Okay, good morning, and welcome to the presentation of Aker BioMarine's third quarter results. Where me, Matts Johansen, and CFO Katrine Klaveness will take you through the highlights and results of the quarter. I will start with taking you through the highlights. The quarter has developed according to the guiding and the expectation we updated the market with in the beginning of September, and it's influenced, which has been the theme for the whole year, with weak Superba sales and low harvesting volumes. Even though the third quarter is quite weak on Superba, we have now started implementing an accelerated growth plan, and we're starting to see the result, and we feel confident about we will see positive development already in Q4 this year.
When it comes to harvesting, third quarter was a troublesome quarter with difficult harvesting conditions and lack of krill in the areas we were catching. At the end of the season, the last two weeks of September, things opened up, and we got really good fishing the last weeks before we went into shipyard with our vessels. Houston facility is continuing to perform really good. Like it's been the theme every single quarter that they continue to surprise us on the positive side. Has it been also for the third quarter with record low unit cost, which will drive positive margin developments for the Superba segments in the quarters to come. When it comes to Kori, there's been some very positive developments in the quarter.
Two major retail chains that's been testing Kori during 2021 has decided to do a full national rollout in all the stores, also supported with pallet promotions and different campaigns, and this will be really important for the growth of Kori going forward and will have a significant impact on Kori sales, especially in 2022. We have also financed our debt now with a kind of three-bank syndicate, and Katrine will take us through the details of that later. It has given us both better terms and increased flexibility with our banks. Looking at the numbers, we're $8 million lower on revenue in the third quarter compared to the same quarter last year.
As mentioned, the key driver is on the Superba side, but also on the branded side. There are also some decline, and the reasons for that is, as I mentioned, this new retailer that has tested the product are changing the product that's going to be on the shelf, which means they're selling out the current Kori SKU as stock keeping unit and replacing it with a new one in beginning of next year. That's short-term impacting the Kori revenues. Kind of for 2022, it will have a very positive effect. On EBITDA side, $15 million of EBITDA. When you compare to the same quarter last year, it's important to remember that last year we adjusted out the marketing costs related to Kori.
We're not doing that this year, and if you would like to compare apples to apples, it will be $22 million EBITDA last year and $15 million this year. It has been an eventful quarter for the company. The most important news we are sending over the ticker, but a lot of our press releases, you will have to either go to our webpage to keep track on or just follow us on our social media channels, and then you can get updated on all the news coming out of Aker BioMarine. I would like to highlight a few of the events. The first one I would like to highlight is quite recent news about a patent validation in Europe. We have invested quite significantly in R&D.
We've been a pioneer in krill, and we have a active patenting strategy. Our core patents in Europe that protects basically all commercially available krill oils in the market has been challenged by competitors towards the European Patent Office. We won the first round, it was appealed, and we also won the appeal, and now it's not appealable anymore, which means that the patents stand really robust and basically gives us full protection for all commercially available krill oil products until 2028, which is the length of that patent in Europe. The other thing that I would like to highlight is on the product side. We have developed and launched a Halal-certified Superba Krill Oil product that will allow us to address the Muslim markets with our premium omega-three product.
That's important for our strategy in Asia, where that's an important feature to have growth in many of the Asian countries. There are also a lot of things happening on the science side. I want to pull out especially one study that was published during the quarter, and that's a study that covers liver health. Kind of in short words, what it basically describes is that by taking krill oil supplementation, you can reduce the negative effects related to your health related to obesity. This has mainly to do with the liver function. Liver health is something that is growing quite fast, both in the supplement market, but also on the kind of radar for doctors and practitioners worldwide.
The third and last thing I would like to mention is some of the organizational challenges that we're doing. I will get back to the new CEO of Lang a little bit later in the presentation, but we have recruited a new leader for our China and Asian region, Tong Lu, who came as the Deputy General Manager for Cargill China, one of the largest nutritional companies in the world. A senior leader who will be responsible for taking out our full potential both in China and the wider Asian region, and he started just recently. Also, we're doing some changes in the management of Aker BioMarine. I am now interim leading the human health and nutrition segment, which basically is the Superba business, while we are waiting for the new executive vice president for Superba to start.
