Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Good day, and welcome to our quarter 4 presentation. I'm Guomundur Gislason, the company's CEO. Robert Robertsson, our CFO, is here with me today, and together we'll walk you through the Q4 results of '23. We're coming to you from Arion Banki headquarters in Reykjavík, and we'd like to express our thanks to the bank for having us here today. Back in 2013, Arion Banki became the first bank to provide financing to the company. I can still recall that phone call — I was driving from East Coast to South when they rang and told us they'd extend loans to us, which we could put toward building out the company, biomass and top-of-the-line equipment. Through the years, Arion Banki has proven a good partner and has played a big role in building out the industry in Iceland. So, thank you. I'd also like to thank those of you who are here today. This marks our first presentation outside our offices. We've usually been using Teams, and we listed the company back in beginning of COVID. So technology has been a great help, but it's also good to be face-to-face and have a good discussion. And to those of you online, thank you for being with us.

The quarter's highlights include our success in growing biomass as planned. Planning isn't always straightforward in fish farming, but we take real pride in having stuck to what we've said over recent quarters and in managing to triple the biomass during 2023, from roughly 5,000 tonnes to 16,000 tonnes. Mortality was quite low, and biological status during the quarter was pretty good, apart from one site where downgrades exceeded expectations because of winter wounds. Harvesting at that site will be completed in quarter 1 this year. We harvested around 4,200 tonnes in the quarter, and we're really proud of that. Restarting after several quarters of low harvest took a lot of effort, but we managed to, yes, achieve this volume. For 2024 guidance, given our solid biomass status and buildup, we can hold to 21,500 tonnes and stay on track to become the biggest farmer in Iceland, and we're really motivated to do that. Operating EBIT came to about NOK 52 million in the quarter. That gave us about NOK 12.3 per kilo. Because of the winter wounds and downgrades, the sales price was lower as a result, but we're still quite happy with the sales.

Naturally, prices did fluctuate somewhat, moving both up and down. The increases came later in the quarter than we had expected. Following that, a new CEO was appointed, and it would be better for me to introduce him on the upcoming slides. After that, I'll pass things to Robert, who will walk through the financials.

Thank you, Guomundur, and good morning. As Guomundur noted, I’m Robert Robertsson, the CFO at Ice Fish Farm. We’ve put together a short review of the 2023 and Q4 financials. 2023 was a major year in Ice Fish Farm’s history — a year in which we took the steps needed to build a foundation for success going forward. Following a harvest pause that began at the start of 2023, we started harvesting again in late September 2023. During that harvest pause and throughout 2023, we concentrated on growing biomass, as Guomundur said, and on carrying out infrastructure upgrades, raising quality, putting biosecurity programs in place, and expanding our production capacity. We also brought the company through a financial restructuring in which we refinanced every loan across the group, made the loan structure simpler, and raised equity via our private placement and subsequent offering. In addition, we simplified the group structure by combining 3 companies, with that merger taking effect on January 1, 2023. So our financial health stayed strong at the close of 2023, with an equity ratio of around 67%, in line with the prior quarter, Q3, and better than the 62% equity ratio we had at the start of the year.

If you look at the left-hand side of this slide, you can see how the total asset balance grew and changed over the course of '23. Assets rose by NOK 1.4 billion in total, finishing the year at approximately NOK 5 billion. The largest driver there was our investments in biological assets. So the book value of those biological assets, including the fair value adjustment, went up by roughly NOK 1 billion over the year and closed at NOK 1.3 billion at year-end. As expected, net investment in biological assets was lower in Q4 than in the other quarters. That reflects the fact that we began harvesting at a fairly heavy pace during the fourth quarter. We also saw a substantial rise in fair value adjustments on our biological assets, driven mainly by the fact that forward prices are higher — yes, because of higher oil prices in our calculations. And total liabilities went up by NOK 290 million over the year. So let's move to the next slide. Yes, this gives you a high-level overview of net interest-bearing debt. To start with, Ice Fish Farm is fully financed through 2025.

