Good morning, all, and welcome to the third quarter presentation of Proximar Seafood. My name is Ole Christian Willumsen. I'm the CFO of Proximar, and together with me today is our CEO, Joachim Nielsen, and we will now present the third quarter. Today, we are broadcasting from our facility here in Oyama, at the foot of Mount Fuji.
What you see behind us here is our nursery, where we currently have six batches of Atlantic salmon in production since March this year. And we would very much like to start this presentation by showing you the facilities that we're now taking ownership of through a small video. Here we go. We hope you enjoyed that video. We are now ready to move on with the presentation, and I'll leave the word over to Joachim to kick us off.
Thank you, Ole Christian. Good morning! Through the third quarter, I'm pleased to say that we have achieved many important milestones. Production is running very well, and we are continuing building the biomass. In September, we took delivery of the facility from Daiwa House, this marking end of construction and a six-year-long process, including extensive preparations, design works, and construction works.
The quality of works are very high, and the facility was handed over with no remarks or repair works to be done. In conjunction with the handover, we also took the formal ownership of the buildings, releasing the second and final tranche of our bank loan of JPY 8.8 billion. We have, through the quarter, continued with great success, recruiting new colleagues, and as I've expressed in several presentations, I remain encouraged by the high level of qualified members joining our team.
With the current team, we are well prepared for the years ahead. And finally, and perhaps most importantly, is the stable production and encouraging results seen across all batches. Through the quarter, we have seen the fish thriving across all batches and departments, demonstrating good growth and low mortality. Here are some pictures from our nursery department, which you can see from behind me, and some pictures also from inside the tanks.
The nursery is where the fish stays from 2.5 grams until the fish transfer to the grow-out, which will, on a normal production, be around 100 grams. And this department is the same design and layout as the grow-out building, the main difference being the number of tanks as well as the amount of modules. When it comes to the market, we continue to see a strong market for Atlantic salmon.
The robust supply-demand outlook, coupled with the rise in transportation costs to the Japanese market, puts Proximar in a highly attractive position. The sharp increase in transportation cost of Atlantic salmon from Norway to Japan is expected to remain at high levels. The Japanese import prices for salmon was first affected by the pandemic and then further, in fact, impacted by the geopolitical situation.
Following the rerouting of air traffic from flying the shortest route over Russia, the distance to Japan has increased even more significantly, carrying the implications related to this in terms of carbon emissions, fuel, flights , and higher costs. Looking specifically at the implied transportation cost from Norway to Japan of Atlantic salmon, we see the graph to the left illustrating this point. This shows the difference between export price and import price.
From averaging about 24 NOK per kilogram in 2018 to 2019, and 13 NOK per kilogram from 2020 to 2021. It has now averaged 41 NOK per kilogram for the last 12 months. This is illustrated on the right-hand scale, looking at the tinted area on the graph on the left. This, coupled with record high export prices from Oslo, translate to import prices averaging around 129 NOK per kilogram for the last 12 months into Japan.
This excludes local handling costs and other costs occurring on the Japanese side as part of the import cost. The corresponding average on the market price in Tokyo on the Toyosu market for the last 12 months has averaged 125 NOK per kilogram. So the fundamentals are very attractive.
Following the previous slide, we see this translating into very robust fundamentals and a very attractive outlook for Proximar going forward. We believe Proximar is uniquely positioned in the Japanese market, with strong fundamentals, a robust business model and no local competition in the coming years. Based on our revised forecast, we expect production cost to be around NOK 69 per kilogram on an EBIT level.
Looking at the expected market prices based on the benchmark mechanism, backtracking the relevant cost elements from the previous slide, the graph on the left illustrates the background for our optimistic outlook. In this graph, we are illustrating the margin potential, showing the benchmark selling price in red and the blue line showing the expected production cost on EBIT level at full capacity.
This also provides leeway in terms of volumes achieved, meaning we should still be able to deliver attractive returns even with lower achieved production levels. And this we're trying to illustrate in the graph on the right, with the blue columns showing production cost, assuming different attained production volumes versus the benchmark price, represented by the red line. As shown on this graph, we are still in positive EBIT levels, even at the low end of volumes in this sensitivity.
Having said that, based on the performance we see in our own facility and the results shown since 2017 in the AquaMaof facility in Poland, we remain confident in reaching our production volumes. As we're now seeing the good progress in our production, we are also increasingly spending our time and efforts on sales and marketing.
With our 10-year sales and distribution agreement with Marubeni, we are very confident in a successful execution when it comes to sales. Marubeni has taken a strong involvement and is working together with the Proximar team in a highly dedicated manner. The interest for our upcoming products remains strong, and we have been welcoming many potential buyers to our facility this year, including supermarket chains and restaurant chains.
