Good morning everyone, thank you all for joining this presentation of Salmon Evolution's results for the fourth quarter. Salmon Evolution is currently at a pivotal inflection point, where we are now transitioning from a period dominated by construction and investments towards now commissioning, scale up, and cash flow generation, with phase II at Indre Harøy quickly approaching first production. This is something we have looked forward to for a long time, and today I want to thank all our dedicated and hardworking employees and partners for making this happen. As you can see from the picture here, the scale of what we are doing is quite remarkable.
This is next generation salmon farming at an industrial scale, and we truly believe that what we have built here is something that's gonna have a profound impact on the salmon farming industry in the years and decades to come. My name is Trond Håkon Schaug-Pettersen. I'm the CEO of the company. Together with our CFO, Trond Vadset Veibust, I will take you through this presentation. Just a short recap of where we are. Salmon Evolution is the global frontrunner in land-based salmon farming. We are already operating and delivering at the scale. We have a proven platform. After several years of production, we've demonstrated stable biology, high quality, and also repeatable performance. That matters because we're not just scaling an idea, we are scaling something that already works.
We are also in the right place. Our location at Indre Harøy gives us structural advantages across competence, suppliers, logistics, and costs. These are advantages that will further strengthen as now volume increase. Now we are entering the value creation phase. With phase II coming online, capacity moves towards 18,000 tons. That is fundamentally shifting the earnings profile of the company. This is where fixed costs are absorbed, margins expand, and cash generation also accelerates. To put simply, the platform is built, the risk is reduced, and scale is also now coming. As normal, we will start this presentation by going through the highlights. I will go through the operations and our ongoing growth initiatives before our CFO will take us through the financials.
Finally, we'll end the presentation with some comments on Outlook and a Q&A session. For those of you who are attending virtually, you can submit questions via the webcast. As mentioned, as a company, we are moving towards a clear inflection point, where we go from build-out towards execution and value creation. phase II is progressing according to plan, with the first smolt release planned for week 17. For 2026, we are preparing for a step change in scale. We will stock around 2.8 million smolt, which is up 65% year-on-year, and also underpinning a materially higher production trajectory and setting the foundation for increasing volumes and earnings. Importantly, we also enter this growth phase from a position of operational strength.
The farm goes into 2026 with a solid biological foundation, giving us confidence in our ability to scale efficiently and also to consistently improve performance as now volumes ramp up. Financially, Q4 also sends an important signal. Farming operations were effectively break even on EBITDA, even with some phase II ramp-up cost, and also despite quite low prices during the quarter. I think that clearly demonstrates the operating leverage in our business model. Finally, we're also disciplined on capital. The updated partnership model in Korea ensures that capital and management focus are firmly concentrated on Indre Harøy, where we see the highest, most near-term returns. Takeaway is simple from our perspective.
The platform is working, scale is now on the way, and the salmon market is about to recover, and we are positioned to translate the growth into earnings as we move to through 2026. Moving over to the operations, Q4 harvest volumes reflect a deliberate strategic choice. We harvested around 1,200 tons gutted and prioritized biomass build-up to enter 2026 with a fully stocked farm. As a result, we ended 2025 with a standing biomass above target and expect now to harvest around 1,800 tons gutted in Q1, also giving us a very solid start to the year. Price realization in Q4 was NOK 74 per kilo, reflecting soft market conditions early in the quarter and also the fact that we didn't harvest in December.
During Q4, we also sold a batch of smolt to a conventional farmer, as we have maintained some overcapacity on smolt over the last year. To sum up, with a fully stocked farm and basically full exposure to the spot market, we are well positioned as the salmon market is expected to tighten going forward. Looking at net biomass growth in Q4, this ended at about 1,600 tons, was impacted by a high level of logistics activity as we optimized the farm for the year ahead. I think importantly, the underlying growth trends remain consistent with previous quarters. The standing biomass ended at around 3,100 tons, and we have now maintained a fully stocked farm over four consecutive quarters.
