Good morning, everyone. My name is Ivan Vindheim, and I'm the CEO of Mowi, and it's my pleasure to wish you all welcome to the presentation of Mowi's second quarter results of 2022. With me today to present our financial figures and fundamentals, I have, as usual, our CFO, Kristian Ellingsen, and after the presentation, our IRO, Kim Galtung Døsvig, will routinely host a Q&A session. Those of you who are following the presentation on webcast can submit your questions via email in advance or as we go along. Please refer to our website at mowi.com for the necessary details. Disclaimer, I think we leave for self-study. We are ready for the highlights.
The second quarter goes down in history as the best quarter ever for Mowi financially, both turnover-wise and earnings-wise, with a turnover of EUR 1.23 billion and an operating profit of EUR 320 million. On record-high salmon spot prices driven by a strong post-pandemic demand and a global supply contraction of 6.7% year-over-year for the quarter when it includes release of frozen inventory in Chile last year. Kudos to the organization for this achievement. It's, of course, much appreciated. For our sake, an operating profit of EUR 320 million is also in line with the trading updates of the eighteenth of July.
Furthermore, blended farming costs, i.e., weighted farming costs for our six farming countries, was 5.10 EUR per kilo in the second quarter, up from 4.78 EUR per kilo in the first quarter, due to first and foremost underlying inflation. Speaking of which, inflation has hit more or less every corner of the global economy, and farmed Atlantic salmon has been no exception so far. On a positive note, however, several commodity prices have been on the retreat lately, so maybe we have at least seen some kind of a peak for now. Feed in particular, feed prices, which account for more than 40% of costs in the books. Time will show. In terms of the farming volumes, we harvested 103,000 tonnes gutted weight in the second quarter, slightly above the guidance of 99,000 tonnes.
In general, seawater growth was good in the quarter with a good biological feed conversion ratio. When it comes to our other divisions, Consumer Products has delivered another set of satisfactory results, I would say, considering the record high raw material prices. The Feed division on its part has been through low season with all that entails, so both our feed volumes and our feed profit are colored by that. Although feed volumes were record high for our second quarter. Other than that, the feed performance was very good in the second quarter. Last but not least, the board of directors has declared a quarterly dividend of 2.30 NOK per share, equivalent to 50% of underlying earnings per share and in line with the dividend policy. That, I think, does it for highlights. Over to key financials.
Kristian will, as usual, go in-depth on financial figures under his session. To not disrupt the course of events, we will just touch briefly upon the most important ones now. First, turnover, which we have already been through. Mowi recorded an operational revenue of EUR 1.23 billion in the second quarter, and that was record high, up by 23% year-over-year on 5% lower volumes. Operating EBIT of EUR 320 million, we have also already commented on, more than doubled compared with last year and all-time high by a wide margin. Cash flow was good in the quarter, at least when we adjust for tie-up of working capital and net interest-bearing debt came in at EUR 1.24 billion. Well within our long-term target of EUR 1.4 billion. Equity ratio was of healthy 52.4%.
Furthermore, underlying earnings per share in the quarter was EUR 0.46, and annualized return on capital employed was 31.6%. Well above our long-term target of 12%. In terms of regional margins through the value chain, they range from good to great for all entities in the quarter, I would say, apart from Chile and Scotland. We will get back to the explanation shortly. First, briefly about prices. The Atlantic salmon standing in the markets and its ability to set new records time and time again never ceases to amaze me. What we bore witness to in the second quarter was almost beyond comprehension.
Reference prices of EUR 10.62 per kilo in Europe and $8.25-$9.45 per kilo in the Americas for salmon of Chilean and Canadian origin are not only unprecedented, but also the highest on record by a wide margin, driven by, as already said, a strong post-pandemic demand and a global supply contraction in the quarter. As you can see from the graph, prices have come down lately on higher seasonal supply. This is in line with normal seasonal patterns, and prices are still at a reasonably good level, I would say. Our own price performance. Overall price achievement was 16% below the reference price in the quarter due to first and foremost the record high salmon spot prices and our fixed contracts at lower prices.
