Faroes-based salmon farmer Bakkafrost has underlined its commitment to invest substantially in the Scottish Salmon Company (SSC). Bakkafrost has also indicated it will be looking at offshore sites in the Faroes.
The group’s decision to buy the SSC 18 months ago had taken Bakkafrost into “a new geography”, the chairman Rúni M. Hansen told shareholders in his annual report.
The Faroese salmon farmer paid an estimated £520m for SSC in October 2019 and extensive new investment is planned, he revealed.
Hansen said the acquisition increased the scope of Bakkafrost’s operation and brought new growth and development opportunities to the group – and it was made on low multiples relative to industry peers.
He explained: “We see this as a five-year turnaround case and during 2020 we have worked closely with the organisation in Scotland to begin transforming of the operation using targeted investments and redefined processes, based on best practice.
“We are convinced that the investment case is strong and see a good upside potential. One of the important measures to improve the performance in the farming operation in Scotland is to increase the size and quality of the released smolt.”
Turning to home production, Hansen said that if Bakkafrost was to sustainably grow harvest volumes in the Faroe Islands beyond the 100,000 tonnes, offshore farming offered a great opportunity.
“The conditions on the eastern coast of the Faroe Islands are good for offshore farming and the legislation in the Faroe Islands has been prepared for issuing offshore farming licenses. The location is also well suited for Bakkafrost as it is within short distances to Bakkafrost’s operation.
“We have applied for an offshore farming license and expect to receive it during 2021. It is however important to us that our growth ambitions are well balanced with the natural boundaries given to us. We strongly believe that farmed salmon is one of the solutions to ensure sustainably produced food for the world’s growing population.”
The group as a whole recorded operating revenues of DKK 4,652m for 2020 (£535.5m), up slightly by 3% on 2019, but operational EBITDA was down 19% at DKK 1,068m (£122.9m) and net earnings were down 42% on the previous year, at DKK 463m (£53.3m).
Hansen said that Bakkafrost’s operations had only been “mildly affected” by the coronavirus pandemic.