04 June 2021 – Andfjord Salmon AS today announces an opportunity to initiate a volume expansion plan at its Kvalnes facility. The plan involves increasing production volume by around 50 percent, from 12,600 to 19,000 tonnes HOG. This is equivalent to an annual EBIT increase from approximately NOK 350 million to NOK 500 million at full production.
“We are constantly looking at ways to improve the Kvalnes build-out, both to reduce project risk and to increase the long-term profitability of Andfjord Salmon, to the benefit of our shareholders. To initiate the build-out of Kvalnes Phase 3 is another such measure,” says Martin Rasmussen, CEO of Andfjord Salmon.
New opportunity at Kvalnes
Andfjord Salmon is currently in process of acquiring additional 63,000 square meters of land area adjacent to its site at Kvalnes. This land area purchase unlocks an opportunity to initiate a further expansion at Kvalnes, with a possibility to increase production volume by approximately 50 percent, from today’s 12,600 tonnes to 19,000 tonnes, equivalent to a potential EBIT increase of approximately NOK 150 million at full production.
By initiating the Kvalnes Phase 3 build-out now, Andfjord Salmon is able to capitalize on a window of opportunity that can lower build-out costs notably. It will also allow the company to harvest improved economics at scale at Kvalnes earlier than planned, which means improved profitability. The alternative plan involves shifting the release of smolt in the first pool to the second quarter of 2022 and will significantly strengthen the mid and long-term revenue potential for Andfjord Salmon.
Initiating Kvalnes Phase 3 will also further reduce biological risk at Phase 1 and Phase 2 at Kvalnes. It will allow an even longer test period of the first pool, plus further reduce the risk that fish from Phase 1 and Phase 2 suffer stress from noise/vibrations from nearby construction work.
“It is the management’s view that clearing the path to realize a potential 50 percent growth in production volume at Kvalnes, at lower build-out cost than we will achieve at a later stage, is an attractive proposition that more than outweighs the consequence of moving first smolt release to 2022,” says Martin Rasmussen.
The alternative plan is subject to approval by the Andfjord Salmon board of directors and necessary financing. Should the plan be approved, debt financing will be the source of financing for the early initiation of Phase 3 at Kvalnes.
First pool technically complete
Andfjord Salmon is currently putting the finishing touches on the first pool (Phase 1) and conducting the excavation work for the next pools at Kvalnes (Phase 2), representing a total production volume of 12,600 tonnes HOG.
The construction of the first pool is finalized, with only minor post-construction installations remaining on the pool, making it technically ready to be filled with water.
The installation of the outer joints to the pool’s water inlet pipeline remains. Andfjord Salmon has discovered damage to the outer connection point of the installed water inlet pipeline and a replacement section has been ordered. The company estimates that it will take approximately 8-10 weeks and a cost of NOK 30 million to complete the repair. This work has already commenced.
“This has increased the relevance of initiating the Kvalnes Phase 3 build-out now, because it will eliminate time constraints associated with repairing the inlet pipeline section,” says Martin Rasmussen.
Q1 2021 interim results
Andfjord Salmon is currently building up its first land-based salmon farming facility, which means that at present it does not generate revenues. The company had an operating loss of NOK 7.3 million this year’s first quarter compared to a loss of NOK 3.3 million in the corresponding quarter last year.
As of 31 March 2021, Andfjord Salmon held cash or cash equivalents of NOK 88.8 million. This figure does not include a NOK 35 million undrawn credit facility of NOK 15 million in available grants.
Q1 operational update presentation
The presentation material for today’s operational update and Q1 2021 interim results, to be presented at 08:00 CET today, is enclosed to this announcement. The webcast presentation can be followed from this link: