A profit warning on 15th of July and this is in line with what we are presenting today. In the second quarter we had revenues for DKK 1.6 billion and an operational EBIT of DKK 65 million. The Faroe Islands' harvest in the quarter was 16,000 tonnes, 5,800 tonnes up from the same quarter last year. In Scotland we harvested 7,000 tonnes, which was 4,300 tonnes lower than the same quarter last year. At our P/F division, feed sales increased by 14% in the quarter to 37,500 tonnes. We sold 5,000 tonnes of fish oil. Fishmeal was also lower than in the same quarter last year, 9,000 tonnes in this quarter. Sourcing in this quarter was very strong. 160,000 tonnes of marine raw material were sourced in this quarter compared to 90,600 tonnes last year.
Cash flow from operations was negative with DKK 204 million and all segments had positive EBITs except for the Scottish freshwater and farming segments. We also paid out dividends in the quarter amounting to DKK 501 million, corresponding to DKK 8.44 per share. That was paid out in May. Moving on to markets and sales, the market has been negatively impacted on the price side. In this quarter, the average price for 4 kg- 5 kg salmon was NOK 74.64 per kg, which is a 33% reduction compared to last year and a 20% reduction compared to previous quarter. There has been a downward trend throughout the whole quarter and also continuing into the third quarter.
The large increase in supply, especially from Norway, but also from other regions which have contributed to the supply growth, have put prices under pressure and also reduced the price premium normally achieved for larger fish. That has been significantly lower in this quarter. According to the latest update from Kontali, global sales volumes in this quarter increased 17% compared to the same period last year and sales to all markets increased. EU increased the consumption or the sales of the EU increased with 31,000 tonnes corresponding to 13%, which was around half of the European supply increase. A larger share of the European supply has been exported to other markets, mainly China and to the U.S. The U.S. sale increased with around 17,000 tonnes corresponding to 12%, significantly above the American supply increase. More imported volumes.
Tariffs have not had any significant impact on trade flows in this quarter, so U.S. demand has still been strong. In China, sale to China has grown strongly. China took 52% more volumes in this quarter. A significant portion of that increase is salmon from Norway. Norway has consistently supplied China with around 10,000 tonnes- 11,000 tonnes of whole fish equivalents during the quarter, up from around 8,000 tonnes in the previous quarter. On average, the global harvest in the quarter increased 18% so there were some inventory movements. Growth was mainly delivered by the 24% increase.
Europe.
Norway as mentioned in particular with a 27% increase. Seawater temperatures have been higher in Norway. Biological performance has overall been good and a significantly lower share of production grade fish coming from Norway. That share has dropped from 30% to 17%. Feed sales have also been strong in Norway, 16% up in the second quarter. However, slightly down in July as the number of fish in the water in Norway has reduced, is around 3% less at the end of July compared to last year. In Scotland, harvests have dropped slightly, 3% down, but also there we have increased feed sales with 8% and a slight increase on the average fish weights also to 4.5 kg for Scotland as a whole. Bakkafrost, however, we have increased our harvest weight with 45% which corresponds to 5.9 kg in this quarter. In the Faroe Islands, we have had very strong growth.
Harvest has increased by 51%. That's mainly driven by Bakkafrost. Our biology has been very good, the best ever actually or at least in the last decade or so. Large fish, low mortality, and a 31% increase in our feeding in the Faroe Islands as a whole and also strong, continuing into the third quarter. Harvest from the Americas, Chile was up with 15%, also 50% on feed sales, and Canada was down with 19% on harvest volumes. Moving on to financials and starting with the P&L, the revenue decreased as mentioned to DKK 1,575,000,000. Operational EBIT down from DKK 388,000,000 last year for the group to DKK 65,000,000 in this quarter. We had fair value adjustments of minus DKK 187,000,000 and revenue taxes amounted to minus DKK 25,000,000 in this quarter compared to DKK -84,000,000 last year. That is of course a result of the lower salmon prices.
