Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Good morning, everyone. I'm Roy-Tore Rikardsen, CEO of Kaldvik, and I'm pleased to welcome you to the presentation of our first quarter results for 2025. Joining me today is our CFO, Robert Robertsson. And together, we'll walk you through the key highlights and developments from the past quarter. After the presentation, we'll open the floor for questions. And as before, you're welcome to submit them by e-mail. You all know this. Please take a moment and read through. Then we go to the agenda. We'll begin with some key highlights from the first quarter, covering operational performance, financial results and a few strategic updates. And then we look ahead with a brief outlook and summary before wrapping up with a Q&A session. In the first quarter, we harvested 6,383 tonnes, delivering solid operational performance with an EBIT of EUR 1.54 per kilo and an average price achievement of EUR 7.44 per kilo. Looking ahead to 2025, we are maintaining our full year harvest guidance of 21,500 tonnes with around 1,200 tonnes expected in the second quarter, and we plan to release 7.5 million smolt to support future growth. On the financial side, process initiated to finance the company with a long-term financing package of EUR 230 million. Strategically, we have taken important steps forward with the acquisition of key assets. And when it comes to the new licenses in Seyðisfjörður, which is still pending approval, Robert will come back to this and the financial updates later. Our farming operation on land. As we move into the spring season, we are seeing record high numbers and biomass at our land-based facilities, and that's putting us in a strong position to meet our '25 target of releasing 7.5 million smolt. Over 60% of these smolts are scheduled for an early transfer, and that means before August, and it will help us to optimize the growth cycles. A key milestone this year was the successful launch of our new grow-out facility in Land North, Rifos, which became operational in the first quarter. And overall, production performance remains strong with year-over-year mortality rates reduced by more than 30% in recent years, reflecting ongoing improvements in fish health and operational efficiency. In Q1, we harvested 6,383 tonnes at the sea, exceeding our guidance, mainly due to early harvesting caused by winter wounds in the 2023 generation. This contributed to a year-over-year increase in harvest volume and supported by strong harvest weight. During the quarter, we completed the harvest of both autumn 2022 and the spring 2023 generation and marking a key operational milestones. And we remain on track to meet our 2025 target of releasing 7.5 million smolt. And it's worth noting that sea temperatures began to normalize toward the end of the quarter, which is a positive sign for biological condition going forward. And we have starting to transfer the 2025 generation of smolt to sea in this quarter, in the second quarter. Biological outlook for the Q2 2025, we expect to harvest approximately 1,200 tonnes and continuing with the autumn 2023 generation. And overall, we remain on track to reach our full year harvest target of 21,500 tonnes. And we also, as mentioned earlier, plan to release 7.5 million smolt for the year, which will support future production and long-term growth. When it comes to sales and harvesting, in the first quarter, we achieved a price of EUR 7.44 per kilo despite a lower superior share that was 62% and 25% of our sales was secured through fixed price contracts, and it was helping us to manage pricing stability. Our newly formed sales and trading organization has been actively focused on developing new markets, while we also see a strong potential in value-added products and the logistics. The integrated box factory is now fully operational, and we expect to see a full impact of reduced packing costs starting in the second quarter. And additionally, with the full ownership of our harvesting facility, we have gained greater operational flexibility and control, which support both efficiency and responsiveness in our supply chains. And that concludes the operational update. And now I'll pass it over to Robert, who will walk you through the financial performance.

