Ladies and gentlemen, good morning and very much welcome to the first quarter presentation for AKVA Group. The agenda for this morning is that I will do the highlights and the outlook. Ronny Meinkøhn, the CFO, will do the financial performance, and then we will do a Q&A. Please post any questions during the presentation, and our moderator will read the question during the Q&A. Starting with the highlights for Q1 on the operation, we had a high market activity with order intake of NOK 1,048 million for the quarter. We had some negative EBIT impact from cost inflation and supply chain restrictions. Come back to that later on. We enjoyed some profit from the sales of the shares in Atlantis Subsea Farming, which was completed with a gain of NOK 33 million.
Later in the presentation, I will also give you an update on the progress we are making with regards to our innovation and digital agenda. Starting with the high level numbers for the quarter, we had a revenue of NOK 849 million, which is representing a fairly high activity level. EBITDA came in at NOK 102 million at the group level, and EBIT NOK 59 million. Overall, fairly good numbers. However, please note that the EBITDA and EBIT is also inclusive of the profit from the sales of the shares in Atlantis with the NOK 33 million. Because of that, I will also explain the quality of the earnings on the next slide. The underlying quality of the earnings is certainly impacted by some major macro events.
COVID has been there for quite a while, and also what is certainly new for the quarter is the Russia-Ukraine war, which has certainly intensified the inflation and supply chain restrictions worldwide and has significant implication for AKVA's profitability. A few examples there. We have seen in a few cases some exponential increase in freight rates. Generally speaking, we have high energy prices. We have also increased price level on certain raw materials and in particular some electronic components. And also a bit more minor, but we also see some delayed progress on some land-based projects. If I were to elaborate a little bit on the first one, because that's the big ticket, that's roughly 40% of the total negative EBIT impact of NOK 30 million.
40% ballpark is related to freights. It's basically one incident or one issue, and that was two barges which we completed in a shipyard in Vietnam. We had a cost overrun of double-digit numbers for bringing those two barges to Norway compared with what was the sold freight cost. That is one single incident costing quite some money. The good news is that we already changed our contract practice back in July last year, meaning that as of July a year, almost a year ago, we are selling everything Ex Works, meaning that the customer is now paying for the freight. We have kind of closed that issue, but it came with a cost for this quarter.
The other two examples with the high energy price and some certainly inflation and price increases on key raw materials or in particular some key electronic components, that is in a way more structural. How to see that is that typically in our order backlog, we have on Sea-Based, as the example here, we have three to six months of delivery time on our order backlog. What is in our order backlog, there we have fixed prices. We do not have mechanisms for inflation adjustment or cost regulation mechanism in the short-term order backlog. What we have to do is basically to reprice and pass through cost when we enter into new contracts.
That's basically what we are doing. We are doing all kind of contract management and mitigating actions as much as we can, also with the limitations the market and the competitor scenario will give you. That's very much the dynamic there. We are not immune if you have very short-term kind of price shocks. Generally speaking, we have a relatively robust pricing model. With regards to land-based, in the past it was no tradition for price regulation mechanism during the life of the contract, but we also changed that practice during 2021. That will all be more back-to-back going forward. Finally here, just an update on the Russian situation.
First of all, AKVA has the view and has made the stance that we will not enter into new contracts in Russia in the foreseeable future. Given all the hassle or complication there with the sanctions, payments, freights, et cetera, we will, for the time being, not do any more business. How important is the Russian market for us? Over the last years, it has accounted for about 5% of AKVA's total revenue in recent years. But also there are some piece of good news that all existing contracts have been delivered and fully paid, so we now have a clean sheet there. Very interesting to watch the salmon price these days.
It has been kind of spiking, so a very, very strong sentiment there. For us, that's certainly important because that's fueling a high activity level going forward. That's our expectation, and we see that also in the marketplace, quite good activity level. No doubt that HORECA hotel, restaurants, catering segment is coming back, so that's good. The expectation for the year with regards to salmon supply is a very low growth, if any, for the year. Also, we see that forward prices for the full 2022 and next year is now reaching a new level, so maybe the new floor is set to be NOK 80. This is very positive. Also for the quarter, we had a solid order intake of NOK 1.048 billion.
