Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Yes. Good morning. I can see a few people joining right now. I'd like to welcome everyone to the Ice Fish Farm Second Quarter 2023 Results. My name is Guomundur Gislason. I'm the CEO. Róbert Róbertsson, our CFO, is here with me today. And we'll walk through the Q2 highlights. Harvesting begins in Q3, in line with the plan. Generation '22 stands at 5.4 million fish in the sea, and the largest fish was roughly 4 kilo at the close of June. Right now, that group is surpassing 5 kilos. Generation '23 has a planned release of 5.4 million smolt, and survival is better than ever so far. We'll cover that in greater detail on the slides. Operational EBIT came in at minus NOK 23 million, as expected, and the subsequent offering sold out successfully. And on the right side, you can see a photo of the feeding center — top-of-the-line tech — and they are really busy feeding at the moment, setting new records daily for feeding amount.

Good morning. We have an overview of the Q2 results for you here. As expected, no harvest took place during the first and second quarter of this year. In line with the ISA, since last year we have been building biomass and strengthening our biosecurity. That said, this quarter is the final one without a harvest, since we will start harvesting again in the second quarter. As expected, operational EBIT came in negative, largely because we are not harvesting any salmon at our harvesting facilities. However, the majority of revenues are generated by the harvesting station, through external sales or services there. So overall, the quarter is developing as expect -- as expected and planned. Turning to our balance sheet, it is a strong one, with an equity ratio of roughly 70% at quarter-end. That is up from a 62% equity ratio at the start of the year. This comes directly from the refinancing private placement and the subsequent offering. On the asset side, the main changes relate to the biomass buildup. Biological assets stood at around NOK 810 million at the end of the quarter. We have been focused on building up our biomass, and that has gone well.

When it comes to biological assets, the overall value rose by approximately NOK 470 million since the start of the year, with NOK 270 million of that increase occurring in the second quarter. We also made some fixed asset investments, CapEx, during the quarter. That investment came to NOK 44.5 million, which puts total investment across the first and second quarters at about NOK 84 million. For the full year '23, the budget anticipates investment of roughly NOK 200 million, and the main focus there is on upgrading our land stations. Guomundur will cover that in greater detail later. Net interest-bearing debt has been declining too, thanks to the private placement and subsequent offering and refinancing. At the close of the quarter, net interest-bearing debt stood at NOK 911 million. That means a total reduction of approximately NOK 230 million since the beginning of the year. So the key takeaway here is that biological, or biomass, buildup is progressing well, and we are seeing the effects of the private placement and subsequent offering. To dig a bit deeper into the refinancing and subsequent offering: the first drawdown under the new syndicated loan facility took place in the second quarter, and it was mainly used to settle existing term loans and CapEx loans, as well as to support the biomass buildup.

The syndicated loan's overall bank facility comes to approximately EUR 156 million. And by quarter-end, net loans from the bank syndicate stood at about EUR 72 million. The subsequent offering — during the quarter we carried out a successful subsequent offering. Its purpose was ensuring shareholders who hadn't taken part in the year's first private placement would get the chance to subscribe for new shares at the same subscription price as in the first equity increase. So the subsequent offering brought total equity increase to roughly NOK 50 million. So after an operational reset — with our focus on building biomass and improving biosecurity, plus fully financing the company through to '25 via the private placement, subsequent offering and refinancing — we are in a, we feel we're in a great position to and are confident that our operational goals will be reached.

Yes. Now turning to how things are going operationally on land. Smolt transfer happens over the summer, and we've made improvements this year, particularly from the north, where we now have a second year running, and the results from the north are excellent compared with the south. We have larger fish, so it's a bigger challenge, but the rates, or the survival, are better, and the fish are feeding well. We estimate reaching around 5.4 million, as we indicated earlier, at roughly 300 gram average size. We're vaccinating for ISA. That is proceeding as planned. We have partial coverage this year, with output this year, and then 100% next year. And we've been working on a new, improved vaccine for our fish, and it looks positive that we can begin in, yes, Q3. That's, yes, coming in September. And the fish will then have better protection from the environment on the East Coast of Iceland. We're taking more samples and have looked at strains in the water, and the current vaccine is missing some of them. And we see that with a new vaccine, we can get better protection going forward. So this is a huge improvement. And our fish health manager has been working hard on this, and we're happy about that, and it could improve conditions for the fish going forward.

