Thank you very much. We are ready to start, and I will hand over first to our CEO, Vincent Erenst. Vincent, go ahead.
Thank you, Marieke, and welcome to the presentation of the financial results, first half of 2023. I'm here together with Jean-Charles Valette, our CFO. Today, I will start with an update on our phase II expansion project and how that is progressing. And then after that, I will hand over to Jean-Charles to present and comment upon the financial results in more detail. After his presentation, I will explain what we're doing to further improve our operational APIs, followed by some concluding remarks, and after that, we will open up for a few questions. But let's start with the highlights of the first half year. We made substantial progress in our operations in the first half, also in financing and in the construction of our phase II project.
Most importantly, the revenue per kilo, improved further in the first half of 2023, as compared to first half of 2022, and this has offset, higher input costs, especially feed. The production in our phase II extension has started, and the results, that means the fish, are doing extremely well in that system, and it, looks very promising. We have, in July, successfully completed a new financing round, raising EUR 32 million in a convertible loan, and in this way, we have secured the growth of the company. Next slide, please. So the phase II extension project will be completed this year. In May of this year, we, we put fish in the first six tanks. There are 18 large tanks in the system and, and a series of small tanks.
The production is going to come, of course, out of the last tanks. six tanks in May and a further four tanks in August, and we expect to fill the whole system in October. The biological performance of the fish has been, we can say, beyond expectations. Growth is faster than in our phase I systems, and mortality is extremely low, and also the FCR is better than we had expected, especially for larger-sized fish. We expect that our biomass between phase I and phase II will end up between 900 and 1,000 tons at the end of the year, which is a very sharp increase from the 420 metric tons with which we ended 2022.
As mentioned, we expect to fully complete the phase II project by year-end, and this will include then the commissioning and operating of a new processing facility, state-of-the-art, which we will start to operate in November and should be fully operational in December of this year. With that, I'm handing over to Jean-Charles, who will go deeper into our financial results.
Yes. Thank you, Vincent. So, this first half of the year, we've seen very positive development in operation, but also in the cost of operations. First, if we look at our feed price, they increased massively last year in the Q3 and Q4 of last year, resulting in the first half of this year, feed price being 35% higher than in the first half of last year. This being said, we've been able to offset this increase by the very good biological performance of the farm. Very low FCR, 1.3, which, like Vincent mentioned, is beyond expectation.
But also, already for a long time, we've been doing a lot of trials with new feed and new formulation, and we've seen a very encouraging result in the first half of this year in some of these trials. So we have now new feed, new formulations, which are cheaper, which are performing as good or better than the older feed, and with a lower FIFO. So we have started to introduce this new formulation in the farm in the first half of the year, with limited volume, and this will increase in the second half of the year. So we think that here we are going in the right direction. We've seen the worst with the price increase improving. On energy cost, a similar picture.
Last year, we were not hedged, so we had to pay a spot price, which were extremely high, and this year we have a very favorable electricity contract, which means that we have a electricity price, which is less than half of what it was last year. So very favorable for us this year. This being said, unfortunately next year, this will be much higher than it is this year. We have started to hedge for next year, but this will... for what it is what it is this year. Also, worth mentioning, so you see that the electricity price per kilo is half of what it used to be at EUR 1.1. So this is not something we will be able to maintain in the long term.
However, also what we see is that in the first half of this year, we've been impacted by the startup of the new farm. So we started commissioning, testing, and commissioning equipment, starting in January, while we started production only in May. So we have had an electricity consumption just for testing, the farm of about 1,000 MWh, which is something which, obviously, when the farm is fully operational, we won't have anymore. So that will offset the price increase we will have next year on electricity. The third positive element on the production cost, that's the oxygen cost and all the other chemicals. They peaked last year, especially in Q4, were extremely high.
Now, for most of this component, the price is half or a third of what it used to be. So very positive impact, again, on our production cost. So we see our cost of goods sold going in the right direction, going down, and this will continue in the rest of this year and next year, and especially next year when we benefit fully from the scaling scaling impact. Also this year, beyond electricity, we have also a labor cost, which are already sized for phase II, while we are not yet harvesting from the phase II. So next year, when we start harvesting, the cost of goods sold, the production cost, and cost of goods sold per kilo will go down significantly. Next slide, please.
