Welcome everyone to this Q3 2022 Presentation for Icelandic Salmon. Today we have a view of our site in Patreksfjörður as a background. On this site, we have the 2021 generation, which we will start harvesting next week. At the end of this presentation, there will be a Q&A session, and you can send your questions to questions@arnarlax.is. Icelandic Salmon is a listed company at Euronext Growth in Oslo and is the sole owner of Arnarlax ehf. Arnarlax Sustainable Salmon is our common brand for our operational activities and our products out in the market. Arnarlax have today four smolt facilities and a current capacity of 7million-8 million smolts, depending on size.
We have our farming activities in the southern part of the Westfjords, where we have 23,700 tons of maximum allowed biomass. I will comment on that number later in the presentation. All our production is ASC certified, and we harvest our production in Bíldudalur at our harvest plant, where we have a capacity of approximately 30,000 ton. The harvest plant is BRC certified. We sell all our fish through our sales team to both the domestic and, of course, mainly the global market for salmon. Icelandic Salmon show a continuous strong organic growth in the quarter with over 50% increase in volume compared to Q 3 2021. The market prices were lower in Q 3 than in Q 2, but we still see good price achievement compared to market price.
Most of the volumes we had in quarter three was harvested late in the quarter, and the market prices were lower in end of quarter, which have effect on the price achievement. We see some increased cost in Q3 . This is due to a general higher raw material prices. We also did a reevaluation of stock when emptying out the 2020 generation, and that was due to a lower biomass than expected. This partly happened in Q4 , but the loss was taken in Q3 . In Q3 , 2020 generation was harvested, and that happened at a high average rate and high superior share. We expect increased volumes and stable cost levels in Q4 .
The 2020 generation will be finalized in Q4 , and we will start harvesting on the 2021 generation in that quarter as well. We expect to continue with high average rate and also high superior share. This shows us that we have a good biological performance. In Q4 , we also will have a good utilization of the capacity due to high volumes through our harvest plant. Growth plants are developing according to plan. Ísþór Smolt plant was acquired and is now under full integration into the Arnarlax family. It means all systems and everything. We expect a stable demand for Atlantic Salmon from Iceland in Q4 . For volume guidance, we have still 16,000 tons for this year, and we expect approximately same level for 2023.
For 2024, we expect a significant increase, following the investment in smolt capacity in turn this year and 2021. We have now completed our smolt strategy and want to summarize that up in this presentation. Our present capacity you can see on the slide where we have a total maximum allowed biomass in our smolt facilities of exactly 3,000 ton and a capacity up to 8.5 million smolt. The number will vary with the decisions around smolt weight. We now adapt our smolt production to give us the best MAB utilization in sea, and that will mean a higher proportion of bigger smolt.
Part of the strategy is also to build a competent center around our smolt production on the South Coast of Iceland, connected to the facilities Ísþór, Laxabraut 5 and Fjallalax. We think that by doing that, we secure implementation of best practice in our operation, which again will give us a better smolt quality. That is one of the areas where we know we can improve. We expect, as I said, to see effect of the smolt strategy on the harvest volumes in 2024 based on the output we then do in 2023. The main effect of bigger smolt is a reduced time in sea.
The upper line of the chart, where you see a 100-gram smolt put out in sea late in autumn, gives a long production time and two full winters in sea, which gives us a higher risk and a higher cost. On the lower chart, we see the effect of putting out bigger smolt early in the spring, the lower line, which then will be harvested before the second winter in sea. When we put out a big smolt in the autumn, we see that we reach harvest weight during the second winter and therefore reduce the risk with the fact that the fish is ready to harvest. If an incident should occur, we can take it to the harvest plant and harvest it.
We go to sales and marketing. For sales and marketing, communication directly with customers have been a main focus in the quarter. That has been done through participation in seafood shows and direct visit to the customers. This has given us new customers, and we also see an increased demand. The contract share for Q3 was 17%, and we expect in Q4 a contract share of approximately 22%. We saw an increase in the US market in Q3 compared to Q2 , and 73% of the volumes to the US market was transported with the Eimskip vessel from Reykjavík to Portland, Maine. That is the solution of production and transport that probably serves the US market with the salmon who have the lowest carbon footprint.
Our brand IceFjord came out to the end consumer in Q3 in L.A., and we are very proud to show the menu from The Ranch Restaurant in L.A., where we can eat our salmon in the restaurant. Kjersti, our CSO, and I was visiting L.A. in September, and we can just confirm that it tasted excellent. We also see an example of our salmon in a store in L.A. where the price per pound is almost $19. It's a well paid product.
