SalMar ASA (SALM) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the presentation of SalMar's results for the fourth quarter of 2025. My name is Frode Arntsen, and I am the CEO of SalMar. And with me today, we have our CFO, Ulrik Steinvik. At SalMar, it always comes down to produce salmon on the salmon terms. 2025 has been a financially weak year for SalMar, but operationally and biologically, it has been a strong year, where we have managed to turn several parameters in a positive direction. That is why it is good to present the numbers today, showing that several indicators are now pointing the right way biologically, cost-wise and in terms of financial performance. The engagement, effort and passion our employees have shown in 2025 make me really proud. We have had 1 to 1.5 year with many demanding situations, but our people always step up to ensure that SalMar succeeds. Around the clock, our employees work to ensure that our captain in the value chain, namely the salmon, has the optimal conditions to thrive. This is now reflected in several key indicators. We have record high biomass at sea with lower cost levels. We harvest fish at the end of Q4 and in January with superior grades, we haven't seen in 10 years. Mortality continues to fall, and our greenhouse gas emissions are significantly decreasing. All these indicators show that the work being done is strong and is steering our ship in the right direction. Our focus is always forward. We must always do better today than we did yesterday. That requires continuing and reinforcing the work SalMar has done since 1991, ensuring strong alignment with the environment in which we operate, so we can optimize for fish, people and value creation. Today's presentation will follow the same order as before. I will take you through some highlights for '25 and Q4 as well as the various segments. CFO, Ulrik will then give the financial update. Finally, I will say a few words about SalMar celebrating 35 years and give you a glimpse of the journey we have been on and will continue forward on. In 2025, SalMar reached a milestone by harvesting 300,000 tonnes for the first time when including volume from associated companies. The total ended at 300,900 tonnes. Financially, however, 2025 was a weak year for SalMar. This was due to the high share of downgraded fish in the first half, which led to lower prices as well as global supply growth in '25 that pushed down market prices for salmon. But underlying demand has remained strong, and we used the year actively to develop both new and existing markets, which gives us confidence going forward. Norway harvested more fish than ever. And the development in Northern Norway was particularly strong in '25 with growth and survival levels we have never seen before. Sales and Industry delivered historically strong results, driven by high utilization of plants and raw materials throughout the year as well as positive contributions from contracts. We also completed acquisitions. Knutshaugfisk became part of SalMar in January and Wilsgard in August, both strengthening our position in key areas. Low market prices and biological challenges made '25 difficult for Iceland and Scotland, and both are expected to perform better in 2026 with increased volumes. Even though the year was financially weak, we still have a strong financial position with solid liquidity and a positive outlook. The Board proposed a dividend of NOK 10 per share for 2025. Operationally and biologically, '25 was a good year, reflected in several sustainability indicators moving the right way. Fish survival increased by 2 percentage points, showing that the yearly work on fish welfare is paying off. At the same time, greenhouse gas emissions per kilo produced continue to fall. In 2025, we had 41% lower emissions than in 2020. Few others in Norway achieved this, and we succeed by focusing on our largest emission source, feed, local processing and logistics. We also saw improvements in workplace safety with fewer injuries leading to absence even as activity increased and more people joined the company. This positive development is also being recognized externally. At the World Economic Forum in Davos in January, SalMar was ranked the world's most sustainable food and beverage producer out of over 8,000 companies analyzed globally. As long as we do things right, the industry has unlimited potential when we take care of fish, people and the environment. Now look closer at the Q4 results. In total for Norway, we harvested 80,300 tonnes at a margin of NOK 23 per kilo. For the Norwegian operation as a whole, we delivered an operational EBIT of NOK 1,843 million. Including Icelandic Salmon and SalMar Ocean, we harvested 84,100 tonnes in the quarter with a result of NOK 1,000,834 and a margin of NOK 21.8 per kilo. We have lower cost levels and a strong performance from our Norwegian Farming segments continued into Q4 with high growth, good survival and a high share of superior grade fish. Higher market prices reduced the contribution from sales and industry compared to the strong results earlier in the year. Iceland is finally back in positive territory again, driven by lower cost levels. Unfortunately, Q4 was very weak for