Kaldvik AS ($KLDVK)

Good morning, everyone. I'm Vidar Aspehaug, CEO of Kaldvik, and I'm pleased to welcome you to the presentation of our first quarter results for 2026. And here from our offices in Eskifjörður. Joining me today is our CFO, Hjalti Hvitklett; and together, will 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 to [email protected]. But first of all, you know this disclaimer. So we not have to pause for a long time with that, so will continue. And today, we'll begin with some key highlights from the last quarter. continue by 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 said, if you have questions, please hand to [email protected]. So we'll start off with the key highlights from this quarter. And throughout the presentation, we have put the respective 25 numbers in brackets behind the 26 numbers to give you some reference. In the first quarter, we harvested 6,441 tonnes with a group operational EBIT of negative EUR 26.5 million. The main reasons for the negative results are the completion of the early harvest of the '24 generation that was initiated due to winter bonds, resulting in lower average weight and a superior share of combined with a challenging market situation. I will comment more on this later. Looking ahead in '26, we will be harvesting 1,900 tonnes in Q2 this year and all will be from the 25 generation. And we're maintaining our full harvest guidance of 17,000 tonnes. As announced to the market, the company is going through a challenging financial situation, and in Q1 '26, we identified the risk of breaching financial covenants and thus obtained a favor from our banking partners, combined with a subordinate loan of EUR 20 million from our main shareholder, East Fjords. Strategically, the new aquaculture build was submitted to parliament in March and more detail on this later in the presentation. And the license that we have been awaiting approval on in series Pure is still pending. And I'll also come back with an update on the strategic review of -- in this presentation. So starting with our farming operations. And as presented in our Q4 report last year, our '24 generation experienced severe challenges with winter rooms, and we decided to initiate early harvest of this generation. We were very optimistic for the 24 generation as this was the first generation to receive the tailor-made vaccine towards winter ulcers, but that was not enough to solve our problems with was. 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. Further, the Winter '24, '25 was extreme with an unusually early start of the winter temperatures and significantly lower temperatures than normal throughout Q4 '24 and Q1 '25. A figure on the right illustrates this showing the temperature for the last quarter of 24% compared to the average temperature for the same period since 2010, shown in blue. As a result of this, we decided to harvest the 24 generation aiming to harvest the complete generation as soon as possible. So by the end of Q1, this year, we finalized the harvest of the complete 24 generation, approximately 6 months earlier than originally planned. The consequence is that the 24 generation generated approximately 5,500 tonnes less harvest volume than anticipated, mainly due to lower average weight. Also, the superior share ended at 27% for the total generation and 30% in Q1, affecting the price achievement so the disappointing results with the '24 generation has had a major impact on the financial situation of Kaldvik, and it's pretty much the main reason for the financial challenges that we are in currently. Thus, we are happy now to have put this generation behind us and look ahead with a promising '25 generation and the new production strategy aiming to avoid similar situations in the future. Regarding the '25 generation, things are looking better. This was a milestone output for Kaldvik, reaching 8.25 million smolts with was higher than our target of 7.5 million, and we had a successful transfer with acceptable mortality. Even though the '25 generation has had the same vaccine as the '24 generation, we have had a much more favorable winter temperatures this winter closer to normal temperatures in the East Fjords of Iceland. And you can see in the blue line and the figure to the right that illustrates this showing that we had normal to above average temperatures in the period. And as a result, we have experienced the relatively good growth throughout the winter. Also, the '25 generation is distributed across 3 sites in rear which is our warmest for providing good biological performance and operational flexibility. So as of now, we are seeing better performance in the '25 generation than we saw at the same time for the '24 generation and despite some challenges related to the autumn fish during the period, fish health has remained good. And at the end of Q1, we had a cumulative mortality in the 25 generation of 13.2% and compared to 27.8% in the 24 generation at the same time last year. Our land operations have been going through several upgrades over the last few years and having reached milestone of production capacity of 7.5 million smolts. Our focus is now on optimizing the production. The target for '26 is to release 7.5 million smolts, and the first outputs have already been executed with good results. In accordance with our new production strategy, which I will comment further on later in the presentation, we are now completing 80% of our output before the end of July compared to 60% last year. Also, we are receiving smolt from several external parties this year as part of our strategy to utilize synergies from partners to give more flexibility, optimize our production plan and reduce the overall risk. As examples of improvement initiatives ongoing in land, our land station in the South is on target in their production and have successfully tested improvements in their modification routines using new light regimes. Also, our land sites in the north is on track, and we experienced that the new water treatment system at is performing as expected and the new freshwater ongoing facility in repos, which is the big building in the picture, is running full speed. Then some information on harvesting and sales in Q1 '26. We harvested 6,441 tonnes, of which all was from the Troso24 generation. And despite reaching a superior share of only 30%, the overall price achievement ended at EUR 5.59 per kilo for the quarter. As we're all aware, there have been and still is a volatile market situation with respect to salmon prices. So for the second half of 2026, we have secured a fixed price contracts for approximately 35% of our volume, providing revenue predictability and downstream protection. As part of our production and sales strategy update and after a detailed assessment of the cost and complexity of certification requirements relative to the commercial benefits. We have decided to gradually phase out and discontinue our Whole Foods Market certification. So that concludes the operational update. Now I'll pass the word to Hjalti, who will run you through the financial updates.

