CORRECTION: Q4 2025 Trading Update

Bakkafrost issued a corrected Q4 2025 trading update with harvest volumes and weights: Faroe Islands Q4 harvest 23.3k tonnes HOG (avg weight 5.6 kg) and YTD 83.6k t; Scotland Q4 harvest 4.6k t HOG (avg weight 4.1 kg) and YTD 23.2k t. Preliminary incident-based mortality costs were reported at 58 mDKK in Farming Scotland (about half linked to a Pasteurella incident at Portree) and 0 mDKK in Faroe; Freshwater incident costs were 2 mDKK in Scotland and 0 mDKK in Faroe. Smolt releases were 5.3m (Q4) in Faroe and 2.2m in Scotland, and FOF Q4 volumes included 39.8k t marine sourcing and 44.7k t feed sales; the full Q4 report is due 9 Feb 2026.

Analysis

Market structure: Bakkafrost's Q4 shows polarized geography — Faroe harvest 23.3k t HOG at 5.6 kg avg with 0 mDKK incident costs, while Scotland 4.6k t HOG at 4.1 kg avg with 58 mDKK of incident costs — this directly benefits vertically integrated, Faroe-centric producers and hurts operators with dense Scottish exposure. FOF segment volumes (Q4 feed sales 44.7k t; YTD feed sales 165.2k vs sourcing 349.2k t) imply heavy raw‑material sourcing and potential inventory build, which compresses near‑term feed margins if commodity prices move higher.

Risk assessment: Tail risks include a large disease outbreak in Faroe/Scotland or regulatory farm closures (high‑impact, low‑probability) that could wipe out several quarters of EBIT; a >20% jump in fishmeal/soy prices would also materially compress FOF margins. Immediate (days) risk is elevated volatility into the Q4 report on 9 Feb 2026; short term (weeks–months) is margin digestion from incident costs and inventory, long term (quarters–years) is driven by smolt release differentials (Faroe YTD 18.7m vs Scotland 7.3m) which favor Faroe growth.

Trade implications: Tactical long bias to BAKKA.OL (BAKKAFROST) given Faroe resilience: consider establishing 2–3% position, stop −12%, target +25–35% over 6–12 months. Pair trade: long BAKKA.OL (2%) vs short MOWI.OL or LSG.OL (1–1.5%) to capture relative operational resilience. Options: buy an event straddle/ATM on BAKKA ahead of 9 Feb (allocate ~0.8–1.2% portfolio to premiums) or a 3‑month call spread (+10% / +30% strikes) to limit premium outlay.

Contrarian angles: Consensus may over‑penalize Bakkafrost for the Scottish incident and ignore Faroe scale and zero Q4 mortality costs — downside to a disciplined long is likely capped versus peers. Historical disease episodes in salmon typically cause 6–12 month repricing then recovery as harvest normalizes; if market overreacts, long integrated feed/farming players (BAKKA.OL, BIO.OL) offer asymmetric upside. Watch for UK veterinary findings and salmon spot price moves as potential catalysts that could reverse sentiment rapidly.

Key Decisions for Investors

• Establish a 2–3% long position in BAKKA.OL (Bakkafrost) within 3 trading days ahead of the Q4 report (9 Feb 2026); set a hard stop at −12% and take‑profit band at +25–35% within 6–12 months, thesis: Faroe harvest scale and zero incident costs support outperformance.
• Execute a relative value pair: long 2% BAKKA.OL vs short 1–1.5% MOWI.OL or LSG.OL to hedge market risk and capture operational divergence from Scottish incident exposure; re‑evaluate after 9 Feb and trim if spread narrows by >50% or if BAKKA misses guidance.
• Buy an ATM straddle on BAKKA expiring the week after 9 Feb 2026 (allocate 0.8–1.2% of portfolio to premiums) to capture event volatility, or alternatively purchase a 3‑month bull call spread (buy ATM, sell +20–30% OTM) if seeking directional upside with capped cost.
• Establish a 1–2% long position in BIO.OL (BioMar) or equivalent listed feed producers to capture FOF margin recovery if feed demand remains steady and raw material dislocations normalize; exit or hedge if fishmeal/soy prices rise >20% or if YTD sourcing vs sales divergence widens beyond 30%.
• Monitor within 30 days: UK/Scottish veterinary inquiry outcomes, salmon spot price moves >10% from current levels, and raw feed commodity prices (fishmeal/soy/oil) — if any trigger occurs, reduce gross exposure by 30% and re‑deploy into hedged call spreads.