That person will start in the first quarter, and we will announce who it is when the person starts in the first quarter. A little bit more about our operations. Again, as you know, it's been a really challenging harvesting season. Our vessel's been working perfectly. The uptime is great. Our crew is working perfectly. It's just been a really difficult season, and we need to go all the way back to 2009 to find a similar difficult season. You can see it with our market share, which is 65% year to date, which is an all-time high market share for Aker BioMarine, showing that it's been a difficult season for everybody.
As mentioned in the highlights, luckily, the things improved at the end of September, allowing us to get some really good fishing before we took the vessels into shipyard. Let's hope that's a sign for a positive harvesting season that's about to start quite soon. All three vessels are now in shipyard to do maintenance and also some upgrades and improvements in their processes. We expect the vessels to be back in the fishing field in end of November. We're looking forward to kick off a new season, a new spring, a new spawning, and the start of a fresh year on the harvesting side.
Onshore in Houston, as mentioned, continue to do very, very well, driven by great management, a great team in Houston, and also the effects that we are getting through our digitalization initiatives in the factory. That is driving up the capacity and basically down the costs in Houston quarter by quarter, resulting in all-time low unit cost, which will then reflect in better margins for Superba going forward. We started to have quite large safety stock in Houston now. Since we are now moving over to sea freight and less air freight of our products as we're starting to get more inventory, we're going to aim to have around one year of safety stock, plus minus maybe a couple of months. That's the safety stock level, which is the right level for us to have.
We will then have about three months of stock in transit to customers all the time, and then we have enough to both handle kind of spikes in demand and also if something unforeseen should happen in Houston. Which means that now finally in 2022 we will have the luxury to have a shutdown and do some much-needed upgrades to the Houston factory. There's basically two focuses we're going to have through that upgrade. One is to do some changes in the process to give flexibility to allow us to launch new products, and the other part is automation to continue to drive cost downwards.
The second initiative we have also in terms of managing the inventory levels is that we have started now to roll out krill oil products into the animal markets at a lower price, but still an okay price, in aquaculture, in pet foods, so that we can build a market to take the excess capacity that we expect also to build in the future in Houston. We expect, and based on history, that Houston will just continue to do better and better, as we move along, and we want to make sure that we have a market that can take that extra capacity that's being developed in Houston so that Houston always can run for its full capacity. On the sales side, on QRILL, things are going really well.
There's great demand for our products, both in pets and aquaculture globally. We are able to cover all the needs of our customers, but at the same time, we're selling every kilo, every ton that we are harvesting this year. If we would have harvest more, we could probably also have sold more volumes in these segments. Especially the Asian region is strong. We talked about India before. India has continued to be strong also in the third quarter. Despite all the challenges with COVID, in India, things are moving along good in that area. Also obviously great development in other Asian markets that are focusing on shrimp. On the Superba side, as mentioned, Q3 is quite weak, on the Superba side.
It's driven mainly by the situation in Korea that we talked about a lot of times and soon now we will have the Korea effects washed out. We also are lower in the U.S., but that's mainly kind of intra-quarterly kind of fluctuations. We have, over the last month, implemented an accelerating growth plan for Superba, an initiative that I'm leading myself, where we're doing both short-term and long-term initiative to make sure that we quickly recover Superba back to the old levels. That's progressing well, and we are confident that in the fourth quarter, we will already start to see results of that turnaround and a positive development in the Superba segments. On the branded side, things are going well on private label.
It's a challenging business environment for these type of products in the U.S. today. It is difficult to get components. Simple things like lids on bottles is really difficult to get hold of, and everybody in the industry is struggling. Our operation is working really good. It's a demonstration how well Lang is being run and our private label division is being run, and we are able to keep the service levels to the retailers and keep all products in stock, and basically our best in class among the competitors in this area. We are confident that that will give us new opportunities in 2022 and beyond, because we have demonstrated for the retailers that we have the ability to deliver also when things are difficult.