Scotland. Volume guidance for 2025 -- sorry, for 2026 remains unchanged for Norway and Iceland, but we are reducing in somewhat for Scotland. For 2026, we expect harvest volumes of 318,000 tonnes, an increase of 7,000 tonnes or 6%. In Central Norway, we harvested 43,400 tonnes in the quarter with an operational EBIT of NOK 764 million, corresponding to EBIT per kilo of NOK 17.6. The autumn '24 generation is the one we harvested the most from during the period, and this generation has a lower cost level than earlier generations harvested this year. Price achievement was somewhat soft in Q4 because we prioritized harvesting some small and weaker fish for fish welfare reasons, which affects average weight and therefore, price achievement. However, this has not impacted the growth or the current biological status of the fish in Central Norway. The biological situation is good and significantly better compared at the same time last year, and we have to go back more than 10 years to find similar superior shares. Volumes in the first quarter will be significantly higher than last year. In January, SalMar was the company responsible for the strong growth in Norwegian export volume, driven by harvests in Central Norway. We are very pleased with the cost development in Q4 and expect further down into 2026. Volume guidance for '26 remains unchanged at 157,000 tonnes. In Northern Norway, we harvested 36,900 tonnes in the quarter with an operational EBIT of NOK 1,160 million and EBIT per kilo of NOK 31.5. Q4 and '25 has been a very strong year for Northern Norway. We continued harvesting our spring '24 generation and started with the autumn '24 generation. We had positive cost development, good average weight, high superior share, strong growth and high survival. Most of the volume was harvested early in the fourth quarter when prices were at their lowest. Looking ahead, the biological status is good. We will finish harvesting spring '24 and continue with autumn '24. Cost levels are expected to increase slightly from the very low level in Q4. Volumes in the first quarter are expected to be at the same level as last year. Volume guidance for 2026 remains unchanged at 113,000 tonnes. For SalMar Ocean, the operational EBITDA in the period was minus NOK 11 million. Production on Ocean Farm 1, which started in August, is progressing very well with low mortality and good growth. We have not needed any sea lice treatment for this generation despite high lice pressure in the region. Conversion applications for the ROF licenses have been submitted, and we are awaiting responses. Volume guidance for the year remains unchanged at 5,000 tonnes. Sales and Industry delivered an operational EBIT of minus NOK 49 million. After several very strong quarters, Q4 was some weaker. We continue to have high utilization of our harvesting plants, but the contribution from sales was weak. The low average weight from Central Norway affected spot sales returns as smaller fish generate lower value. Higher market price and high superior shares from Farming segment resulted in higher input costs, impacting contributions from contracts and VAP division in the quarter. We also supported several large pre-agreed promotions for major contract customers in Q4. While this reduces margins in the quarter, it helps increase long-term demand. Demand for our products remains very strong, and we experienced this daily in conversations with customers worldwide. We, therefore, have a positive view of the market entering 2026. In Q1, we expect lower volumes through our facilities due to seasonal patterns. Contract coverage is around 50%. For the full year '26, we have secured approximately 35% of our volume at fixed prices. The price level is somewhat lower than in '25, but still attractive. And we have maintained and increased volumes to major customers in Asia, U.S. and Europe. In Iceland, we harvested 3,800 tonnes in the quarter, delivering an operational EBIT of NOK 31 million and EBIT per kilo of 8.9 -- NOK 8.1 sorry. It is good to see Iceland returning to positive results after starting to harvest the '24 generation, which has significantly lower cost levels than earlier generations this year. Price achievement was good with a high average weight. Looking ahead, we expect similar cost levels in Q1 with significantly higher volumes than last year. Volume guidance for '26 remains unchanged. Our associated company in Scotland delivered a very weak result. Harvest volume in the quarter was 5,500 tonnes with an operational EBIT of minus NOK 186 million and EBIT per kilo of minus NOK 33.8. Volumes were expected to be low, but biological challenges at several sites caused by negative results. AGD gill health issues led to event-based mortality. Average harvest weight was also lower than in previous quarters, affecting both cost levels and price achievement. The biological situation for the moment is satisfying. And the biological performance improved towards the end of the quarter, but due to some challenges, the harvest volume for '26 has been reduced by 2,000 tonnes to 43,000 tonnes. With this, I have reached the end of the operational update, and I would like to give the word to Ulrik, who will give you the financials update.

