Commenting on the results, CEO
"2013 is the best year ever for the
Bakkafrost Group. The salmon market has been stronger than expected, with the new markets taking the lead. In 2013 we announced our 5 year investment plan, which will prepare the company for the future. Recently we have tested the veterinary early warning system in the Faroe Islands. The outcome has proved a good system and we still have a strong biology."
The Group made a profit for the quarter of
The total volumes harvested in Q4 2013 were 11,097 tonnes gutted weight (13,044 tgw). The total harvested volumes for 2013 were 41,268 tonnes gutted weight (44,341 tgw).
Bakkafrost transferred 2.8 million smolts in Q4 2013 (2.3 million). In 2013, 9.5 million smolts have been transferred (10.7 million). This is a bit lower than the guidance and is due to a slight delay in timing from the end of 2013 to the beginning of 2014. The smolt release is less in 2013, compared to 2012, due to available sites for smolt release. Due to the favourable seawater temperatures in the Faroes, Bakkafrost releases smolts during the whole year. Bakkafrost has built a new hatchery which will commence production in H1 2014. Following this Bakkafrost will be self supplied with smolts. In accordance with the Group's dividend policy, Bakkafrost aims to give its shareholders a competitive return on their investment, both through payment of dividends from the company and by securing an increase in the value of the equity through positive operations. Bakkafrost's financial position is strong with a healthy balance sheet, a competitive operation and undrawn available credit facilities. The Board of Directors has therefore decided to propose to the Annual General Meeting that
DKK 4.50( NOK 5.03*) per share shall be paid out as dividend. This corresponds to approximately DKK 219.9 million( NOK 245.9* million). The dividend per share in NOK is subject to changes depending on the exchange rate between DKK and NOK when the dividend is paid out. In addition to the dividend, Bakkafrost purchased 366,700 own shares at a price of NOK 86each in December 2013. Following the transaction, Bakkafrost holds 378,581 shares corresponding to 0.77% of the total share capital. The 28th of October 2013, Bakkafrost announced the suspicion of Neoparamoeba perurans at a Bakkafrost farming site in FuglafjØrÐur. Further PCR analysis carried out by the Faroese Food- and Veterinary Authorities have detected the presence of Neoparamoeba perurans. The Neo-paramoeba perurans agent is known to be able to cause amoeba gill disease (AGD). All other sites in the Faroes were examined, and Neoparamoeba perurans has been detected on a number of them, including sites that Bakkafrost owns. The detected sites have been treated with Hydrogen Peroxide. No increase in mortality has been observed and no disease outbreak has occurred at any of the detected sites, but the detection of Neoparamoeba perurans agent has increased the biological risk. In February 2014a routine surveillance test detected a possible pathogenic ISA-virus on Bakkafrost farming site A80. The detection was not connected to any increase in mortality, and there was no impact on fish health or fish welfare. Bakkafrost decided to activate the ISA-contingency plan immediately and hence enforced slaughtering of the last cage at the farming site A-80 SelatraÐ. The site was emty before mid february.
The farming companies and the authorities have put a lot of work into maintaining the good biolog-ical status in the
The combined farming and VAP segment made an operational EBIT of
DKK 124.9 million( DKK 95.8 million) in Q4 2013. For 2013 the combined farming and VAP segment made an operational EBIT of DKK 551.9 million( DKK 311.0 million).
The farming segment made an operational EBIT of
As expected, the VAP segment had a loss on its operations in Q4 due to high salmon spot prices. The VAP segment made an operational EBIT of
DKK -5.9 million( DKK 11.5 million) for Q4 2013. For 2013, the accumulated losses amounted to DKK -90.5 million( DKK 37.0 million). There is normally a time lag between the changes in the spot prices and the changes in the contract prices. Therefore, typically the VAP segment has losses the first quarters in a longer period with increasing salmon prices. The third segment - fishmeal, oil and feed - made an operational EBITDA of DKK 21.3 million( DKK 18.4 million) in Q4 2013 and for 2013 the operational EBITDA amounted to DKK 125.8 million( DKK 84.5 million). The increase in the EBITDA is primarily due to higher production of fishmeal and fish oil. In Q4 2013, HavsbrÚn sourced 18,432 tonnes of raw material (11,691 tonnes), and for 2013 the raw material intake was 160,581 tonnes (47,122 tonnes). The Bakkafrost Grouphad a net interest bearing debt at the end of 2013 amounting to DKK 678.0 million( DKK 806.9 millionat year-end 2012) and had undrawn credit facilities of approx DKK 684.0 million, of which DKK 15.6 millionare restricted. Bakkafrost's equity ratio is 54%, compared to 49% at the end of 2012. Bakkafrost paid out DKK 97.7 millionin dividend in Q2 2013. On 14 February 2013, Bakkafrost issued un-secured bonds at a total nominal value of NOK 500,000,000; the issue date was 14 February 2013. The bonds were listed on the market on 3 May 2013. The interest rate is NIBOR 3 months plus a margin of 4.15 %. The bonds are measured at fair value at initial recognition. The bonds mature five years from the issue date at their nominal value. In Q2, all full-time employees from 2012, still employed at Bakkafrost, have received bonus shares with a total value of 2% of paid out salary in 2012. In total Bakkafrost has allocated 45,957 shares to its employees at a fair value on DKK 3.2 million. The grant date was 22 May 2013and the share price was DKK 69.65( NOK 69.75) per share. Segments