Thank you, First off, we have highlights on the quarter, which was marked by high cost and low super share from the generation. And as Wider already mentioned, a challenging year, operational EBIT for the group was negative by EUR 26.4 million and EBIT per kilo amounted to a negative EUR 4.1. This is driven by different factors, mainly the end harvest of the '24 generation with high cost price, lower market prices and lower repair rates. Revenue reached approximately EUR 36.5 million. despite low superior share of 30% and harvest of the '24 generation, the overall price achievement ended at EUR 5.6 per kilo. Total assets have lowered by EUR 4 million during this quarter. This was primarily driven by Harvest and therefore, also lower biological assets. Total liabilities decreased by EUR 10 million in the quarter and this was primarily driven by a decrease in trade and other payables. We see equity ratio there at 53% at the end of the quarter, slightly down from the previous quarter. In Q1, we identified a potential risk of breaching our financial covenants under the senior bank debt facility, and we started a constructive dialogue with our lenders. Following this discussions, we secured available from the financial parties. This included a waiver of the EPRA covenant for '26 and also a reduced a reduction in the minimum liquidity requirement down from EUR 10 million to EUR 5 million. And we also have got an increased availability under the revolving facility for the year. bringing the headroom to around 5 million on top. As part of the overall solution, our largest shareholder also stepped in and provided a subordinated loan of EUR 20 million. Net interest in debt decreased by EUR 11 million during the quarter. EBITDA was negative EUR 13 million. The change in working capital amounted to EUR 32 million. primarily due to lower biomass at the end of the quarter, CapEx investment, EUR 0.9 million and financial items amounted to EUR 4.5 million. We have postponed the publication of the 2025 annual report to June 12. This decision was made to allow additional time to complete the remaining outlets and review procedures. The audit process has been more prolonged than anticipated. This is driven by several factors. As communicated in our Q4 update, '25 has been a challenging year, particularly related to the '24 generation which also impacted the Q1 '26 performance. These complexities have required additional audit work and validation. In addition, there's also been a change in CFO during the reporting period, which also affects the timing. Overall, the delay is procedural in nature and not due to any single issues, but rather the combined effect of a complex operating year and throughout process. Regarding the financial calendar, we have communicated before that we will provide quarterly company updates while the financial reports are issued semiannually with a half year report and an annual report. Next company update with the first half, which is scheduled for August '27. We also have further information on the financials the first quarter in the appendix, where we have the income statement, the balance sheet, cash flow statement and also alternative performance measures. And then I give the word back to you, Vidar.

