Earnings call transcript: Norcod Q2 2025 shows operational gains amid losses

Norcod’s Q2 2025 earnings call revealed a mix of operational improvements and ongoing financial challenges. According to InvestingPro analysis, the company’s financial health score is currently rated as WEAK, with particularly concerning metrics in profitability and cash flow. The company reported a net loss of $52 million, an improvement from the $57 million loss in the same quarter last year. Despite a 16% decrease in harvest volume, revenue increased by NOK 5 million, signaling strong market conditions. The stock saw a slight decline of 0.39%, trading near its 52-week low of $1.02, with the current price at $1.27.

Key Takeaways

• Norcod’s net loss improved year-over-year, with a $5 million revenue increase despite lower harvest volumes.
• The EBIT margin saw a significant improvement of 33% in the first half of 2025.
• The stock price experienced a minor decline, reflecting cautious market sentiment.

Company Performance

Norcod’s performance in Q2 2025 showed resilience in the face of challenges. The company managed to increase revenue despite a reduction in harvest volume, highlighting its ability to capitalize on favorable market conditions. While the EBIT margin improvement suggests effective cost management and operational efficiency, InvestingPro data reveals a concerning gross profit margin of 12.1% in the last twelve months, with revenue reaching $44.89 million.

Financial Highlights

• Revenue: NOK 5 million increase despite a 16% decrease in harvest volume.
• Net loss: $52 million, improved from $57 million in Q2 2024.
• EBIT margin: Improved by 33% year-over-year in the first half of 2025.

Outlook & Guidance

Norcod is targeting a harvest of 8,000 tonnes for the year and expects a sharp increase in biomass from the fall. The company is preparing for significant growth between 2026 and 2028, with a flexible growth plan adaptable to market conditions. Production costs are anticipated to decrease in Q3, aligning with the company’s strategic initiatives.

Executive Commentary

Christian, an executive at Norcod, stated, "We are looking into a scale-up plan which we feel is very robust and are ready for the long-term profitability of Norcod and cod farming in general." He also noted, "We are seeing an increase in sales prices and a decrease in production costs. So it’s going on the right trend."

Risks and Challenges

• Continued financial losses may impact investor confidence.
• Lower harvest volumes could affect future revenue growth.
• Market volatility and economic conditions might pose challenges to strategic initiatives.

Norcod’s Q2 2025 earnings call reflects a company navigating through financial losses while strategically positioning itself for future growth. The improvements in operational efficiency and market conditions offer a cautiously optimistic outlook for the coming quarters. For deeper insights into Norcod’s financial health and future prospects, InvestingPro subscribers can access additional ProTips and comprehensive analysis, including detailed valuation metrics and growth forecasts in the Pro Research Report.

Full transcript - Norcod As (NCOD) Q2 2025:

Christian, Primary Speaker/Executive, NORCOD: Fish at three sites on Freyja and on Nesna, which is which will be the fish that we’ll be harvesting in the future. Our current biomass at the moment is is at a low stage as planned, but we will see an increase in the biomass from the fall and onwards and we are on track to harvest the 8,000 tonnes this year as planned. As shortly explained, we paused the the harvesting from ’2 when we finalized Laporte. Again, the two main reason was very positive development in market prices. We could see that we if we waited with the harvesting, we could achieve higher average prices on this fish, and at the same time, we had more time to to produce a larger fish in average.

That time was also used at Kokoy while no harvesting. We’ve been freezing salmon at Kokoy together with we’ve been upgrading and preparing the facility with a new gutting machine for cut. This puts us in a position to process even higher volumes of cut at cold cutting. As important, we have worked on our growth plan and a very important part of this is that we have aligned our future production plan all the way to 2029, so we more or less have even split of spring and fall releases to new and existing sites, which will give us a very good balance and help us having a very stable production twelve months a year, which also results in a more stable harvesting. This have of course resulted in a lower biomass at the moment due to a lower release this spring, but from this fall already and onwards we will see a sharp increase in that.

