Executive Summary

P/F Bakkafrost is a premier, vertically integrated salmon farmer, distinguished by its high-margin, best-in-class operations in the Faroe Islands and a significant, ongoing turnaround effort in Scotland. This report provides an objective, data-driven analysis of the company’s competitive standing, financial health, and strategic direction within the structurally attractive but cyclically volatile global salmon market.

The company’s core operational narrative is one of two distinct regions. The Faroese operations represent a “crown jewel”—a stable, highly profitable, and cash-generative engine built on decades of operational excellence, superior biological control, and the competitive advantage of in-house feed production. This segment consistently delivers industry-leading profitability metrics. In contrast, the Scottish operations, acquired in 2019, have been characterized by significant biological challenges and financial underperformance. The success of a capital-intensive “large smolt” strategy in Scotland is the central variable that will determine the company’s ability to close the operational gap with peers and unlock its next phase of growth.

Key opportunities for Bakkafrost include the potential for sustained premium pricing for its Faroese salmon, which is recognized for its superior quality and large size. The primary opportunity for value creation lies in the successful execution of the Scottish turnaround, which offers significant operational leverage and margin expansion potential. Furthermore, a new, more stable tax regime in the Faroe Islands, effective from 2025, de-risks the business model and enhances strategic flexibility.

Conversely, the company faces considerable risks. Execution risk associated with its multi-billion Danish Krone (DKK) capital expenditure plan and the ramp-up of new hatchery capacity in Scotland is paramount. Inherent biological risks, such as sea lice and disease, remain elevated in the Scottish operating environment compared to the Faroe Islands. Finally, as with all producers, Bakkafrost’s earnings are highly sensitive to the volatility of global salmon prices, which are influenced by supply-and-demand dynamics largely beyond its control. This analysis concludes by synthesizing these factors to address the core investment questions, focusing on the sustainability of Bakkafrost’s cost advantages, its management of cyclicality, and how its current valuation reflects the balance of risks and long-term growth prospects.

The Global Salmon Market: A Constrained Supply Meets Secular Demand

Industry Structure & Market Dynamics

The global salmon market is a large and growing industry, valued at approximately USD 23.7 billion in 2025 and projected to expand at a compound annual growth rate (CAGR) of 8.89% to reach USD 36.28 billion by 2030.¹ This robust growth trajectory outpaces the broader seafood category, underpinned by powerful, long-term secular trends.¹ The industry structure is best described as an oligopoly, with a high degree of concentration among the top producers. The five largest companies, which include Bakkafrost, Mowi, SalMar, Cermaq, and Leroy, collectively account for an estimated 40% of the global market, creating significant barriers to entry for new players.²

Demand is primarily driven by a global consumer shift towards healthier, protein-rich diets. Salmon’s reputation as a nutrient-dense food, high in omega-3 fatty acids, has elevated it from a luxury item to a dietary staple in developed markets across Europe and North America, lending a degree of resilience to its demand profile during economic downturns.¹ The most significant growth, however, is occurring in emerging markets, particularly in the Asia-Pacific region, where rising disposable incomes and urbanization are fueling an appetite for premium proteins.¹

On the supply side, the industry faces structural constraints. Global supply growth is fundamentally limited by a finite number of suitable marine farming locations (sheltered coastal fjords), stringent government regulations that cap production volumes via Maximum Allowable Biomass (MAB) licenses, and inherent biological ceilings.⁶ Consequently, long-term supply growth is modest. Kontali, a leading industry analyst, projects a 27% increase in global salmon production by 2030, implying a CAGR well below that of projected demand.⁶ In the near term, global supply is expected to increase by 6-7% in 2025, driven by improved biological performance in Europe.⁹ Geographically, production is highly concentrated, with Norway and Chile together accounting for over 75% of the global farmed Atlantic salmon supply.⁷ This structural imbalance between constrained supply growth and robust, secular demand growth creates a fundamentally tight market, supporting long-term pricing and profitability for efficient producers.