Thank you, Hjalti. Then a short status on our strategic updates. The strategic review of our production model is not completely concluded, but some of the main findings are already being implemented in our production plan going forward. The purpose of the review has been to analyze the entire Kaldvik value chain and identify how we can optimize production, utilize license capacity and make effective use of our assets given the specific conditions we operate under in Iceland. A key objective is to establish the lowest possible cost of production at an acceptable level of biological and operational risk. Initially, a project analyzing all of our production data, combined with the review of scientific data, discussions with other producers and suppliers was performed to clarify the assumptions for a new production model adapted environmental conditions of the East Fjords of Iceland. Further, several scenarios have been simulated as potential production models, including scenarios with reduced, stable and increased smolt output and although the output planned for 26 now has been concluded, the complete plan for the coming years has not been finally concluded yet. However, as a result of this work, we are now adapting our output plan going forward to increase the share of fish, grown with only 1 winter at sea. We are implementing concrete measures to reduce the risk of disease, and we are utilizing the opportunity to combine external small supply with our in-house small capacity. Further work is still ongoing to investigate opportunities to optimize harvest capacity and flexibility. And our goal is to reduce mortality to below 10% and to increase the superior share to above 90%. And we believe that we are now in the process of implementing measures that will take us long steps in the right direction. A core principle of our production strategy will be to have most of the fish only 1 winter at sea, but still utilizing the road season. We can still have sites spanning 2 winters, but only sites then that are characterized from experience to be good to winter production sites. Also, Kaldvik has been active in the research ongoing to better understand the infection dynamics of the parasite, part capsular that has been causing increased mortality and reduced superior share in our production. After analysis of our production data and compared to Norwegian experiences, we now know that by avoiding transfers of smolt to sea in August and beginning of September, we can reduce the risk of this disease significantly. Thus, we are aiming to completely avoid transfers in this period going forward, and most of our small transfers will be completed by end of July going forward. As already mentioned, 80% of our transfers will be completed by end of July this year compared to 60% last year. This also supports our One Winter remain strategy. And as mentioned, we are now in land, focusing on optimizing the production in our land sites and have implemented an improvement program, where several ongoing projects will contribute to further improve the quality of our smolt to strengthen the biological performance at sea. The transition to winter mainly strategy means that we will be transferring larger smolt, excluding the groups, we have been struggling the most with previously, namely the smallest fish late in autumn. After having completed the construction projects that we have been having ongoing in our land sites for several years, we are now changing focus to optimize operations and are optimistic that we will see improvements in small quality and reduced biological risk going forward. Also, as already mentioned, we will have a hybrid small sourcing strategy, teaming up with some of the great new small and land-based producers in Iceland to fully utilize the combined strength of our internal small capacity and post mold production capacity with external capacity to optimize timing, sizing and performance in accordance with our new production model at sea. So although we are not presenting a final production here in this presentation, we are already implementing the most important findings from the strategic review of our production model into our ongoing production transitioning into the new production strategy. So 80% of our smolt will be at sea before end of July. We will avoid the high-risk output period in August and early September, and we will avoid the output of small, small in autumn strengthening our total small output by utilizing a hybrid small sourcing strategy. We will focus on finalizing the new production plan now in the coming weeks and will present some more details from the new production strategy at our half year report in August the new aquaculture bill submitted to Iceland's Parliament in March '26. The industry has since submitted a formal response during the parliamentary process, addressing both the operational and tax framework proposed in the build focusing on amendments to taxation, operational flexibility and regulatory predictability. Dialogue with the government and parliament has continued throughout Q2 '26. And the industry is working constructively with the legislative process to support a balanced framework that enables sustainable growth, investment and competitiveness. Further discussions and potential amendments are expected before the bill is finalized. And then the new license in Seydisfjordur is still pending. Then a bit about what to expect going forward. And as already mentioned, and as you are aware, the market situation for salmon is volatile and hard to predict. And in view of the total market situation, we have chosen to enter fixed price contracts for the next 2 quarters of about 30% -- 35% of our production at prices that we believe are favorable aiming to provide revenue predictability and downside protection. For Q2, we expect to harvest 1,900 tonnes and the total harvest guiding for the year, '26 is maintained at 17,000 tonnes. And all harvest for the rest of this year will be from the '25 generation. So to summarize, I will complete old with the outlook and key points going or in Q1, we completed the harvest of the troublesome 24 generation, and we're glad to see the first harvest results from the '25 generation and looks promising. And from Q2 onwards, all harvest will be from this generation. We harvested and sold 6,441 tonnes last quarter. And as this was the '24 generation, we still had a low superior rate of 30%, contributing to the challenging financial situation of the company. After having identified the risk of reaching financial covenants of the company, the company obtained a waiver from the financial parties in Q1, combined with the subordinated shareholder loan from our main shareholder. On the strategic side, we're already implementing measures resulting from the strategic review that we believe will contribute to stabilize production and drive our mortality down and superior share up. And a final production strategy will be presented at our half year presentation in August. We are still awaiting approval of the licenses in Seydisfjordur.And we are still seeing volatility in the market but have secured a contract share for the next half of the year of approximately 35% of our remaining volume a, in our opinion, very favorable prices. This will provide revenue predictability and downside protection. We maintain our guiding at 17,000 tonnes, 42 with a harvest volume of 1,900 tonnes for Q2. So we'll conclude our presentation here, and we will be open for questions. And as mentioned initially, please send questions at [email protected] and we'll have a short break before we're back with the questions. Thank you. [Break]