In addition to that, price achievement was negatively impacted by knock-on effects of winter sores in Norway earlier this year and quality downgrading. Much about prices. Now briefly about the EBIT waterfall. Overall, operational EBIT increased from EUR 137 million to EUR 320 million year-over-year. This was in its entirety driven by increased earnings in farming as a result of higher prices. Farming volumes are in the same period, somewhat down, and farming costs up due to inflation. Other businesses were approximately neutral year-over-year. It's time to address the various business entities, and as usual, we start with the largest and by far most important one, Mowi Norway. Operational EBIT was EUR 235 million for Mowi Norway in the quarter, up from EUR 93 million in the comparable quarter last year. Both prices and earnings are record high for Mowi Norway.
EBIT margin was 3.93 EUR per kilo this year versus 1.66 EUR per kilo last year. As the graph clearly demonstrates, this was caused by higher prices and somewhat higher volumes. Having said that, at the same time, we did not fully benefit from the record high spot prices in the quarter in Mowi Norway due to a contract share of 27%, in addition to already mentioned winter sores earlier this year. In terms of overall biology in the quarter, it was reasonably good, and we saw, among other improvement in production and biological feed conversion ratio year-over-year. The breakdown of the margins for the different regions in Norway. Margin-wise, it was a mixed bag also this time around following the coastline.
Region North stands yet again out as the margin winner with 4.45 EUR per kilo on lowest cost, although it was adversely impacted by, as already mentioned, winter sores earlier this year, in addition to a less favorable site mix year-over-year with a higher proportion from production area seven this year. Harvest volumes are also down by approximately 20% year-over-year, which has impacted dilution of cost negatively. Region Mid achieved a margin of 4.03 EUR per kilo. Realized cost was like for Region North, negatively impacted by winter sores earlier this year, in addition to CMS-related costs in the quarter. Region West on its part, achieved a margin of 3.83 EUR per kilo in the quarter and improved by that its relative position year-over-year on substantially higher volumes.
Although harvest profile was far from optimal as we harvested very low volumes in April when the prices were the highest. In general, production and biology has been better for Region West so far this year compared with last year. Lastly, Region South achieved a spot margin of EUR 3.06 per kilo in the quarter, heavily impacted by advanced harvesting of our Sotra sites due to issues with sores and gills. In addition, harvest volumes were also very low, which impacted dilution of cost. On the positive side other than that, the biology and biological performance was very reasonably good for Region South in the second quarter, with, in particular, very good seawater growth. Our Norwegian contract portfolio.
Due to optimistic market view for this year, we decided last fall to keep our contract share at the low end for Mowi Norway to capitalize on this. This strategy obviously hit the bull's eye in the second quarter with our contract share of as low as 27% in a quarter with record high spot prices. To be prepared for the coming autumn season and higher season supply, we have upped our contract volumes by 8,000 tons since last time we met at attractive terms. When it comes to next year, for competitive reasons, we must keep our cards close to the chest for now, so we have unfortunately no comments to it today. Scotland.
Operating profit for Mowi Scotland was EUR 21 million in the quarter, down from EUR 30 million in the second quarter last year, due to substantially lower volumes. 13,000 tons versus 19,000 tons. Margin was stable year over year, 1.60 EUR per kilo versus 1.56 EUR per kilo due to a higher cost. Our 2022 harvest in Scotland is heavily impacted by poor production on stocks grown from externally sourced eggs we introduced in Scotland in absence of other options in the aftermath of the Norwegian export ban on eggs in 2019.
On a positive note, however, the last part of this stock is harvested out in the third quarter, so we expect to start to see improvements from that point onwards, which hopefully will materialize in better cost performance in the fourth quarter. As far as prices are concerned, price achievement for our Scottish fish is also significantly up year-over-year, although obviously held back by a contract share of 69% in the quarter. Mowi Chile. Mowi Chile, on its part, saw stable earnings and margins year-over-year in the quarter. Operating profit was EUR 15 million, similar to last year, whereas margin was EUR 1.07 per kilo. Both on the low side, unfortunately, due to higher cost and a high contract share of 63%. In the case of the latter, it negatively impacted by low seasonal volumes.
