Good afternoon. Welcome to the Kingfish Company's results call. Today with me are CEO Vincent Erenst and CFO Jean-Charles Valette. Vincent will kick off this presentation. The presentation will last around 20 minutes -25 minutes, and after that we will open the lines for questions. Vincent, go ahead.
Yes, thank you. Thank you, Marieke, and good afternoon to everyone. I'm excited to share with you what we've accomplished in 2023. We finished completion of our Phase II expansion in December 2023, and with that we have significantly enhanced our operational capabilities. Today we have a state-of-the-art hatchery, which produces a consistent number of high-quality juveniles. We have more than doubled our production capacity from 1,500 metric tons per year to 3,500 metric tons per year. In March this year, 2024, we opened our brand new processing plant here inside the facility, and this will allow us to pack and process top-notch product. We are now operating two discharge water treatment plants, and these will ensure that we minimize the impact on the environment. We're very proud of the continuously improving biological performance. This underscores our commitment to farming excellence and innovation.
Furthermore, we have strengthened our sales and marketing capabilities to fully realize the potential of our superior products in the European, North American, and other export markets. Together, these accomplishments pave the way for future growth. Let's take a look at our farming results. In 2023, our biomass production was 2,195 tons. This compares to 1,511 tons in 2022. In May of 2023, we started stocking our Phase II expansion and completed this by the end of the year. This allowed us to gradually increase production to 626 tons produced in Q4. We are confident we are on track to reach the nameplate capacity of this facility of 3,500 tons by the end of next year or early 2026. Our facilities are now fully stocked with third-generation fish. This generation, we have shortened the growth period up to three kilos, our main market size, by up to two months.
Feed conversion-wise, our overall FCR in 2023 was 1.36, and this marked a significant improvement from the 1.47 that we had in the year prior. This improvement is a result of a combination of improved feed quality, improved feeding practices, and also very much by the excellent water quality that we now have in our Phase II expansion. At the same time, we have been surprised by the strong biological performance of our fish and the growth. The increase of biomass is actually going faster than we had anticipated. As we have to align the increase of production with the growth of our sales volume, we had to control the pace of biomass growth by reducing temperature. This resulted in a slight increase of the FCR in Q4 and a reduction of productivity to 0.64 kilos per cubic meter per year.
Looking at the foundation of our production, our hatchery, this hatchery houses 400 broodstock, and we produce day-by-day eggs and are able to produce around 3 million fingerlings throughout the year. At the same time, this hatchery has capability for increasing numbers further. A fourth-generation broodstock is now in the making, and we expect these will start to mature in about 18 months from now. This will provide further opportunity for improvement in biological performance. R&D is one of our key strategic pillars. We have established R&D facilities consisting of four experimental systems, and they cover the entire lifecycle from larvae to grow- out. In 2023, we conducted in total 13 trials, and these yielded very valuable insights and actionable outcomes. These findings will drive our future production strategy, enhance our efficiency, and elevate our product quality.
When we look at our sales development overall, our revenue increased by 17% from the year prior. This was mainly driven by a higher revenue per kilo and a small increase in sales volume. Due to the delayed construction, as we have reported before, of Phase II, we faced production and size mix constraints in the first three quarters. This hindered our sales growth in that period of the year. In Q4, we have more fish available, but we faced softer markets in October and November. In December, we did have robust holiday sales, so that was good. But as a result, our overall sales from Q4 2022 to Q4 2023 were more or less stable. We did see a good growth of fresh out there, among others with strongly increased presence in North American retail.
On the other hand, the frozen market, also in the U.S., witnessed increased competition, especially from Japan, which affected our frozen sales. So to increase our market share for frozen products, we must strategically position ourselves as the only sustainable alternative to Japanese frozen product. Looking at revenue per kilo, we increased this from 2022 by 16%. The average price or the average revenue per kilo was hovering around €15 per kilo throughout the year. In the last quarter, our size mix was about 50/50 between large and small-sized fish. Smaller-sized fish are very popular in retail. Going forward, while we will emphasize our presence in the Horeca markets for large fish, we will keep producing certain volumes of smaller fish to meet the retail demand.
In 2023 and going forward, we have and we will continue to export to expand our sales and marketing efforts by strengthening and increasing the size of our sales and marketing teams. At the same time, we are increasing the number of distributors and retail customers, and we are supporting their sales efforts through promotions and other marketing activities. We continue to focus our efforts on our key markets in Europe and North America, but we will also strengthen our efforts in selected export markets such as the Far East and the Middle East. With that, I hand over to Jean-Charles, who will comment, make more points on the financial figures.