That means also, as a result, we see positive development in our gross margin. The gross margin per kilo is EUR 2.4 in the first half of the year, which is 16% lower than the previous half year, second half year of 2022. That means also that the price increase that we've done last year in Q2 and Q3 has more than offset the increase of input prices. So we are able to through scaling and through the price increase, to increase our margin. And again, this trend should continue in the course of this year and next year when we scale up. SG&A costs have increased. SG&A costs per kilo have increased more than what I was expecting or more than what I was wishing.
Now that the organization has increased, as we mentioned earlier, we have now the organization, both sales, marketing, and support functions, shaped to be able to deal with the phase II volume. Also, we may invest little bit more in the marketing and sales in the next few months. But overall, the increase in the first half of the year is more driven by transformation activities that we have conducted and well, of course, that were resulting from these activities. So as SG&A costs, when we scale, when with the scaling impact, when we double the volume in the next few months, will decrease per kilo significantly. The operational EBITDA also is developing in line with the expectation.
It's improving and will fully benefit from the scaling impact from next year. Cash-wise, we've seen also, as a result of the improvement of the margin and improving of the cash from farming operations. If you look at the net cash from operating activities, it's slightly less than it was in the same period of last year. However, this is driven by less CapEx payable because we are now at the end of the project, so we have less spending on equipment and less CapEx payable, but also the increase of the biomass.
The biomass at the end of June was 512 tons, so an increase of about 110 tons-120 tons compared to the steady state situation of phase I, and this has an impact on our working capital. But the cash we get from the farming operation per kilo is improving. During the first half of the year, we've been investing EUR 16.1 million in CapEx, so EUR 14.8 million in phase II, and EUR 1.3 million, EUR 1.3 million both in maintenance CapEx for the farm, but also CapEx for the U.S. operation to maintain the permit and also for the U.S. hatchery.
During this period, also from financing, we received EUR 14.1 million from tranche three of the equity raise of last year. We've been using a little bit of the PCP facility, and we got a bridge loan at the very end of June for EUR 5 million. Next slide. With this EUR 32 million that we've raised at the end of June, beginning of July, and which have been fully paid in August, we have strengthened our balance sheet, we have strengthened our financial position. We had a debt at the end of June of EUR 60 million, increasing by about EUR 5 million compared to December, and considering that we have spent now EUR 89 million on the phase II project.
So beyond the EUR 32 million of convertible loan that we received in August, we still have a facility with PCP of EUR 10.9 million to finish building the phase II, and we have also four point seven million facility to pay for the interest. That means that we will start paying interest cash by the very end of Q1 2024. But now, based on our expectation, and especially when we see the performance of the farm, we are fully financed to be able to finish not only this construction, but also to be able to grow the company until it becomes cash positive.
So we have a couple of very important milestones in front of us, which are really changing the shape of Kingfish. The first one this year is to have phase II fully operational, which we expect in the Q4 of this year. Again, right now, more than half of the tanks are stocked. The other half will be starting from the next few weeks until Q4. The farm biomass will more than double before the end of the year.
What we've seen is that despite the headwind we had on the phase II project and the delay we had on phase II project this year, the performance, the biological performance has offset these delays. So, in term of production, in term of growth, in term of biomass, we are in line with the expectations we had last year or in our budget for this year. So this is for us, very encouraging. If this performance continue, this is very encouraging, and we could be in a very good position at the end of the year. So this is the first important milestone for this year. As a result of this milestone, we will turn positive.
We expect to turn operationally positive in the second half of 2024, driven by the scaling impact, but also by the fact that we are going to produce larger fish than we've produced last year and we've produced also in the first half of this year, where the mix was little bit less interesting than we expected, with more small fish than we expected. And the last milestone will be to turn cash flow positive. So we expect to be cash flow from farm operation positive in the second half of next year, and then to turn free cash flow positive in the second half of 2024 or 2025, after paying the interest on the debt.
So very important milestone ahead of us, and now that this new financing round has been completed, we are fully focused to deliver this milestone. That's also what Vincent is going to explain, what other actions we are starting to improve the performance of the company.
Thank you, Jean-Charles. So just a few comments on the work we're doing to increase efficiency and optimize our operations. First, now that we have almost finalized the expansion of our hatchery and build the hatchery, basically four times the size of what we had for phase I, we can and are producing much more fry than we did before. We are in fact producing more fry than we need. As a result, we can and have applied much tougher grading standards, and now we only put into our grow-out systems the small fish that grow fastest, and that we will expect will increase the overall growth speed in the farm.
