Good morning, and welcome to Bakkafrost presentation of Q3 2021. We are going to look at the summary of the Q3 , the markets, segment information, financial and ESG, and the outlook for the company. Bakkafrost harvested in the Faroe Islands in the Q3 14,937 tons, compared with 11,135 last year. In Scotland, we harvested 6,914 ton, compared with ten thousand, four hundred and seventy-six last year. The feed sales in the quarter were 44,973 ton, compared with 39,869 ton last year. The raw material purchases sourcing for Havsbrún was 17,224 tons, compared with 24,101 tons last year.
The revenues amounted to DKK 1,272 million, compared with DKK 1,123 million last year. The operational EBIT in the quarter amounted to DKK 17.5 million, compared with DKK 102.7 million last year. The cash flow from operation in the quarter were DKK 267 million, compared with DKK 105 million last year. There were positive operational EBIT from the farming in the Faroe Islands, the value-added products, fish meal, oil, and feed, but negative operational EBIT from our farming operations in Scotland. If you look at the numbers in the quarter, we see a flat development in the farming segment in the Faroe Islands from NOK 12,443 per kilo last year to NOK 12,456 this year.
In Scotland, the negative EBIT last year of DKK -389 dropped to DKK -1,632 this year. The VAP segment in Faroe Islands had a positive margin of DKK 2.89, compared with DKK 5.84 last year. The fish meal, oil, and feed segment had a positive margin of 20% compared with 14.4% last year. If we look at the EBIT year-to-date, we see that the operations in the Faroe Islands had NOK 2,107 per kilo year-to-date, compared with NOK 1,836 last year. If you go to markets and sales, we see an increase of our sales to Western Europe markets. We see 65% of the total products in the quarter.
65% of the products from Faroe Islands were sold in the Western European market, 71% from the group as a whole. This is an increase, especially with the breakdown of products, smaller sizes of fish, which caused this development. We see a significant drop in North America, 17% compared with 24% from Faroes. In Asia, it was flat at 9%. In Eastern Europe, a drop from 11% to 9%. The VAP segment had 35% in this quarter, compared with 48% last year. The big change in the quarter is that of fresh salmon.
If you look at the numbers from Faroes, 64% in this quarter were sold to Western Europe, compared with 29% last year, which is a big increase to Western Europe. We see a significant drop in the U.S. market from 38% last year to 18% this year. That's a big change of product allocation to the markets, where we see Western Europe taking products from the North American market. In general, description on the market, I can say that there has been a good momentum in demand. We see healthy products are in high demand in the marketplace. We see also that COVID-19 fueled intentions with consumers to eat healthy diets that limits risks of lifestyle diseases. We see consumers are more aware of buying products with less harm to environment.
We saw also in the quarter logistics constraints hampering supply to some markets, continuing issues with air transportation, and higher pressure on both transport by ship and trucks, partly also apparently related to Brexit. On the market side we see that the average spot price increased year-on-year but decreased quarter-on-quarter. Year-on-year, we see an increase from 48.43 up to 55.41, which is an increase of 14% compared to the same quarter last year. From the second quarter into the Q3 , we see a drop from 63 to 55, which is 12.5%. Overall, we can say that this is a strong development on prices. Demand for salmon is strong, leading to relatively high prices despite increased harvest and supply to the market.
This year there have been some months of double-digit supply growth on very high prices. Compared with 2020, especially March, we saw 30% demand growth. If you move to the harvested unsold quantity in the markets, we see European supply around 14% up, mainly contributed from Norwegian supply, which is 15% up in the quarter. Average weight of harvest from Norway was 4.3 kilo in the quarter, compared with 4.1 kilo last year. Feed volumes in Norway was also 8% up. In Faroes, we see volumes 33% up. Average weight in Faroes was down 4.6 kilo for Faroe Islands as a whole, compared with 5 kilo last year. Feed volumes in Faroes are up with 6%. In Scotland, numbers are unchanged, both on average weight and also on feed volume.
In the Americas, we see harvest volume down by 17%. We see average weight from Chile down 4.6 kilo versus 4.9 kilo last year, and the feed sales 3% down. In Canada, we saw 9% down on feed volume. Overall, the market had increased quantity sold of 5.7%. Looking at the market side, on the demand side, there is a 5% increase in the European market, which is lower compared with the growth of supply from Europe, which means that more fish has been sold out of Europe. If we break that down, we see that around 40,000 tons of products were sold from EU to the U.S. market in the third quarter.
