Good morning, ladies and gentlemen, and welcome to this presentation of the financial results for the Q1 of 2020 for Bakkafrost, and welcome also to the analysts on Teams. And if you please can turn on your microphone during the presentation, and then at the question you can turn the microphone on again. This is the first time we have the presentation directly from our headquarters here in the Faroes. Normally, we will be in Oslo. This has been the case for the last 10 years. But due to the situation at these times, we do the presentation this way this year or today.
The agenda for this morning's presentation is first a summary of the quarter, and then secondly the financials, then secondly the segment information on the financials and ESG, and then finally the outlook for the sector. First, a small update on the corona situation. The situation has been very serious for the industry and also for Bakkafrost, but we are in a good position to handle it. Our operations in the Faroe Islands have been up and running with full capacity during the whole period. In Scotland, we have all operations running. However, processing have been running with lower capacity.
None of our employees in the Faroe Islands or Scotland have been confirmed positive. However, some have been in quarantine due to family and other relationships. All of our facilities' employees have been screened for COVID-19, and none have been found positive. We will continue the screening program as the society reopens to mitigate the risk during this process. In this quarter, Bakkafrost harvested 10,667 tons in the Faroe Islands compared with 13,707 the same period last year. The harvest in Scotland in this quarter amounted to 7,268 tons.
The feed sales in this quarter was 19,123 tons compared with 16,264 last year. The sourcing of raw material in this quarter was 64,807 tons compared with 115,530 tons last year. The revenues for the company was DKK 1,255,000,000 compared with DKK 964,000,000 last year. The operational EBIT amounted to DKK 248,000,000 compared with DKK 268,000,000 last year. The cash flow from operations amounted to DKK 365,000,000 in the quarter compared with DKK 77,000,000 last year. There were positive operational EBIT for the farming segment in the Faroe Islands, Scotland, and for the FOF segment, and negative operational EBIT for the VAP segment.
Then the summary, a brief summary for the financial numbers in the Q1 . The margin increased from 21.99% up to 25.10% in this quarter compared with last year. The clean farming margin was increased from 21.86% up to 26.51% for the quarter. In Scotland, we had a farming margin of 5.7. Last year, it was not a part of our operations. The clean VAP margin went down from 37 EUR per kilo down to minus 2.78 DKK per kilo, and the FOF margin was reduced from 23% down to 13%, and then a brief look into the markets and sales in this quarter.
The interruptions in the salmon market during the Q1 because of the COVID-19 pandemic are very clear in our numbers. Sales to Western Europe from Faroe Islands increased from 50% to 52%, and 91% of the sales from our Scottish operations went to Western Europe. The sales were very highly driven by our strong retail market. Consumers seem to have switched from Horeca to retail. The supermarkets in many regions reported a record high sale in March, the biggest month of take-home grocery shopping ever seen, even bigger than Christmas.
In North America, sales of salmon from Bakkafrost Faroe Islands increased from 23% to 28% of total sales in the Q1 and from 31% of fresh to 48% of fresh salmon. This makes USA the biggest market for fresh salmon from Bakkafrost in this quarter. The food service share of the US market for salmon is estimated to be around 50%, and some say 60%. This segment has been very hard hit globally by the pandemic. However, many have now converted their operations to take-away delivery and slowly increasing volumes again. The markets in Asia were the first to take the hit by the COVID-19 pandemic.
The Chinese market were already affected by the end of January, and after the Chinese New Year, which was expected to last until the 2nd of February, the lockdown was prolonged for weeks, and the markets were closed. The Chinese markets reopened in March, and then they were hit by a tsunami of salmon as markets in Europe and the U.S. were closed down. From Bakkafrost, Faroe Islands' sales to the Chinese market dropped from a share of 24% in the Q1 2019 down to 14% in this quarter. Of the fresh sales, the drop was from 37% down to 21%.
The share of VAP operations in this quarter accounted for 51% of the quantity of salmon in the Faroese operations. This is up from 34% last year. In times like these, we see the strength in our integrated value chain and, in particular, having significant production capacity and flexibility in our VAP segment. Swiftly, we have been able to shift volumes from the spot-oriented market towards the VAP segment for the retail market and hereby maintained a high production. Of the sales in this quarter, 51% were in the VAP, and in Scotland, that number was 25%.
