Good morning, America. Good afternoon, Europe. Good evening, Asia. Welcome to the Atlantic Sapphire first half 2024 report. My name is Gunnar Skinderhaug. I'm the CFO of the company. Together with me, I have Pedro Courard, who is the CEO of the company. Pedro will start with an operational update. I will continue with a financial update, and then Pedro will finish off with some closing remarks. So Pedro, over to you.
Thank you, Gunnar. Hello, everybody. As mentioned by Gunnar, I will start making the operational update, and then I will give the word to my colleague. Okay, moving to the company highlights. Main highlights are as follows: starting by the normal statement said in previous presentations, the combination of our permits and licenses, together with the closeness to a huge market, should give the company all the competitive advantages required to become a unique supplier in the United States. We have stabilized our production, which, in this kind of business, is key. That means we are starting a period where we plan to achieve the full utilization of Phase 1, while we prepare the next step by finishing the Phase 2 decision process.
Our plan, together with better size of fish, as well as constant consistent production, is to increase our prices and, at the same time, optimize the operation in terms of performance and cost. Once Phase 2 is in full operation, we estimate an EBITDA generation above $100 million, considering a margin of $5 per kilo HOG. The process will be performed by the combination of the competence of the existing team with the new management, focused on adding value and fulfilling committed plans. We have defined a company business plan divided basically into three stages. Stage 1, called proof of concept, will have, as an output, the proof that the farm can raise fish at all the required characteristics to be sold at a premium price in the American market, in stable farming and biological conditions.
This stage is expected to be realized by the end of 2024. Stage 2, called resiliency and efficiency, running in parallel with Stage 1, will be the step to optimize Phase 1 by fixing main bottlenecks that are currently limiting our production capacity, as well as our feed conversion rate. The final output of this stage should be being cash positive by the end of 2025. Phase Stage 3, called Phase 2 investment decision, correspond to Phase 2 investment decision. We plan to finish all the design and the engineering by the end of first quarter 2025, allowing us to have the final CapEx that will permit to make the final decision.
In terms of biological development during the first half of the year, on one side, we had the consequences of maturation events in summer 2023, due to high water farming temperatures. This situation produced bad quality fish, both in terms of color and average size, affecting sales price. On the other hand, and due to operational improvements done by the end of 2023, mortality during the first half was very low, even much lower than traditional farming industry. Being a very positive aspect, low mortality resulted in a bigger stock of fish that was not possible to feed well with current feeding capacities, forcing us to make elimination or early harvest of very small fish, having also, as a consequence, lower prices.
However, as it is possible to see in the graph, all this process ended with current very good picture in terms of biomass distribution, where, for the first time in the history of the company, more than 30% of the fish is about 2.5 kilos, showing a very good perspective. In terms of harvest, during first half, we harvest 2.4 thousand tons of HOG fish, which is a record, and a much higher volume compared to same period in 2023. We expect a similar level of harvest for second half, but at much better harvest average weight and better prices, especially during last quarter.
As part of the Phase 1, the change done in the second half of 2023, like the installation of new chillers to avoid future maturation, the elimination of different bottlenecks, the implementation of new protocols, and the change of our technical service from a reactive maintenance to preventive one, has allowing us to stabilize water quality, producing a drastic drop to normal water temperature level, as well as very low mortality. Low mortality in a RAS operation is one of the main indicator of good farming conditions, which is, without no doubts, the main challenge in Atlantic's operation. This graph is probably the best way to show difference in performance for different group of fish. The graph shows the evolution of average weight for different groups for the same farming periods.
As reference, we have light blue line that correspond to the Denmark curve, and in dark blue, our current growing model. Then we have in red line, our historical batches, and in green, current Batches from 28 to Batch 34. As it is possible to see, new generations are coming with much better performance, not only compared to previous batches, but also compared to our model. The impact of that, especially in Batches 28 and 34, will be a better tank volume utilization of the farm, an increase of the Superior Tier product, and final, an improvement of cost and the reduction of risk load. What do we understand of proof of concept? For us, and that's very important, proof of concept will be a stable, production in many aspects.
First, we consider four consecutive weeks of average weight above or equal to three kilos HOG, a biological feed conversion rate below 1.3 for harvest fish, and at least 80% of harvest in Superior Grade. We will need to have stable farm operations for twelve months. That means monthly average water temperature below 14 degrees for our own growing phase, and monthly mortalities below 1% per month. In land-based, one of the production restrictions is the feeding capacity, which is directly linked to the capacity of the system to keep good water quality. Since Q4 2023 to date, feeding rate has been constantly increasing through the elimination of part of existing bottlenecks.
