Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Welcome to our Q3 presentation. My name is Guomundur Gislason, and I'm the CEO of the company. With me today is our CFO, Robert Robertsson. There was a good growth of our biomass at sea an excellent condition for production. We managed to increase biomass by around 6,600 tonnes to 76% in the quarter, reached over 15,000 tonnes in sea by the end of Q3. We saw significant improvement of our smolt transfer during 2023 with 50% lower mortality compared to 2022. Then a potential for further improvement and our plan to do that is going forward. Harvest generation '22 started in September, and it took only 14 months of heating due to our big smolts. The company is proud of reaching this milestone to get the generation '22 sales through harvest this is due to reorganization actions taken to secure biological safety. We are moving expected harvest volume by plus 21,500 tonnes in Q4 and increased the volume for 2024 by the same amount of 21,500 tons. The reason is to optimize production and higher prices in Q1 expected. Contracts are currently at 30% and price achievement during quarter was of NOK 86.8 per kilo. Operational EBIT of NOK 3.5 million and EBIT per kilo of NOK 18.2.

Good morning. You can see the financial highlights of the group balance. The balance sheet is strong with equity ratio of 66%. The main change on the balance sheet is related to continued build of our biological assets. Our biomass buildup has been going well, and biological assets amounted to around NOK 1.2 billion at the end of the quarter. The biomass buildup is also the main reason for increased liability between quarters. Proceeds from borrowings amounted to NOK 155 million in the third quarter. which was mainly biomass financing. Trade and other receivables increased also by NOK 71 million due to increased feeding in the quarter. Net interest-bearing debt increased by NOK 285 million in a quarter, investment of around NOK 300 million in biological assets is the main contributor to increased working capital during the quarter, thus increasing net interest-bearing debt, along with investment in working capital , both CapEx investments and financial items are the main contributors to increased net interest-bearing debt. Total CapEx investment during the quarter amounted to NOK 51 million, bringing the total investment for the first 9 months this year to roughly NOK 135 million. The total CapEx budget for '23 is NOK 200 million and for '24 NOK 210 million. However, the CapEx projection indicates that investment will not reach NOK 200 million this year. This is due to delays in investment projects which have been moved from '23 to '24. However, the total projected CapEx investment for '23 and '24 remains NOK 410 million and are mainly focused towards improving the operational performance and to enable us to reach a stable production of 30,000 tonnes. Having projected after 2024, investments will reach normal levels. Ice Fish Farm is fully financed through 2025, the total facility of syndicate loan amounts to roughly EUR 156 million net loans from the banks indicate that at the end of third quarter amounted to roughly EUR 100 million.