For the rest of the year, we expect at the moment around 40% to be sold in the VAP segment and in Scotland around 25%. If you look at the global markets, we see that during the quarter, there has been a reduced salmon price from around NOK 80 by the beginning of the quarter down to a level of around NOK 55. The average spot price increased compared with the same period last year, at least when we calculate in Norwegian kroner.
There is, however, a significant effect as the markets don't pay in Norwegian kroner but in euro and US dollars, so measured in Norwegian kroner, the increase is 11% year on year, 6.91, and 20% measured quarter on quarter, but as the graph in the left side below shows, the FX effect has had an effect during the quarter of around 25%. The impact from the Horeca segment is very clear, especially from mid of the quarter up to the end of the quarter. This segment normally accounts for around 45% of the global market and has been closed for a long time, and big uncertainties are still when it reopens.
Therefore, many channels have been closed for product flow to consumers. In China, they have partly reopened after two months close, and the capacity is, however, lower than pre-corona. In Europe, they have been closed since early March, and in the US, they have been shut down since mid-March. The retail segment is booming since early March, and Bakkafrost has been able to redirect volumes to the segment from our operations with the high capacity available. Consumers seem to have shifted from Horeca to retail.
Challenges for the industry is to shift supply from food service to retail, capacity of packaging material, setting up new product lines, specifications, etc. So there have been a limited flow of products to the consumers during this period. It will be very interesting to see if the huge number of new customers, new consumers buying salmon from the supermarkets will be part of the increased demand for salmon when the Horeca segment reopens during the next coming weeks or months. If you look at the development on the supply side, we see a global increase in this quarter on 2.3% on the supply side.
Europe, however, reduced their supply volumes by 1.9%. America has increased their supply on 8.2%, and the growth is mainly from Chile and from Norway. The Chilean harvest weight in this quarter ended 4.55 kilos compared with 4.6 last year. The Norwegian harvest weight in this quarter ended 4.39 compared with 4.36 last year. In Scotland, the average harvest weight was 3.8 compared with 4.1 last year. In Faroe Islands, the average harvest weight for whole fish in Faroe Islands was 5.2 compared with 5.3 last year.
If you look at the demand side, we see that the global demand increased 0.4% in this quarter, some 2,300 tons. The difference between those two sides are inventory movements. The biggest changes, as we see here, is in China and Asia, where the drop is evident related to the COVID-19 epidemic. The issues in China was both the closed markets but also the availability of commercial airline transport, low availability, and we saw that commercial passenger air traffic was reduced by around 80%. There is obviously a much lower availability, but there's also a huge cost impact by this situation on global transport by air.
The prices during this period have doubled and tripled in some markets. So the changes in this period is that the European market increased 2%, 4,700 tons, and the US market increased 5%, 6,000 tons, and the drop was then mainly in the Chinese market with 8,500 tons reduced supply and demand. If you look at the supply situation for the next quarters, there is a clear trend for the next quarters with an increased supply from the European side.
From a drop in the Q1 on 2%, we see now an increase of around 2% in the Q2 , which rises up to around 5%-6% in the Q3 , and then this takes off again by the end of the year in the Q4 and into the Q1 next year where we are close to zero again. This can, of course, change according to the pattern in the market where suppliers see an improved market later on or earlier depending on how they see the market situation.
In the Americas, there is, however, a more flat development where the Q1 was where we saw a growth on around 7%, and this drops down to more or less very low growth, 2%-3% during the next coming quarters and down to -3% to -4% in the Q1 next year. So the global supply is expected to be in the very low single-digit growth terms for the next quarters up to a maximum of 4%-5% during the summer and the autumn, and then dropping down to 0% in the Q1 next year. So then our segments, Faroe Islands, we reduced our volumes compared with last year.
The split between our areas here is that in this quarter, we started in January by harvesting in Suðuroy, and all the fish in the south region was harvested in January, and all the fish in the west region was harvested also in January. All the fish from the north region was harvested in February and March. The average weight of our harvested fish was 5.2 kilos, which is good and in line with last year, 600 grams ahead of the Q1 2018. Significantly improved growth rates on the harvested fish, both measured in SGR and TGC. FCR also very strong, average 108 compared with 118 last year.