Profit after tax was with DKK -138,000,000. Our adjusted earnings per share in this quarter were DKK -0.1. On the balance sheet, we have increased our property, plant and equipment with DKK 185,000,000 since year end. That amounts now to DKK 6.9 billion. Fair value of biological assets amounted to DKK 2.6 billion and inventory have increased quite significantly, DKK 322,000,000 in the quarter to DKK 993,000,000. This is mainly driven by the sourcing at Hafsbro where we have produced a lot of fishmeal inventory. Receivables have dropped DKK 316,000,000. Cash and cash equivalents were DKK 205,000,000 at the end of the quarter and the equity ratio 59%. Moving on to cash flow from operations as previously mentioned, with DKK -204,000,000.
Cash flow from investments were with DKK -238 million and positive from financing with DKK 397 million, meaning a net change in cash of DKK -45 million. In this quarter we have increased our net debt to around DKK 3.8 billion. The dividend payment of DKK 501 million and the changes in working capital are the main drivers behind that. We had DKK 1.6 billion in undrawn credit facilities at the end of the quarter. Finally, before handing over to Regin to go through the operations and outlook, I want to point your attention to Note 3 in the Accounts which declares how we have changed our internal invoicing between the farming segment and the sales and other segments. In short, we have removed the freight cost which previously was both expensed and invoiced back. It was both a cost and an income to the farming segment.
That was due to the previous revenue tax regulation in the Faroe Islands. With the changes that were introduced on the 1st of January, we have decided to remove that freight element to provide more transparency and give a clearer picture of the true costs in the farming segment. We have included an appendix also in the report which shows the comparable figures for last year if the same method was applied last year. With that I'll hand it over to Regin.
Thank you and good morning. We will start with the P/F segment. In this quarter the P/F segment delivered strong feed sales but lower external sales of fishmeal and fish oil. The growth in the Faroes is of course the primary driver for this. The marine raw material sourcing was also very strong, 160,000, which is 77% up from last year. Last year we had the strike, which was not this year. We had good sourcing. This year feed sales increased 14% to 37.5 kt versus 33 kt last year. External sales declined, fishmeal 9,000 versus 15,800 , and only marginal sales of marine oil or fish oil. Inventories have been built, so we have more fishmeal, especially on inventory. The operational EBIT from the P/F segment was $89 million versus $112 million last year, which is 21% down, and the margin was 13%.
Looking at the prices of these raw materials, which are of course drivers for the farming cost, the feed cost, fishmeal has increased slightly in the quarter, but fish oil continued to drop. Vegetable ingredients have moved slightly up. Overall, there is an overall downwards trend in raw materials for feed, which of course is positive for feed cost and will continue to lower farming cost going forward. Moving to the freshwater operations in the Faroes, the ramp-up after our expansion in Glydala North continued in the second quarter with new production records. 5.4 million smolt are transferred in this quarter versus 4.5 last year. Full year transfers are still maintained at 18.5 versus 17.1 last year. The average smolt weights are increasing, 464 gram in this quarter versus 391 gram last year, which is significantly reducing biological risk and supporting the higher productivity.
Operations continue to deliver high quality and robust smolt, which is a key driver for the low risk in our marine operations and productivity. In Bakkafrost and Faroes, the operational EBIT increased to $85 million versus $74 million last year, 15% up, and the margin is 36% versus 40% last year. On note, we can report about a very strong biology, a robust smolt, and the main indicator here is the 90 days mortality post stocking, which is now all time. Survivability is all time high, mortality is all time low, and that means that 97%-98% during the first 90 days after transfer, all inclusive, everything, absolutely everything, which is record high levels with improved capacity utilization, robust smolt, and strong survivability. Cost per smolt is trending down and expected to continue in the future in coming months.
The Faroese freshwater division has stepped up to a new level, delivering smolt of unprecedented quality and robustness, which is the strongest foundation for our farming in the future. Coming to freshwater, Scotland is another story. In the second quarter, the transfers in Scotland were lower: 0.9 million smolt versus 1.5 smolt million last year. However, the average weight was 170 grams compared to 95 grams last year, and smolt produced internally at Applecross reached 243 grams versus 95 grams last year. The financial impact of the issues in the quarter from the mortality was DKK 52 million, and the operational EBIT was DKK -72 million in the quarter. Cost per smolt is obviously very much impacted by the volume, which is not yet where it must be.