Yeah, thank you, Vincent. Now we are going to see how the improvements we are doing in farming are also translating into improving financials. 2023 has been a strange year in the sense that we have first suffered for increasing input prices, and particularly feed prices have increased quite a lot in 2023 with an average increase of 24%. We've seen also in the course of the year an increase in the general impact of the inflation on our costs, and particularly on the labor costs and all the costs related to services. The increase has been in the range of 10%-15%, sometimes even a little bit more. On the other hand, we've benefited from very good electricity prices in 2023, much better than in 2022 because we had a very favorable contract.
On top of it, in the fourth quarter of this year, we benefited from a subsidy on electricity to compensate for the very high price we had in 2022. So very much higher input prices except for electricity, but this is a little bit exceptional. With all this, we have been able to reduce our production costs quite a lot in the range of 20% for the year, and this is only the beginning of the journey. And this reduction of the production cost, that's the outcome of two factors. First, our biological performance, and particularly the reduction of the FCR has a big impact on our production cost. Our variable costs, including feed, represent about 50% of our production costs. So when we can reduce FCR, it has a very significant impact. And what we start seeing also in 2023, already from the second quarter, that's the scaling-up impact.
So we have increased the production quite significantly, and we see that the production costs are reducing as a result of this increase in production. We are not yet at full capacity. We are not yet at steady state. So that means that these prices will continue to decrease in the next quarter when the production increases. We also see that the environment is rather in our favor right now. The price of feed, especially fish meal and fish oil, have plateaued. The electricity prices are back in our comfort zone. They are, especially in the beginning of this year, very interesting. So we have some hedge, but the part which is not hedged is very favorable this year, and we hope this will continue for the rest of the year.
We will continue to benefit from the good biological performance, but also the new development that we are making, especially in feed. We are doing a lot of feed trials, trying new formulations, and we expect to continue to include in the farm these new formulations, which are cheaper and better performing. And we are doing trials, which are also very encouraging, and we believe that we will continue to reduce these production costs quite a lot in the course of 2024 and later. So, of course, this has a direct impact on our profitability. The profitability has increased quite significantly this year. So if we compare Q4 to Q4 last year, it's an increase of about more than 80% of the gross margin per kilo, which is the result of the improving production costs while we have been able to maintain our selling price.
We see that the trend is improving. The gross margin is improving. I already said in Q3 that we had quite an exceptional result in Q3, and that was beyond our expectations for Q3. That's the reason why the gross margin in Q4 is slightly lower than Q3, but still prolonging the trend of an increasing gross margin. On the SG&A side, first, we see that the SG&A per kilo has increased quite a lot in Q4, but here, this is a result of a few one-off costs and non-recurring expenses that we incurred in Q4. This is not a change in the trend. Basically, we have the structure. We have the support function that we need to continue growing. There is no intention to increase the support function and to increase, in general, the overhead.
On the other hand, we have announced that we are increasing our sales and marketing efforts. This is not something that we see very much in Q4. Also, we started to have additional costs in Q4, but we will see it progressively in the course of 2024. In January, we welcome on board our new commercial director, Gudo Klein Gebbink , and he's continuing to reorganize his team, strengthen his team, and strengthen the commercial efforts and marketing efforts that we are making in our key markets in Europe, in the U.S., and the new export market. SG&A, what you see in Q4 is an exception. It will go back to what we've seen before, and the trend will continue to decrease, especially fully benefiting from the scale-up impact. As soon as the sale will increase, SG&A will remain stable, and the SG&A per kilo will reduce automatically.
So that's why we think we are well on track and according to our plan in terms of improving our profitability and very soon being able to break even. So on the financing side, we had, at the end of the quarter, EUR 31 million of liquidity, so cash equivalent and available committed financing facilities. We've been using EUR 7 million of cash in the fourth quarter, being the end of the Phase II Capex. We spent EUR 2.7 million on Phase II in Q4, and we had a negative operating cash flow of EUR 4.4 million, which was mainly driven by the increase of inventory. And in the inventory, we include the growth of the biomass. The biomass has been growing by 220 tons in the fourth quarter to 967 tons. So we are almost at steady state, not completely.
We think that the farm will operate at biomass between 1,000 tons - 1,100 tons. So the biomass will increase a little bit in the course of 2024 until we reach steady state, but most of the working capital that we need on the inventory side has been already used. So we've been using EUR 7 million of cash in the quarter. We are fully financed to complete, to continue the growth of the company, but we are clearly monitoring our liquidity position very, very closely to make sure that we are able to finance the growth of the company in the next quarters. Beyond finance, we've also made quite some progress in quality and sustainability.