NOK 254 million within land-based. We got two new post-smolt contracts in Norway, one for Tytlandsvik, step number four there. Also we got an add-on for Mowi, Nordheim as well. Also strong order intake for Sea-Based. Order backlog is now at NOK 1,849 million, so that's a good step up from the last quarter, so that's fine. Please also note that the order backlog is adjusted for the land-based ongoing contract related to AquaCon. The situation with AquaCon is still. We are still working with AquaCon. We support the project. However.
However, in the U.S. in particular, we see a very high inflation related to building and construction costs these days, so that means that the project will be delayed, and project start is currently postponed. Because of this, we have taken the project out of the order backlog with the NOK 1.3 billion. Moving on to an update on strategic status. We really see a strong fundamental for salmon now in the coming decade or the way to, all the way to 2030. We think there is appetite for salmon, driven by the key demand drivers on the right-hand side. There is a very positive sentiment for consumption of salmon.
Basically, there is a real consensus there that the demand potential is gonna stay at 5% on a price neutral basis. That's what all players or analysts and everybody believes. However, we think that the supply potential is way less, and that's probably at max of 3% annual growth. There is a massive, I call it window of opportunity between supply growth and the demand potential. If we look a little bit more into this, upper left, a repetition of the demand potential, with 5% annual growth. Then in the midst there, the conventional production, which is typically the sea-based production today based on the traditional technology we see.
We believe that the max growth there, very much driven by Norway, is not more than 3% year-on-year. That leaves a huge supply gap or a window of opportunity for land-based and other technology. We believe that the AKVA Group implications of all this is still a very strong cage farming segment with at least double-digit growth year-on-year to total market and also exponential growth in land-based revenue. Why do I say double-digit growth in the cage farming segment when the volume growth for salmon is 3%? That's because of modernization, professionalization, more exposed sites, et cetera. That's why you have a growth on the technology which is more than the biomass growth.
If we dive into the land-based segment, we have the traditional smolt market that is rather stable. Then we have in the midst there the post-smolt segment, which is the salmon in between or the smolt in between 250 and 1,000 gram or a kilo. We believe that the post-smolt segment is now a very proven concept in our view. You have seen several sites being constructed in the last few years. Our key reference is Tytlandsvik, which produced 3,000 tons of post-smolt and on average size 750 gram, with less than 1% mortality and a FCR of 0.87. That was the biological results of last year. This year they will produce even more.
The very same fish produced by Grieg Seafood went very well in the sea. You basically stock 750 gram, and you harvest five kilo of fish eight or nine months later. That fish went to harvest without any sea lice treatment. The combination of post-smolt size of up to one kilo, short production time in sea, less or if any sea lice treatment, that is a win-win. We think that's the best growth opportunity you have in the Norwegian market these days, that combination. Because you typically can utilize your license even more, plus the additional growth you get on land. That combination, we see a great interest for that now when we start to travel and visit a lot of customers following COVID.
We are pretty hopeful that the post-smolt market will see a very strong momentum in the coming years. Finally, the grow-out segment. We still believe and repeat that the fundamentals there in our view is unchanged. We believe that a complete cycle on land, a grow-out of four to five kilo, is really part of the solution to close the supply gap going forward. Our strategy, or let's call it innovation agenda for the land-based farming. The building block number one is about the RAS technology as such. There we have our market-leading zero water concept, which enable the farmer to produce with as little water consumption as possible.
Building block number two is about the other technology which is needed in addition to the core RAS technology. That's the feeding, the fish tanks, the fish handling, the camera, the lights, the sensors and the control system. There we have built a very strong R&D organization, which is fully dedicated for doing those R&D projects. I can report that we have very good progress within several of those projects, and we will commercialize. For instance, feeding, the fish handling will be commercialized later this year. Also, we have a strong digital team in place for box number three. Also number four, we have a strong team in place for offering production advisory services. Those are specialists in RAS and fish health.
