Kaldvik AS (KLDVK) Earnings Call Transcript & Summary

Good morning, everyone. Vidar Aspehaug here, CEO of Kaldvík, and it's a pleasure to welcome all of you to this presentation of our results for the third quarter of 2026, coming to you from our feeding station at Djúpivogur in the Eastfjords of Iceland. From this location we control the feeding across all our sites, making sure we're able to feed for as many days as possible throughout the year, even when the weather turns bad; it's also the place where our feeding expertise is concentrated and where we learn from one another, making sure we control things in the best way we can. Our CFO, Þórunn Ragnarsdóttir, is with me today, and together we'll take you through the key highlights and developments of the past quarter. Once the presentation is done, we'll open the floor for questions, and we're giving out an email address, qa@kaldvik.is, but given that Outlook and Teams are causing problems worldwide today, we may have to answer questions sent by email at a later point via email. We'll give you a phone number as a backup so you can submit questions by SMS if the email doesn't work, and that phone number will also be provided toward the end of the presentation. Before we go further, you're all familiar with the disclaimer, so let's move on; we'll begin with the key highlights from this quarter. During the third quarter, we harvested 4,483 tons, with a superior share of 75.8%, which is up from the 65% recorded in Q3 last year. Group operational EBIT in Q3 came in at EUR -3.8 million, with an operational EBIT per kilo of EUR -0.85; in Q3, we finally received the operational licenses of 10,000 tons MAB in Seyðisfjörður, which brings our total licenses to 53,800 tons. As previously announced to the market, we had a jellyfish incident in September, which caused additional mortality in the 25 generation of 11.5 percentage points at our sites in Reyðarfjörður. By early October, the situation had normalized. As a result of that incident, we wrote down the biomass by EUR 11.5 million in Q3. In the two figures to the right here, it has been excluded from the operational EBIT to give a clearer picture of how the business performed in the quarter. Let's look at what happened; on the 4th of September, we began seeing elevated mortality and reduced appetite at our sites in Reyðarfjörður, and this coincided with an increasing number of lion's mane jellyfish in the fjord and at the site; we implemented necessary measures, including accelerated harvest for the fish at risk, reduced feeding, and we were closely monitoring the fish health; we informed the market on the 6th of September when additional mortality was at about 0.3 percentage points, and we gave an update on the 15th of September when it had reached about 6.5 percentage points, and the impact seemed to be declining. By October 7, things had settled down: mortality was low and far fewer jellyfish were at the site. Altogether, the event wound up adding 11.5 percentage points of mortality in the 25 generation. It was a serious event, but limited in time, and it hit the 25 generation while the 26 generation came through unaffected. The accelerated harvest means a lower average weight at harvest this quarter, which affects the price achievement, and that will be covered later in this presentation. Lower biomass in the 2025 generation will mostly hit harvest volumes in 2027. Jellyfish are not a new problem in Icelandic waters, particularly here on the east coast. We have had this risk in our operational strategy for several years. We have put measures in place before, among them strategic washing of our nets to cut exposure and keep water exchange good. But the unusually high concentration of lion's mane jellyfish we saw in September this year showed that our existing measures were not enough under such extreme conditions. Our response this year centred on protecting fish welfare and lowering the biomass at risk. We sped up harvesting, cut feeding, and kept a close watch on fish health. Going forward, we are now planning to strengthen our strategy for lion's mane jellyfish in two main areas. First, earlier warning. By combining information about lion's mane jellyfish occurrence, migration patterns, and ocean currents, we aim to get better at anticipating events and responding before fish are exposed. Second, exposure protection. We are assessing physical barriers, electric fences, and additional support to make sure our fish is protected against lion's mane jellyfish exposure while also keeping a good environment for our cages during high-risk periods. These technologies are still under assessment, and we need to establish how effective they are under our operating conditions. We have allocated roughly EUR 4 million in planned CapEx during 2027 and 2028 for these measures. Our goal is to finalize the site-specific solutions by February 2027, complete procurement and installation during the spring, and have the chosen measures operational by June next year. The key message here is that we are building on experience we already have, strengthening our preparedness, and taking concrete steps to reduce the biological and financial consequences of future lion's mane jellyfish events. Even so, after this severe event, the 2025 generation is doing better than the 2024 generation. Cumulative mortality by end of quarter in the 2025 generation is 24.2% against 35.6% in the 2024 generation. The superior share at harvest so far is 73.6% compared to 65.1% in the 2024 generation. Following the lion's mane jellyfish event, mortality and appetite in the 2025 generation are now back to normal; we have received the operational licenses in Seyðisfjörður, as mentioned, 6,500 tons of fertile and 3,500 tons of sterile. So that brings our total licenses from 43,800 tons up to 53,800 tons MAB. Regarding smolt release for the 2026 generation, we had already pushed back the output because of regulatory constraints, which we communicated in the Q2 report. The lion's mane jellyfish event caused a further delay. The transfer finished by 6th of November, and the final group went to sea at roughly 6.5 degrees Celsius in the sea. At the close of this quarter, transfer mortality stood at 11.42%, versus our 4% target. We did manage to steer clear of transfers during the Parvicapsula high-risk period, which runs from August to early September. Kaldvík has faced a number of biological challenges over the past few years, and these have impacted both our production volumes and our profitability. Each of these challenges has a different underlying cause and therefore calls for a different response; even so, many of the solutions tie closely to our new production model, which came out of our strategic review and rests on lowering risk through strategic outputs, steering clear of high-risk periods, stronger smolt, and less production time at sea, with the aim of cutting down the number of groups that spend more than one winter at sea. Reaching our goals was a significant milestone for Kaldvík. In reaching our goals, they had been achieved before, in the 2025 generation, when we showed a freshwater production capacity of 7.5 to 8 million smolts annually. Our focus from here on will be to build on that achievement, concentrating now on making our smolt more robust.