We expect the discussions to become more specific in the coming months, and we have already received requests for price and volumes. Our current goal, together with Marubeni, is to address the premium market, and Proximar's fish is well aligned with the prosumer, with the consumer preferences. We're looking into the months ahead with great excitement and remain optimistic on securing good results.
The installation of equipment by AquaMaof is ongoing, and the first transfer of fish of the two first batches is scheduled in December. Unfortunately, we've seen some CapEx increase following in our recent review and our expectations going forward, partly related to the final completion works of the construction and final settlement with Daiwa House, combined with higher transportation costs related to equipment deliveries, but also in some additional equipment-related investments, driving these changes.
This resulting in total increase of NOK 45 million, leaving the total CapEx at NOK 1.24 billion, or up equivalent to 17% increase since we started the construction in 2021. Again, we believe the most important for Proximar now and going forward is the production and the development here. It is therefore very encouraging to continue seeing the positive results and performance across all our batches and departments.
We see stable water quality and steady and robust operations, which again then translates into strong growth. We continue building our biomass, currently standing at 19.5 tons, and the production is developing according to our plan, and we are on track for the first harvest in third quarter 2024, less than one year from now. As informed previously, we have experienced some operational startup issues relating in mortalities.
However, I'm very pleased to say that we have had no such experiences in third quarter. We are in line with our production plan in terms of harvest volumes for 2024 and 2025, and we are continuing to bring more eggs into the facility to secure adequate buffer in case of incidents in our buildup phase.
The water quality continues showing stable conditions and within adequate levels for the fish, again, demonstrated in the growth curves from the previous slide. We have reduced the temperature levels in the short term for the nursery slightly as part of the contingency for the startup of our grow-out building, also to secure some buffer during the startup and transition of the first batches.
If the fish grows too quick, we could have bottlenecks, and this is what we're trying to avoid. We have good capacity in terms of oxygen levels, as you see here, also illustrated on the graph. And, we see the ammonia data. From the ammonia data, levels that the biofilter has now matured and is showing steady and good performance. We are currently 31 employees and more to join going forward.
I continue to be impressed by the strong enthusiasm across our team and the strong dedication to Proximar. Our team continues doing a great job every day, 24 hours. We are continuing recruiting talented people to our team, and we are well on track for the future.
We have also secured more experienced members to our team, including a production manager with extensive and relevant experience from the aquaculture industry. Securing qualified and dedicated production personnel is key for the success, and I'm pleased to say that we are well positioned. Now I will leave the word to Ole Christian.
Thank you, Joachim. Let's start with the PNL, where we report a quarterly loss of NOK 14.4 million. This result is in line with our expectations, reflecting the increased CapEx activity in Japan, including the added personnel costs. Moving over to the balance sheet, our assets have roughly tripled in value since we reported a year ago, standing now at about NOK 1.6 billion at the end of the quarter.
About three-quarters of this asset value is related to land, asset under construction, and associated equipment. The remaining 23% of our assets consist of biomass, other short-term receivables, mainly coming VAT refunds and cash. Looking at the debt side, over 90% of the current liabilities relates to the JA Mitsui Leasing loan of about NOK 230 million.
As described in note seven to the accounts, the majority of this loan was repaid now in October. The remaining part of the loan has maturity in March next year. The non-current liability consists of three main components: the convertible loan of about NOK 216 million, the loan to Grieg Kapital of NOK 95 million, and the syndicated loan of NOK 607 million that was mentioned by Joachim. In total, NOK 918 million.
Finally, on the equity side, the equity has risen through the converts from the convertible loan during the quarter, while being reduced by the net loss. In addition, the weakened yen in the quarter, compared to NOK, has led to a negative effect of NOK 42 million. The equity stands at NOK 402 million at the end of the third quarter.
Now, let's turn over to look at the financing of the company going forward. As already explained by Joachim, we have experienced an increase in CapEx in the quarter of NOK 45 million, totaling NOK 90 million over the last two quarters. In addition to our ongoing work with the budget for 2024, we are seeing a combination of some higher costs driven by inflated input prices, as well as additional required costs to secure adequate headroom as we are now moving into full production.
Furthermore, we see the liquidity effects related to the timing of consumption tax refunds. In sum, this translates to higher OpEx and working capital requirement of about NOK 45 million. A large part of this effect is seen in the second and third quarters next year, just before we start harvesting and generating positive cash flow.
On the financing side, we have seen higher incurred costs driven by processes with banks and various advisors, increased interest rate levels, and changes in our financial planning assumptions. We are now evaluating several options for how to fund the additional capital need, seeking a combination of debt and equity, both in Norway and Japan in the coming months.
