Bakkafrost profit plunges as weak salmon prices and Scottish losses weigh on Q3

Bakkafrost reported a significant decline in Q3 operational EBIT to DKK 22 million, down from DKK 173 million year-over-year, primarily driven by lower salmon prices resulting from an 11.9% increase in global supply and substantial losses in its Scottish operations, which posted a DKK 205 million loss due to a Pasteurella bacteria outbreak. Despite these financial challenges, the company achieved record biological performance in the Faroe Islands, characterized by strong survival and growth, coupled with declining farming costs in that region. CEO Regin Jacobsen acknowledged the weak financial results but underscored the strong biological foundation and ongoing strategic investments, including a DKK 5 billion plan for 2026-2030, aimed at enhancing biological control and delivering long-term value.

Analysis

Bakkafrost reported a significant decline in Q3 operational EBIT to DKK 22 million, a sharp drop from DKK 173 million year-over-year, primarily driven by a 13.1% decrease in salmon reference prices and an 11.9% increase in global supply. The Scottish operations were a major drag, posting a DKK 205 million loss, exacerbated by a Pasteurella bacteria outbreak that led to increased mortality and early harvests. This contrasts sharply with the DKK 138 million loss in the prior year.

Despite the overall financial headwinds, the Faroe Islands segment demonstrated robust biological performance, achieving record survival and growth, alongside a 14% year-over-year reduction in farming costs in Q3. This strong operational efficiency in the Faroe Islands, which saw operational EBIT of DKK 227 million, partially offset the substantial losses incurred in Scotland. Combined harvest volumes increased to 30,678 tonnes from 27,029 tonnes a year earlier.

Management acknowledged the unsatisfactory financial results but highlighted the strong biological foundation across the group, particularly in the Faroe Islands. Bakkafrost plans a DKK 5 billion investment from 2026-2030 to expand hatchery and processing capacity, aiming to strengthen biological control and maintain cost discipline. The company forecasts a 2025 harvest of 104,000 tonnes, indicating future growth ambitions despite current market pressures.

The Feed, Oil and Fishmeal segment also saw a margin compression to 12% from 20% year-over-year, although feed sales increased. The cautious tone from management, coupled with the moderately negative sentiment score of -0.5, suggests that while operational improvements are underway in key areas, external market conditions and specific regional challenges continue to impact profitability.

Key Decisions for Investors

• Monitor global salmon supply and pricing trends, as these significantly impacted Q3 results and remain a key external risk factor for Bakkafrost's profitability.
• Evaluate the progress of Bakkafrost's DKK 5 billion strategic investments and the recovery in Scottish operations, particularly the management of biological challenges and the Applecross hatchery's contribution to future smolt quality.
• Assess the long-term value proposition considering the strong biological performance and cost discipline in the Faroe Islands, which provides a stable base amidst broader market volatility and Scottish operational challenges.