This is key for continuing to improve performance and also get the operating cost down. At the same time, we continue to execute on various operational improvements that are expected to gradually lift the growth performance. Here we have several initiatives ongoing, which we very much look forward to see the results from over the coming quarters. I think to sum up, we have a strong biological foundation, and now it's all about taking out the full potential. I think as to the full potential, this is a good illustration of how we will do that. What we clearly see is that growth performance is good.
I would say very good, up to 2.5 to around 3 kilo, even at high densities, while the growth curve flattens out in the final stage. Producing large fish is not a problem from our perspective. For example, in, in the fourth quarter, we harvested a batch of around 200 tons at an average weight of 5 kilo gutted , but where the fish stayed a little longer in the tank. The issue goes to maintaining the desired productivity throughout the full cycle so that you're able to reach the target weight within the time that the production plan allows for. Key to this is water quality. Through four years of operations, we have identified specific bottlenecks around particles, gases, and flow.
The important point is that these are known and addressable issues that we are already acting on. This includes, for example, a new and improved feed composition, which is expected to improve water quality that we have already incorporated. It also includes improvements in the way we treat and manage the sort of water recirculation. Finally, it also includes increasingly using data and AI to replicate what works, tank by tank and also cycle by cycle. Importantly, all these learnings are already embedded in phase II, and we see also a clear potential for similar phase I upgrades in a very cost-efficient manner.
To sum up, we see tangible upside in growth, harvest weights, and cost efficiency, driven by execution, experience, and also data, as we now move into the scale-up phase. phase II is about quality as much as scale. We've taken four years of operations of experience from phase I and incorporated those learnings into phase II, especially around water quality, robustness, and reliability. We are now introducing more seawater, actually up to 20% more. We are upgrading the degassing systems and the water hydraulics, and we're also adding particle filtration on the water that we are reusing. These are targeted, experience-driven upgrades designed to support strong growth throughout the full production cycle. At the same time, we have also simplified the systems.
We have strengthened biosecurity to ensure predictable production at the higher volumes. Importantly, also, this is capital efficient improvements. phase II is designed to deliver higher quality capacity from day one, and it also gives us a very clear roadmap for potentially cost-efficient upgrades in phase I. I think the key takeaway is clear: phase II is not just about volume, it's also better biology, lower risk, and better margins as we now scale the operation. As a company, we have a very clear and credible roadmap for substantial production growth at Indre Harøy.
Over the next 18 months, we target to reach 85% capacity utilization of phase I, while we, at the same time, are ramping up phase II operations, which will give us a run rate production of 14,000 tons-15,000 tons gutted . We are going to implement the pre-grower tanks, as well as solving the remaining bottlenecks in phase I, which will give us a run rate production of 18,000 tons gutted by year end 2027. This is not growth far into the future. We are commencing operations in phase II just over Easter, for 2026 alone, as I mentioned, we will stock around 2.8 million smolt, which is a massive increase from last year. In sum, disciplined and stepwise growth on a proven platform.
A little bit about our growth initiatives. I think we are entering now a very attractive phase for Salmon Evolution, where years of execution and experience are translating into clear and scalable growth. Our strategy is focused and disciplined. It's all about execution on the current operations, deliver phase II, and also build a compelling pipeline. phase III at Indre Harøy is a natural next step, doubling capacity to 36,000 tons on a site platform and organization that already works. This is growth that leverages the existing infrastructure and experience that we have, also reducing risk and enhancing returns. I think this is a good illustration of sort of the strength and scale and long-term potential of our platform at Indre Harøy.
phase I, as we've been through, has been operating successfully for several years. phase II is now very soon about to enter first production, then bringing the capacity to 18,000 tons. Obviously, phase III here, a highly attractive project, building on the same proven site infrastructure and also the organization. Beyond that, we have a potential phase IV, which represent also meaningful long-term optionality. While this is still conceptual, it provides additional upside that can be unlocked over time, in line with market conditions, permitting, and so on. I think to sum up, Indre Harøy is a unique platform that offers significant volume growth in the near term, very tangible medium-term expansion opportunities, and also long-term growth optionality, all anchored in a proven platform.