We have a new CEO for our branded business in place. Seth French, he has been for many years the president of Lassonde Pappas, which is one of the biggest private label beverage companies in the U.S. He's been managing an $800 million business for many years. He's a senior leader that knows the private label space, knows the same customers as we are operating towards, and he's now going to double up with existing management for half a year, and then the old management will retire. Seth comes in with a clear growth mandate, and based on his background and experience, he's looking to expand Lang both in the existing products they have, but also looking into new areas that's natural to bolt on our private label business.
On the Kori side, we talked about the great news of two large retailers that will have significant impact, positive, on the Kori sales going forward. I think it's a testament that Kori is a product that's come to stay. They're testing the product, they're happy with the performance, and they're prioritizing it over lots of other products that are doing well during these times, like immune and other type of supplements. On the revenue side, we have this impact of a switch of the product. So the biggest of those two, they are changing the product configuration, and because of that, selling out what they have, and then starting January, the new product will pop up on the shelf.
We have also now launched on Amazon. If you remember from back in the day, we had an agreement with the retailers not to go on Amazon. But given the recent developments of Amazon during COVID, we have, in agreement with the retailers, now also decided to launch on Amazon. We started that in August, and that's also developing positively. I would say that we're well into now the planogram process for 2022, where they are kind of resetting the shelves in April, May, June. All feedback from all the retailers so far is that everybody is staying shoulder to shoulder with Kori also into the next year. No, sorry, I have one more. That is, yeah, just looking at the numbers.
You can see here the Q3 sales out of stores are down a bit, driven by this retailer that we just talked about. If you look at all the other retailers, they are growing according to the pace that we have seen earlier. On the marketing spend, you can see the reach is lower, but it has to do that we are now targeting much more the right consumers. Because of that, we are wasting less of the reach. Still kind of very focused in the marketing efforts. Also we have now taken all the data and all experience from 2021, and in 2022, we're launching a completely new campaign and marketing concept for Kori based on all the learnings that we have done and gotten since the launch. Katrine, you'll take us through the finance.
Good morning. I will take you through the financial figures for the third quarter in this year. The quarter is in line with our most recent guidance, but still, nevertheless disappointing compared to third quarter last year. Revenue is $62 million for the quarter, down 11% compared to Q3 last year as a result of lower Superba Krill Oil sales and lower Kori sales. With a significant drop in our high margin business, Superba, in addition to not adjusting out the marketing spend for Kori, the adjusted EBITDA is significantly lower with a reduction from $27 million last year to $15 million Q3 this year. The corresponding adjusted EBITDA margin is 24%, down from 38%.
Net interest bearing debt is $305 million, up from $222 million last year, and this is due to the inclusion of the Antarctic Provider debt facility in February this year. Sharing a bit more details per segment. Moving to the ingredient segment. Sales in the ingredient segment was 21% down compared to Q3 last year, where a continuous lower level of Superba sales in South Korea and the U.S. market accounts for most of the decline. The Superba sales were down 42% in the quarter, driven by zero sales to South Korea this quarter and lower sales to certain U.S. customers. For the QRILL Aqua category, sales were in line with the same amount or same period last year.
Adjusted EBITDA ended at $16 million, down from $23 million, with a corresponding adjusted EBITDA margin of 39%, down from 45%. Gross margin for the segment was 35%, down from 46% Q3 last year. For QRILL Aqua gross margins increased compared to same period last year due to cost improvements in the offshore sector. Gross margins for the Superba Krill Oil decreased compared to same period last year, mainly due to more expensive Nutramil, which is the main raw material that goes into the production process. Cost improvements have reduced our SG&A cost base for the segment despite higher freight costs, increased customs and duties, and also unfavorable FX rates in the quarter. Finally, the company has done a rebalancing of its fuel option portfolio and sold a portion to match expected fuel usage going forward.