We also see an 11% increase on the demand from the U.S. market. The U.S. and EU is the largest volume sold in the third quarter. They had a strong development. 75% of global market growth was in EU and the U.S. in this quarter, indicating a very strong underlying demand for salmon in these markets, and especially a strong demand from food service segments, but also retail segment continued with a high demand. Retail sales on salmon increased from 19% to 21% of all seafood traded in retail in this quarter. In China, we see a growth of 35%.
This must be taken into consideration that it was very much impacted last year with the lockdown on the back of the COVID-19 issues on the fish market in Beijing in June last year. Russia and Japan dropped 5,600 tons corresponding to 10%-18% totally for these two markets mainly related to reduced supply from Chile, probably also related to inventories of frozen products which were consumed. If you go to the outlook for the supply side, we see that the numbers indicate a drop of the next quarters of supply. Chile lowered numbers of smolt transfer at the onset of the global pandemic early 2020.
This impact significant cut in Chilean supply will drop their supply close to 30% in the Q4 2021. From European suppliers, we expect 8% growth in harvest volume in the fourth quarter. Looking at the H1 of 2020, global supply is unchanged compared to this year. Both Europe and Americas are unchanged. In the second quarter, there will be an inflection point when the correction of Chilean supply will stop. The low supply in the H1 of 2022 will lead to price impacts on products. In the second half of 2022, global market supply is expected to increase around 9%. This is split between the U.S. market with 15% of supply growth from Americas and around 7% from Europe. Since supply growth in 2021.
Norway is expected to slow growth to 3% next year from about 10% growth rate this year, as the sector runs into license constraints that will limit expansion. U.K. will have stable production compared with high growth of around 17% this year. Chile will grow around 4%, which is compared with 4% reduction in 2021. Both Canada and U.S. will have reduced production in 2022 compared with rather flat development recent years. Going into the segment numbers, the harvest volume from our farming segment increased in Faroe Islands and decreased in Scotland. We see also an increased average of the smolt size here in the Faroe Islands.
In Faroe Islands in general, there are an increase of 34% of the volume, which is breaking down to a drop in the North division of 53%, but an increase of 66% in the West. Mainly harvested from the West in this quarter. 52% of all harvested fish are from the West area. In Scotland, there was a big drop in quantity, 6,914 tons compared with 10,476, which is 34% down. The North part was 10% down and the South part in Scotland was 51% down compared with last year. The average weight in Faroe Islands was 15% down from 5.4 last year to 4.6 this year.
This is highly impacted by harvesting from Haraldssund A72 at 3.7 kilo average in order to synchronize with A73 Viðareiði. A stocking of these two sites will be now in December. In Scotland, the numbers are down from the average weight from 4.2 to 3.8 kilos. The smolt transfer in Faroe Islands are 6% up, 3.8 million pieces compared with 3.6, and in Scotland, 27% up, 3.3 million compared with 2.6. The average weight in Faroes is 13% up, 334 gram compared with 295 gram. In Scotland, stocking tripled from 653 to 1.9, as many sites were farmed in the South.
The Applecross hatchery delivered its first batch of larger smolt in this quarter at 145 grams. This development will continue, but the big change will be in 2023. Production in Applecross is so far matching the plan and the targets. On the next page, we see the operating EBIT and margin in kroner, and especially the Faroe Islands margin is behind expectation. The premium on sold fish from the Faroe Islands dropped from DKK 15 last year to DKK 9 this year. The sales price in fish from the Faroe Islands is DKK 2 down compared with last year, but the costs are also DKK 2.5 down. Feed use is up from 26,000 to 30,000 tons.
In Scotland, the premium increased from NOK 5.3 to NOK 8 per kilo, and the sales price also increased NOK 8. The big issue is the cost, which in the quarter was NOK 20 up compared with last year. The feed use is 11% down from 17,000 to 15,000 tons. The revenue from the farming segment were DKK 759 million compared with DKK 530 million last year. The EBIT DKK 135 compared with DKK 97. On the next page, we continue with the farming segment.
We see the margin in kroner per kilo in Faroes flat and in Scotland a significant drop. In Faroes, we deliberately harvested the small fish from A72, which impacted the average weight of the fish, the markets to sell the fish, and our ability to maximize the value of our products. As mentioned earlier, we saw that a lot of the fish were had to be sold in the EU market instead of U.S. market and other markets where we have higher value. When we look at the KPIs in Faroes, we see a stable development. FCR is improved 1%, which is feed conversion rate. TGC growth rate is also improved 1%, so stable development on that. Mortality is more or less unchanged, same number of fish.