Overall, if we take the internal approach here, we are really building our capabilities within land-based, stronger projects, organization, more specialists in supply chain, contract management, R&D, and even within sales. We are certain that we are gonna harvest from that, all the investments we are making and all the organization we are building up, or the capabilities we are building up. That's positive. Of course, in the short term it comes with a higher OpEx. The CFO will elaborate a little bit more on that one. On the Sea-Based solutions, we call it precision farming, and it's about also therefore building blocks, marine infrastructure for secure containment and efficient operations. Precision feeding for optimizing feed conversion and growth.
Digital support the precision farming with leading open, and that's important, and modular digital solutions. Then we also have a lot of focus on deep farming. Let's talk a little bit more about deep farming. Deep farming comes with quite some clear benefits. You avoid or reduce the unwanted surface influences like sea lice, algae, currents and high temperature. Better fish health and reduced mortality, and also improved fish welfare and reduced frequency and cost of the reactive sea lice treatments. Nautilus is a concept we now have tested in full scale production together with SinkaBerg-Hansen in the Rørvik area.
Now basically the concept is about bringing down the salmon 20 or 30 meters below the surface, and they are kept there during the whole production and oxygen is supplied via an air dome. By doing that, the theory is to bring it below the sea lice belt and we see that working now together with SinkaBerg-Hansen. They have three full sites operating with the Nautilus concept, and that's altogether 26 cages and nets. One complete site is now harvested, fully out, and without any sea lice treatment. The smolt started at ballpark average size at 150 grams, so it's really a full production cycle. Without any sea lice treatment.
We believe that has not happened in the Rørvik area for 20 years. This is very, very promising. I can report that we have many leads on new sales for this new technology. Moving on to digital and those are the key digital trends in aquaculture we see. We believe that the future is truly digital. Radical changes is needed to meet the supply demand with more sustainable solutions, and we are working equally with both solutions for land-based and also Sea-Based farming. We do that on the back of the three mega trends for digital within aquaculture, which we believe is remote operation, precision fish farming, and business ecosystem to unlock the information throughout the whole of the value chain.
Overall, we are truly stepping up and also investing in our digital capabilities. We have a three-year plan approved by the board to invest some NOK 40 million annually to accelerate the AKVA digital agenda. We expect in a few years that digital will become a strategically important for AKVA with attractive returns. Those are the three key solutions we are focusing on is AKVA observe, which is our AI solution, artificial intelligence solution, also based on ML, machine learning. That is to automate the feeding, which today for the most part is done manually. Today we have already installations on 34 sites around the world, salmon world, and we have a good momentum with regards to commercialization, further commercialization and sales there.
Also, AKVA fishtalk, we have 60% market share, and this is more the kind of fish ERP system for the planning and the biological steering and control the production system. AKVA connect is bringing the hardware and the software together, and there also we have a fairly high market share. We have during gradually during 2021 and also this year, we are stepping further up. We are making considerable investments within AKVA digital with the focus on building a strong team. Altogether, we have 120 people within the digital team, and we think that's by far the strongest team within digital within the space of aquaculture. We have strengthened the digital leadership with a new team, also product management.
We acquired last year 1/3 stake of Observe, the AI company, outside London. That brings me very much to the end. Starting to the left, we are focusing on our organic top-line growth. We don't foresee any major M&A. We are really focusing on building on what we have, investing in what we have, and having a strong operational excellence program in place. On the right-hand side, we are stepping up our innovation spending, both for our innovation agenda on land-based and Sea-Based as well. The three digital platforms, AKVA connect, AKVA observe, and AKVA fishtalk. We are gonna step up our EBIT over time and improve ROIs in direction of 15%, in a couple of years.
That's very much the end of my presentation. Now, Ronny Meinkøhn will give some more details with regards to our financial performance. Please, Ronny Meinkøhn.