We've got some questions here. The new strategy does not seem to directly address what you've communicated to be your main problem the last few years, wounds causing early harvest and downgrades. How do you plan to solve those problems?

Well, yes, the problems with whom is a complex problem, but I do believe that we are implementing measures to reduce the problem. First of all, the losses due to wounds have been biggest and mainly the second winter at sea. So by reducing to 1 winter strategy, we should reduce the losses due to wounds significantly. An important exception to that was the '24 generation that started to get wounds already in the summer. And we have identified some challenges related to the production in land in connection to vaccination that we believe will improve that situation as well. Then -- we also see that the challenges with Patrick Oslo and end up with fishing getting blind, and we get mortalities eventually due to with fish with wounds. So also reducing the output in the high-risk season will reduce the challenges with wounds. So I do believe that we are addressing also the challenges with the moves in this new strategy.

Okay. Since we have a lot of questions, so maybe not be able to answer all is Whole Foods included in the contracts for second half of 2026.

Yes, that is included in the fixed price contracts for the remaining year. Another question, similar to the other one. Any signs of winter wounds on the 25 generation during this winter, for example, on the, where you say you have some challenges. Of course, we do see some with wounds, but that has not been the main challenge there. The autumn fish with us that has seen some challenges is the fish in harness that went out the latest. And there, we've had in some of the groups that went out in August and beginning of September. And we've also seen losses due to, especially in the groups that went out the latest. So wounds have not been the predominant problem in in that fish. What's available liquidity at the end of Q1 I think that we had cash on hand as we look in the appendix, EUR 10 million. Then we have also the subordinate loan and availability, adding up to around EUR 20 million.

How do you end the contract with whole holds the contracts for the rest of '26 with?

Okay. I already answered the first and the second part of that question. But why do we end it as I said in the presentation, the certification requirements affect our production in a negative manner, and we've made a lot of calculations and assessments on the indirect cost of this certification and conclusion is that this is not beneficial for our production and that we will be better off with improving the production, improving the biology and not having done the certification from Whole Foods. And a question on vaccine. Do you use the standard Norwegian winter Wound vaccine on the 26th generation. We have made adjustments to our vaccination strategy, and we are using the pharma vaccine for the 26th generation, yes. And then regarding the '25 generation, what is your best estimate for payer share on the '25 generation. We are estimating 80% at the time. So yes we have addressed. Okay. Then thank you very much for listening and seeing our presentation. And see you next time.

Thank you.