In Scotland, the harvest is 61% from north and 39% from south. There is high cost on the fish, and this will also continue in the Q2 . However, we expect the cost to come down in the second half of this year. Average weight of this fish is 4.0, down from 4.4 in the Q1 last year. We transferred 2.3 million smolts in Faroe Islands at 309 grams on average compared with 1.7 million last year at 211 grams last year. Our hatcheries have doubled the production volume in the Q1 this year compared with two years ago.
Two years ago, we transferred 536 tons, and this Q1 , this is 1,042 tons. In Scotland, one million were transferred at an average weight of 99 grams. This is down from 2.5 million last year. The operational performance in the Faroe Islands in this quarter was an EBIT of DKK 203 million from the farming segment, down from DKK 230 million last year. However, the EBITDA margin increased from 30% to 32%, and the operational revenues came down from DKK 755 million to DKK 633 million. In Scotland, we have a much lower margin, which is mainly due to the higher cost of the production, which will continue in the Q2 but come down in the second half of this year.
In Faroe Islands, the loss of fish in the severe storm that hit the Faroe Islands late February caused a financial loss that has been accounted for in the Q1 , so this took the EBIT down from DKK 29.58 to DKK 26.51 per kilo. The cost of this, which was not covered by the insurance, is DKK 23.5 million, which has been accounted for in this quarter. The west and south accounted for 41% of the total volume, and this was harvested in January. We see that the margin in south was DKK 38.47 per kilo, and in the west, DKK 38.85, and this is mainly due to the time of the harvest.
The north in Faroes had a margin of DKK 17.94, and this fish was harvested in February and March. In Scotland, the margin is NOK 5.7 per kilo for the whole segment. The average weight in south was 6.5 kilos head-on gutted. In west, it was 5.26. In north, it was 4.9, and in Scotland, the average harvest weight was four kilos. The Scottish operations are on track with our plans. The integration is going as expected. We expect the cost to be stable for the first half year and gradually decrease during the second half. The mortality numbers have improved, are stable, still relatively high. There have been no material events in the operations.
However, we have improved our growth rates in the quarter, and the FCR is stable. We are investing in people, provenance, and pride. We are upgrading facilities. We are in the process now to increase our investments in hatcheries, and the first one on the agenda is the Applecross Hatchery, where an investment is undergoing and will be expanded significantly to increase the capacity. We also improved the IT feed systems to secure better connectivity. There are also other investments this year, especially in the processing, to secure the capacity needed for the year.
On the operations, high focus is on biology and to improve the KPI on operations. We are about to start feeding the fish with our own feed these days. The integration between the leadership group has been successful and very positive so far. In order to mitigate the issues with the COVID-19, there are frequent meeting activity on Teams across the leadership groups and through the organizations. The value-added segment increased operations from 4,689 tons to 5,408 tons raw material head-on gutted equivalents. The revenue increased from DKK 261 to 274 million in the quarter compared with last year.
Spot prices in January and February were very high, and this dominates the numbers for the quarter. The EBIT fell from DKK 1 million down to minus 11, which is equivalent to minus 2.78 Norwegian kroner per kilo. The share of harvested salmon in Faroes increased from 34% up to 51%, and we have signed contracts for around 40% of the expected harvested volume in 2020. From mid-March and onwards, there has been an explosion in demand on vacuum-packed and skin-packed ready meals in salmon from the retail segment.
In these corona times, consumers seem to have switched to source food from supermarkets from Horeca to retail. This change in consumer habit has brought challenges to the industry to find the capacity for a shift in the supply chain. It is a huge logistical operation to move volumes from Horeca segment to the retail segment, to set up more capacity with packaging material, new products, and specifications, etc. The constraint has limited the flow of products to consumers somehow and created big market disruptions.
At Bakkafrost, we have had good capacity in our new factory here in Glyvrar, where we have been able to redirect big volumes to the retail segment from mid-March and boosted production significantly. The retail segment accounts normally for around 55% of global sales, where a part is finished wrap products in consumer packs. Retailers have reported sales in the latest months above their record high ever. The operations in Havsbrún in this quarter had a reduction in raw material intake, which is the main reason for the drop in our margins.
