Kaldvik AS (KLDVK) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. I'm Vidar Aspehaug, CEO of Kaldvik, and I'm pleased to welcome you to the presentation of our fourth quarter results for 2025. Joining me today is our new CFO, Hjalti Hvitklett, who will introduce himself shortly. 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 before -- and as before, you're welcome to submit them to e-mail -- by e-mail to [email protected]. But first of all, you know this, so let's move on. So here is the updated management team with Hjalti Hvitklett stepping in as CFO. And I will leave the word to him to introduce himself.

Thank you, Vidar. My name is Hjalti Hvitklett. I started here in Kaldvik in the beginning of February. I live in the Faroe Islands and will be commuting to Iceland. I have an education in finance from the University of Aarhus, Denmark, and I worked within the fishing aquaculture most of my career, most recently at Nordic Aqua Partners operating in China. I'm very happy to join Kaldvik at an exciting time for the company, and I have always experienced a strong team with a clear ambition, and I'm looking forward to contributing going forward. I'll hand it back to you, Vidar, and I'll return later with the financials.

Thank you, Hjalti. So today, we'll begin with some key highlights from the last quarter, covering operational updates, financial results and strategic updates. Then we'll look ahead with a brief outlook and summary before wrapping up with a Q&A session. And as I said, if you have any questions, please send to [email protected]. So throughout the presentation, we have put the respective 2024 numbers in brackets behind the '25 numbers to give you some reference. And for the Q4 highlights, in the fourth quarter, we harvested 7,943 tonnes with a group operational EBIT of negative EUR 10.6 million. The main reasons for the negative results are early harvest of the '24 generation due to winter wounds, resulting in lower average weight, a low superior share, combined with a challenging market situation. I will comment further on this later. For the full year '25, we harvested a total of 17,105 tonnes compared to almost 15,000 tonnes in '24. Looking ahead in '26, we will be harvesting 6,500 tonnes in Q1 this year, mainly from the '24 generation, and we're maintaining our full year harvest guidance of 17,000 tonnes. As announced to the market, the company is in a challenging financial situation and has requested a waiver from its banking partners. As of today, we're in a constructive discussion with the banks, and we expect to conclude the issue within the end of Q1. Strategically, the government's published legislative agenda indicates that the new aquaculture bill is expected to be introduced shortly. So we will comment further on this later. The license that we have been awaiting approval in Seydisfjordur is still pending and the strategic review of our production model aiming to reduce risk and improve stability in our operations, supporting our long-term goal of producing 30,000 tonnes is still ongoing and expected to be concluded no later than May this year. So to the 2024 generation. within our farming operations. And as already mentioned, we decided to initiate early harvest of the '24 generation due to an unacceptable situation with winter wounds. We were very optimistic for the '24 generation as this was the first generation to receive the tailor-made vaccine towards winter ulcers. However, it's now clear that this has not been enough to solve our problems with wounds. As previously communicated, part of the '24 generation had a challenging release in the late fall due to delays and the dramatic and early drop in sea temperature. And on top of that, the winter '24/'25 was extreme with an unusually early start of winter temperatures and significantly lower temperatures than normal throughout Q4 '24 and Q1 '25. The figure on the right illustrates this, showing the temperatures for these quarters for '24, '25 compared to the average temperature since 2010, shown in blue. Surprisingly, we saw wound starting to develop in the growth season on rising temperatures in Q3 and the situation escalated in Q4 '25. As a result of this, we decided to harvest the '24 generation, starting with the most severe cages, aiming to harvest the complete generation as soon as possible. So by the end of Q4 and '25, 62% of this generation had been harvested. And by the end of Q1 this year, we expect to have finalized the harvest of almost the complete '24 generation. The consequence is that the '24 generation will generate approximately 5,200 tonnes less harvest volume than anticipated, mainly due to lower average weight. Also, the Superior share ended at 41%, affecting the price -- so the disappointing results with the '24 generation had a major impact on the financial situation of Kaldvik and it's pretty much the main reason for the financial challenges we are in currently. Looking at the '25 generation, things are looking better. And as of now, we are ahead of plan and the fish is going -- is with good health. The '25 generation was a milestone output for Kaldvik, reaching 8.25 million smolt, and we had a successful transfer with acceptable mortality. Even though the '25 generation has the same vaccine as the '24 generation, we have had much more favorable temperatures this winter, closer to normal temperatures for the East fjords of Iceland. The red line in the figure at the right illustrates this, showing that the temperatures above -- that we had temperatures above average in Q3 last year and significantly higher temperatures than '24 throughout the period. As of now, we are seeing good performance with good growth and an overall good health status. And at year-end, we had a cumulative mortality in the '25 generation of 9.3%. So in '26, 61% of the total harvest volume will be from the '25 generation. To elucidate a bit further on the importance of the temperature we are seeing in '25 compared to the normal '24 temperatures, I have included an illustration to show the difference in growth given a starting weight of 500 grams and 6 months growth at the respective temperature profiles for these 2 years. The specific growth rate is highly dependent on temperature and as illustrated in the figure on the right, the specific growth rate in '25 has been higher than in '24 throughout the last 2 quarters. With an average specific growth rate of 0.58% in '24 and 0.82% in '25, we get 330 grams more growth in '25 compared to 2024. Given a 5 million fish scenario, this would result in a total difference of 16,000 -- 1,655 tonnes production. On top of this, the fish is in better condition. Then some information on harvesting and sales. In Q4, we harvested almost 8,000 tonnes with a record volume, which is a record volume for Kaldvik and for our harvest facilities. We had single-day harvest volumes up to 245 tonnes, which is the highest we have had. And the increased harvesting capacity was partly achieved by the addition of stun and bleed capacity and partly through operational optimization at the harvest site. As we're all aware, there have been and still is a volatile market situation with respect to salmon prices. And despite the low superior share of 42% and early harvest of the '24 generation, the overall price achievement ended at EUR 6.01 per kilo for the quarter. So that concludes the operational update. Now I'll pass the word to Hjalti, who will walk you through the financial updates.