In doing so, the company is working closely with the largest shareholders, who are very supportive in seeking good solutions. There are indications of several alternatives covering the majority of the capital needs. We are working with advisors both in Japan and Norway in this process. Following from our financial planning, we are also continuing our efforts to seek strategic opportunities for Proximar.... This is increasingly relevant as we now look into the future and consider further capacity growth.
Since 2015, we have continuously been working hard with a long-term perspective and patience, and believe we so far have succeeded in building a very strong platform for the company. As we now can showcase the completed facility and positive production results, we expect this to fuel further interest and see progress in 2024.
We are also actively developing our Japanese foothold and are engaging a Japanese investment bank to advise us going forward. Overall, and I believe it's important to emphasize this in light of the announced funding increase, we are working with a strong focus and dedication on creating shareholder value. With that, I'd like to hand it over back again to Joachim for the summary and outlook session.
Thank you, Ole Christian. Wrapping up, we continue to see stable water quality and good growth conditions, which is also demonstrated in the growth curves of our fish across all batches. Our team is further strengthened, and we are well on track to meet our planned production growth. Going forward, we will continue building our team and focusing increasingly on production.
We completed the handover of the facilities and made the final drawdown of our Japanese bank loan in third quarter. Looking forward, the market outlook remains very promising in terms of economics and growth, and we believe Proximar is well positioned for the future with a first-mover advantage, years ahead of competition, and with very attractive economics.
In terms of required funding, we are working actively on this with support from our major shareholders to secure a good solution for all our shareholders, and we are also addressing strategic opportunities. With this, wrapping up, the outlook remains very attractive, and we are looking forward to the years ahead, and I will now open up for questions. Thank you.
Welcome to Proximar's Q3 reporting. My name is Marius Birkenes. I'm the Director of Strategy in Proximar, and I will function as the moderator in this Q&A session. Our CEO, Joachim Nielsen, and CFO, Ole Christian Willumsen, will be answering the questions from our facility in Oyama. Let's start with the first question here. Given the slight ramp-up issues with the biofilter in the nursery, should we expect similar issues in the grow-out facility, or have we found any new way to speed up the maturation in the biofilters?
Yes, we have-- we do expect time for the biofilter to mature, which is part of the normal startup procedure. Having said that, we also have quite a large of water to fill up the PSG or the grow-out building, so that means that the level of recirculation and dependence on the biofilter is less in the beginning. So we expect this to be a gradual build-up and will also take the advantage of the relatively large biofilter and the limited load on it by introducing sequentially the batches. So we do not expect any large issues related to this.
Okay, moving on to the next question. What is our expectations around premium pricing for the Atlantic salmon and also the thoughts around the proximity to Mount Fuji for the sales?
Yes, I can answer that. We definitely expect to be able to take a premium for our Atlantic salmon. We know that Japan and the Japanese like to be self-sufficient, also with food. So there is a clear expectation that there is willingness to pay for a premium product made in Japan. Hard to quantify exactly, but that is what we have in our modeling. When it comes to the brand name, we know that Proximar is already directly and strongly related to Mount Fuji. It is the strongest individual brand name in Japan, across all industries. And we are planning to use Mount Fuji in our marketing, going forward.
Okay, thank you. Could you say anything more about the plans to list on the Tokyo Stock Market? And if we had done any talk with local investors and how the interest has been.
Listing on the Tokyo Stock Exchange is something we are also looking into as one alternative of many. It's not nothing specific, but we are obviously aware of that as one opportunity. We also see the strong interest in Japan for Proximar. And despite being a small company, we are attracting a lot of interest.
And as Ole Christian said, we also believe this is linked to the location close to Mount Fuji, which makes it come on top of the memory of many of the Japanese consumers. We do have and continuously we have meetings with Japanese potential investors, as with many other investors.
I would say that we are receiving a lot of positive attention here. And again, it's something that Proximar is a company that many are aware of. And we are getting from time to time also space in the media, in newspapers, in industry papers, and also on TV.
Yeah. And it's... I think it's fair to say that for, for most Japanese, they are not very accustomed to the Norwegian Stock Exchange, obviously. So we do receive questions about this, because for them, it would be more natural to, to invest in, in, in a stock in, in Japan. So, so as Joachim saying, it's something we need to, to, assess or address, going forward. But, no, no decisions as of yet.
Okay. Then we have no more questions, and that does conclude the Q&A session. Our next financial reporting is the Q4 presentation, which will be held on the 23rd of February, 2024. And before that, we will also distribute a production update at the beginning of January. Have a nice weekend.
Thank you.
Thank you.