Bakkafrost shares plummet on profit warning

Bakkafrost shares plunged by 15% on the Oslo Stock Exchange yesterday following a second quarter profit warning from the company.

Some estimates put the loss in share value at more than five million Norwegian kroner – or at least £380,000. Bakkafrost has a current market value of NOK 32 billion (£2.4bn).

The shock came late on Sunday when the Faroese salmon farmer announced its EBIT or operating profit for the April to June period would be DKK 353m (£40.7m) due to lower slaughter volumes in the Faroe Islands and higher costs in dealing with mortality issues in Scotland.

Some industry insiders had expected an operating profit around 560m Danish kroner (£64m) for the quarter – the company’s share price is reckoned in NOK but its financial results are given in Danish kroner.

Bakkafrost has adjusted the slaughter volume for the year in the Faroes to 63,000 tonnes while Scotland remains on target at 30,000 tonnes.

Hitherto, it was Scotland that posed problems for the business, but those concerns have now been overtaken by the main farming platforms in the Faroe Islands.

There were indications of problems when the company published its Q2 trading update a couple of weeks ago, predicting a 16,000 tonne harvest against 19,100 tonnes in the previous (winter) quarter.

Whatever the cause, investors reacted strongly yesterday with shares falling heavily.

At first the share price was down by around 9%, but as analysts began to look more closely at the company’s problems it fell further to 15%, before recovering a little.

Some believe that Bakkafrost’s profit for the entire year may be up to 20% lower this year compared with earlier expectations, although more optimistic observers think it could be around 10% down.