Good morning and welcome to Grieg Seafood's third quarter presentation. My name is Nina Willumsen Grieg, and I am the CEO of Grieg Seafood. Together with me for presenting today is also our CFO, Magnus Johannesen. Our agenda today is quite standard. I will start by presenting operations and some details, and Magnus will follow with an update on financial review and capital allocation. Summing up, I will restate a little bit what we said last time on our strategy going forward. Starting with the highlights of the quarter, I am pleased to report that we have received full regulatory clearance for both the US and Norway. That was important for us. The process in Canada is progressing, and we remain confident in closing the transaction during Q4. This will allow us to go into 2026, focusing on our core Norwegian operations and strengthening our financial position.
Harvest volume for the quarter was almost 7,000 tons for continued operations. Due to lower market prices and higher costs, the operational EBIT for our farming activities was NOK 3.2 per kilo and close to zero for the group. Operationally, Q3 has seen strong freshwater results, but the environment at sea has been challenging, as for many others. However, by taking out our non-performing fish groups at higher cost this quarter, we were able to ensure a maximum MAB into Q4 and keep our guidance for the year at 30,000 tons. I will get back to the details on this. This quarter has also been a lot about setting up the structure for the new Grieg Seafood and getting started on cost reductions. As we emphasized last quarter, we are moving forward with a clear direction. We will go from global to regional and from growth to profitability.
Our goal is simple: operational excellence. We have made significant progress this quarter, even before closing of the transaction. We have defined a new operating model with operational capabilities centered in Rogaland. We have reduced or postponed NOK 110 million in 2025 CapEx and made significant headquarter cuts. Cost discipline remains a top priority. The main change we have done is the reduction of 55% of our staff across sales and shared service functions. It has been a tough task and a tough quarter for all, having to say goodbye to talented and valued colleagues. Today, we have a right-sized and highly capable team ready to deliver. Deep diving into operations and the quarterly performance, all our freshwater facilities, including our joint ventures, delivered solid production. At sea, however, this quarter has been challenging, as I mentioned, with high water temperature and sea lice pressure.
As a result, some pens have had increased mortality and lower growth, and we decided to change our harvest plan to take them out. I am of the strong belief that success in fish farming is flexibility and robustness in our plans. Incidents will happen, but the higher average weights from post-smolt improves our risk profile and flexibility. The non-performing fish we harvested was put to sea as late as this year in March, but was already at an average weight of 2.8 kilos. While still small, it was ready for harvesting. Having this flexibility to harvest, our actions ensured optimal MAB utilization for Q4, as well as fish welfare. As a result, the farming cost for the quarter was high at NOK 70.4 per kilo, mainly due to this harvesting of small fish and also write-downs of biomass in general.
We expect farming costs to decrease in Q4, but it will still be somewhat above our long-term target of 60. Summing up, the key figures for this quarter, our cost level is not satisfying, but due to our high contract share, we are still profitable in Rogaland, with an operational EBIT of NOK 21.7 million. Post-smolt is increasingly becoming the strategy for Norwegian salmon farmers, whether in closed containment or on land. However, few have advanced as far as we have in Rogaland. Our post-smolt is gradually increasing in average size, and we are seeing real economies of scale as both Tytlandsvik and Årdal Aqua are putting large smolt to sea. Årdal is expected to increase fish size significantly in Q4, with one batch already above 2.6 kilos. The post-smolt we put to sea now is significantly higher than any of our peers.
The distribution of smolt size has shifted dramatically over the last few years, as we can see on the middle chart, with more than 50% being above 1 kilo. Our main objective for 2025 has been to minimize the lower-sized groups, and this year only our broodstock smolt is below 500 grams. Finding the right-sized smolt for each site is a key part of our production planning. The benefits are clear, and we have presented them many times. We are seeing improved survival rates, reduced sea lice treatments, and less time in sea per generation. This means that we can utilize our best farming sites more efficiently, and it is changing how we plan and how we optimize and how we harvest.