The overall target for 2025 is now, after the incident at Applecross, taken down to 6 million- 7 million smolt at about 200 grams to marine farms, which is compared to 6 million last year at 100 grams or 109 grams. The construction is coming to an end; the last part, AP7, is expected to be complete now in 2025. All other units are now in operation and being scaled up. Talking a bit about this impact at Applecross, the second quarter was impacted by a major incident in the D1 module at Applecross, causing significant mortality and a full cleanout of the stock. Insufficient biosecurity during construction works triggered a severe disease outbreak, leading to culling of most of the fish in the affected module. The direct financial impact was DKK 52 million, but of course, also lost fish will have impact.
The freshwater division in Scotland is now being integrated into the freshwater unit in the Faroe Islands and organized under one Group Freshwater Director. A new local management at Applecross, supported by experienced staff from the Faroe Islands, is now in place. As production scales up over the coming quarters and operational control improves, we expect a gradual recovery in biological performance and capacity utilization. This will reduce our Scottish operations' risk, which so far has been unacceptably high. The biological cycle from egg to 250 grams is around 12 months. The current biomass at Applecross, or at our freshwater division in Scotland, is currently at 30 million individuals. This includes 4.5 million from the June-July batch this year. Another 4.5 million will be hatched in October.
With new management we aim to successfully scale up the smolt production in Scotland over the next 12 months, enabling the planned transfer in 2026. The new management team is reviewing all procedures and operations and we will report back at the next quarterly presentation. Farming in the Faroe Islands in this quarter we harvested 16,000 tonnes versus 10.2 last year, 57% up. The average weight of the harvested fish was 5.2 kgs versus 5.5 last year, slightly lower but solid numbers. The operational EBIT was DKK 4 million versus DKK 206 million last year, DKK 31 per kg versus DKK 20.19 per kg last year. The decline is fully explained by the significant drop in summer price. Biological performance was very robust and remains very robust. Strong growth, efficient sea lice transfers, sea lice management and low mortality.
Survival rates are the best levels we have seen in the Faroes in a decade. Feeding in the quarter was 46% up. Growth trend continues into the third quarter with 31% improved in the first seven weeks of the third quarter or 31% growth compared with last year. Growth at record high levels supported by stable seawater temperatures and good biology. Survivability at the decade high levels which is key for productivity. Farming cost 12% down versus the same quarter last year driven by reduced risk, improved productivity and volume growth. The Faroese farming operation remains the backbone of Bakkafrost, delivering strong growth, excellent survivability and a solid biological platform for future operations.
If you look at the note on our inventory you see the biomass supports good growth which is also of course the reason for our guidance, upgrading guidance for this year and supports also a very strong platform for next year which we will revisit when we come to next quarter presentation. Looking to Scotland, in this quarter we harvested 7,000 tonnes versus 11.4 last year, 38% down. The average weight was 5.9 kgs versus 4.1. This is 45% up, all-time high for a second quarter. However, the operational EBIT in the quarter was NOK -127 million versus NOK 111 million, so NOK -28.36 per kg versus NOK 15 per kg. A big difference. The negative result was mainly driven by lower salmon price, mackerel price, lower volume and NOK 39 million which is expensed as extraordinary mortality.
The biological performance is a bit of a mixed bag in this quarter. The strong growth and large fish is a very good indicator and creates good value for Bakkafrost. There were two farms which were impacted by mortality events for oncolosis, CMS, and PD, which had a heavy impact on these sites. The harvested volume shows a sharp reduction versus last year. The average fish weights are very good in progress, and we see that we can grow large fish in Scotland and also high quality fish, which have been sold to the market at really, really good prices. We see also that our key performing indicators in Scotland are now moving in the right direction with really good growth. Also, good feed conversion ratio, which are good improvements.