The Salmon Price Cycle

The salmon market is characterized by significant price volatility, a direct consequence of the interplay between its rigid supply and fluctuating demand. Salmon prices are primarily driven by short-term shifts in supply, which can be affected by a range of unpredictable factors including biological performance at farms, disease outbreaks, adverse weather conditions, and regulatory actions that impact harvest timing and volumes.⁷ A key biological challenge is the management of sea lice, a naturally occurring parasite that can harm fish health and trigger regulatory-mandated harvesting, thereby impacting supply.³

Demand is influenced by macroeconomic factors such as global economic growth, inflation, and consumer discretionary spending.¹¹ Recent trends illustrate this dynamic: strong prices in early 2024 softened in the latter half of the year and into 2025 as increased supply from Europe, stemming from favorable biological conditions, outpaced demand.¹³ While this cyclicality creates earnings volatility for producers, long-term price forecasts remain constructive, with experts predicting that prices will, on average, remain at levels sufficient to sustain healthy profit margins for the industry.¹¹

Regulatory and Environmental Landscape

The salmon farming industry operates within a complex and evolving regulatory framework that acts as both a constraint and a competitive advantage. The high barriers to entry are reinforced by the limited availability of new farming licenses and strict environmental regulations in key producing nations, which protects the profitability of established, licensed operators.⁶

However, the industry also faces significant sustainability challenges and increasing public scrutiny. Key environmental concerns include the management of fish waste and excess feed, the potential for farmed fish to escape and interact with wild populations, and the use of chemical treatments for sea lice.³ This has led to a growing regulatory and social pushback against traditional open-net pen farming in some jurisdictions, such as British Columbia, Canada.¹

In response, the industry is undergoing a technological evolution. Significant capital is being invested in alternative farming technologies aimed at mitigating environmental impacts and overcoming the scarcity of coastal sites. The most prominent of these are land-based Recirculating Aquaculture Systems (RAS) and offshore farming structures.¹⁷ Land-based farming, which allows for full containment and waste capture, is currently the fastest-growing segment of the industry.⁶ While these technologies offer a potential path to sustainable growth, they are also characterized by extremely high capital intensity and operational complexity. The mixed track record of large-scale RAS projects globally suggests that this technological shift may lead to further industry consolidation among the most well-capitalized players rather than a broad-based increase in supply from new entrants.

Bakkafrost: A Vertically Integrated Leader with a Tale of Two Regions

Business Model & Value Chain

Bakkafrost possesses what is widely regarded as the most vertically integrated business model in the global salmon farming industry.¹⁸ This integration provides the company with a unique level of control over its entire value chain, from the sourcing of raw materials for feed to the final sale of processed salmon products.¹⁹ This structure is a cornerstone of its strategy, enabling superior quality control, cost efficiency, and product differentiation. The business is organized into several key segments that reflect this value chain control:

• Fishmeal, Oil, and Feed (FOF): Operating through its subsidiary Havsbrún, this segment produces fishmeal, fish oil, and a proprietary, high-performance salmon feed. A key differentiating factor is the feed’s high marine content, which more closely mimics a wild salmon’s natural diet. This is believed to result in a healthier fish with a superior taste profile and higher levels of Omega-3 fatty acids, underpinning Bakkafrost’s premium product positioning.¹⁵ The FOF segment serves the company’s internal farming needs in both the Faroe Islands and Scotland, with surplus fishmeal and oil sold to external customers.
• Farming Faroe Islands (FO): This is the company’s original and core profit center. The Faroese farming operations are characterized by a stable and favorable natural environment, a robust and predictable regulatory framework, and a long history of operational excellence. This segment consistently delivers strong biological performance, including low mortality rates and industry-leading feed conversion ratios, which translates into superior profitability.¹⁴
• Farming Scotland (SCT): Acquired in 2019 through the purchase of The Scottish Salmon Company, this segment represents Bakkafrost’s primary vector for geographic diversification and future growth. However, the operations have been beset by significant biological challenges, leading to higher costs and weaker financial results compared to the Faroese segment.¹⁴ The turnaround of the Scottish operations is the company’s foremost strategic priority.
• Value-Added Products (VAP): This segment processes fresh salmon into a range of consumer-ready products, such as fillets, portions, and smoked salmon. These products are typically sold to retail customers under long-term, fixed-price contracts. The profitability and activity level of the VAP segment are highly sensitive to the prevailing tax regime and the spread between spot and contract salmon prices.¹⁰

