Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Good morning, everyone. I'm Vidar Aspehaug, the new Interim CEO of Kaldvik, and I'm glad to welcome you to the presentation of our second quarter results for 2025. Our CFO, Robert Robertsson, is with me today, and together we'll take you through the key highlights and developments from the past quarter. Once the presentation is done, we'll open the floor for questions. And as before, you're welcome to send them by e-mail to robert@kaldvik.is. But first, a short introduction of myself. I'm, as I say, Vidar Aspehaug, and I've been working with Kaldvik since November '21 and been in the executive management since August '22. I'm a fish health biologist with a PhD in virology, specialized in handling the ISA virus. I cofounded PatoGen, the major diagnostic laboratory for the aquaculture industry in 2005 and was the CEO there for 8 years until I moved into a position as Business Development Officer, focusing then on fish health challenges in Norway, Chile and Scotland. And I worked with PatoGen until we sold the company in 2021. In Kaldvik, I have had responsibility for fish health and quality, and my focus has been on several improvement projects throughout the value chain, starting in our land facilities as well as working closely with every department on improvements, including sea and harvest.

Now, turning to the presentation — you're familiar with this disclaimer. Let's move on to the agenda. We'll start with a few highlights from the quarter just ended, going over operational performance, financial results, and strategic updates. After that, we'll look ahead with a short outlook and summary, then finish with a Q&A session. Should you have questions, please email them to robert@kaldvik.is. So, some highlights from this quarter. During Q2, we harvested 1,235 tonnes, with a group operational EBIT of minus EUR 4.3 million. One key reason is, of course, elevated costs stemming from low utilization of our company's capacity, a 2023 generation that was especially challenging — which I'll discuss in more detail a bit later — and the difficult market conditions. As Q2 closes out, we've harvested 7,618 tonnes in total so far this year. Looking toward 2025, we are reducing our full-year harvest guidance to 18,000 tonnes from 21,500 tonnes, and I'll provide further detail on that later in the presentation. We anticipate harvesting roughly 2,300 tonnes during Q3, and we stay on track toward our 2025 goal of releasing 7.5 million smolt to underpin our future growth. In addition, the smolt transfer has gone extremely well, with the best survival we've achieved thus far at Kaldvik, which reflects the improved robustness of the smolt that came from our strategic investments in our land sites over the last 2 years.

In addition, smolt output is going to be finalized now during Q3, which lowers risk even more. On the strategic side, the refinancing was wrapped up in Q2, and we expect the new licenses at Seyðisfjörður to be granted at last within this year. Robert will return to that subject along with the financial updates afterward. So, as I said, the 2023 generation has proven difficult and is likewise the main reason we are revising the harvest forecast for 2025. It has additionally led to a low superior share in this quarter. This generation is the final one that gained no benefit from the new winter wound vaccine, nor from the improvements we have made at the land sites over the last 3 years. So, beginning with suboptimal smolt quality on top of the abnormally cold sea temperatures at the close of 2024, this fish struggled right from the outset and was affected by algae more heavily than usual over the summer, which produced elevated mortality, slower growth and downgrading relative to the production plan. As a result, harvesting in Q2 '25 mostly consists of early harvest of fish smaller than expected. And we now intend to complete the harvest of the '23 generation within this year. Turning to our land-based farming operations, we, as I mentioned, are still on track for our '25 targets of releasing 7.5 million smolts, and 70% is already in the sea, delivering very strong performance and the best survival we have recorded to date.

We’ll wrap this up in Q3, reducing the chance of any issues. So we think the money we’ve put into our land sites over the last 3 years is now delivering returns. The upgrades include greater production capacity, among them our new grow-out facility at Land North in Rifós, which started operating earlier this year and is currently performing well. We’ve also enhanced water quality across every site, refined operational routines, and put in place proactive health and biosecurity management, including the new vaccination strategy. In addition, we’ve boosted operational efficiency with extra wellboat capacity. On the whole, land production performance continues to be solid, with mortality rates down year over year by more than 30% in recent years, which reflects better fish health and operational efficiency. Turning to the graph on the left-hand side, it shows how tough the marketing situation was this quarter, driven mainly by a substantial rise in production in both Norway and Chile. Global supply growth is expected to hit 8.5% this year and 1% in ’26. During Q2, we harvested 1,225 (sic) 1235 tonnes. And as I said earlier, the superior rate was low, largely because of the weak-performing ’23 generation. Even with that low superior share of 40%, 25% of our sales were locked in through fixed price contracts, which supported overall price achievement.

The sales and trading group we recently established has been putting active effort into opening up new markets, and right now we are in China promoting our premium salmon to buyers there. Given the restricted volumes we harvested this quarter, our unit cost per kilo harvested has of course come in high. That said, we took advantage of the situation to carry out improvements at the harvest station, and we have also begun planning additional upgrades along with expansion meant to accommodate a biomass that keeps growing. That wraps up the operational portion of the update. I will now hand things over to Robert, who is going to take you through the financial results.

Thanks, Vidar. Good morning, all. I've put together some slides to take you through the financial update for Q2. To start, here are the quarter's highlights, a period shaped by limited harvest volumes, suboptimal use of our harvesting capacity, and a tough market situation. Because harvest volume was limited, our harvesting facility in wellboats ran at partial utilization. As a result, we saw higher operational costs. The average price achieved came in at roughly EUR 6 per kilo. That result stemmed from a smaller proportion of superior quality fish and softer market prices in the quarter. And as Vidar noted, the fixed price contracts we have with customers in the U.S. helped lift overall price achievement, giving some stability in a market that was otherwise challenging. Moving on to the financial summary. Total assets rose by EUR 27 million in the quarter. That was mainly driven by investments in biological assets and a higher cash balance from the successful private placement, which lifted the equity ratio to 57% at quarter-end. Total liabilities fell by EUR 16 million, largely reflecting the final payment for strategic investments on the East Coast in the new box factory and harvesting station Búlandstindur.