Ringside cost is of course heavily impacted by the low volume, which will be coming up when we have our risk in better control. Looking at smolt in pipeline, the first large batch of large smolt was transferred from Applecross back in January this year. This fish was not exactly where we want them to be, but they have been performing really, really exceptional. They were transferred in January and are expected to be harvested already in January next year. They were transferred at around 200 gram or 180 gram, and we are expected to be harvested already in 12 months. That's a really, really game changer and will be a milestone when they are harvested. Operations remain in a transition, I would say, at the moment as we need more robust and large smolt to enter the sea. We are just now expected to see this start.
Gradual improvement in biology, lower risk, and strong cost performance is expected to be seen as we will gradually ramp up during the next 12 months.
Applecross.
Coming to the service segment. In this quarter, the service segment delivered solid results driven by efficient sea lice mitigation and major improvements in smolt transfer. Smolt transfer is a part of this segment to transfer the smolt from the hatcheries to the farms. The reason why I emphasize this is because this is really the start of the smolt and this is very important to have a good and healthy and strong marine operation. In this quarter, this segment delivered EBIT of NOK 17 million compared with NOK 12 million last year, so 42% up. This is NOK 1.6 per kg versus NOK 0.87 early last year. Smolt transfer is a key area. If you compare with a few years back, we used to transfer around 1,000 tonnes per year. Last year, we transferred 7,000, so we have seven-doubled this number.
This will increase to 12,000 tonnes shortly as numbers on average fish weights in the Faroe Islands are increasing. We are going to double that volume in a short time. We have converted one of our vessels, Martin, for this job and this has now been ongoing for 12 months. Conversion of Martin tripled our capacity. Originally, this was an offshore vessel and we have repurposed 10 of the tanks for smolt transfer. This has improved our operation significantly. This is a system designed in-house, fully automated to control oxygen, CO2, and key water parameters which ensure all the best fish welfare and survivability in the transfer. The benefit of the conversion is optimized capacity to match transfer volumes, gentle handling via pressure-based transfer, no pumping, guaranteed water quality throughout the journey, and high cost-effectiveness because of repurposing existing assets.
The performance so far has been that we have transferred 5,000 tonnes with Martin and the survivability in all transfers has been about 97%. This is also part of the driver for higher survivability and a better start for the fish in the water. Strong fish welfare and early start of feeding after sea transfer. Now as we speak, Bacchanes, which is the sister vessel to Martin, has been undergoing the same conversion and is operating in Scotland and has now started operation in Scotland with the same purpose to transfer smolt from Applecross to the sites where we have used third-party vessels, different vessels with a very mixed bag of results. Bacchanes went back to Scotland end of July and is now in full operation to do this. We expect this will also be one of the drivers for improved results in Scotland going forward.
Coming to sales market, operating as one company enabled record high sales from Scotland to both the U.S. and China in this quarter. Volumes to value-added products increased sharply with 50% more various production allocated to VAP compared to last year. Overall sales volumes increased, and revenues were positively impacted by the improved premium realization. The operational EBIT improved to $97 million versus -$57 million last year. Plus + $97 million versus - $57 million last year. This corresponds to a margin of 4% compared with - 2% last year. The difference is quite important. It's NOK +65 per kg versus NOK -4 per kg. The difference is NOK 10 per kg. It's a big difference, and this is driven by good premium. We have managed to lift our premium from NOK -1.37 to NOK 5.84 per kg despite the challenging market conditions.
Western Europe market continues to be our largest market, but U.S. and China grew most strongly in this quarter, supported by our one company approach and being able to channel large fish from Scotland to the overseas markets. China volumes doubled, though lower premiums because of the pressure of supply to this market segment. Retail and branding efforts have gained attraction. Heimland brand, which is a Bakkafrost brand, is now present in retail and catering chains both in Europe, U.S., and Asia, which strengthen our premium position. Our marketing and sales have really done well in the quarter, and despite this global pressure of salmon prices, our one company strategy and stronger branding has managed to increase the value and better premium capture lifted our results significantly in this quarter.