Year-over-year volumes are, however, stable 14,000 tons versus 15,000 tons. In terms of cost level has been increasing for our Chilean operation over the past two years as issues with SRS and Tenacibaculum have increased in magnitude. The vaccine that was introduced a few years back seems to have lost some efficacy, and it's something we are looking into as we speak. SRS and Tenacibaculum are both bacterial diseases, so this is double unfortunate as it leads to more use of antibiotics with the negative consequences that has. To conclude Mowi Chile on a positive note, both production and overall biological performance was better in the second quarter this year compared with the second quarter last year. Farther north to Mowi Canada.
Mowi Canada turned a profit of EUR 31 million in the quarter against a loss of EUR 7 million in the second quarter last year. This was driven by significantly higher prices, 100% spot exposure, and lower cost. Volumes on the brand are somewhat down from 13,000 tons to 10,000 tons as we harvested a minimum in Canada East in the quarter. Canada West saw a healthy margin of 3.87 EUR per kilo, and overall production and biological performance were reasonably good for Canada West in the quarter. In terms of the political situation for Canada West, we have not much more to report today than what is already known.
To recap a little, we have just received our 2 years renewal of our license in British Columbia to allow for what the Canadian government calls a transition plan for salmon farming in this area. What the content of this transition plan is and what we are transitioning to are yet to be decided. Next step now is public consultations, including consultations with First Nations and the industry. We will, on our side, continue to work unabashed with all levels of the Canadian government and First Nations to secure our future for sustainable and viable salmon farming in this area. Much about Mowi Canada West. As far as Mowi Canada East is concerned, we have, as already said, harvested a minimum in the quarter. Perhaps most important now, biology has been under reasonably good control this summer.
In particular, the lice situation is much better this year than previous years. Knock on wood. We have also used the quarter well organizationally and strengthened the team with, among other, a new highly skilled and experienced MD from Scotland who knows both Mowi and our best practices and standards in-depth. I think this will be a valuable and important addition to our operation in Atlantic Canada. At the end of the day, it's all about the people. Finally, a heads up on cost for Mowi Canada for the third quarter as we harvest from sites with a higher cost level than in the second quarter. It's time to address Mowi Ireland and Mowi Faroes, our two smallest farming entities.
For the salmon of Mowi Ireland, we made an operational EBIT of EUR 9 million in the quarter on EUR 2.80 per kilo in margin on 3,300 tons harvest volumes. Please note that the market for the organic salmon is, to a large extent, a contract market, so Mowi Ireland did not benefit from the fantastic spot prices we saw in the second quarter. Biology was reasonably good in Mowi Ireland in the first half of the year, so cost was down accordingly in the second quarter. In the third quarter, however, we expect higher costs as we have faced issues with Pancreas Disease, compounded by compromised gill pathology due to zooplankton.
In the Faroes, operational EBIT came to EUR 10 million by means of an impressive margin of 5.78 EUR per kilo enabled by 100% spot exposure on 1,800 tons harvest volumes. Much about Mowi farming. Over to Mowi Consumer Products. Consumer Products made an operational profit of EUR 18 million in the quarter, up from EUR 16 million last year, thanks to higher margins in absolute terms. Because volumes were down from 58,000 tons product weight last year to 53,000 tons product weight this year, following the drop in farming volumes. Return on sales in total and for value added, value added only were approximately neutral year-over-year at 2.4% and 2.5%. Not neutral, but stable.
The high raw material prices we have seen have undoubtedly made it more challenging for consumer products in the short term. Having said that, I think we have handled the situation reasonably well so far, so a big thanks to the organization for this. In terms of overall demand, it was strong in more or less all markets in the second quarter. We also see a good development in demand so far in the third quarter, although summer holiday season has slowed it somewhat down in some markets, but nothing out of the ordinary. This is typical seasonal patterns. Our latest addition to the Mowi family, Mowi Feed. I said initially this morning, the second quarter is characterized by low season for Mowi Feed with all that entails.
Operational EBIT was stable year over year, EUR 2 million in the second quarter this year versus EUR 3 million in the second quarter last year. Feed volumes are, on the other hand, up significantly from 96,000 tons to 111,000 tons on good seawater growth for Mowi farming, which also has led to record high feed volumes for our second quarter. Overall feed production was satisfactory in the quarter. The same was the feed performance. Kristian, the floor is all yours for walking us through the financials and fundamentals. Thank you so far.