The operating revenue for Bakkafrost's farming segment was
Operational EBIT, which is EBIT before fair value adjustments on biological assets, amounted to
Operational EBIT/kg for the farming segment was
Value Added Products (VAP): The operating revenue for the value added segment amounted to
Operational EBIT amounted to
DKK -5.9 millionin Q4 2013 (DKK 11.5 million), corresponding to an operational EBIT of DKK -1.17( NOK -1.29) per kg gutted weight in Q4 2013, compared to DKK 2.55( NOK 2.52) per kg gutted weight in Q4 2012. The decrease in the operational EBIT margins is due to higher salmon spot prices. The VAP segment acquires its raw material (fresh salmon) at spot prices each week. For 2013, operational EBIT amounted to DKK -90.5 million( DKK 37.0 million), corresponding to an operational EBIT of DKK -4.93( NOK -5.16) per kg gutted weight in Q4 2013, compared to DKK 2.30( NOK 2.31) per kg gutted weight in 2012. Fishmeal, Fish Oil and Fish Feed: The operating revenue for the fishmeal, fish oil and fish feed segment amounted to DKK 252.5 million( DKK 248.1 million) in Q4 2013, of which DKK 150.7 millionrepresents sales to Bakkafrost's farming segment corresponding to 59.7% (61.5%). For 2013 the revenue was DKK 1,083.0 million( DKK 889.3 million), of which DKK 631.3 millionrepresents sales to Bakkafrost's farming segment corresponding to 58.3% (64.7%).
Operational EBITDA was
Sales of feed amounted to 20,270 tonnes (25,047 tonnes) in Q4 2013, of which the farming segment internally used 14,736 tonnes (16,210 tonnes). For 2013, the feed sale was 85,333 tonnes (91,398 tonnes). The internal sale was 63,820 tonnes (61,506 tonnes).
The production of fishmeal in Q4 2013 was 4.324 tonnes (2.829 tonnes). The production for 2013 was 34.031 tonnes (10.808 tonnes).
The production of fish oil in Q4 2013 was 1.619 tonnes (1.229 tonnes). The production for 2013 was 15.996 tonnes (4.199 tonnes)
Statement of Financial Position
The Group's total assets as of end 2013 amounted to
The Group's intangible assets amounted to
Property, plant and equipment amounted to
Non-current financial assets amounted to
DKK 115.3 millionat the end of 2013, compared to DKK 91.2 millionat the end of 2012. The increase in the financial assets relates mainly to the positive result in Faroe Farming, a financial investment.
The Group's carrying amount (fair value) of biological assets amounted to
The Group's total inventories amounted to
The Group's total receivables amounted to
The Group's equity at the end of 2013 is
The Group's total non-current liabilities amounted to
Bakkafrost's interests bearing debt consists of two bank loans and a bond loan. The bank loans are one instalment loan of
DKK 300 million, payable with DKK 25 millioneach quarter, and one loan payable in 2016 with the full amount of DKK 553 million. The bond loan of NOK 500 millionwas issued at 14 February 2013and is payable in full after five years i.e. at 14 February 2018. The interest rate of the bonds is NIBOR 3m + 4.15%. Following the issuance of the bonds, Bakkafrost has entered into a currency/interest rate swap, hedging the exchange rate and has switched the interest rate from NIBOR 3m to CIBOR 3m. Bakkafrost has entered the swap due to its exposure to DKK, as a large part of the income and costs are in DKK and EUR.
At the end of 2013, the Group's total current liabilities are
Bakkafrost's equity ratio is 54%, compared to 49% at the end of 2012.
The cash flow from operations in Q4 2013 was
DKK 187.1 million( DKK 103.8 million). The Cash flow from operations was positively affected by higher sales prises on lower volumes and positive cash-flow due to decrease in inventory. For 2013, the cash flow from operations was DKK 517.5 million( DKK 285.6 million). The cash flow from investment activities in Q4 2013 amounted to DKK -96.7 million( DKK -44.6 million). The amount relates primarily to invest-ments in fixed assets. For 2013, the cash flow from investments amounts to DKK -204.4 million( DKK -66.9 million). Included in the prepayments made for purchase of fixed assets are approximately DKK 22 millionfor the well boat that Bakkafrost has ordered for delivery in 2015. Cash flow from financing activities totalled DKK -72.2 millionin Q4 2013 (DKK -43.9 million). The interest bearing debt decreased by DKK 53.6 million, purchase of own shares was DKK 28.1 millionand changes in financing of associated companies contributed positively with DKK 16.3 million. For 2013, cash flow from financing amoun-ted to DKK -156.1 million( DKK -210.6 million).