I would like to go through this, which I normally don't, because there's a big change in the value, especially from the market. This waterfall, if you look at the Faroes, we see that the big change from DKK 20 per kg to only DKK 24 is a decline of around DKK 20. The main driver was the price reduction, which is DKK 22 actually more. This is offset by a positive reduction in cost price, which benefits with DKK 5 per kg in Faroes. Even under heavy pressure, the Faroese operations have remained profitable, demonstrating resilience and strong biology and cost control, which of course is very much in focus when you are forced to be in this challenging water, as we are at the moment. When you look at the Scottish operation, we see that the output per kg dropped from 970 last year to - 1,813.
It's a drop of DKK 28 per kg and the price effect is DKK 27 per kg. It's more or less the same or DKK 1 difference. In this area we see that the cost improvements have actually benefited with DKK 5.8 per kg. Then we have lost value with exceptional mortality and other items on production cost on land. Scotland is showing the most dramatic turnaround in the group from profitable to deeply negative in this year, underlying the urgent need of robust large smolt and good and improved biology in Scotland. When we look at the performance per region, we see the contrast between Faroe Islands and Scotland. The operational performance in Faroes was an EBIT of 211 million kroner versus 274 last year. The EBIT per kg declined from DKK 26.86 to DKK 13.15 .
Driven by the lower salmon prices in Scotland, the operational EBIT turned to DKK - 146 versus DKK + 113. The EBIT per kg dropped to DKK - 20.70 from DKK + 10 , a swing of more than DKK 30 per kg. This is caused by exceptional mortality, lower volumes, and underutilized capacity. The Faroes operation remains solid profitable, also with lower salmon prices. The Faroes farming remains the backbone of the group, while the Scottish result is urgently needing the completing of the transition to robust large smolt. Coming to the outlook for the industry and for Bakkafrost, we see reduced growth ahead. Global supply growth will slow down in 2H 2025 compared to the strong growth in the first half of the year. Especially the availability of ungutted salmon for the spot market will come down to a totally different level compared with last year.
Good biology in Norway has supported strong growth so far this year. Supply is expected to slow in the second half as MAB restrictions and fewer fish in the water limit harvest. In Faroes, volumes are significantly higher year on year driven by larger and more robust smolt, strong survivability, and solid growth in the first half of the year. In Scotland, marine operations remain mixed, but improvements are emerging with higher volumes expected going forward. Europe overall, we see that the growth is behind us on the supply side this year. RS is now expected to come down to maybe 2% -3%, 2% - 3% in the second half and close to zero in 2026. In Chile's and Americas the supply will pick up in the second half after week 24, and they will probably be peaking in the fourth quarter.
North America remains stable with normal seasonal patterns. Overall for 2025, harvest will be higher than 2024, but growth will be much reduced in the second half. Looking into 2026, we expect around 2% supply growth and a more muted outlook from the supply side for Bakkafrost. We are raising our guidance for this year to 104,000 tons versus 97,000 tons. Faroe Islands from 77,000 tons up to 82,000 tons. Scotland from 20,000 tons to 22,000 tons. This is of course because of our strong development so far this year. In Faroe Islands and in Scotland, the biomass is higher, and Scotland especially, the average weight of the harvested fish has been high, so the numbers are still available. Harvest profile reflects our de-risking strategy in Scotland, where 58% of Faroe Islands volume will be harvested in the second half. It's the opposite.
In 2025, the smolt transfer is expected to be 18.5 in Faroe Islands, which is same as before. We are lowering our guidance to 6 - 7 for Scotland after the issues. Totally 24.5 - 25.5, which is 10% up from last year. Larger, more robust smolt underpins lower risk, stronger survival, and higher productivity on the contracts. We still remain with around 10% - 15% of our sales on contracts, balancing stability with flexibility to capture market premiums. At a later point, we will be open for increasing contracts when market conditions are right. Fishmeal, oil, and feed production is broadly similar as last year. Lower raw material prices will benefit farming costs in the second half of this year. The strategy for Bakkafrost is unchanged. Growth targets 165,000 tons by 2028. Sustainability growth, focus on robust smolt, efficient feed, and fish welfare.