Thank you very much, Ivan, and good morning to everybody. Hope everybody is doing well. As usual, we start with the statement of profit and loss, where the top line shows a record high revenue for both the second quarter and also for the first half of the year of 2022. As we see from the table here, Q2 revenue was EUR 1.2 billion, up 23% from Q2 last year on higher prices, while sold volumes were slightly down compared with the second quarter last year. This was connected with lower harvest volumes in Scotland and Canada.
When it comes to operational EBIT of EUR 320 million, that translates into an impressive return on capital employed of as much as 31.6% annualized in the second quarter and underlying earnings per share of EUR 0.46. All of these figures are connected and are 2.3-2.4 times the figure last year. Net cash flow per share includes an effect of increased working capital, which we will take a look at in the cash flow statement. Year-to-date operational EBIT of EUR 527 million. That's higher than the full year of 2021 and also record high.
When it comes to the figures between operational EBIT and IFRS financial EBIT, we see that most of them cancel out, except the net fair value adjustment of biomass of EUR 140 million due to improved prices. Income from associated companies includes a very strong operational result from Nova Sea of 460 EUR per kilo. So we congratulate them on a good quarter this time around. When it comes to net financial items, they were as expected and minor in total. We move on to the balance sheet. The financial position is strong with equity share of 52%. Net interest-bearing debt still below the long-term target of EUR 1.4 billion.
Non-current assets, you see here in the first row, that's stable from year-end 2021, while there is some movement on current assets and current liabilities, i.e. working capital items. As reflected here in the cash flow statement on this slide, we see that there is an increase in the net working capital items of EUR 101 million in the second quarter. That's related to BiomassNC, receivables on higher prices, and feed inventory for preparation for the peak season for feed demand. As Ivan just showed us, we saw that the produced volumes were higher than sold volumes in the feed segment. We also see that tax payments increased from last year on higher earnings. We see that we paid out almost EUR 100 million in dividend in the quarter.
That's the NOK 1.95 based on the Q1 results. When it comes to the cash flow guidance for the year of 2022, we have lifted the estimated working capital tie-up for the year from EUR 90 million to EUR 200 million. This is due to higher salmon prices leading to increased accounts receivable. Cost inflation increases the biomass tie-up, especially related to feed inflation. Our cost-saving initiatives and activities, they continue unabated to at least partly offset some of this pressure. Of course, feed prices have increased now for the last 1.5 year, and we all know that feed is the single most important input factor in our salmon that we produce.
We see a recent price decline on raw material commodities, and this might indicate an inflection point. We expect growth across the value chain with continued volume growth, and this ties up working capital. The other items are unchanged as we see from the previous time we met. CapEx at record high EUR 300 million, where the freshwater investments represents the largest individual part, including the ongoing post-smolt program in Norway. Interest paid EUR 35 million, taxes at EUR 130 million, and the second quarter dividend of NOK 2.3 per share, which is payable in the third quarter. This slide gives an overview of our financing, and there are no changes here from the first quarter, and we see that no debt is maturing until June 2023.
Over to supply and demand fundamentals, and of course, with the best quarter financially ever, market fundamentals have played an important role. We see from this table here that global supply declined in the quarter. The global supply from the salmon-producing regions was down by 3%, as reflected here. This is only part of the story because we remember that last year, there was a release of 26,000 tons frozen inventory in Chile built up during the pandemic year of 2020. When factoring in this, the figure for Americas goes from + 9% to - 5%, and there was in fact a global supply contraction of 7%, shedding further light on the record high prices also in Americas in the quarter.
Supply from Norway decreased 5% on lower opening biomass. This was as expected. Average harvest weights were quite stable, and so were closing biomass in Norway for the market. Also in Scotland, supply decreased as expected on lower opening biomass and lower growth. In Chile, supply was higher than expected from the salmon-producing companies. A higher number of fish was harvested as biological challenges caused some advanced harvesting, and the record high prices might also have accelerated some harvest plans in Chile. Here on this table, we see the consumption of salmon, and there we see the 7% drop reflected here in the numbers. Nevertheless, the value of salmon consumed reached a new record high level in the second quarter. There was a strong underlying growth of salmon demand across all markets.
