Bakkafrost chairman speaks of bright future

THE chairman of Bakkafrost, the main salmon farming company in the Faroe Islands, has spoken of a future of continuing impressive growth and investment in the business as it becomes a major international player in the industry.
Writing in the company’s annual report published at the weekend, Mr Runi M Hansen outlined an ambitious five year investment plan already underway but which has since been increased by 470 million Danish kroners (DKK) to a new total of DKK 1,370-million. he also said the company was creating higher value than the industry average.
Celebrating the best financial performance in the company’s history, he  says: “The increased investment was both to increase capacity in hatcheries, which will gradually increase the farming production and reduce the biological risk, to increase ambition and reduce timeframe for the new combined harvest-VAP factory in Glyvrar.
“Contracts are signed with both foreign and Faroese suppliers for the new hatcheries and factory, commenced in 2014. Suppliers for Bakkafrost are selected because of highest quality, best available technology and best market price. We are pleased to see that Faroese suppliers are competitive both in quality and in price.”
Bakkafrost was  one of the most vertically integrated salmon farming groups in the industry. Controlling the value chain from raw material, intake for fish oil, fishmeal and fish feed to value added processing, was  essential for its  position as high quality salmon producer.
“The Group’s sheer size and numerous crossing points with several parts of society, makes Bakkafrost an important player in the Faroese industry. Lifting this responsibility towards both society and our shareholder is our main goal,” he added.
Mr Hansen said the salmon farming industry – and thus Bakkafrost –  was dependent on good and stable regulations from the authorities.
“The Faroese veterinary law package from 2003 is a good example on the positive effect laws and regulations can have on an industry, when politicians, authorities and the industry in cooperation implement a sustainable farming system. Since 2011, the Faroese salmon farming industry has had a 2.5% licence tax, which was set one year at a time. In 2014, the licence tax was stipulated by law as a permanent licence tax on the salmon farming industry.
The licence tax consists of 4.5 per cent tax on taxable farming income and 0.5% tax on farming revenue. He agreed it was  crucial for the industry to have transparent long-term regulations in order to take long-term decisions and run the industry as best possible. The competitive position for the company is linked to the regulators ability to create good financial environment of business.
Mr Hansen continued: “The salmon farming industry is in international competition. The competitive situation for the Faroese companies should not be worse than in other salmon farming countries. Since the establishment of Bakkafrost’s new strategy, the company has managed to create higher value than the industry average.
“The value of the Bakkafrost brand, the Faroese taste, the special recipe in our feed with local raw materials and the cost-efficient value chain has proven to create competitive advantage for both the company, its shareholders and the society. Corporate tax for 2014 is DKK 252 million. ”
In addition to this, Bakkafrost pays indirect taxes as duty, social payments etc., and shareholders will pay tax of dividend payout. Estimated dividend tax for 2014 paid in the Faroes will be DKK 80-90 million. Bakkafrost strives to be a cost-efficient salmon farming group. This commitment is visible in our investment plan and our ongoing work to improve procedures and production methods. The employees play an important part to reach this goal. Bakkafrost employs over one thousand employees, and DKK 264 million was paid out in 2014 as salaries.
A combined operational EBIT for the farming and value added products segment at almost NOK 20 per kilogram demonstrates that both the production and sales in Bakkafrost has done an excellent work in 2014. The fishmeal, fish oil and fish feed segments also performed good margin in 2014. Together, this resulted in earnings before taxes of DKK 899 million in 2014.
To maintain growth and create jobs you need investments, for investments you need investors, and for investors you need dividend. Bakkafrost’s dividend policy is unchanged, and the Board of Directors will propose to the Annual General Meeting a dividend of DKK 6.00 per share, which corresponds to DKK 293 million. The financial position of Bakkafrost is positive with a strong balance sheet and available credit lines.
Mr Hansen concluded: ” This position, together with a healthy operation, makes Bakkafrost capable of meeting future challenges and returning value to its shareholders and society. “