Turning to the opposite side of our value chain with some comments on sales and processing, with high price volatility and changing consumer trends, maximizing the value of our fish is a key success factor. Even with lower volumes, we will retain an internal sales team as we see several positive effects. While we are not focused on building brands, our packing station and sales team have a good standing in strong markets, and we have consistently outperformed the price benchmark. As we have tried to illustrate in the right chart here, we also see the value of strong collaboration between our farming and sales team. While difficult to achieve, we strive to plan harvest timing, responding to price changes from week to week. Value-added processing will also be part of increasing the value of our fish.
The new facility at Gardemoen will ramp up through next year towards 10,000-ton capacity, 8.5 next year, utilizing both internal and external raw material. We are actively seeking partners for external fish. Construction will be finalized in December, and we expect production to begin in early January, with organization and training already underway. With that, I give the word to Magnus and the financial review.
Thank you very much, Nina, and good morning, everyone. My name is Magnus Johannesen. I'm the CFO of Grieg Seafood. As last quarter, these financial numbers have been prepared in accordance with IFRS 5, which means that we are splitting between discontinued and continued operations in our financial reporting. This makes the figures somewhat difficult to interpret when going through slide by slide, but I will make sure that we try to stay on the right path. Starting with profit and loss for the continued operations. We see a decline in our sales revenues due to lower prices and lower average weights, in combination with the lower volumes due to advanced harvesting. This is, however, offset by our very high share of contracts, as well as a very high superior share of the fish that we did harvest.
All in all, we did come in with an operational EBIT of negative NOK 1 million, corresponding to an EBIT NOK per kilo of 0.2. However, it's important to note that this is heavily influenced by transitional cost increases coming from the changes that we are in. Hence, we do expect this to come down significantly moving forward quarter by quarter. There's also some tax effects from the transaction that we are now doing. We have reversed a deferred tax benefit as we no longer see the Canadian loans being in a loss position. This is the reason why we have an increased cost in our taxes this quarter. Moving on to cash flow. This is prepared for the continued and discontinued operations. Starting with the operational cash flow. We see net cash flow from operations coming in at negative NOK 304 million.
It's positively contributing that we have a positive EBITDA of NOK 101 million, but at the same time, we have a significant biomass buildup in all regions, including the discontinued and continued. Moving to investment activities. The net cash flow for investment activities is negative NOK 168 million. However, out of this, NOK 130 million is relating to the continued financing of constructing the post-smolt facility in Finnmark. This shows how much we need to do until closing, despite this being a locked box transaction. To compensate, we have a positive contribution from our net cash flow from financing activities of NOK 340 million. This is due to the continued financing, both for operational losses, but also the CapEx commitments that we have in our divested regions. Isolating the discontinued operations, we have a net change in cash and cash equivalents of negative NOK 437 million if you're only looking at Finnmark and Canada.
Moving then to net interest-bearing debt, which is prepared for the continued operations, but has elements from the discontinued operations within the bridge. I will try to walk through those numbers. We started with the continued operations having a net interest-bearing debt level of approximately NOK 3.7 billion. However, going through the quarter, we still have to finance the discontinued operations, both in terms of operations, but also in terms of investments. As such, we have an increase of net interest-bearing debt of a bit above NOK 700 million. Out of this, almost NOK 400 million is directly attributed to financing of Finnmark operations, as well as the Canadian operations. This shows how much pressure we still have on our liquidity and debt levels from the discontinued regions, but it is still a locked box transaction, and we do expect some of this to be repaid at closing.
Focusing then on capital allocation. We wanted to clarify the numbers that we communicated that we would prioritize dividend last quarter. As such, we have a preliminary estimate of NOK 4 billion in dividend distribution to our shareholders following the closing of our annual accounts next year. This is both due to two important elements. Grieg Seafood will have a very strong liquidity position despite this dividend, but we do have to ensure that we do have to comply with the equity ratio constrictions as we start new Grieg Seafood. We are focusing on two key aspects. We are still optimizing and reviewing our balance sheet. As part of this, we are in the final phase of negotiating a new bank syndicate backed by Nordea and SEB. This will provide sufficient liquidity, sufficient financial partners, as well as a very strong margin.