The food service segment saw further reopenings in Europe and in the US. In Europe, there were good consumption levels in retail in the quarter, but of course, somewhat impacted by food service recovery and less volumes available. In the US, demand was strong in the quarter with continued focus on pre-packed salmon and positive effects of e-commerce. In Asia, we see that consumption decreased by 19% on less supply and challenging logistics with the reduced air cargo capacity and thereby high air freight costs. When it comes to prices, they were record high. Average spot price for Norwegian salmon reached EUR 10.6 per kilo in the quarter, up 72% year-on-year, and reached a weekly peak of EUR 12.8 per kilo.
Record high prices also in Americas. Prices at these levels have never been experienced before and shows the potential to continue to increase the value of the salmon category given that the supply continues to grow. We believe that the potential for salmon is fantastic. Consumption is still relatively low compared with other proteins. Salmon is 1% of land-based proteins in the world. Average salmon consumption in Europe, that's only once a month on average. Product features are excellent, and so is the alignment with important global megatrends. We expect salmon to continue to stand out versus other proteins. Demand growth, strong in the quarter, and during the past 10 years, the annual growth rate for demand has been impressive, 9.1%. So much for demand.
Supply, of course, played an important role. Supply reduction of 7% also contributed to the tight salmon market. In the markets, we have recently seen that prices have adjusted somewhat down in Europe on higher seasonal supply and summertime in Europe, very hot summer. In Americas, higher seasonal supply, and we see that the Canadian price is also somewhat impacted by the record high Sockeye wild catch. When it comes to industry supply growth, volumes in the second half of 2022 is expected to grow between -1% to +3%, giving a total for 2022 of -1%. In the next 12 months, supply growth is estimated to a modest 2% on a global level, and this suggests a tight market.
When it comes to our own volume guidance, that's maintained at 460,000 tons for the year of 2022. With that, Ivan, I leave the word to you to go through the outlook statement.
Thank you for that, Kristian. Much appreciated. It's time to conclude with some closing remarks before we wrap it all up with a Q&A session hosted by our IRO, Kim Galtung Døsvig . I said a few times already, we are optimistic about the market prospects, and the supply side looks constrained in the next 12 months with a global supply growth of as little as 2% according to Kontali. We also have a fantastic first half year behind us price-wise, which really demonstrates how strong the demand for the salmon is, in particular when it's supply shortage. All the higher seasonal volumes obviously have an impact on price achievement in the second half of the year compared with the first half of the year. We still believe in good prices going forward.
With Mowi's diverse and integrated value chain and organizational agility, we think we're on a great position to capitalize on this. In terms of cost and inflation, what we all bear witness to as we speak gives cause for concern to all and sundry. There is no doubt about that. Hopefully, the recent decline in several commodity prices at least signals that we have reached some kind of a peak for now. Time will show. Meanwhile, we believe the salmon will continue to stand out versus other animal protein sources due to its great product features, its low feed conversion ratio, low energy use, and not to mention its superior sustainability credentials. In terms of harvest volume guidance for 2022, we have, as Kristian just showed us, maintained it at 460,000 tons, so no changes there.
Finally, the board of directors has declared a quarterly dividend of 2.30 NOK per share, equivalent to 50% of underlying earnings per share. I think we are ready for the Q&A session, Kim, so if Kristian please can join me on the stage.
Hi, Alexander Aukner from DNB. Two questions. The first, are you seeing some switching between the various proteins given the price fluctuations? The second question is on the cost side. In Norway, you don't really seem to give any guidance, and that normally means flat cost. Is that correct for Q3? Is the increase in feed cost basically canceled out by the higher volumes?
Thank you, Alexander. Maybe we should start with the last question, cost, Kristian.
Yeah. As we see it now, we see no indications that cost will increase from the level we are at in the second quarter to the third and the fourth quarter for the group. That's the information we have at this point. No cost increases on a blended level.
Okay. Just a quick follow-up on that based on the outlook statement. You say you indicate inflection point in terms of the price increases. How long does it take for those prices to feed through your P&L?
