Kaldvik AS (KLDVK) 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 second quarter results for '26. Joining me today is our new CFO, Thorunn Ragnarsdottir. And together, we 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 QA@kaldvik.is. So I've included a slide here with the updated management team with Thorunn Ragnarsdottir joining Kaldvik in July as CFO. And I would like to say thank you to Hjalti Hvitklett, who has been interim CFO for the last months, and that has been working with us for a period. I have highly appreciated his great work and look forward to continue the collaboration even though Thorunn is now stepping in as CFO. And now I'll leave the word to Thorunn to introduce herself.

Thank you. My name is Thorunn Ragnarsdottir. And as Vidar just mentioned, I started here at Kaldvik in July, and I'm really excited to be part of the team. I have over 17 years of experience in administration and financial management, most recently with EFTA in Brussels, where I was for 6 years as the Head of Finance and later Director of Administration for the 3 duty stations in Brussels, Geneva and Luxembourg. Earlier, I have held senior finance positions in both the private and public sectors, including within the Icelandair Group, where I was the Director of Finance for Icelandair Ground Services and a member of Icelandair's FP&A team. I hold a business degree from Iceland and a Master's degree in Finance and International Business from Aarhus, Denmark. I will then hand it back to you, Vidar, and return later with the financial update.

Thank you, Thorunn. And before we continue, you all know this disclaimer. So let's move on. So we will begin with some key highlights from the last quarter and continue by covering operational updates, financial results and strategic updates. Then we look ahead with a brief outlook and summary before wrapping up with a Q&A session. And questions, please send them to QA@kaldvik.is. So we'll start off with the key highlights from this quarter. And in the second quarter, we harvested 1,840 tonnes with a superior share of 68%, which is up from the 40% we had in Q2 last year, reflecting the improved performance of the '25 generation compared to previous generations. Group operational EBIT in Q2 was negative EUR 3.3 million with an operational EBIT per kilo of negative EUR 1.77. Due to the low harvest volume and thus low utilization of our infrastructure, we have a high harvest cost in the quarter. In Q1 '26, we identified a risk of breaching financial covenants and thus obtained the waiver from our banking partners, combined with a subordinated shareholder loan of EUR 20 million from our main shareholder. Looking ahead in '26, we will be harvesting 3,000 tonnes in Q3 this year and all from the '25 generation, and we will be maintaining our full year harvest guidance of 17,000 tonnes. On the strategic side, the new Aquaculture Bill that was submitted to parliament in March was not adopted, and I'll bring some more detail on this later in the presentation. The new license in Seyðisfjörður is still pending, and I'll provide further update on our strategic review later in the presentation. As already mentioned, the '25 generation is performing well. The output of this generation was an important milestone for Kaldvik, transferring 8.25 million smolt, exceeding our target of 7.5 million smolt. Overall, we see good health and good recovery after some challenges related to the autumn fish during the coldest part of the season. And by end of Q2, cumulative mortality for the '25 generation was 15.7% compared to 35.6% for the '25 (sic) [ '24 ] generation at the same time last year. Harvest for this generation was restarted in August and is now ongoing, reaching an average of above 85% superior. Our land operations have been through several upgrades over the last few years, and our focus is now on further optimizing the production. The target for '26 is to release 7.5 million smolt. And by the end of Q2 or end of June, 35% of the outputs have been executed. We have seen slightly higher release mortality connected to transport than target in some groups. We are also seeing improved flexibility and reduced risk from combining external sourced smolt with internal capacity in line with our new strategy. Our smolt stations are still on track with production and have full focus on improving initiatives, focusing on operational excellence and optimizing of production parameters. And the first internally produced smolt groups smoltified using light regimes have now been released to sea, showing good performance. Then some information on harvesting and sales. In Q2, we harvested 1,840 tonnes and all of this was from the '25 generation, reaching a superior share of 68.2%, which is higher than the 40% we had in Q2 last year. Still, with such low harvest volume, the cost of harvest is still high due to low utilization of infrastructure. The overall price achievement ended at EUR 5.92 per kilo for the quarter, which is slightly lower than last year. And the main reason for this is that we have harvested at a low average weight, and we had lower contract share than in '25. So that concludes the operational update. And now I'll pass the word to Thorunn, who will walk you through the financial updates.

Thank you, Vidar. We begin with the highlights from the second quarter. And here, you can also see the year-to-date comparison numbers. Operational EBIT in Q2 was negative by EUR 3.3 million and EBIT per kilo amounted to negative EUR 1.77. This is driven by different factors, mainly small average sizes and low harvest volume. Revenues reached approximately EUR 11.3 million. The overall price achievement in Q2 ended at EUR 5.92 per kilo. Now over to the financial summary. Total assets increased by EUR 8 million during the quarter. This was primarily driven by increase in biomass, offset by decrease in receivables and cash. Total liabilities increased by EUR 16 million in the quarter, primarily due to increase in subordinated shareholder loan and payables. And finally, the equity ratio was 51% at quarter end, slightly down from the previous quarter. As previously reported, Kaldvik obtained a waiver in Q1 from the financial partners for '26, including a waiver of the EBITDA covenant, reduction in minimum liquidity requirement from EUR 10 million to EUR 5 million and increased availability under the revolving facility for '26. The minimum liquidity requirement includes cash and undrawn credit facilities. As part of the waiver, the company's largest shareholder provided a subordinated loan of EUR 20 million received in two EUR 10 million tranches at the end of Q1 and in early Q2. And here, we have an analysis of the net interest-bearing debt, which increased by EUR 13 million during the quarter. EBITDA was negative by EUR 0.1 million. The change in working capital amounted to EUR 7 million, primarily due to higher biomass at the end of the quarter. CapEx investments during the quarter amounted to EUR 0.8 million. Financial items amounted to EUR 5 million and production tax amounted to EUR 0.5 million. And as communicated before, we provide quarterly company updates, while financial reports are issued twice a year, a half year report and an annual report. Next company update is the Q3 report scheduled for November 13, '26. And for further information about the financials for the first half year, I refer to the half year report and the annex of this presentation. And then I will give the word back to you, Vidar.