When it comes to phase II, this is progressing according to plan. We are now well underway with the testing and commissioning, marking a clear transition from construction towards operations. The major civil works are largely complete. Our focus now is firmly on process installation and operational readiness. Importantly, we have reached this stage without any lost time injuries, which reflects strong execution, discipline, and also a continued focus on safety across the project. We remain on schedule for the first smolt release in week 17, and all activities on the site are aligned around this milestone.
In parallel, we have also completed planning and nearing for the pre-grow-out tank, grower tanks, where we target to make an investment decision during the first half of this year. Sum up, phase II is on track. Project risk is now coming down, and we are moving from build-out to execution. I think this is a key step in shifting the company towards scale and earnings. These pictures captures a major milestone at Indre Harøy in phase II. We have now successfully filled the water in the first two production tanks, which is a critical step in the commissioning process. This confirms that the core systems, the water intake, water management, and treatment and are performing as designed.
These tanks are now soon ready for the first smolt release, after which we will gradually take the remaining phase II tanks into operation throughout 2026. Reaching this stage is a significant and strong validation of the work done by our organization and our partners over several years, turning a large-scale, complex build-out into a functioning production platform. I also would like to briefly address the updated partnership model in Korea that we announced earlier this quarter. This is an important strategic clarification. The key message is that this update reinforces Indre Harøy as our foremost priority in the near to medium term.
Our capital and management attention and execution focus are firmly concentrated on Indre Harøy and maximizing the output and delivering phase II according to plan, and also preparing for the next steps at Indre Harøy. The revised structure also reflects a disciplined approach to capital allocation. Salmon Evolution will provide technical advisory services on market terms, with also the potential for quite substantial royalty payments linked to certain operational milestones. Also importantly, we will remain a minority shareholder, with no further investment commitments, while we also retain a five-year purchase option to increase ownership, should we desire to do so.
I think this is a good example of how we're able to leverage the significant competence and experience that we have built up over many years, without the working capital or focus away from the core operation in Norway. Trond, will you take us through the financials?
All right. Starting with the farming segment, which comprise most of our activity. In the fourth quarter, we harvested about 1,200 tons in addition to the sale of a smolt group due to temporary overcapacity. As Trond Håkon has elaborated earlier, retaining overcapacity on smolt through 2025 was part of our deliberate strategy. As you are all aware, salmon prices through 2025 have been weak, and we are fully exposed to this as we sell our salmon exclusively in the spot market. The impact of low salmon prices are clearly reflected in our financial results, both for the quarter and the year.
In Q4, as Trond Håkon mentioned, our harvest took place in October and November, meaning that we lost out on most of the price recovery towards the end of the year. Overall, we ended up an all-in price realization of NOK 74 per kilo in the quarter and about NOK 70 for the year. Looking at costs, our farming EBITDA cost ended at NOK 73 per kilo in Q4 and NOK 77 for the year. Q4 reflects the capacity utilization in the second half of 2025. Considering that initiation of phase II operations is commencing soon, we have some ramp-up costs related to this. Net of these ramp-up costs, farming operations were break even in the fourth quarter.
For 2025, we ended with a negative EBITDA of NOK 39 million, reflecting the mentioned weak salmon prices through the year. In for the other segment, which comprise headquarter and expansion costs, fully aligned with our growth strategy, we had a negative EBITDA of NOK 7 million in the quarter and NOK 39 million for the year. Through 2025, we have taken steps to minimize cash burn on expansion projects, as well as retaining our relentless cost focus through the year. Importantly, this part of our cost base scales significantly once phase II is fully operational, with harvest volumes set to more than double. To underline and illustrate this, it is worth mentioning that we are initiating operations at Indre Harøy phase II without increasing the administrative headcount. The increase in personnel is exclusively linked to farming operations.