The big issue is that the average weight drops, and we lose our ability to maximize the value of our products in the quarter. That's the issue in Faroes. In Scotland, we see in this quarter a higher mortality, or a high mortality, especially on 3 sites where we had impacts from PD, AGD, and micro jellyfish. These three in combination is a very negative impact and had a negative impact on 4,000 tons of fish. 4,000 tons of fish lost because of these issues. On KPIs in general, there is a more or less flat development. FCR is 5% worse, but TGC is 6% improved. It's the mortality which kills the numbers. 14% down in volume, but up in numbers.
If we look at what it means for the quarter is down in volume because of mortality. We also, because of these issues, 4,000 tons of fish that should be harvested in the fourth quarter are moved into the first quarter, which means that 4,000 tons in addition are taken out of 2021. In addition, we lose around 2,000 tons on average weight because of lower average weight than expected. The 10,000-ton drop in guidance from 40 to 30 is these 4,000 tons which are moved into 2022, 4,000 tons on increased mortality, and 2,000 tons with lower average weight.
On the road, stumbling blocks and stepping stones in this quarter, and we are disappointed with the numbers and KPIs from the farming operation and will do better in the future. We must admit that progress is rarely a straight line. There are always bumps in the road, and we will need to keep looking ahead. Looking into the value-added products, we see a stable development, flat volume, a slight increase in revenue, a drop in operational EBIT, mainly due to the increased raw materials to the segment in this quarter. Raw material cost is up by 3.16 NOK per kilo or Danish krone per kilo, and EBIT is down 3.02 per kilo, so more or less the same. Demand for VAP products is on the forward market.
All in all, we have secured around 21% of the volumes for next year in contracts. If you look into the fishmeal, oil, and feed segment, we see a good development in the quarter with a strong margin, DKK 111 million, 20%. External fishmeal sold is more or less flat, 2,800 compared with 2,700. The raw materials sourced are slightly down. If you look at the development on raw materials, we see that feed raw materials have increased lately or during 2021. When we compare raw material cost in this quarter compared with last year, we see around 20% increased cost.
If you break it down, we see that marine ingredients are now around 10% up compared with last year, but vegetable ingredients are 40% up compared with last year. It's not the same for these two areas. Now, Høgni Dahl Jakobsen, our CFO, will take us through the financials.
Thank you, Regin. If we look at our income statement or our profit and loss for this quarter, we see that our revenues have increased by 13% to DKK 1,272 million. However, our operational EBIT, as Regin has mentioned, has dropped significantly by 31% and amounted to DKK 71 million. That's a mixed bag of goods, you could say. Our farming segment in the Faroes delivered DKK 135 million, a 40% increase. The big disappointment is the Scottish farming segment, which delivered -DKK 81 million in this quarter. We had DKK 69 million in incident-based mortality in this quarter in Scotland, so that's a significant factor in the results from Scotland. Our
The sweetener is the FOF segment, which delivered really good results in this quarter with DKK 111 million. Move on and look at the fair value adjustments. They were slightly lower than the same quarter last year. That's mainly due to lower biomass in the sea and also a slight increase in the average time to harvest of the biomass. Revenue tax was increased. We paid 228% higher revenue tax in this quarter. That's mainly due to a combination of higher harvest volumes in the Faroes and also higher spot prices. Year to date, our operational EBIT amounts to DKK 702 million.
As you can see from the graph in the top, this is the weakest quarter that we have delivered for five years. Adjusted earnings per share was zero. If we look at the balance sheet, we still have a very strong balance sheet. Property, plant, and equipment has increased by DKK 522 million in this quarter and amounts to DKK 4.712 billion. Biological assets are up with DKK 845 million and amount to DKK 2.7 billion. Inventory has decreased by DKK 86 million. Receivables have increased by DKK 156 million. Cash and cash equivalents by the end of the quarter have decreased by DKK 94 million and amounted to DKK 337 million.
Equity is up by DKK 794 million, and equity ratio has improved slightly to 67%. If we look at the cash flow, cash flow from operation in this quarter have improved compared to last same quarter last year by DKK 162 million and amounted to DKK 267 million in this quarter. Cash flow from investments were minus DKK 310 million, and cash flow from financing were minus DKK 136 million. We have a lot of ongoing investments. We have capital commitments in this quarter amounting to DKK 838 million. That's primarily linked to our expansions of hatcheries both here in the Faroes and then, of course, our new 7,000 cubic meter wellboat which will be delivered to us next year.