Thank you, Thorunn. Then a short status on strategic updates. So the strategic review of our production model has been concluded. And as mentioned in our previous update, some of the main findings are already being implemented. The purpose of the review have been to analyze the entire Kaldvik value chain and identify how we can optimize production, utilize license capacity and make efficient use of our assets given the specific conditions that we operate under in Iceland. Key measures will be focused at risk reduction to reduce risk of losses due to disease, optimize the use of our sites and ensure that we have good quality smolt. Our goal is to establish a robust and stable production at 30,000 tonnes plus with a mortality below 10% and superior share above 90%. And a core principle of our production strategy will be to have fewer groups with 2 winters at sea to reduce biological risk, but still utilize the growth season. We will still have sites spanning 2 winters, but only at locations characterized from experience to be good 2 winter production sites. Also, Kaldvik has been active in the research ongoing to better understand the infection dynamics of the parasite Parvicapsula pseudobranchicola that has been causing increased mortality and reduced superior share in our production. After analysis of our production data and comparing 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 now avoiding transfers in this period going forward and more of our smolt transfers will be completed by end of July going forward. This will also support our one-winter main strategy. Further, we know the importance of having premium smolt and are already seeing the first results from our ongoing initiative to improve smolt quality and also our hybrid smolt sourcing strategies, providing reduced risk and flexibility. So concluding our strategic review, I've included a time line indicating our ambition now that we believe that we are transitioning into a more robust and stable production model, and we're expecting to gradually see the effect of the measures being implemented. To reduce risk and also as a result of some regulatory constraints, we have made one adjustment to our previously communicated output plan so that 65% of the '26 generation will be transferred to sea by end of July and not 80%. However, we have good capacity to maintain that fish in land, and it will keep growing until transfer in the period mid-September and October. So we are still in accordance with the main measure in our plans, including the adjusted output strategy and avoiding the transfers in the high-risk period for Parvicapsula. And as you're aware, Kaldvik has 43,800 tonnes of license volume with another 10,000 tonnes pending in Seyðisfjörður. So we have taken this strategic step to ensure a more robust production model and to adapt to our environment and to ensure a sustainable growth. So we consider 2027 to be a transitioning year where we will harvest above 20,000 tonnes. In 2028, we are targeting to reach our Milestone 1 with 30,000 tonnes harvest and stabilize the production. Our long-term goal will be to reach less than 10% mortality and above 90% superior and eventually using more of our license volume approaching 45,000 tonnes production, hereafter referred to as Milestone 2. So that concludes the strategic review. And on other strategic items, we have included a short update on the new Aquaculture Bill. And as you're aware, the new Aquaculture Bill was submitted to parliament in March '26, but it was not adopted before the end of the latest parliamentary session before summer. Thus, there have been no change to the current regulatory and taxation framework. And the licenses in Seyðisfjörður is still pending. Then a bit what to expect going forward. As you are aware, the market situation for salmon is still volatile and hard to predict. And in view of the total market situation, we have chosen to enter fixed price contracts for Q3 and Q4 of about 35% of our production at prices that we believe are favorable, aiming to provide revenue predictability and downside protection. However, we do share a positive market view where we believe that demand is increasing and believe that we will see higher prices in the 2 next quarters than in the same period in '21. So for Q3 2026, we expect to harvest approximately 3,500 tonnes. And for Q4, we expect 5,200 tonnes. Thus, we maintain the full year guidance for '26 of approximately 17,000 tonnes. The current production year-to-date is in according to plan, and all harvest for the rest of this year will be from the '25 generation. And again, the '25 generation is with good health and the first harvest in Q3 has been executed with high superior share. So to summarize, our production is currently in accordance to plan and the '25 generation is performing well with good health and with high superior share in the first harvest in Q3. In Q2, we harvested 1,840 tonnes and the first half year ended at 8,281 tonnes of harvest. Earlier this year, we saw a risk of breaching our financial covenants and obtained a waiver from our financial partners and the subordinated loan from our main shareholder. We have now completed the strategic review with a strategic goal to stabilize our production at plus 30,000 tonnes with a mortality below 10% superior share and above 90% -- sorry, mortality below 10% and superior above 90%. Implementation of the new strategy is ongoing. The license in Seyðisfjörður is still pending and the new Aquaculture Bill was not adopted before the summer. We still see a volatile market, but with some more optimism than before, but we do have a contract share of 37% for the next 2 quarters. We are maintaining the full harvest guiding for '26 at 17,000 tonnes and plan to harvest 3,500 tonnes in Q3. So we will conclude our presentation here, and we will now open for questions. And as mentioned previously, please send the questions to QA@kaldvik.is.

So we have received 3 questions so far. So the first one is, when are you planning on harvesting 45,000 tonnes?

Yes. We will not be guiding the timing for the 45,000 tonnes, but it is our long-term target to reach 45,000 tonnes. As you're aware, we have 43,300 tonnes -- 43,800 tonnes license volume and awaiting another 10,000 tonnes, and we will be aiming to utilize our license volume in the long run.