Key objectives are progressing, which are mainly at the moment the Skalavik hatchery, the Havsbrún expansion, which are critical for our long-term resilience. I guess I said 165,000 tons by 2028. That's from our CMD update in June. Our target is 162,000 tons by 2030, so I had that wrong. Our long-term investment plan is still the update from the capital market day. We have made some small adjustments in the investments in 2025, where some of the investments will be postponed to 2026. The strategic focus is still the same, and the journey is still the same to reduce the risk, to increase productivity, and drive organic growth. The key projects include large smolt capacity in the Faroe Islands and Scotland, feed capacity, and new harvest and processing facilities in Scotland.
Given this current market environment, part of the 2025 investments have been moved into 2026, but we are quite excited about the outlooks for 2026. This creates a smoother, more balanced investment profile without altering our long-term ambition. Our strategy and commitment remain firm. With robust biology, stronger balance, and the clear investment priorities, Bakkafrost is well positioned to deliver sustainable growth and long-term value. We are firmly on track with robust operations, a clear strategy, and the investments needed to secure sustainable growth and long-term value creation. We think we are on the right path. Thank you very much. We are open for questions.
Thanks.
Could you say something about the knock-on effects we should expect into 2026 on volume and cost from the issues in the smolt facility in Scotland?
Yeah, as we are reducing our smolt guidance this year, of course that will have some impact, some negative impact on the harvest next year. I guess that it will be a more or less stable development on the volume from this year to next year. We revisit that on the next quarter presentation. I think it's fair to expect a level around the mid-20s next year as well as we don't have the fish in the water.
Thank you.
On the Faroe Islands, could you try to decompose the reasons behind the volume guidance upgrade? How much is better growth due to higher temps and how much is lower mortality and other effects?
Yeah, that's a good question. We have, as you just pointed out, had good growth temperatures in the winter in the Faroe Islands with slightly higher temperatures, which are positive for the growth in Faroe Islands and have been really good environment for good growth in Faroe Islands in the first and second quarter. Just as you mentioned, we have also had low mortality, so we are trending around 10% or maybe even below 10% on a full generation-based mortality, which is down. We used to be maybe at 15%, so our mortality rates are around 50% down compared with earlier, and that of course gives us more fish for harvest rather than for loss. That's a part of the driver then. A part is from growth. How much is from improved survivability and how much is from improved growth?
I don't have a number on that, but those are the two drivers which gives us more growth this year and, as things also look at the moment, also for next year.
Thank you.
Christian Nordby, Arctic Securities AS, can you give some comments on cost development in Scotland ahead? As low volumes as you have there, will it be quite stable as it's been in the past, or do you see any improvements from the larger smolt.
We won't see the. We expense the cost of the fish when they are harvested. That means that for next year we'll probably maintain more or less the same level. There is a marginal drop in operational cost, but those are not so important compared with the low utilization of assets. We are not totally out of the challenging waters in Scotland yet. I guess because of the risks that we have had right now, we have to expect now with the change of management, we will have to revisit this subject on next quarterly presentation where I will give you more clear visibility into this. I guess that for the next three months we will say, okay, things must be more or less unchanged. Hopefully at the next presentation I can give a bit more visibility. I also mentioned the numbers at Applecross at the moment.
13 million fish plus around 4.5 million which is in biomass at the moment and it's around a 12-month cycle to grow them to 250 gram. By this time next year, depending on how good we now, we have really been bad in our operations and if we can now manage to be better, then normally we would say that 62% of the eggs that you stock will be as smolt. Some of this fish which is now in the biomass has been grown for a couple of months and as this gradual growth will come, we will see a reduction in costs because there will be more fish to allocate the costs on. We have said that 2025 was a transitional year. I expect that the transitional year will at least go another six months.
Hopefully then, second half of next year, we will have more fish in our biomass to allocate costs on and then we should see a positive trend.
Thank you. In your sales and market segment in this quarter, you say you have a higher price premium. How much of that EBIT is also driven by fixed price contracts?
As you know, our fixed price contracts have been taken down as a result of the changes in the tax situation in the Faroe Islands, and therefore the total volume in fixed price contracts is around 15% of our total revenues, up from last year. It's a lower volume than it used to be. If we had stuck to our normal strategy as it used to be, it would have been a benefit in this quarter.
Thank you.
Any other question? No. Thank you very much.