Historically, when we transferred our smolt, survival was poor—we were losing an average of around 12% during the initial 60 days at sea. Clearly, that figure is unacceptable, and raising survival through this crucial window ranks among our highest priorities. We have identified a number of causes behind this, including smolt quality being influenced by water chemistry on land, the smoltification process, and stress from transport and handling. We are addressing these causes now through better freshwater production, improved operational practices, and stronger well-boat logistics. Beginning with the 2027 generation, we aim to reduce mortality in the first 60 days to roughly 5%. The second issue has been winter wounds. The 2024 generation took a particularly heavy hit, and that played a part in harvest volume landing about 5,500 tons below what we had expected, together with serious downgrades at harvest. Unusually cold seawater was a key factor behind this, though we do think smolt of better quality with improved vaccination status will handle those temperatures much more effectively than the 2024 generation managed to. Beyond that, we intend to reduce exposure to the conditions behind winter wounds by reworking transfer and harvesting schedules and by lowering the count of groups that remain two winters in the sea. Third, Parvicapsula: survival, growth, and quality have all been affected by this parasite, especially among fish moved in August and early September. We’ve flagged this stretch as a high-risk window, so we’re shifting production timetables to keep seawater transfers out of those weeks. Along with better smolt quality and our one-winter approach, that ought to reduce the parasite’s toll and cut the chance of secondary problems such as winter wounds. Last, the jellyfish incident. As we went through earlier, the September occurrence pushed mortality in our 2025 generation up by roughly 11.5 percentage points. Luckily, both mortality and appetite were back to normal by early October. I’ve already laid out how we’ll reinforce the current mitigation plan with about EUR 4 million of planned investment across 2027 and 2028. In short, we’ve shown the smolt production capacity required to underpin our future ambitions. Right now we're concentrating on turning that capacity into better biological results — through higher smolt quality, improved timing, lower mortality, and a shorter cycle in seawater. Getting this right is essential if we're to deliver more predictable output, better fish welfare, and stronger financial results. A few points on harvesting and sales: we took 4,483 tons in Q3, nearly triple the figure from a year earlier and ahead of the roughly 3,500 tons we had guided. That higher harvest stemmed from the jellyfish incident. The superior share came in at 75.8%, up from 65% last year, while price achievement was EUR 5.75 per kilo versus EUR 6.27 a year ago. The jellyfish incident forced us to bring in our fish ahead of schedule so we could lower the biomass exposed to risk, and as a result, a bigger portion of the catch consisted of smaller fish, which dragged the average price lower. Turning to the future, contracts account for 38% of the share in Q4. That concludes the operational portion, and now I'll pass it to Þórunn, who will walk you through the financial updates.

Thank you, Vidar. We'll start by going through the third quarter highlights, and you can see the year-to-date comparison figures here as well. Operational EBIT for Q3 came in at EUR -3.8 million, with operational EBIT per kilo at EUR -0.85. A number of factors drive this, chiefly a lower achieved price resulting from a bigger share of smaller fish. Even so, it's an improvement versus the same quarter last year, since we now have more harvesting volume. Operating income came to roughly EUR 26.1 million, compared with EUR 9.9 million a year ago, on a harvest of 4,483 tons versus 1,545. The EUR 11.5 million biomass write-down tied to the jellyfish event appears on a separate line outside operational EBIT. Production tax for the quarter was EUR 1.4 million, against EUR 0.5 million in Q3 last year. Now let's move on to the balance sheet items. Total assets stood at EUR 482 million by the end of the quarter. The equity ratio was 46%, down from 51% at the end of June, mainly due to the biomass write-down and the quarter's result. On the liability side, you can see a shift from non-current to current liabilities. That's a question of timing: the waiver for the covenant breach was signed on 1st of October, one day after the quarter ended, so the bank debt is classified as current at the end of September. Net interest-bearing debt increased by EUR 18.1 million during the quarter. EBITDA was EUR -12.1 million, though this figure includes a non-cash biomass write-down of EUR 11.5 million. The increase was driven mainly by continued biomass buildup of around EUR 14 million, partly offset by other working capital of EUR 3.6 million. Because the write-down also reduces the biomass value, working capital shows a net reduction of EUR 1.3 million on the slide. Financial items were EUR 5 million, production tax EUR 1.4 million, and CapEx EUR 0.9 million. Following the jellyfish event, we agreed a waiver with our bank syndicate on 1st of October, and on 29th of October we signed an amendment agreement. The new financing package consists of three parts. First, the bank syndicate, where total commitments rise from EUR 207 million to EUR 232 million. The term loan moves from EUR 117 million to EUR 102 million following repayment of EUR 15 million, while the revolving credit facility grows from EUR 90 million to EUR 130 million. All facilities now mature on 30th of June 2030, and term loan repayments begin in March 2029. We also have an additional EUR 15 million of availability on the RCF through October 2028, and the agreement provides capacity of as much as EUR 30 million for finance lease of equipment. Second, our largest shareholder, Austur, backed by its owners, gives a guarantee of up to EUR 25 million for drawings on the RCF above the borrowing base during the waiver period, which runs until December 17. The third item is a planned equity raise of roughly EUR 105 million during the fourth quarter. Once that equity raise is finished, the new financing package takes effect, and the new covenants will track our business plan and adjust as production increases. At this point, I'll give the floor back to Vidar.