Net change in cash flow in Q4 2013 amounted to
At the end of 2013 Bakkafrost had unused credit facilities of approximately
The salmon marked have proved to be strong recent years. Therefore the outlook for the salmon market in 2014 is good. Global supply of salmon in 2014 is expected to increase 4-6%. Based on historical numbers, the salmon marked is in balance, when the supply increases by 6-8% per year. This together with an average NOS (Independent exporters purchase price, spot from farmers) price in 2013 of
NOK 39.07per kg gives indications of salmon prices in the same price range as in 2013 in average. As the supply of salmon is expected to be low first half of 2014 it is expected that the market will be tight, while more salmon will be harvested in the second half. Bakkafrost expects to sell around 55% of the harvested volume of salmon in the spot market in 2014 and around 45% as VAP. The market place is one of Bakkafrost's most significant risk areas. To reduce the exposure to the market risk, Bakkafrost has a geographical approach and a market price approach. To diversify the geographical market risk, Bakkafrost sells its products to some of the largest salmon markets in the world, US, the Far East, Europeand Russia.
The outlook for the farming segment is good. The biological situation is good and the price outlook in the spot market is good. Bakkafrost expects to harvest 45,000-48,000 tonnes gutted weight in 2014 and Faroe Farming, which Bakkafrost holds
49% in, expects to harvest around 5,000 tonnes in 2014.
The number of smolts released is one key element of predicting the future production for the Group. Bakkafrost's forecast for the smolt release in 2014 is 11.6 million smolts and shall be compared to the number of smolts released in 2012, when the smolt release was 10.7 million. The same sites are available for smolt release in 2014, as in 2012. Therefore 2014 is comparable to 2012. Bakkafrost has invested in a new hatchery amounting to
DKK 53 million, which will commence production in H1 2014. Following this Bakkafrost will be self supplied with smolts. The estimates for harvesting volumes and smolt releases, is as always, dependent on the biological situation in the Faroe Islands. The overall biolog- ical situation in the Faroe Islandsis good, but the detection of Neoparamoeba perurans in the Faroes and the possible detection of an ISA virus are new risks to handle. The number of sea lice is lower than in previous years after a coordinated treatment in the whole Faroese farming area during 2013. The number has been significantly lower during the summer 2013, compared to previous years. Therefore the farming companies in the Faroes have decided, to do an coordinated treatment again sea lice again in 2014. Value added products (VAP) The outlook for the sale of value added products is good. Bakkafrost has already signed contracts covering around 70% of the VAP capacity for 2014 corresponding to 30% of the expected total harvested volumes in 2014. The last 30 % of the VAP capacity is expected to be committed during the year. The contracts are at fixed prices based on the salmon prices in 2013 and the expectations for the salmon spot price for 2014. Therefore the contracts are based on a significant higher level in 2014 than in 2013.The contracts lasts for 6 to 12 months. The strategy is to sell around 40- 50% of the harvested volumes of salmon as VAP products on fixed price contracts. Selling the products at fixed prices reduces the financial risk with fluctuating salmon prices. The market price for contracted VAP products follows a more stable pattern with trends instead of short-term fluctu-ations as in the spot marked. Fish oil, -meal and feed The major market for HavsbrÚnīs fish feed is the local Faroese market. It is expected that the total consumption of fish feed in the Faroe Islandswill be approximately 90,000-95,000 tons in 2014. Depending on the purchase from external customers in the Faroe Islandsand abroad, the sale of fish feed will be approximately 83,000-87,000 tonnes. With the positive outlook for the fisheries of blue whiting and the establishment of a pelagic fish processing plant next to HavsbrÚn's production facilities in FuglafjØrÐur the outlook for sourcing raw material is better than in recent years. Off-cuts from the new processing facility, which Bakkafrost has a 30% share in, can be used for the production of fishmeal and fish oil. However, depending on supply, demand and the price level, the sourcing of raw material for the production of fish oil and -meal is very uncertain. An alternative to HavsbrÚn's production of fish oil and -meal is purchasing these raw materials from other producers, which has been common in recent years.
Improved market balances in the world market for salmon products and costs effective production will likely improve the financial flexibility going forward. A high equity ratio together with the Group's bank financing and the issuance of bonds, makes Bakkafrost's financial situation strong, which enables Bakkafrost to carry out its investment plans to further focus on strengthening the
Group, M&A's, organic growth opportunities and fulfil its dividend policy in the future.
This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)
About Bakkafrost: Bakkafrost is the largest salmon farmer in the
Faroe Islands. The Group is fully integrated from feed production to smolt, farming, VAP and sales. The Group has production of fish meal, fish oil and salmon feed in FuglafjØrÐur. The Group operates licenses on 14 farming fjords. The Group has primary processing in KlaksvÍk, KollafjØrÐ and Strendur and secondary processing (VAP) in Glyvrar and FuglafjØrÐur. The headquarters are located in Glyvrar, and the company has a total of 640 employees.
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