We have a bank facility of approximately EUR 156 million, and the net loan facility from the bank syndicate came to EUR 112 million at year-end, so -- and across all facilities, around EUR 44 million. Yes. On the left-hand side, you can see how net interest-bearing debt developed over the course of the year. As I said, we've been restructuring the company. We moved to strengthen the equity, and the swings during the year reflect that. On the right-hand side, you can see how net interest-bearing debt developed in this flow chart in Q4. And the main items that impacted net interest-bearing debt, and the first one would be EBITDA, which came in at NOK 85 million in the quarter, the first quarter, where we are harvesting in every month. And as Guomundur said earlier, the harvest volume came to roughly 4,200 tonnes, bringing total harvest for '23 to 4,400 tonnes. We harvested around 200 tonnes in September Q3. The cost level held steady quarter-over-quarter. But as Guomundur mentioned, the price achievement was lower in Q4 because we harvested smaller-sized fish. And because of quality impacts regarding fish we harvested at one of our sites, which was affected by winter wounds.

That site will be fully harvested during the first quarter of '24. So we anticipate that price achievement will be impacted by this in the first quarter. Working capital investments came to NOK 36 million. The largest driver there is spending on biological assets. CapEx investments totaled NOK 99 million, bringing overall investments -- CapEx investments in '23 to more than NOK 230 million, which exceeds the original projection of NOK 200 million. And the primary reason is adverse currency movements as well as essentially higher prices than we had anticipated. And we intend to keep pursuing our path toward better production quality, stronger biosecurity and greater production capacity and to achieve a steady 30,000-tonne yearly output, which is the first milestone. And I would say this objective is mirrored in the revised CapEx projection for '24, which we are raising from the original NOK 210 million to approximately NOK 290 million. And the last item in the flow chart is financial items, which came to NOK 44 million. The largest contributor there is a financial cost of NOK 37 million. So 2023 was a turnaround year for Ice Fish Farm, in which we began our production and raised quality, implemented necessary biosecurity measures and took the company through restructuring.

Financial health right now is really strong. And honestly, the groundwork for food to succeed has never been better than it is today. Thank you.

Thank you, Robert. We've been shifting more biomass, and there's also been a change in the company's leadership. I've held quite a few positions here since launching the business in spring 2012, gradually handing off duties to newer team members. It has been a joy ride, and the aim of creating a big salmon farming operation — one that supplies premium, certified, sustainable salmon, employs roughly 200 people, and makes a positive impact on the communities where we work — has been met. So it's a pretty — a very good position to be in. I feel proud of everything we've accomplished and I'm eager to pass the reins to the newly appointed CEO, Roy Tore Rikardsen, later this year. Roy Tore carries more than 20 years of experience in salmon farming. His expertise covers operations in cold water, such as what we have in Iceland, cold water, in areas like North of Norway and Canada. In my view, he'll contribute strategic vision along with operational focus, and he'll be based on the East Coast, where all the action is. With his skill set, he intends to grow the company while concentrating on excellent operations, animal welfare and environmental safety. Rikardsen has wide-ranging experience throughout the value chain.

Right now, for instance, he's operating a harvesting station with a 40,000-tonne capacity, and earlier on in the Canada process as well. So he has covered the entire value chain. And hopefully we can draw on his experience and keep moving down the road toward better production. We welcome him aboard. My expectation is that he'll begin around summertime, though this is still in development. No fixed date has been set as of yet. Until that point, I'm serving as CEO of the company, and an announcement will come later regarding when he takes over. After that we move into operation for 4 months, and that's where all the emphasis has been placed in recent years — doing things better and getting things into a state we're proud of. We have small stations in Iceland: one on the South Coast in <<inaudible>>, near Reykjavík, and then one on the island's north side in Kopasker and Rifós, close to Húsavík. So we call them Land South and Land North, simply for simplification, since some of you may not be up to date on that. But Land South, which is in <<inaudible>>, has embarked on a transformative journey, setting a new benchmark in aquaculture through a series of strategic improvements aimed at optimizing operations and evaluating quality standards.