The margin dropped from 23% down to 13%. The EBITDA came down from DKK 65 million down to DKK 40 million. The revenues increased, however, from DKK 283 million down up to DKK 310 million, mainly due to the increased volumes of feed, which increased from 16,264 up to 19,123. The share of feed sold externally doubled. The increase of feed sold internally increased slightly, mainly due to the bad weather in January and February. We were not able to source the volumes that we normally do. We expect the season here in the Q2 to improve slightly these numbers so that the blue whiting that normally is caught early in the year will be caught later in the year.
Looking at the feed sales, we see that these increased 18% in the quarter, which was mainly due to the external feed sale. The external feed sales went up from 2,300 up to 4,800 tons. There were also an increased sale of fish meal in this quarter. The prices of fish meal and oil have been increasing during all last year but went down in the second half of last year. Still, the fish meal price is rather low, but the fish oil price has been increased. Now, Høgni, you will take us through the financials.
Thank you, Regin. Yes, I will give you a short update on the financial development in the group and also a brief update on our ESG agenda. So looking at the P&L first and foremost, as Regin mentioned, we have had an increase in revenue this quarter, so that we are up at we had a total revenue for the group at DKK 1.3 billion, roughly speaking. But we need to have in mind that in this quarter, we have contribution from the Scottish operation, which we did not have in the Q1 of 2019. So if you only look at the Faroese numbers, our revenue in the Faroe Islands were DKK 843 million, which is less than the DKK 964 million we had in the Q1 of last year.
The same goes for the operational EBIT, which was DKK 248 million in this quarter, whereof DKK 280 million is out of the Faroese operation. As Regin also mentioned, spot prices dropped radically towards the end of the quarter, so we have in this quarter quite significant negative fair value adjustment of the biomass amounting to DKK 411 million. Income tax, we paid less income tax in this quarter amounting to minus DKK 19 million, and taxes were positive at DKK 33 million in this quarter. That leaves us with a profit after tax of, or rather a loss after tax of DKK 148 million in this quarter.
And the operational EBIT margin for the group as a whole is 19.8% in this quarter. And if we compare this quarter to previous quarters in regards to operational EBIT, in this quarter, we are at DKK 248 million. That's slightly below the two Q1 of the two previous years in 2019 and 2018, where we were at DKK 268 million. Looking at the adjusted EPS, in this quarter, we had an adjusted EPS of 3.90, which is lower than the previous quarters that we have had. Moving on to the balance sheet. Comparing to the year-end 2019, our intangible assets were more or less unchanged, amounting to roughly DKK 4.4 billion.
During this quarter, we made investments in property, plant and equipment amounting to DKK 101 million, leaving the balance at the end of the quarter at roughly DKK 3.8 billion. The biological assets amounted to roughly DKK 1.5 billion, significantly reduced by the fair value adjustment. Inventories were down with DKK 25 million during this quarter. Receivables more or less unchanged, amounting to DKK 629 million, and cash and cash equivalents amounting to DKK 801 million. Equity in this quarter amounts by the end of this quarter amounts to DKK 8.4 billion, and our net interest-bearing debt was slightly improved by DKK 30 million and now amounts to DKK 988 million.
The equity ratio after this quarter was 66%, and total assets amounting to roughly DKK 12.3 billion. Looking at the cash flow, in this quarter, we had a positive cash flow of DKK 365 million from operations, and we have a negative cash flow from investments amounting to DKK 106 million, and cash flow from financing amounting to DKK 772 million. In regards to the cash flow from financing, we acquired the last remaining shares of The Scottish Salmon Company in this quarter as well, and that amounted to DKK 168 million.
Looking at the liquidity and net interest-bearing debt, how that has evolved during this quarter, we left last quarter with a net interest-bearing debt of DKK 1.1 billion and 18 million Danish kroner and made investments amounting to DKK 101 million and acquired the minorities of The Scottish Salmon Company amounting to DKK 168 million, so that increased our net interest-bearing debt throughout the quarter, and then we had a reduction caused by the cash flow from operations and the working capital reductions.
And financing, in December last year, we refinanced the entire group and ensured bank facilities amounting to EUR 352 million and GBP 100 million for the operation in Scotland, and at the end of this quarter, we have undrawn credit facilities of roughly DKK 2.5 billion, which is on the same level as in the last quarter. Sustainability and ESG is very important for us at Bakkafrost, so I just want to give you a brief update on the progress that we have made throughout this quarter. In this quarter, we released our third annual sustainability report, and in that, that's available on our website.
