Norcod AS (NCOD) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to Norcod's Q4 webcast. My name is Christian Riber, and I am CEO of Norcod, and I will be presenting today together with my colleague, Stian Hansen, who is our CFO. To go through some of the highlights from the quarter. First off, we had a revenue in the quarter of NOK 123 million and total for 2025 was NOK 444 million turnover. That's an increase of about 12% from previous year despite lower harvesting volumes. Also, we saw an operating loss of NOK 47 million, where the majority of that loss in the quarter came from extraordinary mortality. Actually, if we hadn't seen this extraordinary mortality, we would be very close to having an EBIT margin of 0. Talking about EBIT margins, we've improved it with 12.5% year-on-year. And again, if we exclude the nonrecurring items, we have improved it with about 33%. We've seen our quarter production cost at sea end at just over NOK 51 per kilo, which is an increase from previous quarter and was mainly affected by the mortality situation. We harvested just over 1,700 tonnes during the quarter and a total of 7,700 tonnes in 2025. We are seeing, again, a very, very strong market this quarter. In general, I think we can say we've never seen a stronger market for farmed cod, and our sales prices are up with 35% year-on-year. Also another very important highlight from Q4 is that we had Jerónimo Martins becoming a key shareholder in Norcod with about an 18% share of our company. Jerónimo Martins is the world's 25th largest retailer, and this partnership will give us a unique access to major European retailers. Also another highlight is that despite the mortality challenges we saw in the quarter, we still maintained a high superior quality on the fish harvested and delivered in Q4 with over 90% superior quality. Also another very important point for us is that all during 2025, we had zero escapes, which we're very proud of. I will come back to this matter later. Post Q4, we are now seeing lower harvesting volumes in Q1 due to the mortality from Jamnungen. And also after Jerónimo Martins came in, we are now evaluating our options regarding the financing going forward in order to execute our growth plan. On the operations, as I said, there's been a lot of interesting facts during the quarter. First off, as I said, we have harvested just over 1,700 tonnes from our Jamnungen site. All fish was processed at our own facility, Kråkøy. And we maintained 91.7% superior quality of all the fish we took out. And also, there was a lot of biological highlights from this production at Jamnungen despite we had this Vibriosis outbreak. After finalizing the full site, we've had a biological feed conversion rate below 1, which means we've used less than 1 kilo of feed to produce all our fish at the site. Also, the site showed very, very solid growth, demonstrated by part of the fish in the last cage -- or all the fish in the last cage had a weight of over 3.5 kilos, and that was only after being at sea for 16 months. Also the last couple of months during that site, we didn't see a lot of growth due to limited feeding and the mortality. So this just shows that there's a very, very strong growth and biological results. Also during the quarter, we fully stocked our site Frosvika close to Bodø. We stocked that with almost 1.6 million fish. It's had a very, very good start, and we see a solid growth and low mortality. Also during the quarter, on our other site, Bjørnvika, we experienced an increased mortality due to cod pox. That fish is now normalized and are back in good growth, but there's been a lot of talks and discussion about cod pox. So we will address this in a separate slide later. From our location in Mausund, where we have our sites Skogsøya and Pålskjæra, we've seen extremely good production during Q4 with growth well above budget and the mortality lower than budgeted. So this production looks very promising going forward. As mentioned, during '25 and the beginning of '25, we have reviewed our net policies, how we can strengthen this and lower our risks. As informed earlier, what we have done is we have earlier had generational nets, meaning we've had nets during the full production of 24 months in at sea, where now we are switching nets during the production so that they only stand there for 12 months at a time. Also, we switched the material and the type of nets that we use, and we've seen very positive results of that. So over the last 15 months, we have been escape free and all of 2025 have been escape free. This just shows