Our net interest-bearing debt increased slightly in this quarter by DKK 83 million and amounted to DKK 1,986 million by the end of the quarter. If we look at the bridge from last quarter, it is mainly the net investments of DKK 310 million that have increased the net interest-bearing debt. That's counterweighted by changes in working capital amounting to DKK 97 million and DKK 130 million cash from operating activities. Our bank facility or financing is unchanged. We still have a EUR 463 million bank facility and EUR 150 million accordion option, an undrawn credit facility. A short update on ESG, what has happened in this quarter.
Earlier in this quarter, we announced our net zero emission target for 2050. It's a necessary but also a very challenging goal to set. From our previous healthy living and sustainability plan we announced the target to reduce our CO2 emission by 50% in 2030. That's of the Scope 1 and 2 emission. But we take the step further with a net zero commitment to 2050. Also, in this quarter, we have deployed our new farming supply vessel, Bakkanes, to Scotland.
It's up and running in the operation in Scotland doing mechanical delousing there with the same kind of equipment that we have installed on our supply vessel, Martin, here in the Faroes in the summer. In the beginning of October, we learned that the blue whiting has been accepted into the fishery improvement project with MarinTrust. This is important news to us because it paves the way for the blue whiting regaining its MSC certification. That's of course of great importance to us to ensure that we can produce ASC certified fishmeal in the future. Back to you, Regin.
If you look at the outlook for the company and the market, we see expectation of a low supply growth in the future. The supply is expected to decrease in the Q4 by 4%, to be flat in the H1 of 2022, and to increase 9% in the H2 next year. In our farming operations, we have had some bumps on the road in the Q3 , in the Faroe Islands, mainly related to the synchronization of the two areas has sometimes created issues for us. In the third quarter, we were also impacted by the improved capabilities that we installed on Martin, our treatment boat. This installation was planned. All the equipment were ordered, and the installation was contracted to be delivered in June.
Due to COVID-19, there were delays in supplies, and we lost two months of critical period for our operations, which created issues for our operations in August and September, with the result of some losses. Additional freshwater capacity is in the pipeline for Scotland, which means that we are capable to protect our operations better next year than this. Bakkafossur, that will be delivered next June. All in all, we are not satisfied with the operations in this quarter, but we think that the action in place will create a better foundation for a more competitive environment next year for our operations.
That's why this year we need to reduce our volumes down to 96,000 tons compared with 106,000, due to the fact that Scotland is dropping from 40,000-30,000 tons. For next year, our guidance is 68,000 from Faroes, up from 66,000 this year, and in Scotland, 35,000 tons. The release of or transfer of smolt in Faroes is 14.5 this year, up to 15 million next year. The average weight is still good. Average weight in Scotland will start to lift next year, but the big change will be in 2023, or a bigger change. Looking at contracts, new contracts are signed for next year, around 21% of our volume at increased prices, in line with the increase of forward prices in the market.
Fish meal, fish oil and feed, lower production of fish meal and oil next year than this year. However, there are good development with the blue whiting. The FIP, which Høgni mentioned, is accepted, and it gives a maximum three years possibility to solve the issues on the blue whiting, which means that we can use blue whiting in our feed during this period and maintain our certification. It's revised regularly, and it can be lost if no improvement are made from authorities on catches.
We had our capital market day on the 14th and 15th of September, where we announced our plans for the next five years, where we are building capacity across our value chain to reach 180,000 tons of capacity and an actual production of 150,000 tons target in 2026. The key drivers in our capital market day and our strategy is large smolt, focus on biology, good capacity to keep the fish healthy. As mentioned, two new vessels are in the pipeline for next year, one for Faroes, one for Scotland, which means that compared with last year, we are increasing this significantly. We are building capacity in Havsbrún for next year to increase the feed capacity. Thank you very much.
Now Christian Nordby.
Christian, can't be sorry.
Question is, do you see any obvious read-acrosses on your costs for either Scotland or Faroes into Q4 as of right now that we should take into account?
In Scotland, the issues in Scotland in the third quarter will also impact somewhat the Q4 , especially the month of October. We expect that the main issues are solved in October. Prices are expected to be better also than in the Q3, in the Q4. We expect that Scotland will not perform well in the Q4 , but hopefully better than in the Q3 . In Faroes, we are finished with the synchronization issue, and we will harvest larger fish in Faroes.