Appreciate that, Þórunn. Turning to Q4 2026, our harvest estimate sits at about 4,200 tons, and full-year 2026 guidance remains unchanged at roughly 17,000 tons. We're also introducing 2027 guidance for the first time, at approximately 18,000 tons. Back in the Q2 presentation, our initial target was to exceed 20,000 tons in 2027; the reduction to 18,000 tons reflects the lion's mane jellyfish event, which cut the biomass in generation 2025 — the stock we'll be harvesting next year. Looking further out, this slide illustrates how we see production developing in the years ahead. For 2026, it's broadly a stabilization. We have implemented a modified production approach centered on higher smolt quality, enhanced timing, reduced mortality, and a shorter seawater grow-out period. Those changes are essential for achieving more consistent output, improved fish welfare, and better financial results. Notably, despite the lion's mane jellyfish incident, the 2025 generation continues to outperform the 2024 generation, and our 2026 harvest guidance of roughly 17,000 tons remains unchanged. Deployment of the new model is advancing, with 63% of the 2026 generation moved into the sea ahead of August. The year 2027 will serve as a transitional period. We anticipate harvest volumes of about 18,000 tons, reflecting the reduced residual biomass carried over from the 2025 generation. Meanwhile, the 2026 generation is set to grow out in the sea, establishing the basis for greater harvested volumes during the following year. For 2028, our goal is roughly 30,000 tons. That growth stems mainly from the 2026 generation, through bigger smolt volumes and better biological results that we anticipate under our updated production approach. Beyond that horizon, our license base of 53,800 tons underpins a long-term potential harvest of about 45,000 tons. Achieving that potential calls for ongoing biological gains, extra harvest infrastructure, and outside smolt supply. The key point to keep clear is that 2028 is our revised production target, whereas 45,000 tons reflects our long-term potential rather than current production guidance. Right now, the main thing we need to do is execute on the updated production plan and show steady biological results — that's the path to turning the capacity we already have into bigger harvests and better earnings. So, in summary: Q3 harvest came to 4,483 tons, and the superior share was 75.8%. The lion's mane jellyfish incident at Reyðarfjörður caused extra mortality in the 2025 generation, though conditions are back to normal now. Operational EBIT landed at EUR -3.8 million, better than EUR -5 million in the same period last year, on operating income of EUR 26.1 million. We took an EUR 11.5 million write-down on the biomass as a result of the jellyfish event. A fresh financing arrangement has been settled with our bank syndicate and our biggest shareholder, and combined with the equity raise we plan to carry out, this provides us with a strong foundation as we move ahead. Last of all, we are keeping our 2026 harvest guidance at roughly 17,000 tons, and for 2027 we anticipate around 18,000 tons; that brings our presentation to a close. Our next company update will come with the Q4 report, scheduled for February 25, 2027, and right now we'll make every effort to start taking questions. You can reach us through our email address qa@kaldvik.is, although, as I mentioned, with the worldwide problems affecting Outlook and Teams, we cannot guarantee that those emails will get to us today. So another option is to submit questions via the phone number that appears on screen. Thank you.

We've gotten a handful of questions. The first one asks: how confident are you that you'll hit 30,000 tons in 2028?

Naturally, we believe hitting 30,000 tons is within reach, and that view rests on the production capacity we now have in place plus the adjustments we're making under the new production model. That being said, biological uncertainty is always part of salmon farming, and we have to show that we can produce consistent results in both survival and growth. Executing on the revised production model will be our priority, and we'll work to deliver the biological performance required to get us to that target.

What quantity of fish was lost because of jellyfish, and should we anticipate additional biomass write-downs in Q4?

The lion's mane jellyfish event cost us 1,400 tons. The write-down has already been taken since the event occurred in September, and no additional write-downs from this event are expected on our side.