So here, what you're seeing is a high-level look at net interest-bearing debt, and that figure went down by EUR 4 million over the quarter. EBITDA for the quarter came in negative, and that pushed net interest-bearing debt up by EUR 1.3 million. Net investments in working capital were EUR 29.5 million, mainly because of biomass buildup during the quarter along with lower trade payables. For 2025, total CapEx is estimated at EUR 18.5 million. CapEx investment in the second quarter totaled EUR 3.7 million, which brings total CapEx investment for the first half of 2025 to roughly EUR 8.3 million. Financial items came to EUR 4.9 million, with finance costs as the biggest contributor. And as was mentioned earlier, Kaldvik strengthened its equity base by issuing 44.2 million new shares during the quarter. That happened first through an acquisition-related share issue in April, and second through a significant private placement tied to the refinancing in June. Also, during the quarter, the Board announced plans for a potential subsequent offering of up to 4.3 million new shares at NOK 14 per share, subject to shareholder and regulatory approvals. That offering is expected to wrap up before the end of the third quarter this year. On the 4th of July, an extraordinary general meeting was held to consider a proposal from a group of minority shareholders who hold more than 10% of the shares in the company, to initiate an investigation into agreements between Kaldvik, Heimstø, and Osval connected to the acquisition of the newly or recently acquired box factory and the 33% share in our harvesting facility, Bulandstindur.

Then, on 3 August, a formal request was sent to a district court in Norway by a group of minority shareholders asking for an investigation to be opened. We expect this matter to be settled in the autumn of this year. And a quick status on strategic updates. The new license at Seyðisfjörður is expected to be issued this year. That license covers a total capacity of 10,000 tonnes MAB, or maximum allowed biomass. It is split into 6,500 tonnes of fertile license and 3,500 tonnes of sterile license. This new production area gives us a significant strategic opportunity — it raises our overall capacity, lets us meet growing demand, and provides greater flexibility in our operations. Even more importantly, the new area will help lower biological risk at sea, adding to the sustainability and health of our operations. Thank you. I'll now hand it back over to our CEO, Vidar Aspehaug.

Thanks, Robert. So here's a bit about what to expect going forward. For Q3 2025, we expect to harvest approximately 2,300 tonnes, continuing with the fall '23 generation and the spring '24 generation. For '24, we will be harvesting 8,000 — sorry, for Q4, we'll be harvesting 8,100 tonnes, hopefully at more favorable prices, and will thus be utilizing the best growth period here in Iceland to the fall. As previously said, we're guiding a total harvest of 18,000 tonnes for 2025. We are on track with our goal to release 7.5 million smolt for the year, of which about 70% is already at sea, showing very promising performance, and we will finalize the transfer by the end of Q3. Thus, with the reduced mortality rate that we are seeing at transfer, we expect that our investments will continue to pay off now that we can start off with a smolt of improved robustness supporting our future production and long-term growth. It's also worth noting that we are presently seeing beneficial sea temperatures, improving wound healing and growth, which is also a positive sign for biological conditions going forward. And talking about future potential. During my time with Kaldvik, I have been part of ups and downs, but I also see the great potential that lies in Kaldvik.

Kaldvik holds a unique spot as the sole salmon farmer located on Iceland's eastern side, which brings substantial biosecurity benefits along with a license volume of 44,000 tonnes, and soon 54,000 tonnes. Although there's still a distance to travel, the challenges salmon-producing countries elsewhere contend with are not ones we share. To illustrate, sea lice cause us no trouble, and we have no PD and no AGD. That said, a few years ago we went through an ISA situation that taught us a great deal, and it led to improvements across all operational processes and biosecurity. I'm confident the most pressing matters in our production are already resolved and that we've identified further opportunities for improvement. Since we're now close to reaching some of our key strategic goals — including 7.5 million smolt, record low output mortality, and the most robust smolt we have ever had — I believe we will keep seeing significant performance improvements going forward. So I feel confident that salmon farming in the Eastfjords of Iceland will succeed, and I feel confident stepping into the CEO role of the most exciting salmon company in the fastest-growing salmon region in the world. But besides a well-performing fish, volume is key to fully utilize our production capacity and to reach economy of scale.

In the last few years, then, we've directed our strategy toward putting money into our land sites so we can build biomass quickly, and following the consolidation a few years back, we're now a single united salmon producer in the East, which lays the groundwork for more scaling and growth. As of today, we see considerable potential unlocked by hitting milestone 1. Our smolt supply is robust enough to back the growth we've planned, and we've invested fully to get to a 30,000 tonne run rate as we move forward. Improving smolt quality will remain a focus for the Kaldvik team, and our goal is to produce a larger smolt, shortening time in the sea and lowering biological risk, although a consistent 2-year cycle will take additional capital investment to achieve. Come 2027, we intend to begin using our sterile licenses, which should deliver yearly output of 3,000 to 4,000 tonnes. We're also making progress on a 10,000 tonne license in Seyðisfjörður, which we're hoping to have finalized this year. At the same time, we're optimizing our production areas so that our maximum allowed biomass gets used to the fullest. Taken together, all of this points to total production potential of as much as 45,000 tonnes. Looking forward, then, global demand for premium salmon is strong, with especially promising opportunities in the U.S.