This has resulted in a gain of $2.5 million that is booked as other operating income for the quarter. Taking a look at the production volumes, offshore production was 7,196 tons for the quarter, and Q3 year-to-date volumes of 40,700 tons puts us in the communicated range between 40,000 tons and 45,000 tons for the full year. Depending on harvesting conditions in November and December, we expect to be more or less on par with last year's production of 45,000 tons. The vessels are expected to arrive back on the fishing ground late November to start the new season. Onshore production continues to grow quarter by quarter. The 2000 by 2022 project is near completion and is showing the intended effect with regards to the bottlenecking and capacity increase.
Inventory of krill oil is growing as a result of higher production and lower krill oil sales, and with the ambition of moving all customer freight of Superba from air to sea transport, we see the necessity of increasing our safety stock up towards 12 months. This is also supported by shelf life now being three years for the krill oil. In order to avoid building additional capacity in 2022, we are considering, as Mats alluded to earlier, to take the opportunity first half next year, do a longer shutdown of the Houston plant for certain upgrades and digital improvements. Moving on to the brand segment. Sales in the brand segment were down 11% from Q3 last year. Lang, the private label business, is stable compared to Q3 last year, while Kori is down as a result of the SKU discontinuation that Mats mentioned.
Gross margins for the brand segment are fairly stable at 22%. EBITDA margin is down as a result of the Kori marketing spend not being adjusted out of the EBITDA, hence driving SG&A cost in the brand segment up. The marketing spend for the quarter was $1.4 million. In addition, the brand segment has adjusted for an accounting effect for the compensation package for the new CEO that is accrued for in its totality in Q3. In the profit and loss, I would like to draw your attention to five key topics. First, we see a positive development in the SG&A cost base as a result of a number of cost initiatives. Our cost program is in full force and will continue in 2022.
Other operating income reflects the rebalancing sale of approximately 20% of our fuel option portfolio, resulting in $2.5 million that is booked as a gain. Net financial items reflect the lower estimated earn-out from the Lang transaction. As we now move closer to the end of the earn-out period, and with more visibility on the final year, 2022, this number has been adjusted down to $12.3 million, which is now the total expected earn-out payments. Depreciation for our operational assets is up in the quarter because of the accelerated depreciation profile on La Manche in relation to the sale of the vessel. Finally, we are showing a net profit for the quarter and year to date, but this is due to the Lang earn-out reduction of $19.7 million affecting net financial items positively.
Moving on to the balance sheet, another five topics I would like to mention. Property, plant, and equipment includes the sale of La Manche this quarter, as well as the inclusion of Antarctic Provider first quarter 2021. Inventories are now above $150 million by end of September. High production in Houston combined with low Superba sales are driving this development. Derivative assets are related to our fuel hedge. The mark-to-market value on the remaining portfolio is booked here. While the change in value, the gain/loss, since last period is booked as other comprehensive income. Realized gain is booked towards the fuel cost and rolled out as a lower COGS. Total fuel cost savings year to date, which is reflected in our COGS, is $3.2 million.
Change in interest-bearing debt reflects the inclusion of Provider earlier this year, while change in other non-interest-bearing debt includes the lower earn-out commitments to the previous owner of Lang. The Tax Appeals Board ruled in favor of Aker BioMarine in an old tax dispute regarding a total amount of NOK 297 million in tax losses carry forward. This is an off-balance sheet item for now. Finally, the company had an equity ratio of 50% end of September. As Matts stated earlier, we have agreed a new financing structure with our bank group. One new bank is invited into the new bank syndicate, totaling now three banks.
The facility is a sustainability-linked facility with attached ESG KPIs that will lead to lower margin if the KPIs are met on an annual basis. The new agreement will take us from a somewhat scattered financing structure with a number of loans and tranches to one facility with three tranches, also reducing annual amortization profile as we increase the revolving credit facility part amount versus the term loan amount. The structure is more favorable with more flexibility on both covenants, dividends, and de-indebtedness, and it also includes an uncommitted accordion of $100 million. The new facility carries the same financial covenants as the existing structure, but the threshold for the leverage covenant is increased, creating more headroom for the company in the near to medium- term. We expect the loan documentation to be signed and executed during Q4.