that we are very focused on optimizing all parts of our operations. One thing has been the net strategy, also our lighting regime to counter maturation and other operational improvements are being done on a regular basis on our sites. Regarding cod pox, as I said, there's been a lot of -- there's been some writing and some discussion about what cod pox actually is. We experienced this in Q4. We have also experienced it earlier with much lower mortality. To describe it simple, it can be related to kind of like when a human has flu, it's something that we -- that the fish will experience when they have the virus, and then it will be passing over a certain time, normally 4 to 6 weeks. But cod pox is nothing new. Cod pox was first described back in the mid-2000s with a report around 2006. It belongs to the same virus family as salmon pox. They are both viral gill disease viruses. And today, we don't have a vaccine against cod pox. This is something that's being worked on at the moment. But as I said, we have experienced before, both in the springtime, we now experienced it in late fall time. We've seen it in the industry, both in north of Norway, south of Norway and ourselves here in mid-Norway. So cod pox is something that we have to manage and handle. What we're seeing is that with Bjørnvika is that when we have handling while the fish is infected with cod pox, then we will see these significant increases in mortality. So it's very important to focus on not being -- doing the handling on sites that can give stress to the fish because that will cause increased mortality. So what we do to counter this is that now we -- on all our sites, we do a monthly screening and test of our fish to see if the fish have cod pox. They can be infected without really showing any signs. So therefore, we screen for this every month, all sites. And also, we do a test before any handling situations and operations. We are seeing this as a positive counter to cod pox. And also, as I said, there's been worked on a vaccine for this, which will take a bit of time. Short status on our further growth in Norcod. As we reported in the last quarter, we have already started our growth plan with stocking of Frosvika. Now we are also preparing the new stockings for 2026, and we have now increased our juvenile production with over 50% compared to previous years. This is due to we have more sites available. We have increased MAB at Jamnungen, and this will help us have an operational flexibility that we haven't seen before. It's very important for us that we have more sites and more fish to operate on. This will spread the risk for us. So if we see any incidents, we can switch between sites. So this will give us a completely new operational flexibility. At the same time, financially, of course, that scaling up with more fish at sea and more kilos to split our cost on will also significantly bring down our cost per kilo. Stian will elaborate at this later. Also, we are spending a bit of time on developing all our sites. As informed earlier, Jamnungen has now been increased to 5,160 tonnes of MAB, and we now have 10 pens instead of 8 at that site, which gives us the opportunity to stock with more fish per production cycle. Again, this will give us lower production cost per kilo of fish. Also, we have an application in for our Frosvika site, which is similar to Jamnungen. And this is the plan going forward that we will increase all our existing sites to larger MAB, so we can have more fish per site. Our sites are focused on being far out on the coast, so there's as good environment as possible for the cod farming. It's in great temperature profiles, good water shifting and good currents around these sites. So we are seeing very good opportunities to scale up these production sites. Also, we have new applications in and under review for new sites and new areas are being assessed as well. We've also increased our juvenile capacity with a new partnership together with Namdal Rensefisk. They have a very good facility in Namdal close to several of our sites. And we have just stocked that here in January with 500,000 fry and we'll be delivering from the site already during the first half of this year. This juvenile increased -- juvenile capacity increase also gives us opportunity and flexibility to where we will do with our juvenile production and what kind of size of juveniles we will produce. Also with new sites coming on this year, we've also had a good recruitment process and have added a couple of very, very good new key staff for our operations at sea.