First, of course, we continue to differentiate ourselves from most of our competitors by not using any antibiotics during the entire production cycle, which is really one of our unique selling points and differentiating ourselves very much from most of our competitors. In terms of quality, we have maintained all our certifications in 2023, and we have even upgraded some of them to a better status, showing also the quality of the product that we are producing, but also the quality of the asset that we have. We have audits here almost every month and sometimes several times a month for certifications or from customers. Usually, the auditors are really amazed with the quality of our asset. There is always room for improvement, but we have excellent assets, which are proven by all the certifications that we have. On the sustainability front, we continue to make very good progress.
There are two indicators that we track particularly. The first one is the FFDR, where we have reached in 2023 the target that we had set for 2025. So that's a super good improvement. We have reduced FFDR by about 30% since 2020 when we started our program, the 25 x 25 program. So we have already reached the target we had set for 25. We are not stopping there. We want to continue to improve the FFDR, to reduce the impact we have on the marine environment. Again, we are doing a lot of trials on feed to have new feed formulation, and one of the criteria we have in all these trials is to reduce the FFDR. So we really expect to continue to improve this indicator.
The other indicator that we are following very closely, that's our CO2 footprint. Here, we have already reached 75% of the target we had set for 2025 with a reduction of about 20% since 2020. Same here. We are making a lot of efforts to continue reducing the CO2, improving the FCR has a huge impact on our CO2 footprint, but we are also working on our production methodology to try to further reduce the CO2 footprint. So good progress in this area in 2023, but with the R&D team and the production team. I hand over to Vincent for concluding remarks.
So basically concluding, I mean. Three big drivers for the progress of this company. A is technical excellence. We are improving our farming practices, and we're improving our systems. Together with progress in genetics, all of these result in a significant improvement of biological performance, which reduces cost and also increases production capacity. We are very happy with the results we have reached so far, but at the same time, we know there's more, and we can improve further, and we will. When it comes to scale, scale brings efficiencies, and we are increasing the size of our company, and we will continue to do it forward. But also, we are optimizing our processes. We are streamlining our workflows, and we are increasing automation. All of these will lead to a reduction of production cost.
Finally, but definitely not last, we are putting a lot of emphasis on sales and marketing. We're doubling down on our efforts, and the results are coming through. Our customer base is expanding. Our revenue growth is starting to accelerate. Sales and marketing teams are working tirelessly to position our offerings in the market, and we will carry this momentum forward in the future. These three together, combined, should drive increased profitability and cash generation. For this year, the focus is on optimizing the operations here in the Netherlands. But at the same time, we have started on version 3.0 of our installations by refining the current design, and we will hope to make significant progress there this year.
We're also concluding the work on the permits in the Netherlands for expansion for potential Phase III, and we are finalizing, hopefully, the challenges we've had to our permits in the United States. Fairly confident that all of those will be ended by the end of this year. So with those in place, we should be ready to continue our expansion in the years to come. With that, thank you for listening, and we can open up the line for questions.
So if you have a question, please raise your question in the chat. So Alex, yeah, what's the CapEx guidance for 2024? So we've completed Phase II. There are still some spending to be done in 2024 related particularly to the connection to the grid. We have the connection, but we are increasing this connection. So there will be another EUR 3 million - EUR 4 million on Phase II spent for the last piece of the work, which have no impact on the operations but have to be done. And beyond this, the CapEx will be standard farm CapEx, slightly higher than we had in 2023, where we were really focusing on the construction of Phase II. So in the range from EUR 3 million - EUR 4 million.
Another question I saw was, when will the harvest of Phase II start? It has started. We actually started harvesting in November last year, and we now routinely harvest large-sized fish from Phase II.
Now we are operating at one farm, Phase I and Phase II, both being specialized a little bit on different size of fish, and we are harvesting from both.
Fine for expansion in Maine. As mentioned before in earlier presentations, we have been challenged both on our municipal permit and on our state permit by the same group of people. They are both in court right now, and in one of the cases, a hearing actually took place yesterday. We expect that both these cases will conclude by the end of this summer. However, it is possible that in one of the permits it will be final. There are no more opportunities for. In the other case, our opponents could still move to one higher court. If that would be the case, then we may see another six months delay. So I do not believe that we could start anything before next year. We are looking at two things right now.
At the same time, we are coming through with our construction permit in Holland, which might also be concluded by the end of this year. So then we have to evaluate what would be the most convenient next step.
So we have not yet made a decision on the next expansion, whether it would be in Maine or in the Netherlands. We are still considering both projects, and we can expect a decision of this year. Is there any other question? No more questions?
Well then, thank you for your participation, and we're looking forward to seeing you in our next presentation, which will be in?
May.
In May of this year, on the results of the first quarter of this year. So thank you for now, and see you in May.
Thank you very much.