As part of this exercise, we are optimizing our balance sheet as we move forward, and hence we have every intention to redeem the hybrid bond, either through a tender offer or through replacement capital. Secondly, we are focusing on liquidity. We need to make sure that Grieg Seafood going forward has sufficient liquidity to be a strong player in the aquaculture industry. We stand firm on our estimate of our operational liquidity buffer of NOK 250 million, but we have yet to determine the amount of liquidity needed to account for other risk. We have intention to comply with paying further dividend as we move along in line with our dividend policy. With that, I will give back the word to Nina to go through the future building blocks.
Thank you, Magnus. One slide to sum it up. I will restate our strategic building blocks because they are becoming important for us: strengthening, prioritizing, and future-proofing our operations. To strengthen Rogaland and enhance profitability is our main focus going into 2026. As we have started, we will do this through post-smolt development, MAB optimization, aligning our cost base with a new scale, and ensuring a strong sales performance. This will form the basis for any new future development. Going along, we will consider potential growth opportunities. However, future investments will focus on projects that truly strengthen Rogaland, prioritizing the regional synergies that we can see there, not just increasing volume. As our third building block, we will look into how we will position Grieg Seafood for the future.
We are seeing a lot of regulatory uncertainties in our industry at the moment, and our ambitions and plans remain flexible, but we will establish a structured process to expand the use of new technology also at sea. The Q3 results have not met our expectations. However, looking at the underlying fundamentals of our production, the organizational changes we have implemented, and a positive market outlook for 2026, I am optimistic ahead to next year. Thank you, and I can open for questions.
You have quite a lot more biomass on your balance sheet. You're going to harvest out less volume year over year in Q4, and still you're only guiding 1,000 tons of growth into 2026. Is that conservative, or should we think that you have a very tilt towards the first half of the year in 2026 in terms of harvest profile?
I think for now we stick with what we have said, and we will get back with an updated trading update, but I think it is a, I at least believe in that prognosis that we have set. Call it realistic.
On the harvest profile.
It's always natural, is good towards the second half, of course, but we have a lot of big fish at sea.
Thank you.
Can you say something about the sites you're harvesting out in Q4 and compare it to more challenging sites you've taken out in Q3?
Do you have the average size for Q4? I don't have that on the back of my head. But as I said, of course, since we changed our harvest plan, we kept bigger fish. So some increase from this quarter, of course.
Thanks. One more, if I may. The price achievement in Q3 was very good. What should we think about price achievement going into Q4 with regards to contracts particularly?
We still have a very strong contract position also in Q4, similar to the contract position we've had in Q3.
Thanks.
Christian Nordby, Arctic Securities. In terms of the hybrid bond, you talk about the tender offer or replacement capital. Can you elaborate what you mean by replacement capital?
Yes. In accordance with the term sheet of our bond, we can replace the hybrid with a subordinate capital to the hybrid and pay out the hybrid at 105. It would be important for us to maintain a good dialogue with the hybrid owners, so we will both see, we have a dialogue with them in terms of a tender offer, and if a tender offer is not successful, we do have progressing discussions on a replacement capital facility.
Thank you.
Martin Källan, ABG Sundal Collier. Could you say something about the health of the fish groups expected to be harvested into 2026 and how that could compare to your long-term target of NOK 60 per kilo?
We are done harvesting out the challenging groups in early and end up Q3, early Q4. The health now is good. Of course, we do not know what will happen with downgrades and winter wounds this year, but I am positive with the trend we saw last year. All in all, it looks much better now than it did during Q3.
Knut Bakken, Sparva. SB1 Markets. Follow up first on the question. You state that you see a normalization of the cost in Q4. So that means that you're looking at a target of around NOK 60 in Q1?
We don't guide specifically on that level, but towards our.
The cost for the full year is expected to come slightly above NOK 60, around NOK 62-NOK 62.5, and that gives you the estimate for Q4 as well.
Yeah, for Q1.
Q1, that will be a very strong quarter.
Also, a follow-up on with the locked box, you are allowed to have minus NOK 100 million EBITDA. The locked box ended end October, so are you within that?
We are well within that, yes.
Perfect. Thank you.
I would say basically there's no impact as of 30th of September in terms of the EBITDA excess losses.
Thank you.
Okay. Maybe open questions from the web?
There are currently no questions from the web.
Good. If no other questions, thank you very much for coming.
Thank you. Have a nice day.