As we can see here, despite pausing our harvesting early in the quarter, we still harvested over a third of all farmed fish in Norway, farmed cut in Norway, and as we can also see our biomass at sea at the moment is at a low at the lowest stage in a long time, but we will see a sharp increase on this from the fall and onwards. What we have a lot of focus on outside our daily operations is, of course, planning and laying the foundation for our growth plan. Already from next year, we will see big increase in our releases and sites in operation, and that’s why we have done quite a bit of planning on this over the quarter. On equipment and feed barges, we’ve made a new agreement with SCALARC, which will be supplying us two new concrete feed barges for the two new sites together with all in with the pens and operations for the site. We have used Gaelag for quite some time.

They delivered very good equipment to our sites. Also, secured five new boats both for for existing and new sites. Boats will be purchased from Euro Industries and Promec and will be delivered over the next two years, so we have secured that as well. All in all, we can say that for the first period of NORCOD when we started our processing, we have tested out quite a bit of equipment, both underwater feeding, different types of pens and feed barges and boats, but we are at a stage now where you can say we’re done testing. We we know what equipment works.

We know what can secure us stable and good production, which will take our production up in volumes, give us stability, and give us profits. So for the next two for the next two sites that we have secured and will set out in 2026, it would be the the same equipment as we’ve used earlier. Also, as mentioned in the highlights, we have made a new agreement with our existing juvenile site on land. We’ve had a very, good relationship and cooperation at this facility, and now in the new agreement we’ve taken full control over this facility and we can utilize it as we wish. This gives us an opportunity that we can choose and manage how much fish we put in a facility versus how big fish we grow.

And this will of course give us much more flexibility on future releases both on what what size fish we put, but also what number of fish we choose to put at sea. So this is a very positive agreement for NORCOT. At the same time, our commercial terms on this agreement has been approved from the existing. And as I said, we have secured two new sites. We were granted the new site Snyon, very close to our existing site, Vosvika, so we are doing that cluster up north, which we’re very happy about.

We will be able to utilize same land base, and then we’ll have a lot of collaboration between the two sites. Snune is a 3,600 tonne MAB site and will go into operation during ’26. Also, we’ve leased another 36 site, Selsoy, which is very close to La Bokta and Bjornviker in Nestle, so we will grow that cluster further now with three full sites. We have that site for the next four and a half years, so two two full cycles, which is very positive. Again, there will be a lot of collaboration between LabCorp, Derbjorn Wieke and Cellsoil in the future.

Now I’ll pass the word to Stijn, who will talk a little bit about the financials.

Stijn, Financial Executive, NORCOD: Yes. So I will take you through the key financial information from our q two report, and we’ll start off by having a look at our highlights and the key figures here. And as Christian has been mentioning now, we have a low harvest volume in Q2 twenty twenty five due to our early harvest at the beginning of the year. But we would like to focus on how the harvest in total, the first half year, is actually 19% up year over year. So we are continuing to scaling up our business.

And of course, the production costs this quarter were was extraordinary high due to harvesting of a poor cycle. We had the escape incident here and some other challenges, are driving the production cost at sea significantly up. In addition, we had lost a lot of volume to distribute these costs on, so this makes the production cost at sea extraordinarily high for this quarter, but we expect to have this reduced already from Q3. The revenues now is lower than previous two quarters, but we’re still at 39% in the 2025 compared to the first half in twenty twenty four. More favorable market prices are driving this in addition to a net growth of volume.

All the available funds we secured in Q1 is utilized for continued scale up and growth in these days. We had $92,000,000 in available credit and cash at hand by the end of the quarter, and we are using this now according to plan of scaling up our business. The biological assets are historically low at the moment. As Christian has been explaining, this is a result of the adjusted and aligned future production plan in order to get the ideal balance between spring and fall releases and growing the fish up to the right size. This is important for us in order to secure the foundation for future growth and a stable harvest throughout the year.

So already from Q3, we are expecting an increase of biological assets, both in terms of in value and also in terms of tons at sea. We’re not going to focus so much on the balance sheet development aside from this. There are mainly the biological assets that are driving the changes there. We have not made any significant investments during q two this year. All of the agreements we have made now will be effective from later on.