In this stage, from November two thousand and twenty-four onwards, we are planning to make improvements to increase the water quality, and in consequence, increase gradually our feeding capacity to reach, by the end of two thousand and twenty-five, an estimated annualized harvest volume of 8,000 tons HOG, defined as a breaking point to move to cash positive. To increase our feeding capacity, we will need to do some investment. First, oxygen and ozone distribution system. Second, water flow improvements, and third, degasser and skimmer capacity. The combination of these three investments is what we are thinking will help us to move from 23 tons per day of feeding to 33 tons per day of feeding. Also, we plan to invest in a new water well to serve both Phase 1 and Phase 2. We are now working in the final step of Phase 2.
Phase 2 design is considering all the improvement and the lesson learned from Phase 1. After we finish the engineering and the design of Phase 2, we will start with the tender process in order to have the final investment required for this. This is important step. Now, I will give the word to Gunnar, who will explain the financial update. Gunnar, thank you.
Thank you, Pedro. The company is in a bit of a paradox with good biological performance, stable growth, increasing fish weight, stable conditions, while the financial situation is a very challenging one. For the first half of 2024, the main negative deviation from plan has been that the fish has been smaller than estimated, partly because the facility has a capacity limitation, and partly because we've had too many fish compared to the feeding capacity. The sales price in the first half has been low and lower than expected. In the first quarter, we harvested fish with early maturation issues due to prior high temperatures. The growth of the fish was slow, and the price achievement was low. In the second quarter, we harvested mainly fish of small size, with sales price far lower than expected.
The lower sales price have given lower revenue and thus, lower cash flow from operation. This is the main negative deviation compared to earlier plans. In addition, the low average fish weight has reduced the access to revolving credit facility with DNB under the borrowing base, as smaller fish gives significantly lower borrowing base. We have taken measures to improve the situation, both short term, to reduce the number of fish affecting harvest weights in the summer of twenty twenty-four, then midterm, to improve the capacity of the farm by removing bottlenecks. This require both capital for CapEx items and operational activities, as we have realistic plans to build up the feeding capacity, hence, the company needs additional capital, which I will come back to.
We have had a harvest volume of 2,395 tons in the first half of 2024, and a revenue of $11 million. Revenue is higher than last year, despite small fish size and low sales price of $4.6 per kilogram. However, on premium fish, we've had consistent price achievement, although very low share of premium fish during the quarter, last quarters. EBITDA of negative $40 million and also lower than the same period last year, despite production cost is lower this year. However, the EBITDA per kilogram, with a sales price of $4.60 per kilogram is negative, and thus increased production explains the negative development of EBITDA compared to last year.
EBIT is negative $48 million, and with $4 million in net financial cost, we have a net loss of $52 million for the first half of 2024. Total assets is $328 million. Net interest-bearing debt is $23 million, and the equity ratio is 80%. Revenue is higher than last year, as mentioned, driven by the higher sales volume and offset by low sales price per kilogram. Cost of goods sold is close to $20 per kilogram, still affected by low production volume in the facility and poor FCR, especially on mature fish. However, cost of goods sold is around half the level it was the same period last year.
Salary, personnel cost, and SG&A cost is affected by the litigation cost related to the aftermath of Phase 1 construction, change of management and employee share option program, as well as provision for bad debt and higher cost of property insurance. With regards to the balance sheet, cash balance is $10 million, plus an additional $15 million in restricted cash. We have CapEx of $6 million in the first half, mostly tied to Phase 2 preparations, with a total capitalized cost is $130 million at the end of June. On the debt side, we have drawn $6 million on the revolving credit facility with DNB and have $11.4 million undrawn on the facility.
Long-term debt is $41 million, and the Phase 2 loan of $100 million is undrawn, and we are canceling this loan in order to reduce the commitment fees owed to the bank going forward. With regards to the segments in the company, all attention is now on the U.S. operation. We are considering to divest the remaining Danish assets. For the first half, both Q1 and Q2, we have realized good prices on Bluehouse premium products. However, the share of those products have been low. The average sales price has been around $4.6 per kilogram in the first half and was driven, as mentioned, by harvesting of mature fish and small fish. Both neither qualifying for premium market prices. Our ambitions are unchanged.
Harvest size will increase with the measures taken, and we are targeting $12 per kilogram on average for the volume from the current facility under stable conditions and production, when production is ramped up. As Pedro already has mentioned, we have strong focus on continuing developing Atlantic Sapphire. The most significant development is the completion of Phase 2, which is a very different facility than the current Phase 1 facility. Design is based on all the knowledge we have gained in Phase 1 over the last six years, and also with extensive use of vendor experience and involvement. Phase 2 will enable a potential also in Phase 1, in addition to adding total capacity to Atlantic Sapphire production. The company has not performed any pricing activities, so we are basing the estimates for completion of Phase 2 on prior estimates.