And there you can see a more detailed explanation of the progress that we have made, but also some new commitments that we have made in this quarter in regards to sustainability. Worth mentioning is our very ambitious and also science-based targets that we have set for reducing CO2 emissions. And speaking of energy and CO2 emission, we're also happy to see that the biogas plant is now in operation. By the end of this quarter, we have received 5,000 tonnes of manure for the biogas plant. It's still not producing energy, but we expect that to happen during the summer months.
In next quarter, we will probably be able to tell you how much CO2 we have saved and how much energy we have produced out of the biogas plant. We also made progress on our ASC certification, so we have now 15 of our farming sites in the Faroe Islands are now ASC certified. We also made progress in regards to increasing our salmon or the average weight of the smolts that we released. Of the 2.3 million smolts that were released in the Faroe Islands during this quarter, the average weight was 309 grams.
Comparing to last year, Q1 of last year, that was 211 grams, so we are almost 100 grams up, and the year before, the average weight was 152 grams. We are definitely moving in the right direction in that regards. As Regin also mentioned, we have initiated this screening program for our employees in the Faroe Islands in order to ensure their health and safety. All our employees in the Faroe Islands are offered free screening for the COVID-19 virus. The week before last week, we completed over 800 tests and all being negative. Yeah, thank you.
Going to the outlook for Bakkafrost and the market as a whole, the most important is the market situation, which is quite stable on volumes. The growth in 2020 is around 2-4%, and with European suppliers, it's maybe up to around 4%. In the Americas, the growth is coming down and will be now only between 0 and 2% for the coming quarters from 10% last quarter. The guidance for our farming is now for 2020, total 89,000 tonnes, whereof 50,000 are from Faroes and 39,000 from Scotland. The Faroese guidance has been taken down due to the storm accident in February.
And we expect to release 15 million smolts in the Faroe Islands this year and 10.7 million smolts in Scotland. We expect the size of smolts in the Faroe Islands to be somewhere around 300 grams or somewhere below 300 grams for the whole year in average. The present situation with the global pandemic and the huge market disruptions has once again showed the importance of a multi-market strategy based on a long value chain. I believe the retail market will be strong for the next months and quarters as demand is extremely strong.
Our long-term strategy is to sell around 40%-50% of the harvested volume in the Faroe Islands at fixed price contracts from value-added products. The fish meal, oil, and feed will this year produce more feed. We expect to source some of our own feed in Scotland, but the raw material situation is more difficult this year, both as we saw the storm in January and February and the bad weather, but also with less availability of fish. So we expect slightly lower raw materials for that operation. Farmed salmon's widespread and year-round availability means that more people than ever before are enjoying salmon.
While we have had to deal with unexpected challenges, for example, adapting to changing markets, moving from food service to retail, this event reminds us that we are offering a product which is playing a central role in many diets around the world. And we have continued responsibility to ensure that products are farmed sustainably. In this spirit, we are continuing to pursue the growth case to build a capacity to farm 100,000 tonnes in the Faroe Islands and to create a similar sustainable growth case in Scotland.
The construction of the new hatchery in Norðtoftir, and with an additional capacity of 12,000 cubic meters, has now started and will be in operation in two years' time from now. A similar project will start later this year in Glyvradal, around 13,000 cubic meters, and an additional project in Applecross, Scotland, around 15,000 cubic meters. Both of these will also be in operation around two years after construction start. These two are post-smolt facilities to grow large smolts. Bakkafrost has also signed a contract with Sefine Shipyard in Turkey to build a new 7,000 cubic meter well boat to be able to be in our operations two years from now.
All these investments are within the plan that has been communicated to the market and are described further on page 37 in the presentation. The investments in the Faroe Islands are expected to be around DKK 1.8 billion in the period 2020 to 2022 and around DKK 350 million per year in Scotland for the next four years. And now I'm ready to take any questions you might have.
Hi, it's Alexander Aukner from DNB.
Yeah, go ahead, Alex. Alexander.
