, the harvest was initiated with the biological challenges we faced.

In the quarter, we sold 12% over salmon to The US market. It’s a bit, early to conclude that, this relative low share of volume was due to tax increase since we also partly had a low average rate over fish during the quarter. And that The U. S. Market mainly take fish that is more than six kilo in weight.

Our average weight for the quarter was, in total, 4.4 kilo head on jacket. But we are very concerned for the tax increase we got from the August 7 when the taxes raised from 10% to 15%. We haven’t harvested. We have had a and we are or we are in a three week break in the harvest plant at the moment and have not sold fish with the 15% tax to US yet. We sold nine percent of our volume to Asia, and both U.

S. And the Asian market have been very positive contributors to the price achievement in the last quarter. If we look a bit into the future and the outlook, we expect a decrease in our cost level from quarter four this year and going forward. This is due to increasing volumes and lower cost out of stock from seawater on the 2024 generation that we start harvesting in October. So this also means that we expect still a high cost level in quarter three while harvesting out ’23 generation.

We will continue to build the biomass to optimize the MIB utilization and expect a significant increase in biomass during 2025 compared to last year. So the the increase in biomass from ’24 to ’25 ’25 will be significant. And this is the fundament for increased volumes in in 2026. Volume guiding for ’26 will be given in the quarter three presentation in November. For this year, we lowered the volume guidance from 15,000 ton to 13,000 ton, and that is mainly due to the situation we faced in quarter two with the BCOD outbreak on our 23 generation.

Excuse me. We expect a low contract share for quarter three, approximately like quarter two of 1%, and for full year, 5% contract share. The salmon market remains uncertain on a short to medium term level with increased global supply pressure and from tariff implications from The US. We do, by the way, expect year over year supply growth to decrease second half of the year, and this should lead to a more normalized price level. I’m really sorry for this.

I will then thank you all for listening to our presentation. I will now leave the presentation, and it’s then we move directly into the Q and A session. So please raise your hand if you have a question, and we will try to answer as good as we can. So please come with your questions. I can open the can you follow the questions that comes into the chat, Edwin?

Edvin Osprey, CFO, Icelandic Salmon: Yeah. I can read them out. There’s a question here from

Hambre, CEO, Icelandic Salmon: I can answer to to that. We we still aim to to reach the the 26,000 ton of of harvest in the in the coming years. So that is still the plan, and that’s not affected by the revised investments.

Edvin Osprey, CFO, Icelandic Salmon: And his second question is, is your plan to release 7,000,000 smoths or more for 2026?

Hambre, CEO, Icelandic Salmon: We will not release 7,000,000 smoths in 2026. It will be at a lower level. Yeah.

Edvin Osprey, CFO, Icelandic Salmon: And his third question. Can you comment on the difference in mortality experienced on the 23 generation versus the 24 generation so far?

Hambre, CEO, Icelandic Salmon: The so the 23 generation, we we have done and that we had several episodes with increased, mortality. And, so far, we are at, I would say, significant lower level on the 24 generation in in total than we had on the 23 generation at the same time last year.

Edvin Osprey, CFO, Icelandic Salmon: Okay.

Hambre, CEO, Icelandic Salmon: Mister Koman, new question in the in the chat, but also feel free to to to use your microphone to ask questions.

Edvin Osprey, CFO, Icelandic Salmon: Yeah. If you raise your hand, I’m able to unmute you. It is for you to ask the question.

Hambre, CEO, Icelandic Salmon: Seems that we have another one in the chat.

Edvin Osprey, CFO, Icelandic Salmon: Yes. And a question from Jason Holland. Amid The U. S. Tariff uncertainty, do you have plans to further diversify your markets?

Hambre, CEO, Icelandic Salmon: Well, the way we we we work in the in the market, we, of course, always try to approach good good customers, and we are continuously working on getting contracts. But as you see, we have a low contract share at the moment, and that means we are in the spot market with most of our fish. And when we are operating in the spot market, we are basically selling to the markets that pays the best price. So but of course, if the demand in the in The US market decrease, that will basically force volumes into to to other markets. And and Asia, especially China, will then be even more important for us.

So I hope that answered your question, Jason.

Edvin Osprey, CFO, Icelandic Salmon: And then Christopher Hoegherne asked, will harvest volumes in Q3 be similar to Q2?

Hambre, CEO, Icelandic Salmon: The harvest volumes in Q3 will be a bit lower than Q2. As I said, we are in a three week break in harvesting at the moment so that our staff in the harvest plant get us a late summer vacation. So and we are able to handle the volume or or or self. And the and the biological situation on the remaining 23 generation is satisfying at the moment. So that’s why we decided to to stop for for three weeks and and gain some weight before we we finalize that generation.

Edvin Osprey, CFO, Icelandic Salmon: Okay. I see any more questions in the chat. And just going to repeat myself. If you raise your hands, I’m able to unmute you if you have any further questions.

Hambre, CEO, Icelandic Salmon: That it doesn’t seem to be more questions. So I think we we then end this q and a session. The presentation is, of course, at our homepage. That is alnalax.is. So, and, again, thank you for for joining us, and have a great day.

So bye bye. Thank you. Bye.

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