So we'll look into the financial update and start off with the main overview of our highlights. The harvest volume was 38% higher in Q4 '24, but the revenue level is almost at the same level now in Q4 '25. So this is clearly illustrating a positive development in achieved sales prices we are currently experiencing. So our harvest volume ended at 1,737 tonnes this quarter. Our production cost is decreasing somewhat from the previous 2 quarters, even though it's still at a too high level due to the mortality and elevated project cost base, but we are expecting to see a further decrease now during 2026. And by the end of this quarter, our available credit and cash at hand has increased to NOK 103 million after we completed the successful private placement where Jerónimo Martins joined us as a strong and long-term industrial investor. Our biological assets are now at NOK 183 million, just about 3,000 tonnes by the end of this quarter. This is lower than expected, of course, due to the extraordinary mortality we experienced at Jamnungen, but the reconstruction is now commencing, and we currently have a biomass growth above 100 tonnes a week now in Q1 '26, and we expect an increase in biological assets by over 40% during the first quarter of 2026 and more than doubling towards the end of this year. So this will continue to significantly strengthen our balance sheet going forward, where the biological assets is the main component of our further strengthening. To go a little bit more into detail on the financial review, we are now pleased to see an increase in operating revenue per kilo, as I mentioned in the highlights. We now have operating revenues during the quarter of NOK 123 million based on the harvest volume of 1,737 tonnes. We're pleased to see that this revenue is at the same level as in Q4 '24, but as the harvest volume were 38% higher than -- this clearly shows the positive development in sales prices and strong market conditions we're currently operating under. This contributes to a revenue growth of almost 12% from year '24 to '25. Our operating expenses are slightly up due to costs related to mortality, but we still experienced an improvement of the EBIT margin from year '24 to '25 of 12.5%. Due to the mortality, we had a lot of nonrecurring items. And if we exclude these nonrecurring items of NOK 43 million related to mortality and the fair value adjustment, we see an increase of EBIT margin -- EBIT with 33%. So we are moving in the right direction as soon as we don't have these extraordinary situations. Our production costs at sea are, of course, infected by this, and we see an increase from NOK 46 per kilo round fish in Q4 '24 to just above NOK 51 per kilo round fish in Q4 '25. The mortality is increasing the cost base of the production cycle, of course, while reducing the harvest of biomass. So we have less biomass to distribute the cost, and this drives the production cost at sea up. Without these events now going forward, we expect a significant decrease of this production cost in future production cycles and in year 2026. This page is summarizing much of the comments to the previous diagram, but the conclusion here is that the net loss for the period ended at NOK 54 million compared to NOK 41 million in the corresponding quarter last year. But it's important to remember that NOK 43 million is classified as nonrecurring items and the mortality above the average. But we are still satisfied that we are moving in a positive direction and improving the overall performance despite the challenging quarter, especially that we have an improvement in EBIT margin, excluding these nonrecurring items of 33%. To comment our balance sheet development. So the total assets are down from the end of the corresponding quarter last year, of course, due to the decrease in biological assets. We lost a lot of fish due to the mortality, but have also pounded significantly more fish to sea last fall, and we are now seeing the effect of this further in 2026. In Q4 alone, we expect, of course, 40% increase, as I mentioned, and the doubling in 2026 will be significantly strengthening our assets. We're also pleased to have our available credit at the end of the quarter at NOK 91 million, which is together with the NOK 12 million in cash at hand, making us have the total available funds strengthened to NOK 103 million, up from NOK 34 million by the end of Q4 '24. This is a result of the funds raised through private placements last year and enables us to continue developing our business. Net cash flows from operating activities ended at NOK 48 million after the situation at Jamnungen demanded significant cash flow last year and also generated lots of revenue due to the accelerated harvesting. But we have also cash flows related to investing activities, which generated only minus NOK 18 million, even though we have made several significant investments related to our new sites and new equipment. This is creating a limited cash expenditure effect for us since we mostly finance all the new equipment through leasing solutions. And now the net cash flows from the financing has made us enter 2026 with an increased available credit facilities and increased funds going forward. And as Christian mentioned at the beginning, we are now exploring different options to our financing structure in 2026 in order to do further optimization.

