Icelandic Salmon AS (Oslo:ISLAX) Q3 2026 Earnings Call

0:00 watch this quarter three presentation for Icelandic Salmon. My name is Bjorn Hambre and with me today I have our CFO, Robert Robertson. After the presentation, there will be a Q&A session where you can ask questions by hand in Teams or type your question into the chat for the meeting. Icelandic Salmon is as most of you know a company listed in Euronext growth in Oslo and the first North listing in Reykjavik and is the sole owner of Analogs AHF where we perform all our operations in Iceland we are fully integrated from Egg to sales and have four small facilities with sufficient capacity for production of 25 to 30,000 tons of harvest volume.

1:08 We have our farming sites in the West Fjords of Iceland with a total maximum allowed biomass of 23,700 tons. All production in sea is ASC certified. and we also harvest our own fish in our harvest plant in Bildedalur with a capacity in that plant of 30 000 ton per year and we have a BRCGS certification on the harvest plant and we also sell all the fish by our own sales team out in the global and domestic market if we look at the Headlights for the quarter. The harvest volume was 5200 tons compared to 3800 tons in Q3 2025.

2:00 In Q3 this year, we had an EBIT that ended at 1.4 million euros, improving from negative 9.4 million euros in Q3 2025. We see in the quarter an improvement in biological performance for all generations in C. Most of the harvest in Q3 was from our 24 generation, which will be harvested out the first week in October. And we also started harvesting from the spring output of the 25 generation, which shows a decreased cost level. The reduction in cost out of stock on our harvest volume combined with good capacity utilization and still more effects of our ongoing cost saving project gave us a reduced operational cost.

2:56 We also saw a good performance in our smolt production and a satisfying result on the smolt output for 2026. There was also an improved price achievement toward market price. This was mainly driven by the fact that the tariffs into the US market was removed on July 24th, and also a strong China market. In addition, of course, a good job done by our sales team. So I will then give the word to you, Robert, for our financial update.

3:37 Thank you Bjørn and good morning.

3:40 This is the first slide of two slides on the group Balanced.

3:46 The main story this quarter is that the Balanced grew. This is the best growth period in sea and investments in our biological assets are the main contributor and in line with expectations. Total assets increased by 11 million euros to 281 million. the increases mainly in current assets which rose by 12 million euros from 123 up to 135 million fixed assets were broadly stable and ended at 145 million total liabilities rose by 14 million euros and ended at 168 million Non-current liabilities increased by 10 million and ended at 137 million euros, while current liabilities rose by 4 million.

4:45 So this is consistent with the higher net debt I'll cover on the next slide. The equity ratio decreased from 43% down to 40%. Assets grew by 11 million, like I said, but liabilities grew more. We remain comfortably within our covenant framework and expect pressure on covenant compliance to remain limited throughout 2026. Fair value adjustments was 200 000 and had limited effect on the result and on the equity. And available liquidity stood at 36 million at the end of the quarter.

5:31 On the next slide we present the development in net insurance debt during the quarter. and it increased by 10.7 million and ended at 134.4 most of the increases in net debt which rose by 10.4 million and reached 122.5 million leasing was almost flat up only 300 000 and ended at 11.9 million so if we walk through the bridge from left to right EBITDA we generate the positive cash contribution from EBITDA of 5.1 million in the quarter taxes paid 2.7 million euros went out in taxes this is the production tax for the first half of the year which was paid in August the production tax for the second half will be paid in February next year Working capital, this is the largest driver.

6:35 As expected, working capital absorbed cash this quarter of almost 8 million euros. And as I said earlier, third quarter has historically been the best growth period, thus increased investments in our biological assets are in line with expectations. Net investments, CAPEX investments reached 600,000 in the quarter and 2.2 million year to date. Net interest paid was 2.6 million and finally leasing and other items added 1.9 million. So in short EBITDA covered the tax payment and part of the interest but the working capital built pushed net investment debt up by 10.7 million euros during the quarter. that puts us at 134.4 in net interest-bearing debt, including leasing.

7:34 So that concludes the Group's financial and I'll hand the word back to Jens-Jörg.

7:42 Thank you, Robert. I'll give you a little update on sales and market. So we saw in the quarter a strong improvement in price achievement compared to market price. This was driven by the before mentioned zero tariffs into the US and also strong interest from the Chinese market. This led to that the volume going into Europe decreased to 47% over total volume compared to 65% in quarter two. This is the first quarter where we have less than 50% volume going into Europe. This is very positive since the European market is the market where we are least compatible with other salmon producing nation when it comes to logistic cost and transport time.

8:45 The superior share of the harvested volume was 96.7%, which also contributed well to the improved price achievement. Price achievement year over year increased with 0.87 euros per kilo from Q3 2025 to Q3 2026 the share of volume going into the North American market was for the quarter 36 percent and that is up from 16 percent in quarter two the share of volume going into the Asian market was 17% down from 19% in Q2. And this decrease is driven by the strong demand from the North American market, which show interest for the same sizes as the Asian market.

9:46 I was myself attending the Seafood Expo in Qingdao in China last week and felt the very strong interest for our salmon there. The demand is driven by good quality and a very good reputation of our packing station in Build-A-Dollar, which has a strong focus in China. They don't talk about companies. They only talk about the packing number for the packing station. and we have a very good reputation there and that contributes very well to the price achievement in that market. And we also still see a growth in volumes on sizes below six kilos in China for sales to the retail market and this is important for further growth in the Chinese market.