Thank you, Frode, and good morning to all of you. We concluded yet another year, a year that overall must be described as a financial deviation in SalMar's history. But at the same time, an end to the year that shows we are back on track where we are experiencing improvements in biology, reduced costs and efficient handling and dynamic allocation and value creation of the salmon, made possible by discipline and a strong corporate culture based on that everything we do today should be done better than yesterday. That is how we always have done it, and that is how we will continue in SalMar. The consolidated financial results we present now for the fourth quarter are positively impacted by a lower cost level and the positive development we have seen in key figures for our biomass over an extended period. At the same time, we have a record high biomass in the sea at the start of 2026 with lower costs and better biological status than we had 1 year ago. As part of the financial update, I will, at the end of my section, comment on expected investments for 2026 before concluding with a proposal for the dividend for 2025. And now it's time to look at the numbers, and I will begin with some comments related to the profit and loss statement. At the top right, we see that operational EBIT increased by NOK 1,123 million compared to the third quarter from NOK 711 million to NOK 1,834 million. The change corresponds to an increase from NOK 7.6 per kilo to NOK 21.8 per kilo. Lower volume reduced operational EBIT by NOK 166 million. The largest increase, NOK 801 million is related to higher price achievement, driven by increased market prices, where sea salmon for the fourth quarter increased by NOK 17.2 per kilo compared to the third quarter and thereby came in above last year for the first time in 2025. Due to timing, low average rate in Central Norway, fixed price contracts and pre-agreed campaigns, we in SalMar did not experience the same change in price achievement despite a higher share of superior quality in harvested biomass. SalMar's price achievement increased by about NOK 10 per kilo compared to the third quarter and therefore, ended below sea salmon in the quarter. As previously communicated and therefore, as expected, we see lower cost out of stock across all our segments. Reduced costs contributed to NOK 350 million of the increase of the operational EBIT. For Norwegian operations, this corresponds to a cost reduction of approximately NOK 4 per kilo compared to the previous quarter. And we expect a further reduction in the costs going forward. Iceland and Ocean contribute positively with NOK 138 million, mainly driven by the lower cost level achieved in Iceland. Moving to the profit and loss statement. We see operational EBITDA at NOK 2,376 million and operational EBIT, as mentioned, at NOK 1,834 million. It is worth noting that operational EBIT generated in the fourth quarter amounts to nearly half of the annual operational EBIT of NOK 3,867 million, supporting the view that the first 3 quarters were deviations from the normal SalMar standard. Furthermore, we see that the production tax in Norway and resource tax in Iceland amount to NOK 90 million for the quarter, a reduction of NOK 8 million explained by reduced volume. Nonrecurring items reduced the result by NOK 82 million in the quarter and consists of costs related to litigations and settlements. Net fair value adjustments are positive due to reduced costs and improved biological status. The fair value adjustment increases the result by NOK 86 million. Share of profit from associated companies was negative with NOK 72 million, mainly explained by negative both operational EBIT and net result from Scottish Sea Farms. Net financial cost amounts to NOK 334 million, which is NOK 183 million higher than the previous quarter. The increase is explained by last quarter being positively affected by NOK 220 million due to financial transactions. Underlying net financial cost is reduced in the quarter due to lower debt levels and lower interest rates. This results in a profit before tax of NOK 1,342 million for the quarter and profit for the period of NOK 1,006 million, provided adjusted earnings per share of NOK 6.6 per share. And for the year, earnings per share totaled NOK 12.3 per share. Moving to the balance sheet. We see that total assets increased by NOK 124 million from the previous quarter, reaching NOK 57.9 billion, a relatively small change in the quarter. From the previous year, the increase of NOK 3,512 million is driven by acquisitions of Wilsgard and Knutshaugfisk as well as an increase in biomass in sea. Both in Norway and Iceland, we have higher biomass levels compared to both the previous quarter and the same quarter last year. As shown in the bottom left graph, total biomass in Norway across all companies increased by only 1% with SalMar being the largest contributor. At the end of 2025, we had 15% more biomass in the sea in Norway with a cost per kilo that was 8% lower, supporting the foundation for increased volume and reduced costs going forward. The equity ratio increased to 34.8% as a result of the positive net result after tax. Net interest-bearing debt is reduced by NOK 803 million to NOK 20.8 billion. The debt ratio, NIBD EBITDA is reduced to 3.6x. With improved earnings and strict discipline in use of capital, we expect debt and gearing to fall further going forward. As mentioned earlier, our strategy is to be optimally and robustly financed at all times and ahead of maturities. At the end of the fourth quarter of 2025, we had NOK 10.1 billion in available liquidity in the group, also taking into account the credit facilities of the partly owned subsidiaries. As