Geographic Operations: A Tale of Two Regions

The operational and financial performance of Bakkafrost is best understood as a tale of two distinct regions. The Faroe Islands represent a model of mature, efficient, and highly profitable salmon farming. In 2024, this segment continued its strong performance, delivering robust growth and high average harvest weights of 5.3 kg.¹⁵ This consistent success provides a stable foundation of earnings and cash flow for the broader group.

In stark contrast, the Scottish operations have been a persistent challenge. Since the acquisition, the region has struggled with biological issues, including higher sea lice pressure and gill health problems, which have led to elevated mortality rates and higher production costs.²³ This performance gap is the central focus of group management. A comprehensive “de-risking” strategy was implemented in 2024, which involved shifting the harvest profile to earlier in the year to avoid the most challenging summer months and intensifying fish health management. This strategy has yielded tangible results, with 2024 marking a significant improvement in biological performance. Mortality rates decreased notably, and the segment delivered its highest full-year EBITDA since the acquisition, providing the first clear evidence that the turnaround effort is gaining traction.¹⁴

The “Large Smolt” Strategy: A Cornerstone for De-risking Growth

The core of Bakkafrost’s long-term strategy, particularly for resolving the challenges in Scotland, is its commitment to producing large smolts (juvenile salmon) in land-based freshwater hatcheries before transferring them to marine farms. The strategic rationale is compelling: growing smolts to a larger size on land significantly shortens the time the fish must spend in the more volatile and higher-risk marine environment. A shorter sea-phase reduces the cumulative exposure to pathogens, parasites like sea lice, and other biological threats, thereby improving survival rates and overall fish welfare.²⁷

This strategy requires substantial upfront investment in state-of-the-art hatchery infrastructure. The Applecross hatchery in Scotland is the centerpiece of this effort and is now delivering smolts exceeding 200g, a critical milestone in the transformation of the Scottish operations.¹⁰ In the Faroe Islands, the strategy is even more advanced, with an average smolt transfer weight of 421g in Q1 2025 and a long-term goal to produce 24 million smolts annually at an average weight of 500g with the completion of the new Skálavík hatchery.⁹ The expected impact of this strategy is profound: it is designed to fundamentally de-risk the farming operations, leading to lower mortality, improved feed conversion efficiency, and more predictable and cost-effective production. For Scotland, the successful execution of the large smolt strategy is the key to transforming the segment into a profitable and sustainable contributor to the group’s growth, with a material impact expected from 2026 onwards.¹⁵

Competitive Benchmarking and Operational Analysis

Market Position and Production Scale

Within the global salmon farming industry, Bakkafrost is a significant producer but is smaller in scale than the largest global players. In 2024, Bakkafrost harvested a total of 90,700 tonnes gutted weight (tgw).¹⁴ This positions it as a mid-tier producer when compared to its primary publicly listed peers. Mowi, the world’s largest producer, harvested 501,530 tonnes in 2024.³¹ SalMar, another Norwegian giant, had a harvest guidance of approximately 257,000 tonnes for 2024.³² Grieg Seafood’s production is more comparable, with a 2024 harvest of 77,704 tonnes.³³ Bakkafrost’s guidance for 2025 is a harvest of 97,000 tonnes, indicating moderate growth as the Scottish turnaround continues.⁹ While not the largest by volume, Bakkafrost’s strategic focus on vertical integration and premium quality differentiates it from competitors.

