Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Morning, everyone. I'm Vidar Aspehaug, the CEO of Kaldvik, and it's a pleasure to welcome all of you to our presentation of the second-quarter results for '26. Our new CFO, Thorunn Ragnarsdottir, is with me today, and the two of us will take you through the main highlights and developments of the quarter just gone. Once the presentation wraps up, we'll open things up for questions, and as usual, feel free to send them in by email to <<email_hidden>>. On this slide I've put up the updated management team, with Thorunn Ragnarsdottir having joined Kaldvik in July as CFO. I'd like to thank Hjalti Hvítklett, who served as interim CFO over the last months and has been working alongside us for a period. I've very much appreciated his excellent work and I'm looking forward to keeping the collaboration going, even with Thorunn now stepping in as CFO. With that, I'll hand over to Thorunn so she can introduce herself.

Thanks, Vidar. I'm Thorunn Ragnarsdottir, and as Vidar said a moment ago, I joined Kaldvik in July, and being on the team is something I'm genuinely excited about. Administration and financial management are areas where I bring more than 17 years of experience, most recently at EFTA in Brussels, where I spent 6 years, first as head of finance and afterward as director of administration for the three duty stations in Brussels, Geneva, and Luxembourg. Before that, I held senior finance roles in the private sector as well as the public sector, among them within the Icelandair Group, where I served as director of finance for Icelandair Ground Services and was also a member of Icelandair's FP&A team. I have a business degree from Iceland and a master's degree in finance and international business from Aarhus, Denmark. With that, I'll hand it back to you, Vidar, and come back later with a financial update.

Thanks, Thorunn. Before we go further, that disclaimer is familiar to all of you, so let's proceed. First up, a few key highlights from the quarter just ended, and after that we'll go through operational updates, financial results, and strategic updates. Following that, we'll take a brief look ahead with an outlook and summary, and then finish with a Q&A session. Please direct your questions to <<email_hidden>>. We'll kick things off with this quarter's key highlights. During the second quarter, we harvested 1,840 tonnes, with a superior share of 68%, up from 40% in Q2 of last year, which reflects the better performance of the '25 generation versus earlier generations. Group operational EBIT for Q2 came in at negative €3.3 million, with operational EBIT per kilo at negative €1.77. Because harvest volume was low and our infrastructure therefore saw low utilization, harvest cost in the quarter was high. In Q1 '26, we identified a risk of breaching financial covenants, and as a result we secured a waiver from our banking partners together with a subordinate shareholder loan of €20 million from our main shareholder. Looking ahead to '26, we will harvest 3,000 tonnes in Q3 this year, all of it from the '25 generation, and we are maintaining our full-year harvest guidance of 17,000 tonnes.

When it comes to strategy, the new aquaculture bill submitted to parliament in March didn't get adopted, and I'll give you more detail on that later in the presentation. The new license in Seyðisfjörður remains pending, and I'll offer a further update on our strategic review later in the presentation. As I've already said, the '25 generation is doing well. Output from this generation marked an important milestone for Kaldvik, with 8.25 million smolt transferred, which beat our target of 7.5 million smolt. Overall, we're seeing good health and good recovery following some challenges with the autumn fish during the coldest stretch of the season. By the end of Q2, cumulative mortality for the '25 generation stood at 15.7%, versus 35.6% for the '25 generation at the same point last year. Harvesting of this generation resumed in August and is now underway, hitting an average above 85% superior. Our land operations have gone through several upgrades in recent years, and our focus now is on further optimizing production. The '26 target is to release 7.5 million smolt, and by the end of Q2, or end of June, 35% of the outputs had been executed. We've seen slightly higher release mortality linked to transport than target in some groups.

We're also seeing greater flexibility and less risk by mixing externally sourced smolt with our own capacity, which aligns with the new strategy. Production at our smolt stations remains on schedule, and they're fully focused on improvement efforts—centered on operational excellence and fine-tuning production parameters. The first batches of smolt produced internally and smoltified under light regimes have now been transferred to the sea, and they're performing well. Next, a few details on harvesting and sales. During Q2 we harvested 1,840 tonnes, every bit of it from the '25 generation, and we hit a superior share of 68.2%, up from the 40% recorded in Q2 of last year. Even so, given such a small harvest volume, harvesting costs remain elevated because infrastructure utilization is low. Overall price achievement came in at €5.92 per kilo for the quarter, a bit below last year. The primary cause is that we harvested at a reduced average weight and our contract share was lower than in '25. That wraps up the operational update. I'll now hand things over to Thorunn, who will take you through the financial updates.