Thank you, Knut, and good morning to everyone. I will start with the consolidated income statement for the first quarter of 2021. The activity was high during the quarter, both with regards to the revenue level and also the market activity. The revenue came in at NOK 849 million, which is NOK 130 million above Q1 last year. Adjusted for the sales of Atlantis, that's included with the NOK 33 million in revenue. The total revenue was NOK 97 million above Q1 last year. EBITDA ended at NOK 102 million. That's 19 million above last year, while EBIT came in at NOK 59 million and 23 million above Q1 2021. The profit from the sale of Atlantis, that's included both in the EBITDA and EBIT numbers with the NOK 33 million.
Adjusted for this transaction, the profit in Q1 was below last year. As Knut stated, the profitability in the quarter is negatively impacted by cost inflation and then global supply restrictions. In general, we have experienced high pressure on profit margins during the quarter. As pointed out by Knut, we have implemented several mitigating actions to manage this challenging situation. Lastly, the financial items, that's NOK 11 million in Q1. That is down from NOK 17 million in Q1 last year, and the reduction is all related to our investment in Nordic Aqua Partners and the development in the share price. What's included with that decrease in market value of NOK 7.5 million in Q1 last year compared to a decrease of NOK 1.4 million this year.
The book-to-bill ratio is close to 100% the last 12 months, with both order intake and revenue close to NOK 3.3 billion. Revenue increased by 18% in Q1 compared to last year, and adjusted for the NOK 33 million on Atlantis, the increase in revenue was 13%. In general, we see a strong momentum and increased activity in all three business segments compared to last year. Looking at the markets, we have increased revenue in all our markets in Q1 compared to last year, except from Europe and Middle East, due to the situation in Russia. We also see a strong increase in the Nordic market of 14%.
As in Q4 last year, the revenue in the Australasia market is just north of NOK 60 million in Q1 this quarter. It's mainly related to the full grower project with Nordic Aqua Partners in China and a smaller land-based project in Korea as well. The Sea-Based revenue, that's still the major part of our revenue with a share of 80% in the quarter, the same level as last year. However, we also see a positive development within both land-based and digital with significant increased activity level compared to a year ago. EBITDA NOK 102 million, 12.1% in the quarter. That's NOK 19 million above last year. Adjusted for the NOK 33 million in Atlantis profit, EBITDA is NOK 14 million below last year. EBIT of NOK 59 million, that's 6.9%.
Also on a like-for-like basis, adjusted for the Atlantis transaction, the EBIT was NOK 10 million below last year. As we already stated, the macro events resulting in global supply restrictions, high cost inflations, had a negative P&L impact of NOK 30 million in Q1. The main part of these costs sits in our Sea-Based segment. We are, of course, striving to reflect the cost inflations in the pricing of new contracts, and at the same time we have initiated several internal improvement projects to reduce the cost base of our products and to improve our competitiveness. The financial position at the end of Q1 is strong, with available cash of NOK 561 million.
As mentioned during the Q4 presentation, we are refinancing our credit facilities, and we have signed a term sheet with DNB, and we expect to finalize the agreement during May. This will add another NOK 200 million in available cash compared to the existing facilities. The available cash was reduced by NOK 42 million in the quarter. On one hand, we have the positive EBIT contribution of NOK 59 million, which was offset by CapEx of NOK 46 million and payment of interests of NOK 10 million. The reduced available cash, it's all related to net working capital, which increased from 11.6% in Q4 to 12.6% at the end of Q1. That's an increase of NOK 47 million.
This increase is partly related to some slight delays on two major payments from customers. They both were paid during April, so we are fine about that now. The main part of the increase, that's related to the inventory. We have increased the inventory quite significantly during Q1 as a mitigating action related to the supply restrictions and the cost inflation. First, we need to ensure that we have raw materials and key components available in a much longer time horizon than we used to plan for. Secondly, we need to increase our stock to secure profit on new sales. Last, NIBD/EBITDA ratio was reduced from 3.1 in Q4 to 3.0 at Q1 this year.
Development on the return on capital employed is positive, increased from 5.6% in Q4 to 8.1% in Q1 this year. We keep our strategic guidance unchanged and still believe that the ROACE of a minimum 15% by the end of 2023 is achievable. As we communicated during Q4, we paid a dividend of NOK 1 per share in Q1, and this dividend was paid on March 11. Some more details on the various business segments, and I will start with the Sea-Based technology. Overall for the business area, we see a positive development with regards to activity level.
