Bakkafrost – The cost leader in salmon farming

Based on the Faroe Islands, Bakkafrost has had a great advantage over its Norwegian competitors because the company has been partially screened for biological challenges. They have also had access to the Russian market, which has been closed to Norwegian fish farming companies. Bakkafrost is a fully integrated salmon breeder based on the Faroe Islands. The company is a low cost salmon producer of the highest quality. This is achieved through strict control regimes for biology in the Faroe Islands, as well as the use of marine fodder. The company has a large proportion of further processing and a strong position against the USA. Bakkafrost has achieved an average return on equity of 23.3% over the past five years.

In September 2019 they acquired The Scottish Salmon Company, and through the acquisition got a foothold in a Scotland based salmon farming company. The Scottish Salmon Company is the second-largest salmon farming firm by harvest volume in Scotland, producing 29,913 metric tons (MT) of salmon in 2018 and 18,463 MT of salmon in the first half of 2019. Bakkafrost has initiated an extensive investment program to make SSC more profitable. The plans include upgrades to SSC’s infrastructure, including a new recirculation plant for smolt production to replace SSC’s collection of smaller smolt facilities, and improvements to SSC’s seawater equipment. 

Risks: biological challenges (sea lice), low salmon price, increased supply growth and lower demand for salmon

Investment basis: The company has been and still is a cost leader in salmon farming.

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