Thank you, Vidar. We'll start with the highlights from the second quarter, and here you can also see the numbers comparing year-to-date. Operational EBIT for Q2 came in at negative €3.3 million, while EBIT per kilo was negative €1.77. Several factors are behind this, chiefly small average sizes and low harvest volume. Revenues came to roughly €11.3 million. Overall price achievement for Q2 finished at €5.92 per kilo. Now let's move to the financial summary. Total assets rose by €8 million over the quarter. The main driver was an increase in biomass, which was offset by a decrease in receivables and cash. Total liabilities grew by €16 million during the quarter, chiefly because of an increase in subordinated shareholder loan and payables. Lastly, the equity ratio stood at 51% at quarter-end, a slight decline from the prior quarter. As we reported earlier, Kaldvik secured a waiver in Q1 from the financial partners for '26, which included a waiver of the EBITDA covenant, a cut in the minimum liquidity requirement from €10 million to €5 million, and greater availability under the revolving facility for '26. Cash and undrawn credit facilities are both part of the minimum liquidity requirement. Under the waiver, the company's largest shareholder supplied a subordinated loan of €20 million, which was received in two €10 million tranches at the end of Q1 and in early Q2.

Turning to how net interest-bearing debt breaks down, it went up by €13 million over the quarter. EBITDA came in at negative €0.1 million. Working capital moved by €7 million, largely because biomass levels were higher when the quarter ended. CapEx investments for the quarter totaled €0.8 million. Financial items were €5 million, and production tax came to €0.5 million. As we've said previously, company updates come quarterly, whereas financial reports come out twice a year — a half-year report and an annual report. The next company update will be the Q3 report, set for November 13th, '26. For more detail on the financials for the first half-year, please see the half-year report and the annex to this presentation. With that, I'll hand the word back to you, Vidar.

Thank you, Thorunn. Now, a brief update on where things stand strategically. We've wrapped up the strategic review of how we produce, and as we noted in earlier updates, several of the key conclusions are already being put into practice. The review was aimed at examining the whole Kaldvik value chain and pinpointing ways to optimize production, make use of licensed capacity, and employ our assets efficiently in light of the particular conditions we face in Iceland. The main measures will target risk reduction — lowering the danger of losses from disease, making the best use of our sites, and making sure we have smolt of good quality. We're aiming to achieve robust, stable output of 30,000 tonnes-plus, with mortality under 10% and a superior share exceeding 90%. A central tenet of our production strategy will be fewer groups spending two winters at sea, which cuts biological risk while still taking advantage of the growth season. We'll continue to have sites that span two winters, but only where experience shows they are good two-winter production locations. In addition, Kaldvik has taken an active part in ongoing research aimed at better understanding how the parasite Parvicapsula pseudobranchicola infects fish — it has been driving higher mortality and a lower superior share in our production.

Having examined our production data and weighed it against Norwegian experience, we now understand that we can cut the risk of this disease substantially by not transferring smolt to sea during August and the start of September. So going forward, we are now steering clear of transfers in that window, and a greater share of our smolt transfers will be finished by the end of July from here on. This will also underpin our one-winter main strategy. Beyond that, we recognize how important premium smolt is, and we are already seeing initial results from the initiative we have underway to raise smolt quality. In addition, our hybrid smolt sourcing strategy is delivering lower risk and greater flexibility. To close out our strategic review, I have put in a timeline showing our ambition, now that we believe we are moving into a more robust and stable production model, and we expect to see the effects of the measures being implemented gradually. To lower risk, and also because of certain regulatory constraints, we have made a single adjustment to the output plan we communicated previously, so that 65% of the '26 generation will be transferred to sea by the end of July and not 80%. That said, we have solid capacity to hold that fish on land, and it will continue growing until transfer during mid-September and October.

We remain aligned with the central element of our plans, which includes the adjusted output strategy and steering clear of transfers during the high-risk window for Parvicapsula. As you know, Kaldvik holds 43,800 tonnes of licensed volume, with a further 10,000 tonnes pending in Seyðisfjörður. This strategic move was made to secure a sturdier production model, adapt to our surroundings, and ensure growth that is sustainable. We see 2027 as a transition year, when we will harvest more than 20,000 tonnes. For 2028, the target is to hit our Milestone 1 with a 30,000-tonne harvest and stabilized production. Over the long term, our aim is to get below 10% mortality and above 90% superior, and eventually to use more of our licensed volume, moving toward 45,000 tonnes of production. This is hereafter called Milestone 2. That wraps up the strategic review. On other strategic matters, we have provided a brief update regarding the new aquaculture bill. As you know, that bill was submitted to parliament in March '26, yet it was not adopted before the latest parliamentary session ended ahead of summer. Therefore, the current regulatory and taxation framework has not changed. The licenses in Seyðisfjörður remain pending.