I said in the beginning that our license capacity is now 23,700 tons of maximum allowed biomass, and this is due to that we had a renewal of our license on the site Fossfjörður to 1,500 tons, which previously was 3,000 tons. This is a decision that the management in Arnarlax don't agree about, and the decision will be appealed. Fossfjörður is a license that is connected to one site, which means you will get a low maximum allowed biomass utilization if you look at the lower chart on the slide. That said, we also see an opportunity to merge the license of Fossfjörður with the big license in Arnarfjörður, which is 10,000 tons, so we can get that up to 11,500 tons.
That will give us a much better MAB utilization and compensate for almost all of the production that will be lost in Fossfjörður if we don't succeed with the appeal to get it back to 3,000 tons. For the other licenses and applications, we have got our first new site, Otta 3 application, to give us a better utilization on the Arnarfjörður license and the license in Patreksfjörður and Tálknafjörður. The application in Ísafjörður for 10,000 tons is still in process. We expect answer on that by end of 2022 or Q1 , 2023. We expect the answer to be 10,000 tons of sterile salmon. It's the application for 4,500 tons in Arnarfjörður that is being worked on, and we are preparing for
an auction that we hopefully will get in some time. The legal framework around auctioning of licenses in Iceland is not in place yet, so the exact timeline on this is undetermined. I will then give the word to Jónas Heiðar Birgisson, our CFO. Off you go, Jónas .
Thank you, Bjørn. Icelandic Salmon acquired the remaining shares of the smolt facility Eldisstöðin Ísþór with the equity value of EUR 60 million in August this year. The consolidation is affected from that date as it is now fully operational with ownership of Icelandic Salmon. This had an impact on the group's fixed assets, which increased by EUR 29 million within the quarter, ending the total assets of EUR 234 million. The acquisition had an impact on the net interest-bearing debts, where the net interest-bearing debts increased by EUR 24 million within the quarter. Without any strains, the acquisition mostly changed the group's cash position, but the interest-bearing debts increased by EUR 7 million and the changes in cash decreased by EUR 17 million within the quarter.
The group met all covenants at the end of the quarter and continued to have a strong equity ratio. In the process of the acquisition, the company secured additional financing through the group loan lines with DNB and Arion banki that have been supported to the group quite significantly over the last two years. The additional financing was not used for the acquisition, but thought of to secure continuing financing in other groups growth projects. Net cash flow from investing activities totaled up to EUR 15 million, and changes on net cash flow from operational activities was negative of EUR 9 million, mostly based on increased biological inventory at cost value. Total investments, excluding the acquisition of Eldisstöðin Ísþór, totaled up to EUR 4.4 million within the quarter. Year to date, Icelandic Salmon has invested for EUR 11.5 million in addition to the acquisition.
Those investments contain deposits for purchases of two 900-ton batches that are to be delivered in next year, as well as 200-meter cages for our sites in Hringsdalur, frames, nets, and other items to support increased production in sea, as well as continuing focus on our investments on our land-based facilities. The group equity ended up at EUR 143 million at the end of third quarter and had increased from EUR 13 million from the end of last quarter. Now, this is the end of the presentation. Me and Bjørn Hembre would like to thank you all for joining us on this session, and we hope you will join us in the Q&A as well after just a few moments. Thank you.
Yes, hello, and welcome to our questions and answer session of our presentation. My name is Jón Garðar Jörundsson, and I will be directing the questions to my colleagues, Björn and Jónas today. You can still send in questions through questions at Arnarlax, so feel free to send them in, and we will try our best to answer as many as possible. We have a question already from Ole-Andreas Krohn. The question is, do you expect to benefit from the high contract prices in 2023 following a stop in the contract market in Norway?
We feel a strong demand out in the market for contracts, which of course is a good situation for us. We are very selective when we go into contracts now, but we see a potential to have a good contract portfolio when we go into 2023. Absolutely.
Okay. He also asks if the contract prices going forward are realistic. He mentioned NOK 90 in that.
I don't think I will comment on the prices we achieve on the contracts, but it's high forward prices, and that means also high contract prices. Yes.
Okay. Thank you. Another question from Carl-Emil Kjølås Johannessen . What do you expect maximum allowed biomass utilization will be with 500 gram smolt?