Thank you, Vidar. First, we have the highlights from the quarter marked by a relatively high harvest volume, but low prices and low superior share. As Vidar already mentioned, operational EBIT for the group was negative by EUR 10.6 million and EBIT per kilo amounted to negative EUR 1.33 during fourth quarter. This is driven by different factors, mainly lower market prices, high costs due to early harvest and low superior rate. Revenues reached approximately EUR 48 million. Despite the low superior share of 41% and the early harvest of the '24 generation, the overall price achievement ended at EUR 6 per kilo for the quarter. Total assets lowered by EUR 22 million during the quarter. This was primarily driven by higher harvest and therefore, lower biological assets. Total liabilities decreased by EUR 10 million in the quarter. This was primarily driven by a significant decrease in trade and other payables. Equity ratio is still is 55%, and it's the same as we had in Q3. Net interest-bearing debt increased by EUR 6 million during the quarter. EBITDA was negative by EUR 7.2 million. The change in working capital amounted to EUR 11 million, primarily due to lower biomass at the end of the quarter. CapEx investments during the quarter amounted to EUR 2.1 million and financial items amounted to EUR 4.4 million. As we have announced, the company has requested a waiver from its banking partner. As of today, we are in a constructive discussion with the banks, and we expect to conclude the issues within end of Q1. We will provide quarterly company updates, while financial reports are issued semiannually with half year and full year reports. Next company update for the first quarter is scheduled for May 21, and the next financial report will be issued for full financial year '25 on April 30. For further information about the financials for the fourth quarter and year-to-date numbers, please refer to the Appendix section. In October '25, Trondelag District Court rejected the minority shareholders' request for a special investigation regarding the acquisition of certain strategic assets completed in March '25. The decision was not appealed and the matter is concluded. Thank you, and now I'll hand it back to you, Vidar.

Thank you, Hjalti. Then a short status on strategic updates. Regarding the ongoing process with the new aquaculture bill in Iceland, the government's published legislative agenda indicates that the bill is expected to be introduced shortly. While consultation drafts have circulated, the final text has not been yet formally presented. We're monitoring developments closely. And once the final framework is publicly available, we'll assess its implication carefully and communicate further once we have completed that evaluation. The new license in Seydisfjordur is still pending. And regarding the ongoing strategic review of our production model, we expect to conclude no later than May this year. The review will give us a clearer basis for long-term decisions and support a more robust and predictable production model going forward, lowering risk and lowering cost. Then a bit about what we expect going forward. And as already mentioned and as you're aware, the market situation for salmon is volatile and hard to predict. Still, forward prices indicate a promising market in Q2 and Q3 of '26 compared to '25. For Q1 in '26, we expect to harvest 6,500 tonnes and the majority of the harvest this quarter will be from the '24 generation. So we expect to finish the rest of the '23 generation and the majority of the '24 generation this quarter. In Q2, we will start the first harvest from the '25 generation, which is performing well with good health. The total harvest volume for '26 is expected to be 17,000 tonnes. And from Q2 onwards, we will be mainly harvesting from the '25 generation. So to summarize, I will conclude with the outlook and key points going forward. We have had challenges with winter wounds in our '24 generation and have initiated early harvest that we are looking forward to put behind us by the end of this quarter. The '25 generation looks much more promising and is ahead of plan with regards to growth and harvest from Q2 onwards will be mainly from this generation. We harvested and sold a total of 17,105 tonnes last year and ended with a record high harvest volume of almost 8,000 tonnes in Q4. As a result of the challenging biology in the '24 generation, the company has requested a waiver from our banking partners and constructive discussions are ongoing, expected to be concluded within Q1. On the strategic side, we are still awaiting approval of the licenses in Seydisfjordur and the strategic review of our production strategy is ongoing and expected to be concluded in May this year. We are still seeing volatility in the market, but forward prices for Q2 and Q3 are promising compared to '25. We maintain our guiding of 17,000 tonnes for '26 with a harvest volume of 6,500 tonnes for Q1. We will conclude our presentation here, and we're now open for questions. And as mentioned initially, please send questions to [email protected].