shown in the bottom right graph, we have flexible financing diversified between bank and bonds with 2 maturities coming up next year. We have sufficient liquidity to handle these maturities, and I can also mention that both the term loan and the revolving credit facility have extension options. We are, therefore, not concerned about these maturities and have a clear plan for managing the financing at all times. Furthermore, I would like to mention that we are now initiating a strategic review of our ownership in Hellesund Fiskeoppdrett, where we own 33.5%. And we will return to the market later if we have any updates. Let's look at the change in net interest-bearing debt, including leasing during the quarter. It started with NIBD, including leasing liabilities of NOK 23,266 million. During the period, we had a positive cash flow from operations. The EBITDA was NOK 2.3 billion. We paid NOK 6 million in taxes from a few smaller partly owned companies. Working capital buildup increased NIBD by NOK 478 million. Total investments amounted to NOK 355 million in the quarter. Investments in fixed assets totaled NOK 364 million, mainly related to sea-based operations. CapEx discipline in SalMar is strong and total CapEx for the year ended at NOK 1,984 million, NOK 33 million lower than we guided 1 year ago. Including interest payments and change in leasing, we end at NOK 22,549 million in NIBD, including leasing at the end of fourth quarter '25. In recent years, we have made significant investments, particularly in preventive technology against sea lice, which is believed to have contributed to improved biological results this past year. As we enter 2026, nearly 50% of our sites are equipped with preventive technology. Having the right technology at the right site is crucial, and we will continue gaining experience before considering adjustments between sites or technologies. The CapEx level for '26 is reduced by NOK 880 million compared to '25, down to NOK 1,070 million, aligned with previously communicated CapEx levels and organic growth. Our total CapEx, approximately NOK 700 million or NOK 2.5 per kilo represents maintenance CapEx. Among capacity investments, NOK 200 million in closed net pen is the largest single project. And the investment is assessed to be economic [indiscernible]. Several major and minor upgrades are also ongoing, particularly at Innovamar to ensure the facility remains efficient and competitive, thereby supporting optimum handling, allocation and value creation of the fish. As outlined in the review, '25 stands out as a deviation from our long-term financial performance trend. Entering '26, SalMar is in a stronger position with a record high biomass in sea, lower cost levels and a sober CapEx level, positioning us for continued value creation. The Board of SalMar proposes a cash dividend of NOK 10 per share for the '25 financial year, equal to an 81% payout ratio. This year, as usual, we subject to approval at our Annual General Meeting in June with payment thereafter. And the proposed dividend is in accordance with SalMar's current dividend policy and in line with previous practice. And with that, I reached the end of the financial review and hand the word back to Frode.

Thank you, Ulrik. 35 years ago, on the 8th of February 1991, SalMar was founded by Gustav Witzoe. He started with 8 employees in a small municipality in Norway on the island named Froya, and have 2 small farming sites and 1 processing facility. And today, 35 years later, we have grown to become the world's second largest salmon producer with global reach. It has been a fantastic growth story made possible by local knowledge, built on the experience gathered from the generations before us as well as competent, dedicated and passionate employees who have managed to harness their potential. We have grown a lot over the last 35 years, but we still have an untapped potential as the growing world population needs more sustainable food. Even though we produced 2.5 billion meals in 2026, we are only able to give meal to less than 1/3 of the world's population for 1 day. Imagine the potential going forward. And it has also been a story of value creation for both local municipalities, suppliers, customers and our owners. Since we were listed back in May 2007, SalMar has outperformed the rest of the Oslo Stock Exchange by close to 7x. This is no coincidence where we operate a focused value chain to always make sure we do what is best for the salmon. By doing this, we, over time, gain the best biological, operational and financial metrics. And we will not rest on our laurels. We have strong ambitions going forward, and we'll continue to be the leading salmon farmer and tap further into the opportunities that lies ahead of us. We have a positive outlook for the period ahead. The biological situation is good, and we must go back 10 years to find similar superior shares on the salmon. We also have record high biomass in both Norway and Iceland with lower cost levels, laying the foundation for increased volumes and strong performance. Guidance for the future has been reviewed and is summarized to the right on the slide. After high global volume growth in 2025, we expect significantly lower global supply growth in '26 and demand for our products remains very strong. People need food and more sustainable food, which we are able to produce 365 days a year, thanks to SalMar's strong setup and employees with genuine passion for salmon. We have then reached the end. Thank you for your attention. Our next presentation is in May. Before then, I assume everyone will have salmon on the menu during both winter, Easter and spring. Thank you very much for following us.