Both revenue and order intake increased strongly in the quarter by 15% and 34% compared to Q1 last year. The Atlantis revenue, the sale, the NOK 33 million also sits within the Sea-Based revenue, so adjusted for the Atlantis transaction, the revenue increased by 9% in the quarter. EBITDA came in at 13.9% or 9.5% adjusted for the Atlantis, compared to 11.7% last year. The underlying EBITDA margin is lower than last year due to the cost inflation and the supply restrictions we have already mentioned. The Nordic region is strong with an increased revenue of 19% and an increased order intake of 16% in the quarter.
On a like for like basis, the revenue increased by 11% adjusted for the Atlantis, and this is mainly driven by strong activity in our nets business out from Egersund Net. In the Americas region, the revenue increased by 14% and there's still very strong momentum in Chile. Order intake in this region saw a strong increase by 176% in the quarter compared to last year and this is mainly driven by high order intake in North America with the three new barges. In Europe and Middle East, we clearly see the effect from the situation in Russia with reduced activity in our export business.
All existing contracts with our Russian customers, they are delivered in Q1 and are fully paid. We have also decided that, as Knut mentioned, not to enter into any new contracts in Russia. The revenue and the order intake was down by 7% and 29% in the quarter. Our recurring revenue represented 27.5% of the total Sea-Based revenue in the quarter. That's NOK 8 million lower than last year. However, if we adjust for the divestment of AKVA Marine Services back in Q3 2021, there is an increase in revenue of NOK 7 million. We see acceptable activity level at all our service stations during the quarter, and it was at the same level as last year. Land-based technology.
A decent acceptable order intake in the quarter of NOK 255 million. That's mainly related to the two new post-smolt contracts in Norway. Revenue increased by 32% or NOK 36 million in the quarter compared to last year. Close to 20% of this revenue is related to our contract with Nordic Aqua Partners in China. This project is progressing according to plan. The EBITDA of NOK 4.2 million in the quarter, that's down from NOK 9.4 million last year. The slow financial performance is all related to lower than expected activity level.
During both 2021 and also in 2022, we have invested significantly in the land-based organization with a high focus on improving our innovation capabilities, our innovation agenda, and also the project execution capabilities. A total of 550 new employees have joined the land-based organization the last 18 months. We think the organization is now complete and ready to take on a significant higher activity level. However, due to slow financing of new full grow out projects, we still think that it will take some more time before we see a significant shift and increase in activity level.
Based on the current cost base in this business segment, we need a run rate of closer to NOK 1 billion in annual revenue until we can deliver a respectable and decent profit from this business segment. Then lastly, the digital segment. The activity level in Q1 2022 was 50% higher compared to last year. Strong growth both in Nordic and in Americas. The EBITDA margin is however down from the high 34% in Q1 last year to 20.2% this year. We also discussed this during the Q4 presentation that the reduced profitability, that's a result of the increased investments and ramping up the organization within digital.
The development of this business segment, that's in line with our strategic ambition. However, on both short and medium term, the earnings will be somewhat soft from this business segment.
Okay. Thank you for your attention. Knut will now continue with the outlook.
Okay. Thank you very much, Ronny. This is the summary and outlook. The salmon prices is expected to remain strong, driven by reduced supply. That calls for a pretty high activity level in our segment. On the other hand, the uncertainty related to supply chain restrictions and cost inflation may impact the profitability. Just one little reflection on the salmon price and the fundamentals. I've been 25 years in this industry, following the aquaculture industry for many years, and the way I see it, for the time being, the fundamentals are really strong, stronger than I ever can remember.
I believe the next five years plus is gonna be very strong when it comes to the salmon price and also the activity level. That's just my personal reflection. The order backlog for AKVA Group is solid and forms a good foundation to execute our organic growth strategy. Also, long-term fundamentals remain unchanged as presented in our capital market day 1.5 year ago. The digital solution is, as already stated, an important part of AKVA Group's total product offering, and the company is gonna continue to invest in new solutions, both within Sea-Based and the land-based technology. That brings me very much to the end, so we are now prepared to start the Q&A session.
