Bakkafrost: A Tale of Two Regions as Record Faroes Output Meets Scottish Smolt Pain

When Bakkafrost reported Q2 2026 on 31 August, group revenues rose 16% to DKK 1.8 billion and operational EBIT jumped to DKK 273 million from DKK 65 million a year earlier – but headline profits were dragged into negative territory by fair-value adjustments. The real story sits beneath the group numbers: a striking strategic divergence between a Faroese operation at record output and a Scottish operation deliberately throttled back while it rebuilds its smolt base.

Record Faroes vs. Scottish de‑risking

The Faroese farming segment delivered a “very strong quarter” – volume rose 67% to 26,700 tgw (the highest ever quarterly harvest), operational EBIT per kilo jumped to DKK 5.96 from DKK 0.37 a year ago, and ringside costs fell 4%. “In the Faroes, we harvested more fish than we have ever done before in a quarter, 26,700 tgw.” — Operator, Operator · 2026-08-31 That performance allowed the group to post an all‑inclusive margin of DKK 9.12 per kg, up from DKK 2.82.

In sharp contrast, Scottish harvest volumes fell 55% to just 3,100 tgw, and the segment swung to an operational loss of DKK 139 million with a negative EBIT per kg of ‑DKK 44.12. The cause is the company’s continuing de‑risking strategy – deliberately lowering Scottish output while Applecross and the new large‑smolt model are brought up to full capacity. CEO Regin Jacobsen summed up the current phase when he noted the operation was “stalling because we are reducing speed too much” and that the company needs to move back toward higher production as Applecross reaches full utilisation next year. The immediate problem: a batch of externally sourced smolt triggered biological issues at Sgian Dubh and Loch Striven, highlighting the fragility of relying on outside smolt while the internal hatchery ramps up.

We have, as you said, had big issues with externally delivered smolt. However, there have been good batches in between… we have reduced the externally sourced smolt compared to our plan. We have taken out batches that we think are not good, but we have maintained batches that we think are good.

This externally sourced smolt issue is not new – it featured in the 2025 calls – but the scale of the impact in Q2, both in terms of per‑kilo losses and the strategic decision to cut external sourcing further, is a clear escalation.

Feed costs and the fishmeal stockpile

Beyond the regional divergence, the most forward‑looking change is Bakkafrost’s response to surging marine raw material costs. The fishmeal, oil, and feed division (FOF) saw no external meal sales in the quarter – everything went to internal use and inventory buildup, with the company holding enough fishmeal and oil to cover its own feed needs into Q2 2027. This is a deliberate buffer against both price inflation and the potential loss of certification for key ingredients like blue whiting.

“We have enough inventories of fishmeal and oil to cover our needs until into the second quarter next year.” — Regin Jacobsen, CEO · 2026-08-31 CEO Jacobsen acknowledged the cost pressure was real: “We are … seeing a clear increase in the price of marine feed ingredients. Therefore, we don't see that our operation is insulated from this inflation.” The strategy is to use the inventory buffer to keep feed costs broadly stable into next year: “Our goal is to balance our feed cost going forward with more or less similar feed cost as before.”“More or less.” — Regin Jacobsen, CEO · 2026-08-31

That raw material challenge is a theme echoed across the industry – the global trajectory shows a sharp rise in “raw material cost” and “fishmeal price” mentions. Bakkafrost is leaning hard on its integrated model and its raw material sourcing expertise through Havsbrún to differentiate itself from other farmers. The company also flagged in Q&A that a potential loss of blue whiting certification was a key planning scenario – with the inventory as plan A and “several options” as plan B.

Market balance and the US opportunity

On the demand side, Bakkafrost sees a tightening market ahead. Global supply growth is expected to slow to just 1% in H2 2026 versus last year, with the Americas (particularly Chile) contracting around 10%. Combined with still‑solid demand, the company expects “a progressive tighter market balance.” The Faroese sales mix has shifted toward North America – a record 31% share this quarter – and CEO Jacobsen is explicit that this is not just a tariff‑driven reaction: “This has been a strategy for ourselves that we have had very high focus on sales in the U.S. … best margins.” Tariff refunds were also mentioned as part of the market context; for a company whose Faroe Islands now face zero U.S. tariffs (as of Q3), the timing is favourable.

Looking ahead, the company reaffirmed its full‑year volume guidance of 117,000 tgw (97,000 from Faroes, 20,000 from Scotland), noting that second half harvests will be more weighted to Q4. But the real change is structural: the shift from externally sourced smolt to large, robust smolt from Applecross – expected to reach full capacity by Q2 2027 – is the skeleton key to unlocking Scotland’s volume growth. As one prior‑call analyst noted, “the transition year will at least go another 6 months.”“…I expect that the transitional year will at least go another 6 months. Hopefully, then second half of next year, we will be more – we will have more fish in our biomass to allocate costs on…” — Johan Regin Jacobsen, Executive, likely CFO or similar financial role · 2025-08-26

In essence, Bakkafrost is navigating a two‑front transition: doubling down on its fish oil and meal inventory strategy to blunt feed cost inflation, while simultaneously engineering a turnaround in Scotland that depends on the successful scale‑up of its new hatchery. The record Faroese performance proves the model works when the smolt is right; the Scottish losses are the price of that transition. Whether the Q2 de‑risking marks a trough or a further beatdown will depend on execution at Applecross – and on whether the salmon market’s tightening supply can offset the cost headwinds that Bakkafrost is now actively managing.