Operational Efficiency Deep Dive

Operational efficiency in salmon farming is primarily measured by key biological performance indicators, which directly impact unit costs and profitability. A comparative analysis of these metrics reveals Bakkafrost’s bifurcated performance.

• Feed Conversion Ratio (FCR): This metric measures the kilograms of feed required to produce one kilogram of fish growth; a lower number is better. Bakkafrost’s Faroese operations consistently achieve an industry-leading FCR, recording 1.096 in 2023 and 1.11 in 2024.³⁵ This superior efficiency is a direct result of its high-quality, marine-rich feed and strong biological control. The Scottish FCR is less competitive, at 1.18 in 2023 and 1.21 in 2024, reflecting the ongoing biological challenges.³⁵ For comparison, Mowi’s group-level FCR was stable at 1.17 in both 2023 and 2024.³⁶
• Mortality and Survival Rates: Fish survival is arguably the most critical driver of cost efficiency. In 2024, Bakkafrost’s Faroese operations maintained a very high survival rate of 93.4% (implying a mortality rate of 6.6%).³⁵ The Scottish operations showed marked improvement, with the survival rate increasing to 84.73% in 2024 from 79.4% in 2023.³⁵ While this is a positive trend, a mortality rate of over 15% in Scotland remains significantly higher than the best-in-class performance in the Faroe Islands and represents a substantial opportunity for cost improvement. The company’s long-term ambition is to achieve survival rates above 94% in the Faroes and above 88% in Scotland.³⁷

The stark difference in survival rates between the Faroe Islands and Scotland is the principal driver of the profitability gap between the two regions. A lost fish represents a 100% loss of all accumulated costs, including the initial smolt cost and all the feed consumed. Therefore, closing this mortality gap through the successful implementation of the large smolt strategy in Scotland is the single most important value-creation lever for the company. Progress in the Scottish survival rate is the most direct and critical metric for investors to monitor to gauge the success of the turnaround strategy.

Table 1: Operational KPI Benchmarking (2022-2024)

Company / Segment	Metric	2022	2023	2024
Bakkafrost FO	Harvest Volume (kt)	66.7	73.0	62.8
	FCR	–	1.096	1.11
	Survival Rate (%)	95.1%	92.7%	93.4%
Bakkafrost SCT	Harvest Volume (kt)	23.9	20.6	27.9
	FCR	–	1.18	1.21
	Survival Rate (%)	78.3%	79.4%	84.7%
Mowi	Harvest Volume (kt)	463.6	475.0	501.5
	FCR	–	1.17	1.17
	Survival Rate (%)	–	99.2%*	99.3%*
SalMar	Harvest Volume (kt)	193.7	254.1	257.0**
	FCR	–	–	–
	Survival Rate (%)	–	–	–
Grieg Seafood	Harvest Volume (kt)	84.7	72.0	77.7
	FCR	–	–	–
	Survival Rate (%)	–	–	–
*Note: Mowi reports average monthly survival, which is not directly comparable to the 12-month rolling rate used by Bakkafrost. Data for SalMar and Grieg FCR/Survival is not consistently available in the provided materials. *SalMar 2024 volume is based on guidance.Sources:.14

Cost Structure and Profitability

The operational performance differences translate directly into financial results. Bakkafrost’s Faroese segment has historically been an industry leader in profitability, measured by operational EBIT per kilogram of harvested salmon. This superior margin is a function of its low costs (driven by high survival and efficient FCR) and its ability to achieve premium prices for its high-quality product. In contrast, the Scottish segment has been a drag on group profitability, frequently posting negative or low single-digit EBIT/kg due to the higher costs associated with biological challenges.²⁴ For example, in the fourth quarter of 2024, the Faroese farming segment generated an operational EBIT of DKK 5.98/kg, while the Scottish farming segment recorded an operational EBIT of DKK -14.44/kg.³⁰ This highlights the immense potential for margin expansion if the Scottish operations can be brought closer to the performance level of the Faroe Islands.