Land production at land has been advancing quickly over the years, and right now we're rebuilding a land south that was constructed on older houses and facilities. As I mentioned earlier, we've done third-party audits and have been running a lot of tests and thinking through how we can put up new facilities there. The results of that are what we're building now, and it's in the final stages, we should say — the house in Bakki — and we installed a new vaccination machine during the quarter. That's speeding up vaccination and making sure the fish get vaccinated. Then we're starting to build a new start feeding house in Fiskalón. It will be pretty similar to the house we have in north and show an excellent result from cabinets to receive lags and the house for start feeding where the fish begins its life, eating and thriving going forward. And with that, we will — hopefully it's the same improvement as we had in north, with the higher survival rate and bigger fish and better fish for going onwards. And then we're also building a freshwater site at Laxabraut, where we have our post-smolt tanks, to do the smoltification and, later on, vaccination.

This is going to boost capacity and keep growth solid. We see that we're able to raise growth on land. Up north, where we've got even more houses constructed, a new house in Rifós. That will function as a kind of intermediate stage from start feeding through vaccination and smoltification to ensure biosecurity. So every group has its own spot, and there's no contact with the next generation ahead of it or behind it. So basically the same as what we do at sea, keeping each generation apart from the others. And then we're adding more tanks. In Kópasker, we're drilling right now for additional water, and that's looking promising. And then we can have more capacity since we're only putting out from this June until September. So the window is fairly narrow. So we need to build up biomass on land, and with the water access we have, we see that's achievable, and now we're constructing more tanks and smooth operations from tanks to well boat and transferring it to the sea is looking really good, particularly in the north. And at sea, performance has been rolling along well and 6.8 million in the sea with 8,200 tonnes at quarter's end.

The largest groups have now surpassed 4 kilos, as I mentioned earlier, and that happened in just 13 months. That result comes from our big smolt program, with fish that came from land and were put in the sea at the end of June last year and at the end of June this year. Yes, it was 4 kilos. So we're genuinely proud of that, and it's what makes it possible to begin harvesting now in the quarter. Our survival rate improved in the first half, though we want to push it higher still. Parvicapsulosis and Moritella have been the main problems. We're making progress on that through new vaccines, smolt facilities, and better operations. Every one of these items sits at the top of our list, and they improve the conditions for the fish to grow. But then, the outlook for farming: the second half is the best growing season in Iceland. Right now the fish are eating well and looking good, and we're breaking records every day on feeding amount. So we feel really positive about this period. We also see challenges — it's like a jellyfish season from the middle of August until the end of September. And then currents can be slow after the easy summer months. And then storms may begin to arrive in October and through the winter.

We're constantly learning and building up our skills here, and last year we made improvements to the cages and the nets, which delivered solid results during the first half of this year. But on that point, our outlook is that we expect to produce roughly 17,000 tonnes live weight this year, which is 1,000 tonnes below the forecast, while the harvest for the quarter is estimated at about 300 tonnes. And looking ahead — yes, 300 tonnes harvested isn't much for the quarter, but we're ramping up more slowly. As Róbert mentioned, we're quite well financed and able to build up biomass. So we're letting the fish grow. Búlandstindur is also getting updated as well. We're strengthening biosecurity there along with the level of security needed for increased capacity. So we've built a new box factory at <<inaudible>>. So we're not shipping the boxes all the way from Brittany. The boxes will be cleaned there instead. And now we have an automatic system that brings the boxes onto the factory floor to the grater. So there's nothing — it's completely clean and nice when the fish — fresh fish goes into an ice and the box gets closed.