Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Yes. Good morning. I see that some are coming in at the moment. I would like to welcome everybody to Ice Fish Farm Second Quarter 2023 Results. My name is Guomundur Gislason. I'm the CEO. And with me today is Róbert Róbertsson, our CFO. And we go through Q2 highlights. Harvest will start in Q3 as planned. Generation '22 is 5.4 million fish at sea, and the biggest fish is around 4 kilo end of June. Currently, this group is reaching over 5 kilos. Generation '23, a planned release of 5.4 million smolt, and the survival rate is better than ever so far. We'll go in more detail on that on the slides. Operational EBIT of minus NOK 23 million as expected, and subsequent offering was successfully sold out. And you can see on the right side, we have a picture of the feeding center, top-of-the-line tech, and they are really busy feeding now, breaking records every day about feeding amount.

Morning. Here, we have an overview of the Q2 results. As expected, there was no harvest in the first and second quarter of this year. Following the ISA is that last year, we've been building up biomass and enhancing our biosecurity. However, this is the last quarter with no harvest as we resume harvesting in the second quarter. And as expected, operational EBIT was negative, mainly due to the fact that we are not harvesting any salmon in our harvesting facilities. However, the -- most of the revenues come from the harvesting station, external sales or services in our harvesting station. So all and off, the quarter is going as expect -- or like as expected, planned. Regarding our balance sheet, we have a strong balance sheet, with an equity ratio of roughly 70% at the end of the quarter. This is an increase from 62% equity ratio at the beginning of the year. This is a direct result of the refinancing private placement and subsequent offering. On the asset side, main changes there are to the biomass buildup. Biological assets ended at around NOK 810 million at the end of the quarter. We've been focusing on our biomass buildup, and the -- that has been going well. The total value increase in biological assets amounts to around NOK 470 million from the beginning of the year, and the increase in the second quarter was NOK 270 million. Furthermore, we did some investments in fixed assets, CapEx during the quarter. The investment amounted to NOK 44.5 million, bringing the total investment in the first and second quarter to roughly NOK 84 million. The budget anticipate an investment of around NOK 200 million for the whole year '23, and that is mainly focused towards improving our land stations. And Guomundur will go into that in more detail later on. Net interest-bearing debt has also been decreasing as a result of the private placement and subsequent offering and refinancing. And the net interest-bearing debt amounted to NOK 911 million at the end of the quarter. So total decrease from the beginning of the year of roughly [ NOK 230 million ]. So main story here is that the biological or biomass buildup is going well, and we are seeing effects from the private placement and subsequent offering. And to go a little bit further into the refinancing and subsequent offering. The initial drawdown on the new syndicated loan facility was done in the second quarter, mainly used towards settling existing term loans, CapEx loans as well as to help with the biomass buildup. The total bank facility of the syndicated loan is EUR 156 million roughly. And at the end of the quarter, the net loans from the bank syndicate was around EUR 72 million. The subsequent offering. We performed successfully a subsequent offering during the quarter. The subsequent offering was to assure that shareholders that did not participate in the first private placement during the year would have a chance to subscribe for new shares at the same subscription price as was in the first equity increase. So total equity increase from the subsequent offering was around NOK 50 million. So following an operational reset, where we have been focused on building of biomass and improving our biosecurity as well as fully financing the company through to '25 with the private placement, subsequent offering and refinancing, we are in a -- we feel that we're in a great position to and are confident that we will reach our operational goals.