We'll just talk a little bit about the market. As I said earlier, I think we can say that the market for farmed cod at the moment is the strongest ever. Of course, the reduction in wild quotas has fast forwarded the price increases. But as we've said from the beginning, the longer time we have our fish in the market, the more demand we'll see, the more dependent our clients will be on our fish, and therefore, we will achieve higher prices. As we can see now, as you can see on the graph on the right, we are achieving a significant premium compared to wild. This is because a lot of our clients are now used to receiving stable high qualities on a regular basis on contracts, so they have a lot of opportunities to work with the fish. And they are ready to pay a premium for that. A very good example of some of our clients being Southern Europe retail. Previously, they used to have fresh cod in the stores only during the season. It will then be delisted and then reintroduced when the season starts again. Now what we are seeing is that farmed cod has now become the yearly product that they have 12 months a year in the stores. It's their regular product in stores now. And then during the season, both Skrei and other fresh cod will be introduced as well as farmed. So we see a clear differentiation between the wild and the farmed cod, and that's exactly what we were trying to achieve. We've also strengthened this by creating our brand Snow Cod, which we've seen very, very good success with, both in Asia, Europe and America. As previously mentioned, the price development we've seen through the year is an increase of 35%, and we're expecting to see this going forward also in '26. And then, of course, the question can be, so what happens when the wild comes back. If it comes back in volume, what then happens? Well, first off, I think we won't see any major volumes coming in the near future. But what we have done now is that we have established a market for farmed cod on its own. It's both, as I said, fresh year-round in the supermarkets. It's on the menus. We are now in the sushi segment with raw fish as well. And we're working hard also getting into the smoked market. Farmed cod is a great product for smoking. So we have differentiated our product. We've created new avenues for the fish, and we see very good possibilities in the markets going forward. We have created a commercial platform together with our owners and partners being Sirena Group, High Liner Foods, who is taking care of distribution and sales in all of North America together with Sirena. They have strong access and distribution into all retail and food service. Now we also have Jerónimo Martins opening direct access to European market retail. And last but not least, we have our partner, Hi-Chain in China, working hard to developing that market, which also has huge potential. Therefore, we have an unparalleled sales platform, and we can see from the statistics that we are also achieving a significant premium compared to our competitors. Outlook -- as informed earlier this year, we have revised our harvesting plan and volume for 2026. We still have full focus on stocking both existing and new sites during the year, and we will see a significant increase in harvest volumes during '27. As I said earlier, Frosvika has already been restocked, and we are preparing to stock both Jamnungen and Labukta during the first half of this year. We have increased our juvenile capacity to support this growth and our plan, and we have now flexibility and opportunities to do juveniles on different sites and in different sizes. And going forward, I will say when we look at Jamnungen during the summertime, it was a fantastic production. We were ahead of budget, both on price and on size. So we were actually on track to show some positive EBIT results here in the Q4, which unfortunately didn't happen due to the extraordinary mortality. But what we are seeing from our new projects and our sites in operation, we are seeing a very positive production overall and are expecting to see cost prices at sea together with the sales prices that we are seeing in today's market and achieving today that will make a positive EBIT. So we're very optimistic for the future. We have done some adjustments on our operations. I mentioned the net operations, but there's been many, many optimizations on our production. We have great control, and we are ready to scale up on the new sites as well. We've also chosen to invest in a fish oil facility on our harvesting facility Kråkøy, where we're going forward, we can utilize the remaining part of our fish that we don't sell today to create oil and increase our revenue from our byproducts significantly. As I also mentioned earlier, we are now evaluating various options regarding our financing going forward to execute these growth targets. Also, we have had DNV certifying our Green Financing Framework, showing that one of our key pillars in our company being sustainability is as it should be. So to finalize, we have new sites coming into operation during the year. We are seeing strong biological results, and we have significantly strengthened our operations. With new sites and more fish at sea, we are getting more operational flexibility than we've had previously, and we will have more kilos to divide our cost on. So we are well positioned for our scale-up plan, and we are moving forward towards sustainable profitability. Now we're ready for questions, which can be done in the Q&A section.

I think we have a question here. [ Tommy Johannes ] is asking regarding evaluation on financing, does an equity issue seem like the most likely option? Has Jerónimo Martins expressed support in participating in possible issue? Well, as we informed earlier, we are evaluating several opportunities. Amongst others, we are looking into if a bond and particularly a green bond is an opportunity, but we are looking at all financial opportunities to create as much value as possible for our owners and shareholders. I think I also hear there is a question asking, could a potential delisting from the stock exchange be an opportunity? No. We have been listed on the Oslo Stock Exchange now for over 5 years. We are seeking to create long-term value for both our shareholders and our owners. And if there is no further questions, then I think we will round off this session, and say thank you for coming. Thank you for today's meeting.