Finally, cash flow from operating activities was positive in the quarter due to favorable development in working capital. The Lang earn-out element is adjusted out from other P&L items with no cash flow effect. Changes in working capital reflects a high realization of customer receivables this quarter, netted out with additional inventory buildup. Net cash flow from the quarter was $7.3 million. With that, I leave the word to Matts to conclude the presentation.
Thank you, Katrine. I just want to remind you that we will have a Q&A session at the end, and you can just type in your questions in the comment field here on Teams. Then Kalle here sitting on my right side will you know go through the questions with us at the end. On the concluding remarks, I think both for the company and I think all the investors, there's two focus areas and that is the turnaround on Superba. That's something we are really committed to. We have a plan in place. We have implementing it. We're starting to see results of it, and we're looking forward to present the fourth quarter and show the results that's coming out of that plan.
We will also soon have a capital market update where we will take you through much of the details of that plan, so you can also see what we're planning to do and what we have also already done. That's kind of priority number one, and priority number two is to make sure that we have a good harvesting season in 2022, you know, starting when the vessel comes out end of November this year. We have made certain upgrades to the vessels so that they can increase the capacity and utilize the harvesting in a better way. Hopefully, the year that we just went through was a blip and that we will go back to a more kind of normal harvesting season coming now in the next year.
We have also done certain investments in technology and drones that will help us search and find the krill and make sure that we can level out some of the natural variation that you sometimes will find in a fishery. There's a lot of good things that's happening in Aker BioMarine in innovation in different areas. For us it's those two focus areas that we have. Demonstrate the turnaround for Superba and make sure that we have a good harvesting season next year. When it comes to guiding going forward, we have our guiding unchanged from what we gave you in September. Offshore production is expected to be between 40 and 45. As of end of Q3, we have just passed 40, which means that we will be within that range.
It depends on the harvesting in fourth quarter on how much above 40 we will be. We expect Houston to continue with strong performance driving unit cost and margin down and margins for Superba up. We expect the total revenues for the company to be somewhat lower than last year and an adjusted EBITDA margin of between 15% and 17%. At the end, I would also like you to kind of book your calendars.
December 1st, we will invite to a capital market update, where we will take you through both the short-term initiatives and actions we are doing now to address mainly those two things that I talked about just now, but also take you through the more longer term perspectives for Aker BioMarine, the key value drivers, and also the outlooks going forward. An invitation will be sent in a couple of weeks. The date is set as December 1s, 2021. With that, we can open up for questions.
Thank you, Matts. Not surprisingly, quite a lot of the questions are regarding Superba. First one is from [Kristoffer Olsen, DNB Markets]. Can you please elaborate regarding the sales drop in Superba, especially in terms of zero sales in South Korea and what happened in the U.S. during the quarter?
Of course, we have still sales in Korea, so that's just more when the order comes in. We got some orders in Q2 and they didn't have any new needs in Q3. That's the reason for that. Korea continued to kind of be on the lower level, and a part of our kind of accelerated growth plan is a comeback in Korea. We will go through that in more detail in the capital market update. When it comes to the U.S. situation, I would say that what we're seeing in this quarter, it's also a little bit on timing when customers are placing their orders. We're seeing quite positive development, I would say, in the overall U.S. market now. We hope to demonstrate that in the fourth quarter when we present our results there.
One more follow-up on Superba. You answered some of it, but can you please add some more color on the expectations for Superba for Q4 and 2022?
Yeah, no, we won't give any guidance other than saying that we are already now seeing good effects of the acceleration plan that we have put in place, and that we feel confident that we will see a positive development in fourth quarter. The same when it comes to 2022, we will not give any guidance on that. We will provide some more data and kind of outlook in the capital market update. For now, we will not provide any kind of update on that, other than saying that our focus is to get it back to the old levels and continue to grow it.
Good. [Simon Brune] is asking also that on Superba, but what is your approximately year-on-year growth in Superba comparing third quarter 2020 to this third quarter if you exclude South Korea?
Yeah, we don't have to do that math. I think it's a majority of it is related to Korea. We can maybe follow up on that afterwards.