There is, of course, the fact that we buy raw materials to be covered in the near term. We have operational security to have the feed we need. Then, of course, we buy for the coming months. You know, the raw materials we purchase for feed, then they will of course be less expensive over time given a reduction in these commodity prices. It takes some time to, of course, first purchase those materials and then it's part of the growth cycle for the salmon. It takes some time before it kicks into the P&L.
Yeah, cash-wise, it has an immediate effect and then it takes some time before you see the cost decrease. The point is that we think this latest reduction in raw material commodities gives some hope that we have seen the top, at least.
Hope.
Yeah. Hope.
Yeah.
The first question, yeah.
So far the demand has been good. The first half year obviously, fantastic. Summer holiday season always plays a role in this part of the year. No, we haven't seen any switch to other proteins so far. I think we are good. Knock on wood.
Thank you.
Carl-Emil Kjølås Johannessen, Pareto Securities. Two questions here. First, on contracts. You have, as you say, been entering into some more contracts for second half this year. Is this something that you have done lately? Or should we assume that the prices have been lifted from where the contracts have been earlier, or let's say the contracts that you entered into last year? Second one, on dividend. Maybe not you decide that, but previous quarters you have been paying an extraordinary dividend because your debt level have been lower than, let's say, the guidance. Now you don't.
Is this related to the working capital buildup or any other things that is leading to, let's say, less dividend than previous quarters in terms of percentage of EPS?
Thank you, Carl-Emil Kjølås Johannessen. We start with the first question in terms of the contract volumes for Norway for the second half of the year. As we said during the presentation, we have upped it by 68,000 tons, and at very different prices than for the rest of the portfolio. We have taken advantage of a very good market for those volumes. Yeah, in hindsight, the only thing I can say is that this contract market is unfortunately slim. The limitation is actually how much you can do, really. I think that will be a good business for us.
In terms of dividend and extraordinary dividend, what the board has committed to is the ordinary dividend, which is 50% of underlying earnings per share. That happens by default unless something very special happens, like the pandemic. In terms of the extraordinary dividend, that's to the board's discretion, and it's a long list of assessment they do. We can't expect the extraordinary dividend every quarter. This is just an instrument to distribute surplus cash, right? In some quarters we have a break. I don't think you should read so much into it, really. Yeah. Welcome.
Okay, we have one question from the web. Christian Nordby at Kepler Cheuvreux is asking about demand. Do you see any difference in demand patterns between the two major regions, EU and US, given the overall strong inflationary pressure on consumers?
Shall I start?
Yeah.
Yeah. You know, it's very early days, really, and so far, as you have seen from the prices, et cetera, the demand was fantastic in the first half of the year. Who knows what to come? But at least so far, as I said to Carl Mel, we are good and yeah. Going forward, normally the American market is stronger than the European market, but I guess this depends on the slowdown and how it plays out. But we haven't seen any kind of weakness so far. Again, a little bit repetitive, but I think we're good. It's hard, actually really hard to answer that question.
Neutral so far.
I guess we can also add that, you know, historically, salmon demand has shown resilience also in times should there be more of a slowdown in the economy, you see that the demand value for salmon increased both in 2008, 2009, 2010. That was the last major crisis, financial crisis. I mentioned during my presentation some of the factors we think will in any case support salmon demand. It is only 1% of the proteins, it is relatively infrequently bought, so it doesn't represent a major part of household spending. Also, we have the mega trends supporting this. People are more preoccupied with health than they were before, also before the pandemic. We see these good product features, and of course also the sustainability credentials.
We also see of course, you know, any slowdown will also probably impact the air freight, which is current at a very high level in certain markets like Asia, where we've seen a reduction in consumption in this quarter. That of course could also be supportive for a demand there. There are several factors I believe that in any case will support salmon on a global level.
That's the demand side. In addition, we also have the supply side, which is very constrained, right? I think we will work ourselves through this in good shape also this time around.
Okay. No further questions from the web. That concludes the Q&A.
Right. It only remains for me to thank everyone for the attention. We hope to see you back in November at our third quarter release. Meanwhile, take care and, have a great day ahead. Thank you.
Thank you.