On 26 March, Salmon Evolution completed its first smolt release at Indre Harøy comprising around 100,000 smolt with an average weight of around 300 grams.
“As of June the fish had reached an average weight of around 1.5 kg, significantly exceeding our expectations. The strong performance has continued into the third quarter and the fish now have an average weight of around 2.3 kg, confirming that we are on track for first harvest in Q4 2022,” the company wrote in its report.
In June, the company also carried out an extensive quality testing with very positive results, confirming good fish health and filet quality, firm meat texture, nice and consistent red meat colour, no maturation issues and excellent salmon taste.
On 13 July, Salmon Evolution released its second smolt batch at Indre Harøy consisting of around 230,000 smolt with an average weight of around 125 grams. As of 15 August, batch 2 had an average weight of around 235 grams, which corresponds to a growth rate higher than what observed for batch 1 for the same time period.
All buildings and structural facilities at Indre Harøy are now completed. The remaining construction works are mainly related to installation of equipment and piping as well as system integration.
“As of today, we are holding fish in two of the fish tanks. Over the coming months we will gradually put the remaining tanks into operation following the stocking of new smolt batches and transfer of existing batches into new tanks. We are currently seeing somewhat lower productivity on the construction site which we expect will push the final completion date from Q4 2022 to Q1 2023. We do however not expect any changes in the production plan at this time due to the built-in flexibility during the ramp-up phase,” the report adds.
Phase 1 capex during the second quarter amounted to NOK 190 million (€19.3 million). In addition, NOK 9.7 million (€990,000) of internal G&A was capitalized. With phase 1 now nearing completion and remaining construction work focused on piping, equipment installation and system integration, the capex intensity is expected to come significantly down over the coming months. Following the expected change in final completion date from Q4 2022 to Q1 2023 as well as a lower productivity at the construction site, we now expect full phase 1 capex of about NOK 1,500 million (€152.6 million) compared to earlier estimate of NOK 1,400 million (€142.4 million).
With first harvest now only a few months away, the company has in recent quarters intensified its commercial focus. The company has an agreement for harvest services with Vikenco, one of the leading salmon processors in Norway. Vikenco is located only 10 km from Indre Harøy, facilitating cost effective logistics. Moreover, the agreement with Vikenco ensures that Salmon Evolution will benefit from industry scale harvest costs from day one, rather than building internal harvest capacity at a suboptimal scale. As part of the commercial strategy the company is also working on how to position our product in the market, reflecting a perceived premium quality and alignment with our values.
During the quarter, Salmon Evolution initiated a process with the aim of expanding its fish farming operations into North America and at the same time raising its production capacity target to 100,000 tonnes HOG by 2032, and the company is currently evaluating selected identified potential production sites in North America. To facilitate this expansion, the company has established a dedicated team of both in-house and external resources. Additionally, the company is in the process of incorporating a US corporate structure under its full ownership.
Indre Harøy phase 2 preparations are continuing with focus so far centred around implementing the learnings from phase 1, identifying cost savings and scaling effects from phase 1, defining a cooperation model designed at further optimising the project management and develop a cost budget for phase 2. The company is currently seeing inflation pressure on parts of the project, in particular the parts with high raw material intensity. On the other hand, many raw material prices have come somewhat down over the last months, but there is still significant uncertainty, both in terms of how the market will develop and lead times with respect to the time needed for changes in the raw material prices to be passed through the value chain.
Salmon Evolution has a negative operating result of NOK 25 million (€2.5 million) in the first half of the year