At group level, EBITDA was negative, with NOK 8 million in Q4 and about NOK 80 million for the year. The difference between farming operation and the group results is the mentioned headquarter and expansion-related costs. Overall, we are not satisfied with the financial results in 2025. As we move into 2026, with higher harvest volumes, higher salmon prices, and continued operational improvements, we expect a significant step-up in financial performance. All the fundamentals are moving in the right direction, and we are well-positioned to translate operational progress into earnings and cash flow going forward. This illustration shows the bridge from gross costs to the farming EBITDA cost of NOK 73 for the quarter and NOK 77 for the year. As mentioned, the farming EBITDA cost in Q4 reflects the capacity utilization in phase I during the second half of 2025.
Included in the gross costs are some ramp-up costs in relation to initiation of operations in phase II, as mentioned, although the effect in the quarter and for 2025 is relatively limited. Consequently, through 2026, there will be some effects on the farming EBITDA cost related to this. The smolt group sold during the quarter also impacts gross costs. Smolt have both a much higher revenue and cost per kilo than the regular head-on gutted salmon, for obvious reasons. As the volumes increase and phase II comes on stream, we expect a meaningful reduction in unit costs driven by scale. In short, Q4 costs are representative of where we are today, not where we are heading.
To look more at the big picture on costs and how the impact of increased volumes, we have prepared this illustration. In a fully operational farm, we have a predictable cost structure with about NOK 200 million in fixed operating costs in phase I. Admittingly, we have a relatively broad definition of fixed costs. For instance, we define electricity as one of them. The reason being that electricity use primarily is defined by whether all tanks are in operation, not how much biomass we produce in them. The same goes for personnel, technical operational costs, and so on. A run rate of about 6,000 tons HOG yields a farming EBITDA cost per kilo of approximately NOK 70-NOK 75. Reaching targeted cost levels in phase I and II, NOK 56 and NOK 53 per kilo, respectively, is all about scale and maintaining a stellar biology.
The majority of the cost improvements is related to scaling of the fixed cost base. Additionally, the feed factor have been higher than normal during 2025, and improvements in this towards targeted levels is also an important part of the equation. Therefore, decreasing farming costs and meeting our cost targets is all about continuing to increase biomass growth, reaching targeted feed conversion ratios, and maintaining current performance on mortality and superior grade share. With phase II operational, we will have further scaling effects on the cost base. Even though volumes are doubling, you don't need one additional CFO. The point being that the required operational platform has already been established in phase I, and there are multiple cost efficiency gains with phase II operational.
Over to another topic that has received a lot of attention lately: EBIT cost, depreciations, and the distinction between recurring and non-recurring CapEx in land-based salmon farming. I can only speak for Salmon Evolution and not other land-based farms, but to me, it seems that there are a lot of opinions on this and little facts. With more than four years of full-scale operations at Indre Harøy, we have deeper insights into this than most. Let me therefore make a few important clarifications. Indre Harøy is built to last and represents a high-quality asset base, supported by stringent maintenance protocols. Anyone who has visited a facility can attest to the quality and the robustness of the operation.
Approximately 25% of accounting depreciations, corresponding to two out of NOK 8 per kilo, relates to engineering, internal project management, rigging, and operation of the building site during the construction phase. This is not capital expenditure that will require reinvestments in the future. In addition, roughly 20% of depreciations relates to concrete and steel structures with an expected useful life well beyond our average depreciation period. On top of this, comes intake pipes and other in-ground infrastructure, components with a useful life measured in decades. Hence, a significant portion of CapEx is non-recurring and carries no future replacement cost. A useful way to think about this is that CapEx for Salmon Evolution effectively replaces license costs in conventional salmon farming. However, licenses are not depreciated, whilst our CapEx is, even though a large portion of it does not need to be replaced.
The bottom line is that with a high-quality asset base, we are well-positioned to maintain a highly competitive EBIT cost over time. Let me briefly take you through the balance sheet and cash flow. phase II is progressing according to plan, as Trond Håkon mentioned. Building activity has peaked, and from here, we expect capital spending to gradually decrease as we move into a period where the primary focus of the project is process installations, whilst civil works is nearing completion. We are comfortable when it comes to the project economics. We have approximately nine months left in the project and are on track to reach our targeted milestones.
