Bakkafrost bids to increase volume by 55%
Faroese salmon farmer Bakkafrost is to invest DKK3 billion (£360 million) over the next five years as it attempts to increase annual production by 55% to around 76,000 tonnes by 2023.
Bakkafrost outlined the plans as it reported an operational EBIT of DKK408m (£49m) for the second quarter of 2018.
The farming segment made an operational EBIT of DKK393m, and the company’s Havsbrún fishmeal, oil and feed (FOF) segment added a further DKK66m, but high spot prices meant the value-added products (VAP) segment based at Bakkafrost’s state-of-the-art factory at Glyvrar made a loss of DKK16.9m.
Lower harvest
The total volumes harvested in Q2 2018 were 12,902 tonnes gutted weight (18,402 tgw Q2 2018). Total harvested volumes in the first half of 2018 were 25,139 tonnes gutted weight (31,560 tgw H1 2017). Bakkafrost has reduced its guidance for volumes for 2018 by 2,000 tonnes gutted weight to 49,000 tonnes as a result of early harvesting at one site because of precautionary action to maintain a good biological situation.
Bakkafrost’s sales to Eastern Europe rose to 33% in the quarter, compared to 22% in Q2 2017, and sales to Asia rose to 25%, up from 16% in Q2 2017. Sales to the EU fell from 46% to 27%, and sales to the US were down slightly from 16% in Q2 2017 to 15%.
Large investments
Chief executive Regin Jacobsen said: “The salmon price was good in the second quarter, and although the price fell throughout the quarter, the result for Bakkafrost was good for the second quarter.
“Bakkafrost has in recent years made large investments to develop the company and now we are pleased to announce a new investment plan for the period from 2018 to 2022. Bakkafrost expects to make investments of around DKK 3 billion during this period. The salmon farming business has developed dramatically since it started in the Faroe Islands. We foresee great opportunities for development in the future and to be able to transfer these opportunities into realities, large investments are needed.”
Sustainable growth
Bakkafrost says the aim of the investment program is to minimise biological risk, increase efficiency and create sustainable organic growth.
Over the next five years it will use around DKK425m in the FOF business to increase feed capacity and feed line capabilities. Investment will also be made to increase the fish oil capacity.
Bakkafrost, which has taken the full responsibility of the Faroese broodstock programme and obtains the genome rights in 2021, also expects to invest around DKK200 million in a new site to run the programme in a totally closed land-based system.
500 gram smolts
Completion of existing smolt projects and new development will cost another DKK1bn. Limited opportunity for geographical expansion means Bakkafrost is concentrating on growing larger smolts of up to 500 grams on land. This means they will spend less time in the sea reaching harvest size, allowing Bakkafrost to make more use of its farm sites.
Investment in the farming operation will be around DKK1.3bn. The company has been given permission for two new sites in the southern island of Suðuroy, and also plans a new hatchery on the island. Harvest capacity on Suðuroy is expected to be 15,000 tonnes, of which 5,000 tonnes will come from large smolts.