I just proceed to the financial review. This is kind of summarizing a lot of what I’ve been talking about the last two pages, But it’s very important to see that we are still driving an improvement in terms of us financial performance. The EBIT margin is improved a little bit for q two compared to q two twenty four. But most importantly, we see a year over year improvement for the first half year in 2025 of ’31 33% compared to first half year twenty four. So so even though we had some challenges now this this past quarter, we are seeing an improvement overall in our financial performance, which is very important because there is there is important for us to keep continuing improving step by step.

Profit and loss. Revenues were million this this quarter based on the harvest and volume of 1,541 tons. It’s a little bit up from due to 2025, but if we have a look at the revenue increase of NOK 5,000,000, this is actually quite good thinking about how our harvesting volume was 16% lower than in Q2 twenty four. So this is the better prices achieved. It’s the effects from the marketing work we see at ValueNow.

And as I said, the increase of the production costs is mainly explained by the effects from the early harvest in addition to completing harvesting from a site where we had some challenges. Of course, the challenge in Escape in itself is creating some direct cost during the quarter, but we also lose a lot of volume, which is driving the production cost up. So this is very temporary. We expect to see a significant improvement already next quarter. Despite of this, we have a net loss for a period of $52,000,000 up, down from $57,000,000 up in Q2 twenty twenty four.

Of course, we like to remember that the EBIT margin is significantly improved, and this is something we are working on to continue with for each quarter going forward. Have a look at the balance sheet development. As I mentioned, there hasn’t been any significant investments during the quarter. So the reduction in assets now are mainly driven because of the decrease in biological assets. And of course, this is something we need to do now temporarily so we can optimize the future growth cycles.

Total equity is reduced from million in Q2 ’twenty four down to NOK211 million now in Q2 ’twenty five. The losses we are carrying here is reducing the equity. So we are looking forward to starting harvesting again now in a few weeks and hopefully generating smaller losses than in Q2. Hence, we will be able to strengthen equity in the future. Cash flows.

We see a smaller improvement in cash flow from the operating activities. We were at minus $71,000,000 in Q2 twenty twenty five compared to minus 92,000,000 in Q2 twenty twenty four. More favorable prices are affecting cash flows positively, even though we were harvesting reduced volume this quarter compared to what we originally planned for. So if we have a look at the net cash flows in total for the period, it’s actually quite close to zero. We have a net increase of million in total because of the cash flow we had from investing activities and the utilization of the overdraft facility.

Then I’ll hand the word over to Christian again for the market update.

Christian, Primary Speaker/Executive, NORCOD: Yes, and regarding the markets, I think it’s very clear that the cod market as we see it at the moment is in an extremely strong place. Stian, please switch slide. We’ve seen increase on prices quarter by quarter, which we again saw during Q2. We are close to having a 70 up per kilo average on all fish, which is positive. And we estimate to see prices probably closer to 80 knots per kilo than 70, but the prices will range from 70 to 80 knots per kilo in Q3 when we start harvesting again.

So we’re looking at a market with very strong demand and stable high prices, so that’s a positive for us. Our strategy is still the same, we are developing new markets both in Asia and North America, where we are positioning our fish as a premium product. This is also a focus for the future where we want to secure markets outside the regular cup markets where we have a premium position and we get our our premium price in these niche markets. Still, the European market is our biggest market with Southern Europe driving the volumes and prices, but we are seeing a very, very positive trend and a lot of opportunities, especially also in North America. We will market our fish as snow caught.

We’ve previously explained the idea behind snow caught, we’ve had extremely positive feedback on on on the name and the brand, and we’ll use this going forward also. And again, as we see with our fish, the benefit of our fish is contracting the fish in shorter or longer periods. Of course, in the current market, it’s it’s in shorter periods, but our fish is very very good for contracts for retail and food service where we can deliver stability, high quality and fixed prices in periods, which is key for our clients. The outlook for the cod market remains the same, it’s expected that we will see a decline in the wild cod quota, which of course is not bad for market condition, but at the same time a lot of the clients that have been working with our fish over the years are increasing their demand on a regular basis. We can very clearly see that the fish works for our clients and they want more.