Thank you. Another question. Your price agreement that was lower in the Faroes in the quarter. Is that-
The logic is that as we had the smaller fish, we did not have access to the premium markets where we normally sell our larger fish, which is the key for us to secure better prices and have a better flexibility in our marketing and sales. When we drop, as we see in this quarter, down to 4.5 kilos, we lose that advantage. That's. Of course, being able to transport to all markets is also key for us. There have been some constraints on transportation, but it seems to be possible to transport fish to all markets now.
All right. Thank you.
Yeah. Carl-Emil, go ahead.
Hello. Two questions from one is related to the guidance for Scotland in 2022. Have you been a bit more conservative on assumptions here given that you guide on 35,000 tons, while you previously guided on 40,000 tons for 2021? The second one is related to the elimination, which is fairly high. Is that related to the strong feed result or are there any other things that is included in the elimination on the appendix?
Yeah.
Skal du komme og svare på det her spørsmål nå.
On Scotland, the guidance on 35,000 tons is lower than this year. That is, as you mentioned, we take down some of the numbers. We try to be a bit more conservative on our guidance. As we saw from this year that we were massively disappointing our own numbers. We are a bit more conservative for the guidance for next year. That's right. On the elimination, this is related to feed margin which are taken out of the external EBIT. That's only the feed.
Thank you.
Martin Kaland, go ahead.
Thank you. Could you highlight price increases for vegetable proteins, the marine ingredients that you mentioned, could that be favorable for your feed costs relative to other farmers as you have the high share of marine ingredients? What could the impact be or what impact do you expect on farming costs going forward from feed if it remains as around these levels?
Bakkafrost, as you know, is using more marine ingredients than many other companies are. As mentioned earlier, the cost of raw materials from vegetables increased 40% in this quarter compared with last year. The marine ingredients increased 10%. All in all, that should be an advantage for us. As it was a disadvantage when marine ingredients increased very much earlier, it should be an advantage now when this difference is reduced. We expect that the cost of marine ingredients will remain high in this quarter.
Going into next year, it is likely that there will be more quotas on capelin as there is a new species for fish meal and oil coming, and catches are expected to be good. This will be very interesting to look for next year, which also could be a new source for our own operations. Of course, this is difficult to predict. It's also very much related to the quotas from Peru, which we don't know yet. All in all, this should be positive.
On the positive side, when we are on the positive side also, we can say that it is also an advantage for us on the currency side at the moment as the value of Norwegian kroner is increased. That's in general positive also for our competitive position. Alex?
Thank you. Two questions, if I can. First of all, on the Scottish issues, I guess it's difficult to give counterfactuals, but could you give a sense of how much better you think the performance would have been this quarter, if you'd been using much larger smolt? In the sense that would some of these issues still have been a problem, or would they have been largely eliminated as a result of that? Second question, just on the feed profitability. If you could give us a sense of what's driving that and whether that's sustainable into future quarters. Thank you.
Our belief is that with larger smolt and with a good ability to protect our fish in the water, we have a much better competitive position. We expect to achieve much better KPIs, lower mortality, and of course, much lower cost of operation. At the moment, you must remember that our operations at the moment are based on smolt, which are below 100 gram, even down to 50 gram. We are not even self-sufficient with smolt. We have to source around 50% of our smolt externally. What we get externally is not necessarily the best quality as this is sales from others, which they don't use themselves. The fish have to stay in the water for two years.
We see in Scotland that there are issues with PD, with AGD, and in this quarter also with blooms of micro jellyfish. This is a killing combination for salmon. We believe that as we are moving into an operation in the next 2-3 years, where the fish is going to stay 10-11 months in the water instead of 24 months, it will be a huge upside for our operations, giving us the opportunity to produce larger fish at a lower cost. That is our strong belief. We see that in Scotland in general, the growth condition are good in the winter, in the spring, and in the summer. It is especially in the autumn where we need to have good capacity to protect the fish for these circumstances.
That's why fresh water is crucial for us. We have big belief that despite smaller fish, next year, we should also be better protected. On the second question, what drives the margin in the feed? This is the margin in the feed is driven by the difference between on these raw materials and feed on the market. It's a combination of keeping an efficient operation in our feed operation with good sourcing and the average prices on the market. I'm not sure if that answered your question, Alex.
Yeah. Thank you.
Good. Thanks. Any other question? Our ability to produce at low cost and the prices. No? Thank you very much for attending.