Currently, we have high focus in the project on effective project execution to minimize delays, change orders, and to ensure good coordination between all disciplines at the building site, and thus, reducing the risk of cost overruns. When it comes to the previously announced refinancing, we are currently having constructive discussions, and these processes are proceeding as expected. We will update the market on the results of this in due course. Cash flow from operations was positive in the quarter, supported by our reduction in working capital. For 2025, the cash flow at large reflects our underlying financial results and the fact that we increased the standing biomass by over 50% during the year. Overall, we remain firmly on track, and the investment, the heavy investment phase is peaking as we move into the scale-up phase.
Bottom line, this is what Indre Harøy is about: positioning Salmon Evolution for significant cash flow generation in the years to come. The key point is that the heavy lifting is done. We have a high-quality asset base in place, and our platform is highly scalable. Strategically, this puts us in a unique position compared to our peers. With phase II fully operational, we are in control of our own destiny, with the ability to fund growth from our own operations rather than having to depend on exclusively on external capital. Based on our expected cash flows, we can self-fund growth in the years ahead, whilst maintaining a disciplined approach to capital allocation and prioritizing returns over raw scale. Bottom line, the business is de-risked, the platform is built, and phase II unlocks strong expected financial results with attractive returns. All right, to Trond Håkon for the summary remarks.
Thank you, Trond. To sum up, we believe that we are well-positioned going into 2026. We have a proven operational platform. The heavy lifting is largely done, and with phase II coming online, we are also entering a new phase for the company, moving from CapEx towards scale, earnings, and cash flow. I think the fundamentals are very clear. We have a good biology, we have a scalable platform, we're disciplined on capital, and also we have a clear visibility on growth. phase II is also a game changer for the company. It significantly increases capacity, strengthening margins, and position us to capitalize on an expected stronger salmon market. Our focus is unchanged. It's all about execution and converting continued operational progress into long-term value creation.
I think with that, I would like to thank you all for your attention, and we're now happy to open up for questions. We can start in the audience, if any, and then we take questions submitted online.
Just raise your hand if you want the microphone. All right. Quiet audience today, but that's okay. We have a whole list of questions received online. I think I will just start from the top. Okay. What is the reasoning behind the updated partnership model in Korea, and what ambitions does Salmon Evolution have to scale outside Norway? Trond Håkon ?
Yeah. No, I think as mentioned, our primary focus now is Indre Harøy and about taking out the full potential of phase I, and also delivering phase II according to plan. We clearly have ambitions beyond Indre Harøy, but I think we need to have a very sort of focused approach, and that's why we have been very clear that we are focusing our both our capital and our resources in getting Indre Harøy fully up and running. Obviously, also from a growth perspective, phase III is extremely attractive. You have to remember that we have made all the infrastructure investments, we have electricity, we have the permits. Everything is in place.
Also from a return perspective, I think there are few, if any, projects anywhere in the world that can compete on the economics of a potential phase III. It's not ending with phase III. We have ambitions well beyond that, and but it's something about sort of timing. I think this was a very good solution for us, where we are able to sort of stay involved in a very good way. We are able to leverage the competence and experience that we've also built up, and we also have a good economic upside. We're very happy about the sort of this revised structure.
Yeah, just to add, I think it also reflects our very disciplined approach when it comes to capital allocation. Importantly, we also retain our five-year option, purchase option in the project, going forward. All right. Okay. What do you expect of phase II, and how long do you think the ramp-up period will be?
Yeah. Now, as we went through in the presentation, we have, we very much look forward to putting phase II into operations. It's sort of we have now four years of experience from phase I. We've gathered a lot of learnings. All of that is incorporated into phase II. It will be a fantastic facility. I dare to say next, it will sort of set a new standard for land-based salmon farming and obviously now we're starting, we will have a quicker ramp-up in phase II than we had in phase I. we will stock five groups this year and by sort of the.
Now we are taking over the first two tanks, in later this quarter. Then we will sort of gradually take over all the remaining tanks for the remainder of this year. By the end of the year, we are sort of all tanks are fully operational. Then into first half of next year, we should be at sort of the steady state where we are producing at full capacity.