Yeah, thanks. Should we expect realized price closer to the spot price as long as the COVID-19 situation lasts, or are you able to achieve the same price premium in retail as you did in the Horeca market?
That's a good question. That's a very good question. There has been a big market disruption during this period, and the market and sales are planned more or less day by day. So it's very important to have a flexibility, which is exactly what the VAP operations gives us. So I guess that the answer is very much related on how the markets will reopen over the next coming weeks and months. There are signs in the markets that they are reopening and that also the Horeca segment has been adapting to the situation, especially by changing some of their operations to take away instead of serving in-house.
That has already had some positive effect, but there is a very narrow balance in the market. So the difference between 3% too much salmon and 2% less availability is very important.
The price seems to be very sensitive on volumes. So I guess that at least for a couple of months ahead of us, there will still be a pressure in the market, which will also affect our availability to achieve premium on those volumes. Was that okay, Alexander?
Yeah, I think that's as much as I could hope for, so thank you.
Yeah. Yeah, yeah. You cannot get everything. Yeah, anyone else?
Kolbjørn Giskeødegård, Nordea Markets. Question on your guiding for 40% contract share this year. Does that mean that it is 40% of your production which will be allocated to frozen portion and retail, or is there any sales above those contracted volumes also going into frozen portions and the retail segments?
Yeah, exactly. Yeah, that's one of the developments that has been quite clear in this during the last couple of weeks and the last two months that there is more. There's a bigger flexibility in the market to take volumes with short notice. So there is a bigger share of shorter contracts, not for six months, but adding on volumes. So I mean, to go 50% up in production from one week to next weeks is, of course, a result of a very big increase in the demand from the segment.
And the majority of this is, for our case, with the clients that we already have, meaning that their operations have increased significantly. And that's both with existing products but also with new products. So that's, I would say, that's the positive side of this situation.
Yeah, but I think when you say 40%, let's say that's the sort of allocation right now. But does that mean that you are selling right now 60% as fresh fish in the spot market, or are you selling more than the 40% as frozen also?
At the moment, it is more. It is more because we are adding on at the moment every week. So that means that at the moment, we don't hold that number, but we expect at the moment, we hold around 40%, but we add on something at the moment to this area, meaning that we could end even higher.
Yeah. Can you say something about the contract price levels? Are you so far able to maintain your previous levels, or do you see a pressure also downwards in accordance with the movements in the forward prices recently?
As you know, there is, of course, a relationship between those two segments on the markets. There is, however, a time lack. There's a time lack in the prices so that when we see big spikes in the spot prices upwards and downwards, there is a time lack in the contracts and in the prices. And we normally don't see the peak prices in the contracts either way. So but the trend follows normally with a time lack.
Okay. Thank you.
Anyone else?
Good morning again. Oh, sorry. Lars Johnsen here from Carnegie. Just a quick question on the cost in Faroe Islands. According to my estimates, around EUR 4.5 this quarter, and you said that the operation was running good and in line with expectations. Is that a level we should kind of put into our estimates going into 2020, the rest of 2020, and into 2021 as well? Or how do you think around that?
Yeah, that's a good question. There is for 2019, our cost development was quite stable. From quarter to quarter, there was up and down DKK 1-DKK 2, and this is the same at the moment. Our costs are quite stable at the same levels as before, also for this quarter. And now I am talking about the operational costs in our operations. What has a big impact right now is the air transport. We have seen a significant rise of those costs here in March and even some in February, which is continuing. So the airborne fish at the moment is struggling with very, very high transport cost because of the reduced availability and thereby the higher cost.
But I expect that our operations here in the Faroe Islands will continue with stable development on the cost side. We are building up capacity of 100,000 tonnes, and some part of our value chain has already a significant extra capacity. For example, our VAP operations, I mean, last week, we did something like 660 tonnes of head-on gutted into portions, which is 50% higher than our average. So there is a big capacity available in some parts of our value chain, which, of course, has to be accounted for on the cost side.
And as long as we are running with reduced capacity utilization, there are some costs involved that is paid by a lower volume. And eventually, as we are increasing our operations, this will be even more efficient. But that's more on the long term as we hopefully will increase our volumes over the next coming years. Was that okay? Okay, Lars?
Yeah, thank you.
Very good. Anyone else?