However, we acknowledge that there has been significant inflation, and there has also been some changes in design. We estimate the total CapEx for Phase 2 completion to be between $350 and $400 million, of which $113 million are already invested. There are significant economies of scale effects for the operations here in Miami. Phase 1 alone is expected to give an EBITDA of between $10 and $20 million annually at scale. Phase 1 and 2 combined is expected to give an EBITDA of $125 million when fully ramped up per year. For the following quarters, we will develop a new well for Phase 2 and continue engineering, pricing, and together with providing proof of concept from Phase 1, work on financing for Phase 2.
For financing, we have a capital need of $94 million to get to a cash positive Phase 1. Included in those numbers is $11 million for development of the Phase 2 well, as Pedro mentioned. Beyond that, we are investing $25 million into Phase 1, improvements and de-bottlenecking items, and we are increasing the working capital with $19 million through buildup of biomass and accounts receivables. Operational costs are $29 million net, and finance cost and general company purposes are $10 million. The capital will be covered by three main sources. Number one, existing debt facility with DNB will be amended with no installments over the next eighteen months. Reduction of restricted cash of $5 million, and the cancellation of the commitment of Phase 2 loan, which gives a lower commitment fee.
Two, Subscription Rights issue of up to $60 million, which is fully underwritten by a list of guarantors. The subscription price will be 0.10 NOK per share, and shareholders will be given warrants to subscribe for their shares. Three, convertible loan of minimum $20 million directed at two investors. With a six-year tenor, a 8% cash interest or 10% PIK interest at the company's decision. The combination of rights issue and convertible loan will be $80 million. Then there will be warrants issued for the participants in the capital raise, which will be available to be used for the future Phase 2 expansion funding. Guarantors and subscribers from this round will be given warrants to subscribe for shares under certain conditions in the future Phase 2 financing round.
For further complete information on this, please see separate message published on Newsweb. I'll pass on the words to Pedro, who will do a closing statement.
After a probably longer challenging period than expected, Atlantic Sapphire is embarking now on a new chapter of its history. As we have presented since October two thousand and twenty-three, the most important productive parameters, like biomass gain, feed conversion ratio, and mortality, were stabilized. We have prepared the farm to progressively increase its standing biomass and output, and project to start harvesting with premium commercial pricing from October onwards this year, proving the feasibility of the business plan, at least from technical perspectives. While this proof of concept is achieved, we will start additional investment that will allow us to increase our production from the current analyzed level of 5,000 tons HOG to 8,000 tons HOG by the end of two thousand and twenty-five, production level that is required to reach cash flow positive operations.
In addition, we plan to finalize the design and engineering for Phase 2 in the first quarter of two thousand and twenty-five. Once Phase 2 is fully implemented, Atlantic Sapphire should reach a very healthy profitability, compensating the shareholders that have had the courage to invest in the most advanced land-based company, and in a technology that will probably be the future of the salmon industry in the world. When Atlantic Sapphire was created, one of the drivers to justify the project was that producing salmon in the largest market in the world would have advantages in terms of cost by eliminating air freight from Norway and Chile, as well as a fresher product, thanks to the proximity to the end consumer. To these two drivers that still fully apply, an additional one, probably more powerful, has emerged during the last ten years.
The projected production limitation from traditional salmon farming is here. For those of us who come from the traditional salmon farming industry, it's not a secret that every single year, producing in sea farms seems to be more complex, with a sustained increase of cost. Reasons behind this new scenario can be attributed to climate change, sanitary challenges, but also to political pressures and regulations coming from the authorities, environmental NGOs, and other agencies. While the demand for an amazing protein like salmon continues to increase, the supply will continue to be limited, opening the door for future production technologies, land-based being the most advanced one, and Atlantic Sapphire being the most prominent project of the planet. Currently, Atlantic Sapphire has all the required components to fill part of the gap between supply and demand of salmon.
The experience gained, at a very high cost, is today probably one of the main assets and consists not only of specific production practices, but also a fully committed and very competent human capital. The appointment of new professional to the management team with experience in the aquaculture industry will permit complementing current capacity for future steps. Our vision of the future is a realistic one. Despite being full of ambitions, we are pragmatic, and we know we will need to commit the best of ourselves to recover the market's confidence. We have a big task in front of us, but we are convinced that by strengthening what has been done well, avoiding what has been done bad, and continuing to look at the future with an innovative view, we will achieve what we all of us are looking forward to.
Thank you, everyone, and I give the final word to Gunnar.
Thank you very much for attending the presentation. We will not take a Q&A here in this session, but you're welcome to reach out to investorrelations@atlanticsapphire.com for investor question, or atlanticsapphire@brightredagency.com for press questions. Thank you.
Thank you.