Faroe Islands-headquartered salmon farmer Bakkafrost has announced “a significant sustainable growth plan” to increase the output of its premium salmon by more than 40 percent over the next five years.
“The planned growth is expected to be generated through a combination of employing idle license capacity and higher utilization of existing licenses by using large smolt,” the company said in a statement dated September 14th, 2021.
Overall, Bakkafrost “intends to invest 6.2 billion DKK [834 million EUR] between 2022 and 2026,” the statement read.
Detailed measures and investments to improve the biological performance and cost structure of Bakkafrost’s recently-acquired Scottish entity were likewise announced. “The business, which has underperformed the industry in the past, will strengthen all parts of the value chain,” according to the announcement.
“A more robust framework for seawater risk mitigation combined with a shorter seawater cycle is expected to become a game changer for biological performance and result in significant sustainable growth.”
Bakkafrost also plans to invest in processing facilities to improve efficiency, productivity and quality, the company stated, “and with a focus to enhance capabilities supporting Bakkafrost’s overall brand strategy and to better meet the needs of the retail market.”
“The implementation of the investment plan will be transformational for its Scottish operations and aims to become the most sustainable and profitable in Scotland.”
“Bakkafrost will use its ‘One Company’ approach in the implementation of the ambitious plan,” the announcement further read, “drawing on the experience, competence and success of similar projects in the past.”
The salmon giant “is collaborating with Scottish authorities in progressing its investment plan in Scotland to ensure sustainable growth.”
Due to lead times in construction and the long production cycle of salmon, expected profit and loss improvements are back end loaded in the plan, with Bakkafrost looking to continue the development of its efficient and well invested value chain in the Faroes.
Here, the company’s aim is to maintain its “strong biological track records and to facilitate planned growth during the next five years and beyond.”
The investment plan is expected to be financed through a combination of operational cash flow and available funding, according to Bakkafrost. The company is “committed to maintaining its sustainable dividend practice,” the statement further noted.
“The conventional salmon farming industry is operating close to capacity. As a result, the industry is committing significant resources to the development of alternative farming methods on and offshore. Common for these projects is far higher capital requirements compared to conventional salmon farming. Consequently, high margin assumptions are required to obtain a satisfactory return.”