10:47 and in October we got a direct flight from Keplavik to Beijing. It started operating in the beginning of the month and the first Salmon is now sent with this flight directly to China from Iceland. This gives us a shorter and very compatible transport time into the Chinese market. and will be a benefit for us going forward. This flight that is operated by Air China will have three flights a week to Beijing from Keplavik.

11:34 the contract share for quarter three was seven percent and the contracts continue to contribute positive to the post post total price achievement towards the market price so if we then Take a look into the future as we see it. The guided volume for 26 is 20,000 ton and is reduced due to movement between years. Volume guidance for 2027 is 18,000 ton and this is affected by biological challenges that we have faced on our autumn 25 generation. in October and so far in November in Q4 26.

12:25 We foresee a stable cost development in Q4 when we will be harvesting only from our spring 2025 generation. We expect higher feed prices going forward and also expect a slight increase in cost in 27 due to that. But we still see a potential of harvesting 26 000 tonnes on our existing licenses. Most CAPEX to reach that goal is done and remaining CAPEX needed is put on hold until new framework for the industry is known. The contract share for the year is expected to be approximately 10%. And as I have mentioned, we see a strong demand for Icelandic Salmon in the market. And with the zero tariffs into the US, we still expect strong price achievement towards the market price going forward.

13:42 The license application in Isafjordur is still a work in progress. The risk assessment for sailing for the 10,000 ton license there is now being finalized and constituting the final step towards approval of that license. The license was awarded in 2024, but revoked due to, among other things, a missing risk assessment of sailing. and then other hot topic for the industry in Iceland is new law formed for the industry a new aquaculture law was presented to the parliament Antingi in June containing many positive elements but was as we all know not approved this has resulted in continued uncertainty on key regulation for both the industry in total and also for Icelandic salmon The lack of clarity on key regulation is unsustainable and is sadly making it irresponsible and impossible for us to commit to further growth and CAPEX right now.

14:53 There is a clear need for a change in regulation and particularly a change in the unfortunate and excessively high industry specific tax. A predictable, more reasonable and compatible tax regime with potential for growth and more optimized monitoring from the authorities are key to continued development of fish farming on Iceland. We therefore hope for a resolution soon putting in place a framework for the industry that will enable continued investment and growth value creation and creation of local jobs in our communities.

15:39 So that was what we plan to present for you. And to the presentation, we will now move straight in Q&A session. So please raise your hand or send the questions in the chat and Robert will follow up. So, feel free.

16:06 So, the first question that we have received is as follows. What caused the biological challenges on the fall 2025 generation? And can you comment on the harvest profile toward 2027? First half versus second half in percentage. And How will the biological challenges on the fall 25th generation impact cost kilo coming quarters? If we start with the first one, what caused the biological challenges on the fall 25th generation?

16:49 The biological challenges on the 25th generation was a combination of of some gill issues which is something that can happen in the autumn combined with with low oxygen levels due to algae bloom so it was a bit several reasons that work together towards some increased mortality. And then the next.

17:34 Yes. Sorry, go ahead. You can take the next.

17:37 Yeah. Can you comment on the harvest profile for 27, first half versus second half in percentage?

17:45 I don't have the exact percentage, but the harvest profile will be a bit backloaded. so if I do a brief calculation so I would say between around 35 to 40 percent first half and the rest second half of the year

18:13 How will the biological challenges on the fall 25th generation impact cost per kilo coming quarter? I think the cost level in Q4 will definitely be affected by the incidents or issues that we are having with the 25th generation. 25th generation are split into two sides. One side is probably our best side and will be harvested out in Q4 and in Q1 but aside with the issue the other 25th generation or yeah from the 25th generation that will part of it will go into potentially go into an early harvest which will affect the cost level in Q4 And then the final question was, how many smolt will you release to sea in 2027?

19:21 We expect an increase of around 800,000, so we should be close to 6 million smolts in 2027. Then we have a similar question.

19:55 Can you elaborate on the biological challenges that impact 2027 harvest? And how much does the biological challenges hit on an isolated basis? I think you have answered most of that.

20:13 I don't think we could say a specific number on the potential loss in Q4. That's way too early. We are not halfway in the quarter. So I think we have basically said what we could tell around that issue.

20:42 When is it reasonable to expect that Icelandic salmon reaches its potential of 26,000 tons?

20:51 That is very dependent that we get a new law into place with a acceptable tax level and also foresee a potential for further growth because That's what the industry need now to move forward. So when we see the new law approved in Altinge, I think we can be more specific on that until that is uncertain. We basically are where we are.

21:39 and one more question here in the Salmon presentation it is stated that the cost is expected lower in fourth quarters versus the third quarter but it sounds like it that might not be the case so as it stands now the projected cost level for Q4 is lower than Q3 however to be on the conservative side and indicate a stable cost level is conservative towards the market. So as it stands now, lower, but with the issues that we are navigating with one of our sites from the 25th generation, the cost level might be stable quarter over quarter.

22:42 So I don't believe that we have received any further questions. If you have any further questions, please feel free to reach out to me or Björn via email and we will try to answer afterwards.

23:01 And of course, if anyone wants one-to-one meetings on Teams, we are also available for that.

23:10 There is one more question. Does this mean that the 20,000 is the max capacity for the coming years?

23:24 Yes, that's. Of course we have smolts for up to 30,000 tons, but we will We need to know the framework before we do the final investments mainly on equipment in the seawater operation before we proceed with the growth.

24:04 I think this concludes this session.

24:08 Then I will thank you all for joining us and wish you a great day. So bye bye.

24:16 Bye bye.