We expect to reach up to a ratio up to approximately one if you divide the harvested volume by maximum allowed biomass. That is, h opefully we can get north of that as well, but in and around that range is our expectations for that.
Okay, quite a lot of questions coming, but another question from Axel Jacobsen. Maybe somewhat similar to what you said earlier, but can you say something about the contract share for 2023? Any price level indications?
We don't have the overview of the contract share yet. We have a decision to not have a very high contract share, but we want good contracts. That's what we're aiming for. As well, the price itself, I don't think I should comment on.
Question from Bjarni Gíslason from Gildi. The ISA infection in the Eastfjords, is there any ongoing review of the case within Arnarlax at the moment, or has the case been seen as an isolated case to the sites in question?
ISA and biosecurity is something, you know, that have or are worked on at the moment in the Ministry of Fisheries. There will be a review of the regulations and laws around that. The industry has had the opportunity to give input to that group. I think that was a very good process to build a structure that the industry agrees about. It will take some time to implement it, and it's something we take very serious. Yeah, ISA is a threat that could happen, and we need to be prepared and are working every day on improving those routines.
Thank you. This is a question from Carl-Emil again. Your guidance on a flat cost for in Q4 from Q3.
Mm.
Is this adjusted for the reevaluation of biomass?
Yes, that is adjusted, so we don't expect any reevaluation for Q4 . We see that we will still, of course, see the effect of the general price increase, but we also see that we have a better biological performance that compensate for that.
Okay. Another question from Ole-Andreas Krohn. What is the average smolt size you plan to release in 2023? Can you comment on that?
I don't have the exact number in my head, but we will be at approximately 250. Somewhere between 250 and 300 grams, with the biggest up to 500. We, of course, also will have some what we call normal smolts at 120-130 grams as well. In that range.
Okay. Question for you, Jónas, as well. You mentioned the financing in IceFjord, or the financing this year. In general, what is the status of financing going forward?
Well, we did place additional financing now alongside with the purchase or acquisition of the remaining share in IceFjord. Going forward, we have a good relationship with our banks and DNB and Arion banki, and that loan agreement is valid. We don't have any plans on refinancing per se, but this is a case that we start to look at in the beginning of next year.
Thank you. Another question from Axel Jacobsen. He asks us, can you tell us anything about the reasoning behind why the government reduced the license in Fossfjörður?
I had to comment on that. I think it's a bit we are the government and Arnarlax have two different opinions that don't match. It's about yeah that. I don't think I have any further comments on that.
Okay, great. A question again from Ole-Andreas Krohn. Should we expect the same seasonality in harvest profiles going forward, with majority of Q3 volumes being harvested late in the quarter?
We expect when we now increase the smolt weight that we will, because now we have been harvesting the autumn fish from the 2020 generation, and when we put out the bigger smolts earlier in the autumn, the harvest will be earlier as well. We will see a more spread harvest throughout Q3 and also Q2 , which we have seen low volumes end of Q2 . It's the same reasoning. We will see a change in that.
Okay. On the branding, the IceFjord brand, is that an indication of increased focus on market work going forward?
That is the brand is a result of hard work towards the market to find the right company, in this case to cooperate with and kind of find the right story and the right customers and match this up. It also shows us that it's possible, and it also shows us the potential in this type of work. It is time-consuming, but when you are able to settle deals like this, it also pays off. It's definitely something we see going forward.
We haven't kind of taken huge steps, but the strategy is more to build stone by stone with identifying the right customers and develop the projects together with them to get a good customer relationship and a good story out in the market.
Very good. Maybe another question. I think we're getting close to the end here. On the max biomass, can you explain how you estimate producing similar amounts with this reduction in MAB?
Yes, I can try to do that, because the license that was reduced from 3,000 to 1,500 tons is allocated to one site, which means you build up biomass over a production cycle, then you need to rest the site, and then you build on again. If we can move this to a license where we have three generations in production, we will be able to keep the level of biomass higher, and therefore we will get the better utilization. There is two possible end results in this case. That is, we'll keep the production up.
That is, that we get the 3,000 tons back by the appeal or that we get the 1,500 tons moved to the Arnarlax's license, which we have positive signals from the government that should be possible.
Okay. I think that will conclude the questions today. I would like to thank everyone for joining in, and maybe a special thanks to our dedicated staff who are of course a very important part of our development up until now and going forward. Thank you very much for joining and see you soon.