Yes. And now we go into operational performance on land. Smolt transfer is done during summer, and we have improved this year, especially from north, where we have like a second year running, and there is the excellent results from north than south. We have bigger fish, then it's a bigger challenge, but the rates or the survival is better, and the fish is eating well. We have an estimate of reach around 5.4 million as we earlier indicated, around 300 gram average size. We are vaccinating for ISA. That's going as planned. We have partly, for this year, the output this year and then 100% next year. And then we've been working on a new improved vaccine for our fish, and it looks positive that we can start in, yes, Q3. That's, yes, coming in September. And then the fish will have better protection from the environment on the East Coast of Iceland. We are taking more of the samples and looked at strains in the water, and the current vaccine is lacking some of them. And we see that with a new vaccine, we can have a better protection going forward. So this is a huge improvement. And our fish health manager has been working hard on this, and we are happy about that, and that could improve the conditions for the fish going forward. Land production at land have been developing fast through the years, and now we are rebuilding a land south that was built on older houses and facilities, and we have done, like I mentioned earlier, third-party audits and been doing a lot of tests and thoughts how we can build new facilities there. And the results of this we are building now, and it's in the last stages, should we say, house in Bakki, and we installed a new vaccination machine in the quarter. This is speeding up the vaccination and making sure that the fish get the vaccination. Then we are starting to build a new start feeding house in Fiskalón. This 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 starts its life, eating and thriving going forward. And with that, we will -- hopefully, it's the same as improvement as we had in north that the higher survival rate and bigger fish and [ better ] fish for going onwards. And then we are also building a freshwater site at Laxabraut, where we have our post-smolt tanks and to do the smoltification and, later on, vaccination. So this will improve capacity and keep growth good. We can see that we can increase growth on land. Land north, where we have even more houses built, new house in Rifós. That is going to be like a middle step from start feeding to the vaccination and smoltification to secure biosecurity. So each group has its place, and there's no touching the next generation ahead of it or behind it. So pretty much the same as we're doing in sea to have each generation separated from each other. And then we are building more tanks. In Kópasker, we're currently drilling for increased water, and that looks good. And then we can have greater capacity as we are only putting out this June until September. So the window is quite limited. So we need to build up biomass on land, and with the water access we have, we see that that's possible, and now we're building more tanks and smooth operations from tanks to well boat and to transfer it to the sea is looking really good, especially at the north. And at sea, performance has been on a good roll and 6.8 million in the sea with 8,200 tonnes end of the quarter. Biggest groups have reached over 4 kilo, as I mentioned, and that's only in 13 months, and that's due to our big smolt program that we received from land that this fish was seen in June last year and end of June this year. It was, yes, 4 kilos. So we are really proud of that and make this possible to start harvest now in the quarter. We have improved survival rate on the first half, but we want to improve further. The main issues have been parvicapsulosis and Moritella. And we are improving that with new vaccines and smolt facilities and improved operations. All these items are on top of our list and improving the conditions for the fish to grow. But -- then outlook for farming. Second half is the best growth season in Iceland. Currently, we are seeing the fish eating well and looking good, breaking records each day on feeding amount. So we are really positive on this period. And we see also challenges that are -- it's like a jellyfish season middle of August until end of September. And then currents can be slow after easy summer months. And then storms can start to come up in October and during the winter. So we are learning and developing skills on this continuously, improved the cages and nets last year, and they showed good results in the first half of this year. And -- but on this, we have an outlook of -- expect to produce around 17,000 tonnes live weight this year, and this is 1,000 tonnes less than forecast than -- the harvest for the quarter is estimated at around 300 tonnes. And looking into -- yes, harvest 300 tonnes is not much in the quarter, but we are starting up slower. We -- as Róbert said, we are quite well financed and can build up biomass. And so we are letting the fish grow. And Búlandstindur is also being updated. We are improving biosecurity there and the level of security for increased capacity. So we have built up a new box factory at [indiscernible]. So we're not moving the boxes all the way from [ Brittany ]. So the box will be cleaned there. And now we have automatic system that is bringing the boxes to the factory floor to the [ grater ]. So no -- so it's completely clean and nice going when the fish -- fresh fish is being put in [ an ice ] and box closed. And then we're also securing that the fish is really cool, and broad water tanks have been installed with subchilling, and that will mean that this is chilled earlier. And then we have a subchiller that we installed in 2017 that's really kept the fish fresh to our customers as we are shipping fish with both to U.S.A. and Europe, and that's up to 7, 8 days. So we need to have really good shelf life, and that's like top priority in harvesting now is get really good shelf life and have the fish ready for the journey and all the way into the party customer. Sales. We have contracted sales for Q3 to until Q1 '24, about 30% of the volume at premium prices. We aim to reach at least 50% of total harvest contracted. And we are pleased that our customers have been patient with us. We managed to keep all contracts that we did over the last year. And so we have good relationships and starting to sell again as early as we harvest. And logistics to U.S.A. are favorable. And as you can see on the right side, Iceland is beautiful. There are a lot of tourists coming, and the planes are going back and forth. And so we have quite good space to transport the fish all over the world. And then we are preparing for ASC certification. We have had certifications in the company since start. And so we have used 2 certifications, and ASC is 1 of those that we feel that we can implement. And this is a really important part of our DNA. This will be a responsible farmer and be able to certify that with certifications from third-party, and our customers really like that. And then to summarize what we've been going through that global market for salmon is good, as we know, and still, it's also especially good for premium salmon. And the contracts, up to 50%, we're optimistic on that. We keep our harvest outlook of 6,000 and 20,000 for '23 and '24. And smolt output, 5.4 million, as we indicated earlier, and then 7 million for '24. And financial business development, fully financed throughout '25. And the growth we are mainly focusing on improving quality and performance of the operations. And then we are waiting for a license for sales further, that is pending in late this year or early next year. Investments, NOK 200 million, '23 and NOK 210 million in '24, and this program is with the goal of reaching a stable capacity around 30,000 tonnes. And then the sustainability and responsible farming, we're continuously improving there and also have certifications in place and also a goal to reach in '24. So if you have some questions, please -- by the way, thank you for listening. We have a chat there and also possibility to speak up.

Yes, so we have a question here from Ola. Is your contract price like I said at Q3 -- Q1 above USD 10? We cannot comment on that, but we are looking at premium prices going forward. And then what, [ to previous year ], do you expect for Q3 and Q4 given the situation with winter wounds? We have been following quite closely the fish. We have a new system in the sea that they can monitor how the fish is looking. And those ratios are looking good after a hard winter. The fish has been healing, and it's almost unbelievable to see the IT possibilities at the moment. So it can be a bit positive on that side now. In this season, the fish is eating well, and the temperature is good. So this is a time for the fish to heal and grow. But the mortality rates for the -- for instance, any comparable figures to last year. We -- well, over the years, we have had quite big incidents. So we didn't have that last year or this first half of the year. So we are really happy about that, not have like a hit on the fish. So in general, we see like normal mortality rates during the first quarter. And -- but the challenges for Moritella and parvicapsulosis. So there -- and there, we are working on improving vaccines and better smolt quality. Then can you comment on what you expect for net working capital in second half?

So we can't comment on specific numbers, but we can say that we are in a -- like I mentioned in the presentation, in a buildup period. We're building up our biomass. So naturally, capital will be evolving in line with that, I would say. So we start our sales in September when we start harvesting and in Q4. So yes, that working capital will be increasing in the full year. But no specific numbers.

We are really excited for the next month. So this is -- we have, yes, good fish in the sea, and it's growing well, and we are optimistic. And of course, we will update the market further in the Q3 report when we have a -- yes, the biggest months. We are in the middle of the growing season. And Iceland is like a really good autumn time. Then we see things moving. So we will update that further in the Q3 report going forward. So as there are no other questions, then we really thank and appreciate your time and looking forward to meet you again in Q3. Thank you.

Thank you.