Yeah, Christian Nordby. Kepler Cheuvreux . I have a question for you regarding the bigger fish market that we're seeing right now. We're seeing that the big fish premium is quite negative, and from before, we've seen that you have the biggest premium that Bakkafrost gets is, of course, from the brand and from the healthier fish and all that. But right now, the market is now in Q2. Do you still see that you net get a premium to the Norwegian salmon price? That's question one. And question two is how much cost reduction do you think is fair to assume for Scotland in the second half?
Yeah. Well, when it comes to the premium, yes, we still obtain a premium on large fish. So the issue is more that the share of large fish has been reduced, and the cost of air transport is very high. So those are the big issues right now. But we still get a premium in the market where the fish is sold. And that premium is still in line with what has been normal. The second question about the costs in Scotland, well, I would guess that in the next year or so, we hope to get a reduction at least for one pound sterling in the cost price per kilo.
Carl-Emil Johannessen, Pareto . Just one short question again on the VAP segment. With the spot prices we see now during Q2 and the contracts you have entered into with the retailers, what should we think about the margins that you will be able to obtain in the VAP segment? I guess at least compared to Q1, you hope for some improvements.
Yeah. As you know, when we calculate our VAP segment, we always use the spot price as the cost base for the raw material intake. And on the revenue side, we use the contract price. So therefore, sometimes it's difficult to calculate. But we will normally use the forward price as the baseline for our calculations and add on a 10% margin. So that's how we calculate it. So depending on the development in spot price compared with the development on the forward price, that will have the impact on the results. I expect that the VAP segment will be positive for Bakkafrost for the next coming months and quarters.
The most difficult thing to estimate at the moment is how the customer's behavior will be in the future. Will the customer's behavior be exactly as it was pre-Corona, or will there be a new type of behavior after this Corona? Will people still buy more in supermarkets, and will they still prefer fish which are pre-packed, closed for bacteria and virus, which seems to be the case at the moment, driving a big demand? So those are the questions which will also have a big impact in the future and will be drivers for this question. Anyone else?
Martin Kaland, ABG Sundal Collier here. I have a couple of questions related to volumes, harvest volumes. Number one, what is the main driver behind increased guidance for Scotland? And for the Faroes, could a storm in February have an impact on the planned harvest for 2021? And in more general terms, are you looking at changing the harvest profile throughout the year now after the COVID-19? And yeah, in general, are you looking at the possibility to hold back volumes, for example?
Okay. So the main driver in Scotland is actually that we want to produce larger fish. So we want to grow the fish more. And we see that, for example, here in the Q1 , we have been successful in that strategy. So that's why we believe that we can increase the volume. The storm in February had an impact on fish, which had a weight of 2.3-2.4 kilos, and was expected to be sold in the second half of this year, in the Q3 , and the Q4 . So the impact will mainly be in that period and not for 2021.
The harvest profile in general, holding back, of course, we always try to be flexible as compared with the market development and the market situation. But in general, you cannot hold back for many, many weeks. You can hold back for a couple of weeks, so you can move some volumes over the new year, for example, but not a big and we don't have a strategy at the moment to do so, so at the moment, we follow the strategy and the plan on harvest that we have for the full year. We have a quite stable planned volumes. Originally, we had much more volumes in the third and Q4 , and now, with this setback, it's quite stable over the year for the full year. Yeah.
Alexander at DNB again. Just you mentioned there's a surge in new retail customers. Is it possible to quantify this?
No, it's not difficult. But I can just say that from our perspective, with our customer base, we see a significant surge and vacuum for more products. And I believe that even if we could double our operations, we would have been able to do so for the last two months. But I think most retailers expect this to take off. But of course, this is probably new territory for all of us. So if this is the same case for everyone, I guess that it is proof that if you say that 50% of the consumption of salmon is in retail normally and 50% will be from the Horeca segment.
Then it shows that the 50% from the Horeca has now been moved to retail. So people are buying from retail. But there are also studies and questionnaires that have been in the market showing that 50% of the clients in supermarkets or the customers buying salmon are buying for the first time. So it means that somehow there are also new customers there. And it shows that salmon is a strong product. And this situation might also increase or expand the market going forward. But to quantify it, from our perspective, I can say that the base that we have seems to have increased considerably.
Okay. Thank you.
Thank you very much.