So going forward, our priority right now is operations and to build the foundation for our future growth. It’s a pretty significant growth we’re looking into over ’26, ’27 and ’28. New sites will be built, a lot of fish will be released at sea, and we need everything to be prepared for that. Right now we’re ahead of schedule both with equipment and sites, which is very positive. The better time we have to prepare new sites, the better.

So everything is in place for all twenty twenty six sites and releases. So already now we’ve begun preparing the twenty twenty seven sites and releases. We will continue to assess our growth plan and scale up plan according to the development in the market, it can go quicker, can go slower depending on market and the development in the biology, so we will always assess that on a regular basis. We, of course, still have arborological challenges. We acknowledge that, but we are very, very confident in our operational.

We have best control we’ve ever had at our sites. We have very, very good procedures in place. As earlier mentioned, we have we’re changing part of the equipment and nets on our sites to either either even strengthen our control. So we are looking into a scale up plan, which we feel is very robust and are ready for the long term profitability of Norcot and cod farming in general. Now we will start the Q and A session, you’re very welcome to put questions into the Q and A and we will answer them best way possible.

And we will start here, we have an anonymous user who’s asking how many many Q and A’s will we stock in 2025. So this in this year and already now we’ve released the 1,200,000.0 and will be close to 3,000,000 juveniles at sea for this year. Same, an anonymous user is asking production cost went up to 59.9 in Q2, an increase of 12%. How do you propose to deal with this? Well, I think has explained this very very well already.

Our our cost price for the quarter is very dependent on is the is it the beginning of a site we are harvesting? Is it the end of a site we are harvesting? Is that specific site good or bad? We’ve had challenges at Laporte and we’ve had less volume, therefore the higher production cost. When we start harvesting here in Q3, it will be from Jammnongen and Freyja, and we expect to see a significant decrease in cost price again.

Same user is here asking again, decline in biomass, we’ve seen a decline in biomass from 7,000 tons to three seven in Q2. Revenue generating capacity, yes, of course, but we’ve also harvested more in the first half of the year compared to the original plan, so we’re still planning on and guiding on the 8,000 tons for the year, which was planned from the beginning. So volume wise is more or the same, but an increase in sale prices will ensure us the revenue at the same level or maybe even higher. Then I guess it’s the same guy who has a lot of questions, which is great. We have been asked here, have you considered cooperating with competitors in the industry?

I think our view is that we’re not really competitors in the industry at the moment. We are both competitors and colleagues. We are three companies who has fish at sea at the moment. And, of course, we are supporting each other and sharing a lot of information with each other on production, how we see challenges, equipment, and other things. So we have a we have a close collaboration in the industry as we all have one common goal to make cod farming profitable and an industry for the future.

And it’s been asked as a lot of people are thinking about when do you forecast profitability? Will this be in Q4 this year? We don’t really have specific comments on that, but we are seeing an increase in sales prices and a decrease in production costs. So it’s going on the right trend. Thomas Holton Nielsen is asking what is the value and tons of lost biomass and do we have long term client contracts or will we have an upside in increased demands?

When we paused our production, we, of course, had to foresee the existing contracts that we had. We finalized those and supplied the fish on that contracts. So we are going into q three only with the new contracts that we will that will be delivered for once we start harvesting, I guess, and we see an upside on the market price on that. So what Sunset is asking, do you expect your cut licenses to become generic agricultural licenses or as suggested by the Norwegian government? That’s of course a very very good question, Tova.

Government has already put indications that they want to have non generic agricultural licenses so we can farm whatever species we wish. This is not something that we’re very focusing on, but of course, that would give us both opportunities and challenges. The challenge as we have discussed over the years is of course once we show profitability and potentially go into a license regime as this, card licenses will come at a price, but also at a value. So we don’t expect in the short term, but it’s for sure the government is showing that this is something that’s on their mind and they have plans for that in the future. Okay, we don’t see more questions for now, so therefore myself and Stir will say thank you for joining our Q2 webcast and we look forward to presenting next results.

Thank you. Thank you.

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