Of course, also the big difference from phase I is that we have a very experienced staff, and we have all the operational protocols in place to facilitate a much faster ramp-up. All right. Okay. How do you view the salmon market going forward, Trond Håkon ?
Yeah, I think everybody has been a little bit surprised, sort of, going into this year. I think the expectations was that the salmon prices would start higher. Now we've had good seawater temperatures, and we've seen higher volumes, sort of early in the year. But I think 2026 will not be as 2025. Now, it seems like the sort of growth in supply is coming down, and hopefully very soon we will see a tightening of the market. At the same time, you had now, we have a period behind us with very high supply growth. The good thing about a lot of supply growth is that you then build demand.
When the supply growth comes down, then prices tend to recover quite sharply. I, I think we are hopefully on the verge of sort of a new sort of price level. From our perspective, obviously, we are now with more and more volumes, we are very well positioned to sort of benefit from that.
Thank you. All right. Okay, what are your views on dividend, and do you have a dividend policy in place? Yeah. We have. Our dividend policy is available at our webpage, so you can check there. Okay. Looking at the superior grade share, it has been fluctuating a little bit, peaking at around 97% in 2024, and now in Q4 2025, it was 92%. Do you have any comments on this?
Yeah, I think it will always fluctuate. We don't see any sort of specific reasoning for sort of why it's a little bit higher or lower. I think overall, looking back over the last, yeah, four years, it's been sort of ± 95%, and sort of that is where, what we are targeting also going forward.
Yes. Our lifetime superior grade share is 94.7%, to be very exact. All right. Can you comment on Q4 results for harvest volume and farming EBITDA cost versus your guidance for 2025? When it comes to the harvest volumes, I think we have covered that in full during the presentation. When it comes to the farming EBITDA cost, that was in line with what we have previously disclosed during our quarterly presentations. Right. Okay. Trond Håkon , looking at the big picture, what opportunities do you see for Salmon Evolution over the next five to 10 years?
We see a lot of opportunities, and I think it obviously starts with Indre Harøy. By the end of this year, we have built out the growth tanks on phase II. phase II is only. We are only halfway, we obviously have phase III, I think that's a very obvious expansion because we have, as I mentioned, we have everything in place. It's very easy to just add on, and we can do that in a very cost-efficient way as well. There's also a upside beyond that. We are looking at other alternatives also in Norway.
I think with the platform that we have, basically being the only player in this space with sort of at this scale, and also now of getting into a stage where we have a substantial cash flow, and sort of an ability to sort of do things, then we are in a very good position to also look at the other things, which we are sort of consistently evaluating. The core focus is here. Then obviously, there are opportunities outside of Norway. We have this project in Korea. We've also done a lot of work in North America, so we have a very good understanding of the market and the opportunities. I would say that it starts...
This is only the beginning, and we have ambitions well beyond what you are looking at here. I think the industry goes into a very exciting time. Obviously last year, we had a weaker salmon prices, but when the market recovers and also when we continue with this, with improving operationally, and suddenly you get into a phase where you where the sort of the business model and also the sort of financial earnings in the company are fully demonstrated, then, I think there will be a lot of opportunities.
Okay. A few closing questions. Can you comment on the scope of the farming cost reductions per kilo we expect in first quarter of 2026 and through 2025? I think on the farming EBITDA cost, we've covered that in quite detail during the presentation. It's all linked to continued operational improvements and increased biomass growth. Do you have a few closing remarks, Trond Håkon, on kind of the production at the start of the year at the in Indre Harøy ?
I think we are as I mentioned, we're going into 2026 on a very good foundation. We have a fully stocked farm. We have good volumes in the already now in the first quarter. Knock on wood, we hope that prices soon recover, but we expect them to do so. I think this will be a very, very exciting year. We are also obviously now with phase II, very much looking forward to take that into operation. At the same time, we have a lot of very interesting initiatives in terms of taking out the full potential in phase I that we very much look forward to seeing the results from over the coming quarters.
I think we are very optimistic, now going into 2026.
All right. That concludes it for today. Thank you for attending. See you again in May, I believe it is. Thank you.
Thank you.