It's quite a lot of Superba questions. I think we have broadly covered. Maybe a somewhat elaboration is asked on sort of prospects of sales in Superba going forward.
Yeah. There's quite large potential for Superba and a big base of prospects that we're following up now in a systematic way as part of this growth acceleration plan. We have in our most successful markets between 20% and 30% market share in the overall omega-3 space. But globally, we are about 3%, 4%, which means that there's a lot of room for growth, and it's all about teaming up with the right brands that have distribution that are investing in marketing, and then you can grow it to those 20%, 30% market share. That's our focus, and we have lists of prioritized prospects that we're following up systematically.
Thanks. [Carlo Mealy] is asking, "When do you expect to start selling Superba to the pet and aqua feed segment?
Quite soon. We have already a team in place that are out now, talking to the players or the companies in those segments. Let's say within the next six months, we expect to ship the first volumes in that segment.
Any comment to the pricing into that segment?
No, I can't comment on that. Although that it will be a low-priced segment, not a big margin driver. It will have some margin contribution, but the main function of it is to allow Houston to maximize its potential from capacity and drive unit costs down so that we can get higher, even higher margin on the Superba side.
Moving over to a couple of Kori questions. One from anonymous here. Kori sales looks weak. How much are you willing to invest, and for how long, given the weak performance?
Yeah, I think you look at Q3, and it's weak when you look at it kind of isolated like that. Looking at the recent events that I went through both with the new retailers that tested it on the shelf and are happy with the performance and the feedback that we're getting from the existing retailers too, we are confident that Kori will be a success. We will probably. This year, we're investing about $11 million in Kori to drive that growth. We will most likely continue to do some investment also in the future. As it grows, the need for investment will be lower and lower.
Thank you. Switching to harvesting, there is a question from anonymous again. If the harvest was as expected, here indicated 60,000 tons-70,000 tons, what would you do with the product?
We would sell some of it, and we would have built up a stock that we would gradually build down. The QRILL Aqua segment's been growing about 17%-20% per year the last couple of years, and expected to continue to do so. We would gradually kind of build up to those type of levels.
AION, what is the timeline of the potential IPO?
Yeah. We are in the process now of spinning out AION. We're actively working on that. Not sure if we will IPO it. Now we are looking at all the options. It depends on what kind of the market conditions looks like. Definitely, we are now looking at spinning it out right now.
Any updates on LYSOVETA?
Yes. LYSOVETA is developing very nice. We have new partnerships coming up on the science side. We are working now towards the regulatory approval for the dietary supplement segment, where we expect to have the approval end of 2022, and then we'll start to open up that market. On the pharmaceutical partnership side, we announced this partnership with MD3 earlier this year. That's been taking longer time than what we expected, but it's moving positively, and we hope to be able to announce a deal related to that in the not too distant future.
A question for Katrine Klaveness. What is the interest rates and covenants on your new debt facilities?
We have detailed that out in note 10 in the Q3 report. We now have leverage covenants at 5x adjusted EBITDA. We also have increased the thresholds for the next three quarters. We are actually 6.5x in Q4 2021, and then going down to 6x and then 5.5x before we go back to the 5.0x onwards after Q3 2022. That should give the company good headroom for improvements.
Last question. Do you have any thoughts, plans about sponsoring fitness profiles or other famous people on social media in, for your products? It's [Arling] who's asking.
Yes. Kori is actually doing that. They are using influencers quite actively, and that's typical with these fitness profiles that they are working with. Also some what we call in the U.S., TV doctors, famous doctors that are promoting the products. I think also for those that follow us on social media will see that we yesterday or the day before, we also launched a partnership within esports, where we are teaming up our customers with the leading gamers and influencers to address the fast-growing hardcore gamer community that are actually focused on nutrition and health to be able to perform better as gamers.
That concludes the Q&A session.
Thank you, that then concludes the presentation today. Looking forward to see you during the capital market updates first of December, and looking forward to share more of our plans and actions and what we're doing right now. Looking forward to see you in the fourth quarter presentation, and to show a little bit more results of the work that we're doing. Thank you.