Yes. Looking at our management. I have been the CEO of this company since it was established in 2012, over 11 years. It has been an exciting journey with highs and lows. But now when the company is in excellent position to reach the operational goals, fully financed improved by security and highly dedicated and talented team. I decided to step down as CEO. However, I'm not going far, as I will put my focus on sales and marketing strategy with a goal of achieving premium prices on our quality salmon. We are working on hiring a new CEO. But in the meantime, I will continue to lead the company. And the current executive management team is experienced and highly skilled in their field. So I have nothing to worry about in this part. Company is also supported by Masoval. It has over 50 years history in aquaculture industry. We have also good support from our Icelandic owners who have vast experience in the fish industry and are now on the Board of Ice Fish Farm to support strategy going forward. The company has been in operation since 2012 with over 150 dedicated employees. We have gained experience in Icelandic conditions, both on land and sea. All operations are certified sustainable. ESG is important for our strategy. the use of thermal water and power reduce CO2. There are no chemicals in use and only natural coloring in our feed with full traceability. Being responsible farmer as a cornerstone for our success, a cooperation with major stakeholders such as government, investors and financing partners. Operational performance on land. We have been implementing improvements on the biosecurity and water quality in our land stations, and we are already seeing positive effects. Improvements in water treatment has signify improved quality of our smolt and growth. Smolt farms ready in 2023 reached 5.4 million with other size of 300 grams, biggest groups of the 1 kilo. Transfer from smolt station improved as expected with about 50% high-survival rate after 60 days at sea, and we see possibility for improvements going forward. With updates and investment in smolt station, we aim to produce around 7 million to 8 million 400-gram average size, smolt in spring and autumn. This will increase utilization of sites in sea and reduce time in sea and therefore, lower operational risk. On Land North, you can see on the right side and pictures from building -- a new house, we are building there. And that house is being constructed for our freshwater station up north to increase capacity and maintain high biological standards. And we are also planning to build 2 new 5, 1500 cubic tank in post smolt station in Kopasker to increase size of smolt and the number of smolt from Land North. And we have good news from Land South, but we are planning building new station next to our post smolt station. The location will be just by the post smolt station where we have 27,000 cubic of capacity for post smolts and after this when this has been done, we expect to produce about 3 million to 4 million smolts at high quality, around 600 grams in May and 400 grams in August. And this will increase utilization of the sites and lower risk in sea. By building a new facility there, when we are combining everything under 1 roof, hatchery for eggs, start feeding, on growing, vaccination and finally office for employees and employee facilities. We will design this and this is under the designment, and we will have a top-of-the-line technology and the production plan to optimize growth and welfare of the fish. And see best quarter ever, a record in biomass production. We had around 10.2 million fish and over 15,000 tonnes at sea, at the end of Q3 '23. We increased the biomass to 6,500 tonnes and biggest groups, we start targeting on around 5.5 kilos to 6 kilos after only 15 months in sea and14 months of feeding. Average sea temperature was around 7.5 degrees. That's close to average in our farming areas. Minimal losses due to good sea conditions. We have, though, some incidents, for example, the jellyfish have as part of this season, and we managed to control that incident. stock feeding jacked water feed status and adjusted feeding and maneuvers and tasks around the cages and managed to stop the [indiscernible] is recovered within about 1.5 week. So this part of where I'm really proud of our team that we are identifying challenges and finding solution with a high skill team to manage the situations that have come up. And we to look at the equipment we have by merging the companies back in 2022. We see even further utilization of our equipment. So we don't see much investment needed for '24 and '25 at the moment. But the outlook for harvest, as I mentioned, we are moving 1,500 tonnes from Q4 to Q1 '24 and that's -- yes, based on good biological conditions, this is growing well. And also, we see potentially higher prices in Q1 than currently. So we have been delaying a little bit harvest due to that. And what is really the cause of -- or why are we having this good situation? And that's because we are the only farmer in the total farming area of the East Coast. We implemented the cost zone management in '22 to reduce risk and increase biological results. each zone has its own equipment land base. And by land base, we mean that the boat and the people, they have separate areas to go from the boat and backwards. So there's no interaction between sites and even in the Reyoarfjorour, we built up a new land base station. So we -- 1 in Reyoarfjorour then 1 in Seyoisfjorour to separate the production smolts. And the generations are split in spring and autumn and all separate production smolts. Fish in, fish out. And we have been farming as in East Coast since 2012. And earlier than that, there were other pioneers -- and so in total, there has been farming over 20 years in these coasts. And this period, we have never had to handle any issues with sea lice. Though we are monitoring with the latest equipment AI cameras. That can take over 20,000 pictures per day per case, and they can evaluate what the status of a fish is, do they have sea lice, do they have [indiscernible] or are they growing as expected. And these cameras are really helpful on the following up, if there are some things happening in the cases, and we can also control harvesting periods and et cetera, with those cameras. And harvesting station Djupivogur was being updated during harvest break is done excellently. We have high capacity and running at least 100 tonnes per day. And we see improved security on blood water treatments and general cleanness of this site and for the fish and also the environment. Sales, we have fixed sales contracts and we secured around 30%, we have not increased that much over the last weeks. But our goals has been around 50%. But due to that we are quite expecting good prices in Q1 next year that we haven't gone higher on contracts. Certifications are in place on Whole Foods and AquaGAP Sustainable Salmon, and we are working on ASC and hope to have that in place in Q3 in '24. So overall, outlook has not changed much from Q2 report. We adjust harvest to increase price and utilize best growing season. Output of smolt is the same. Strategies is what the main new 1 is that the Board is looking into a possibility of dual listing the company on First North in Iceland. This listing could improved asset stability of our standing investors for the company. So we are looking optimistic on that. And then also, there has been some news quite a lot of shaking in Iceland regarding volcanic activity on the Southwest Coast, so it's quite far away from our farming areas, and we just hope that things go well going forward. If you have any questions, please write on the comments or yes.

There's the volcanic question. How do you view the organic risk for Land South assets. We have gathered a team together and evaluated what could happen if there's a volcanic eruption and also earthquakes. First of all, we have these backups and over 15,000 liters of oil capacity. We have high amount of water capacity from the wells we have, yes, around 13 wells and can run up to 600 liters per second in each tank. And so that's a huge capacity. And so if we would have some activity on volcano, that would maybe happen at sea and therefore, produce us that could spread over and -- but we are quite far away. So we consider this risk low but we have prepared our team with clothes and masks and other things that we see that could help fighting this, if this at this time, but again, I look at this as a low risk, but it's better to be prepared and make things possible if they come up.

Then there's a question regarding Land South, the CapEx plans we have there. And if it's included in our CapEx budget. The answer is yes. We are including the land South project in our CapEx budget and the CapEx budget guidance for '23 and '24 remains NOK 410 million.

Any more questions? In general, there are no questions. We are extremely proud of the situation at the moment and starting harvesting and of [indiscernible] though it was not higher amount. It showed up we saw with this. And so the power in the harvesting station is running through and making over 400,000 meals per day, and that's our goal, making a good food, and the customers have enjoyed the salmon after deliveries. You see high quality and happy with our salmon and that's yes, because customers are always right, and we need to follow up on that and keep making good quality salmon going forward. No, I don't see any more questions. Then thank for the audience and looking forward to see you back again over in Q1 in February. Thank you.

Thank you. Bye-bye.