Please post your question on the line, and then our moderator will read the questions. So far, no questions, so you have to hurry up.
We have no questions for today?
Last time you did very well. We had 15, 20 questions. You have to beat that one. Probably a busy day with many presentations. Are there no questions?
We have one.
Okay.
It's from Carl Emil Johannessen. How would we think about the margins in cage-based for the rest of 2022? Will the impact of cost inflation, and supply chain issues be similar as in Q1, or should we expect a better or worse situation?
I think there were some specifics for Q1. That was the freight example. That is not gonna repeat itself later in the year. That is at least a positive one. That was roughly half of the cost or the inflation issue in Sea-Based. At least that is calling for some gradual step-up. Very hard to give guidance in this environment, but we know that at least 50% of the ticket is not gonna repeat itself.
Mm.
We hope that we will see a gradual step-up. We are also hunting for passing through the cost increases as well. This world has been more dynamic than ever before, very hard to give guidance. With information we have today, we hope to see some gradual step-up.
Yes. We have two questions from Mr. Hokeness. On page 22 in your presentation, you state last 12 order intake was NOK 3.285 billion, but you have taken out AquaCon now in your order backlog, representing NOK 1.3 billion. How do you explain that?
Can you repeat the question?
Again.
Why we took out AquaCon? Was that the-
I think that was the question.
Okay. Yeah
We booked this as order intake back in Q3.
Yeah
21.
Yeah.
Yeah.
We did that seven to eight months ago. We had some expectation based on the information from the company that the project start were gonna happen something like mid this year. Now we are informed by the company that that is gonna be delayed and postponed due to spiking CapEx or building and construction costs in the U.S. Because of that, we think it's more correct to reflect this uncertainty and take it out of the order backlog. That's, of course, not a very desired situation, but we have to stay close to reality. That's basically what happened there.
Yes. A follow-up question from Mr. Hokeness. If you have taken out AquaCon, shouldn't you write down the investment made there?
Fair question. We are still working very closely with the company. The project is making good progress. We have been doing a lot of engineering also on the civil side. The company, AquaCon themselves, they believe this project will happen but somewhat later than planned. We share that view now. We have invested ballpark NOK 30 million in the company. Of course, we will give that another evaluation later in the year. The way we see it today, we think the project will happen but later on.
Question from Mr. Nils Thomassen. Do you expect to be able to increase margins in Sea-Based going forward if the industry book-to-bill goes above 1x, or is there excess capacity out there?
In Sea-Based, of course, scale effect in our business is also very, very important. Activity level is the number one positive driver for us. If activity level is gonna be fairly much higher than it used to be, then we will have scale advantage of our operation, and then everything else equal, you will see some margin step up. That's driven by higher activity and scale. The other driver is about our production innovation or technology innovation program and just one example there, we are hopeful with the concept of Nautilus.
If that is taken up by other farmers, you can also see some increased activity level because the farmers believe that's a winning concept. However, it's always a slow trend to implement fundamentally new way of farming practices. Typically you get one pilot for one cage, and you have to prove yourself for one generation, and then you see an uptake afterwards. Activity in general, together with an innovation, can drive a margin uptake.
Yeah. I think we had one more question from Carl Emil Johannessen. How should we think about the margin in the case Sea-Based for the rest of 2022? Will the impact of cost inflation and supply chain issues be similar as in Q1, or should we expect a better or worse situation?
I think you read that question a little bit earlier.
Yeah. That was number one. Okay. I'm sorry.
Yeah.
That was the first one.
Yeah. I'm sorry about that.
That's fine.
You are testing us.
Yeah, yeah.
That's okay. Good one. Thank you. I don't think we have any further questions for now. Okay, we wait for a little while.
Yeah
In case you'd like to post any other questions. Okay, if no other questions, thank you very much for attention, and have a nice day and weekend.
Thank you.
Thanks.