Good morning. Thank you, Roy. Here, we have the highlights from the quarter where we saw strong revenue growth, improved price achievement and healthy EBIT per kilo. Revenues saw a significant increase, reaching approximately EUR 48 million, up from EUR 31 million in the same quarter last year. This growth was primarily driven by higher harvest volumes and solid price achievements. Despite some production challenges and lower share of superior grade products, the average price per kilo rose slightly to EUR 7.5 compared to EUR 7.4 in the first quarter last year. We also achieved a notable reduction in cost levels during the quarter. This was partly due to scale advantage with increased harvest volumes as well as harvesting from one of our better-performing seasons, contributing positively to our bottom line, where operational EBIT reached nearly EUR 10 million with an EBIT per kilo of EUR 1.5. And over to the financial summary. Total assets increased by EUR 14 million during the quarter. This was primarily driven by the acquisition of the new box factory and the higher cash balance resulting from the utilization of a short-term bridge facility. The book value of biological assets decreased by approximately EUR 20 million. This decline reflects a reduced fair value, high harvesting volumes and low biological growth during the quarter. Liabilities rose by EUR 26 million, mainly due to the utilization of the short-term bridge facility and purchase price payables related to the box factory acquisition. These payables were settled in the second quarter with shares in Kaldvik. The equity ratio remains healthy, amounting to 52% at the end of the quarter. And here we can see high-level analysis of the net interest-bearing debt which decreased by EUR 8 million during the quarter. EBITDA amounted to EUR 12.7 million. Net investments in working capital were negative of EUR 10.5 million, primarily due to higher harvest volumes, and low biological growth. Total CapEx for 2025 is estimated at EUR 18.5 million. And during the first quarter, CapEx invested -- CapEx investment totaled at EUR 4.6 million. Financial items amounted to EUR 3.8 million (sic) [ EUR 3.6 million ], which -- where finance cost is the main contributor. And the net increase in net interest-bearing debt due to the box factory acquisition was approximately EUR 7.1 million. At the end of the quarter, the syndicate loans stood at EUR 155 million out of total facility of EUR 180 million. We were in breach of certain loan covenants in the first quarter but successfully obtained a waiver from our financing partners, ensuring continued support and stability. And we are pleased to share a significant milestone in Kaldvik's financial journey. Kaldvik has successfully entered into a new agreement with our bank syndicate to amend, increase and extend our existing debt facilities. The total financing package amounts to EUR 230 million, whereof EUR 20 million are financed through our lease basket agreements. This agreement reflects the continued confidence and support from our financing partners, where the packet includes a relatively light covenant structure for the first 2 years, along with 21 months installment holiday, providing us with a valuable financial flexibility in the growth period ahead. In connection with the refinancing, it's a condition that the company raises EUR 45 million in new equity. And we are in the process of launching such an equity raise with strong backing from our biggest shareholder Austur Holding. The new capital structure significantly strengthens Kaldvik's financial position, and it lays a solid foundation for our next phase of growth, unlocking profit potential by scaling operations on our existing fixed cost base. And over to strategic update. Kaldvik has a vertically integrated value chain, which we have been building up through substantial investments in recent years, where our main focus has been on increasing quality and capacity in our land facilities with good results. Today, we have the production capacity of stable 30,000 tonnes annually, which is the first milestone that we are working towards. We see that this milestone is within reach in the next couple of years. Today, we have a production license in 4 fjords. Kaldvik is in the process of obtaining additional fjords in our license portfolio Seyðisfjörður. The license portfolio would then increase to around 54,000 tonnes split between 5 different fjords where 41,000 tonnes is fertile license and 12,800 tonnes is sterile license. And as previously communicated, Kaldvik acquired a box factory during the first quarter of this year, which is conveniently located next to our processing facility in Djupivogur. We simultaneously increased our stake in our processing facility, and now we own the processing facility 100%. This provides us with full flexibility and utilization and future development in terms of capacity and quality to handle all harvesting volume in-house. Additionally, the acquisition of the box factory is expected to provide approximately EUR 3 million in annual cost savings, around EUR 0.14 per kilo. This directly increases our margin and improves our overall profitability. And briefly on the license status in Seyðisfjörður. As I mentioned earlier, we are in the process of obtaining new license in Seyðisfjörður, which includes a total capacity of 10,000 tonnes MAB. This is divided into 6,500 tonnes of fertile license and 3,500 tonnes of sterile. This is a long process and has been a long process. We started the application process back in 2016, but we feel that we are on the home stretch now. This new production area presents a significant strategic opportunity for us, increasing our overall capacity and allowing us to meet growing demand and provides us with increased flexibility in our operations. More importantly, this new area will help reduce biological risk at sea, contributing to sustainability and health of our operations. In conclusion, the new license in Seyðisfjörður is a major step forward for the company, enhancing our capacity, flexibility and reducing biological risk. That's all for me for now. Thank you. Back over to Roy.

Thank you, Robert. Kaldvik's potential. We see significant potential on Milestone 1 through several key initiatives. And the Kaldvik team is focused on producing larger smolt, which will shortened the seed production cycle and reduce biological risk though achieving a consistent 2-year cycle will require additional capital investment. Starting in '27, we plan to start utilize our sterile licenses, which is expected to yield an annual production of 3,000 to 4,000 tonnes. And we're also progressing toward 10,000 tonne licenses in Seyðisfjörður as Robert mentioned earlier with hope that it's been finalizing in this summer. And in parallel, we are working on optimizing our production areas to maximize the use of our MAB. And altogether, these efforts points to a total production potential of up to 45,000 tonnes. Kaldvik is well positioned for enhanced profitability. And in the early days, we laid the ground work by building a completely new salmon farming industry on the east coast of Iceland, through Ice Fish Farm and Laxar, establishing the foundation and proving the regional potential with strong early results such as EUR 1.5 per kilo in EBIT and 92% superior share in 2020. And the second stage marked a period of consolidation and recovery as we merge with Laxar and navigated challenges like ISA and winter wounds while focusing on establishing operation and rebuilding biomass. And today, in Stage 3, we are scaling up with a fully developed value chain and over 7.5 million smolt to be released moving toward Milestone 1 of 30,000 tonnes. And this growth is happening on a fixed cost base and unlocking the real earning potential with Milestone #1 30,000 tonnes and requiring only a limited investment. And we see a long-term potential to reach 45,000 tonnes by fully utilizing our license capacity and making targeted investments across the value chain. And looking ahead, we see strong global demand for premium salmon with particularly promising opportunities in the U.S. and the Asian markets. And our harvest outlook remains positive, supported by planned smolt output, as we mentioned many times earlier, 7.5 million smolt in 2025 and with a total production capacity in the company of 8 million smolt. On the financial side, process initiated to finance the company with a long-term financing package of EUR 230 million. And strategically, we are awaiting approval for 10,000 tonne licenses in Seyðisfjörður. And in addition, we acquired the key assets, including a box factory in Djupivogur and 1/3 stake in Bulandstindur harvesting station with a total purchase price of EUR 19 million. So with that, we are concluding, and we are open for questions.

Yes. So if you have any questions, please send it to [email protected]. We've had here questions. So you're wondering about the smolt release this year. And we have a question here. What week is the last one you will release smolt to sea this year?

I know that we will transfer fish in October, a small amount. So I guess it's the first or second week in October.

And then you are wondering about the contract share for the year 2025. We are anticipating 20% of fixed contracts in 2025. And regarding the in-house sales organization, the sales is -- up until last year, we have been in cooperation with external sales organizations [indiscernible] and we are very happy with that cooperation. And we will keep that cooperation for some time at least. We are slowly but surely building up our in-house sales organization. So it's hard to say when the in-house sales organization will take bigger portion of sales, but this is an ongoing process. So please feel free to send questions to [email protected]. Okay. If there are no more questions, then I guess we will just stop for now. But if some -- if you want to raise some questions afterwards, please feel free to reach out to [email protected], and I will try and come back surely -- shortly. So thank you.

Okay, thank you.