On the other hand, we have been working and will continue to work with the Wageningen University & Research on a genetic selection program, but we're planning to take it a few notches up to increase the speed of the genetic improvement. On the feed side, Jean-Charles already made quite a few comments. We are and have been doing feed trials all the time, both in a small experimental system that we have and in some of our large on-growing tanks. The aim is mainly to reduce fish meal and fish oil content of the feed, which will improve the fish in, fish out ratio, but not unimportantly, also will reduce the cost of the feed. And as Jean-Charles said, we had some very positive results on a smaller scale at the beginning of this year.
We will now apply these basically in our whole system, and this will result in a reduction of feed cost, provided of course, that the raw material cost does not further increase. There is some uncertainty around that, and El Niño coming up, potentially further increase of fish meal and fish oil prices, but everything being equal, we should be able to lower our feed cost kilo and on fish size, it has been commented that we are optimizing our harvest mix to produce a larger proportion of large-sized fish. Large size for us is fish between two and four kilos. Small size is anything between 0.8 gram and about two kilos.
We will do this, but we will do it cautiously because there is a good market for small fish, and while we're increasing our volume, we do want to maintain that market. That is a market that almost we have developed over the last couple of years and is not unattractive, but we will definitely increase the proportion of large-sized fish. Operational excellence, there's an ongoing effort to optimize and analyze the whole organization in terms of support functions, mainly purchasing, warehousing, maintenance, but we're also working very hard to increase the output per full-time equivalent on the farm. So all of these small things, we expect to have together a positive effect on production cost.
Last but not least, and, and this is more for the future, further growth, we have now submitted, a couple of months ago, the building- a request for a building permit, for phase III here in Zeeland, and we expect to receive response on that request in the first half of next year. Gotta be a bit cautious there, because this process is obviously, this process obviously is not under our control, so we cannot be sure about the, the timeline. On the other hand, we are continuing to work, on the appeals, that have been raised vis-a-vis our permits for our site in Maine. And only a few weeks ago, we made very good progress there when the court rejected yet another appeal.
So again, we are one step further in that process, which we hope to conclude, if not by the end of this, this year, at least somewhere next year. It remains to be seen, but we will conclude. With that, maybe a few concluding remarks. As mentioned, we, we are very happy and, and very impressed with the performance of the fish in our, our new system. Of course, every time you commission a new system, and there are definitely some changes from phase I, you're a bit nervous about how things will function. But they function actually very well, and, and like me- like we mentioned, the fish are doing extremely well in that new system. And with that, of course, we, we're very happy that we're now getting close to completing fairly long construction process that we had for phase II.
We aim, and then we'll... Well, we expect to finish this fully in the Q4 of this year. So with all that behind us, then the whole team can really, here in Zeeland at least, focus on growing our biomass, growing our sales, and not least, in further improving our performance, so that we will become a cash flow and profitable company by 2024, respectively 2025. And with that, I think we can open up for questions.
Yes, Erenst here from Rabo Investments. I have two questions. First of all, thank you for the presentation, very informative, and much appreciated. I was just wondering what is the main reason that the revenue per kilogram decreased in Q2 compared to Q1 of this year? Is that because of the different sizes fish sold, perhaps? And my second question at this moment is why is it that the fish actually performs better in the phase II systems than in the phase I systems? Is that something that we can perhaps copy over to the phase I in retrospect?
So on your first question, as we were delayed in construction, especially in the first half of this year, now we've caught up. We did have to sell some smaller fish that we were planning to grow on in phase II. We didn't have the space there yet, so we had to sell them. So as a result, we sold a higher proportion of small fish in the Q2 , and also, I think in maybe overall in the first half than we did before, which reduced the revenue per kilo. Revenue per kilo on a sort of size-by-size basis was basically unchanged, or in some cases, even most likely up. So as you suspected, purely a size effect.
As to performance, well, we, we've upgraded some of our systems in phase II as compared to phase I, and, the results are indeed better. I mean, systems are more robust, are in some cases, have higher capacity, and this leads to even better for water quality in, in phase II, and therefore, improved performance in phase II. Well, yes, we can go back and, and retrofit this also in, phase II. We haven't currently planned that, but it's definitely something we can look at.
Thank you.
Other questions? You can also put question in the chat if you want.
Well, if there are no further questions, then we thank you very much for your attention, and look forward to talk to you again in our next presentation in a couple of months. Thank you very much.
Thank you very much. Bye-bye.
Thank you. Bye-bye.