Russian problems eat away at Bakkafrost’s premium

Andreas Witzøe

“There was a pressure on the premium that we normally used to achieve when we had such a large turnover in the market,” said Bakkafrost CEO Regin Jacobsen.

On Monday, Bakkafrost delivered disappointing figures for the first quarter and opened five per cent lower on Oslo Stock Exchange on Monday. For the aquaculture segment, EBIT per kilo in the quarter was EUR 2.23 compared to EUR 2.33 in the same quarter last year.

“It has been a challenging situation for Bakkafrost in the quarter, both in terms of operational, but also in terms of price. This has improved during the quarter and it continues into the second quarter,” said Jacobsen to SalmonBusiness.

The main reason for the weak result are the issues Bakkafrost has been having with access to Russia since November last year. This was settled in late February and Bakkafrost has since regained access to the Russian market, but the figures show that exports to Russia have fallen drastically compared to the first quarter last year.

In the quarterly report, the company writes that volumes sold to Russia has fallen from 32 percent to three percent.

“Norwegian prices”
There was broad consensus among the analysts who were present at Hotel Continental in Oslo that it was a disappointing result from Bakkafrost, well below consensus in the market.

Pareto seafood analyst Carl-Emil Kjølås Johannessen asked if the prices Bakkafrost had achieved in the quarter were more on a par with Norwegian prices. To that, CEO Jacobsen nodded.

Previously, Bakkafrost has sold at a premium, Jacobsen confirmed that the company wants to return there.

“We aim to restore the premium price we have had. Russia’s problems have put pressure on prices and we have had a number of challenges when we had such major upheavals in the market,” said Jacobsen.

Waiting for Russia
“We aim to produce a high-quality salmon and sell it to a market that is willing to pay for quality. And in our value chain, we have a competitive advantage, which means that we have a lower cost price, and therefore we should have a better margin one we have now,” said Jacobsen.

How Bakkafrost will relate to Russia is somewhat more uncertain.

“We aren’t selling as much to Russia as we did earlier, and how it will be, we will see. In the short term, we will not have as much exposure as we have had before, so we will see how it develops,” says Jacobsen.

For 2019, Bakkafrost has contracted 33 per cent of expected harvest volume. The company’s long-term strategy is to sell between 40 and 50 percent of harvesting volume as VAP products with contractual prices.


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