Financial Performance and Capital Management

Historical Financial Review (2018-2024)

Bakkafrost’s financial performance over the past several years reflects a period of significant strategic transformation and industry cyclicality. The 2019 acquisition of The Scottish Salmon Company marked a step-change in the scale of the business, but also introduced a lower-margin asset base that has since weighed on group profitability.

Revenues have shown strong growth, increasing from DKK 3.2 billion in 2018 to DKK 7.3 billion in 2024.¹⁴ This growth was driven primarily by the consolidation of the Scottish business and, to a lesser extent, organic growth in the Faroe Islands. Operational EBIT has been more volatile, fluctuating with the salmon price cycle and the costs associated with the Scottish integration. EBIT rose from DKK 1.1 billion in 2018 to DKK 1.55 billion in 2024, having peaked at DKK 1.7 billion in 2022 during a period of very high salmon prices.¹⁴

The company’s profitability per kilogram, a key industry metric, clearly illustrates the impact of the acquisition. In 2018, before the acquisition, the group’s operational EBIT/kg was a very strong DKK 24.11. This has since moderated as the lower-margin Scottish volumes were added to the mix. Cash flow from operations has remained robust, providing the financial resources to fund the company’s ambitious investment plans. In Q1 2025, cash flow from operations was DKK 590 million.⁹

Table 2: Key Financial Metrics (2018-2024)

Metric	2018	2019	2020	2021	2022	2023	2024
Revenue (DKK m)	3,177	4,511	4,652	5,554	7,130	7,141	7,300
Operational EBIT (DKK m)	1,075	1,325	621	821	1,705	1,544	1,550
Op. EBIT Margin (%)	33.8%	29.4%	13.3%	14.8%	23.9%	21.6%	21.2%
Net Profit (DKK m)	–	802	–	–	–	955	645
Harvest Volume (kt)	44.6	65.1	85.7	96.9	90.6	73.0	90.7
Op. EBIT/kg (DKK)	24.11	20.35	7.25	8.47	18.82	21.15	17.09
Note: Data compiled from multiple annual and quarterly reports. 2021 and 2023 Net Profit data was not available in provided materials. 2023 Harvest Volume appears lower due to specific reporting in that period.Sources:.14

Capital Allocation Strategy

Bakkafrost’s capital allocation strategy has undergone a clear pivot from balanced shareholder returns to a phase of intensive reinvestment for growth. This is most evident in the company’s ambitious capital expenditure program. On its 2023 Capital Markets Day, the company announced a DKK 6.3 billion investment plan for the 2024-2028 period.⁹ This capital is primarily directed towards expanding hatchery capacity in both the Faroe Islands (the new Skálavík facility) and Scotland (the Applecross facility) to support the large smolt strategy. This represents a conscious decision by management to prioritize long-term value creation through operational improvements over maximizing short-term cash returns to shareholders.

Despite this heavy investment cycle, the company remains committed to its dividend policy, which targets a payout of 30-50% of adjusted earnings per share.⁴⁶ This policy provides a degree of capital discipline, ensuring that a portion of profits is consistently returned to shareholders. Dividend payments have been substantial, with DKK 10.00 per share paid for the 2022 fiscal year and DKK 8.70 per share for 2023.⁴⁶ A dividend of DKK 8.44 per share has been proposed for 2024.³⁰ The only recent interruption to this policy was in 2019, when the dividend was suspended, a move likely made to conserve capital for the acquisition of The Scottish Salmon Company.⁴⁶ There is no mention of significant share buyback programs, reinforcing that the primary uses of capital are reinvestment and dividends.

Balance Sheet and Financial Health

Bakkafrost maintains a strong and solid balance sheet, providing the financial flexibility required to execute its growth strategy and navigate the inherent volatility of the salmon industry. The company’s financial strategy explicitly targets an equity ratio of no less than 35%.⁴⁷ It has consistently operated well above this floor; at the end of 2022, the equity ratio was a healthy 62%.³⁸ Net Interest-Bearing Debt (NIBD) stood at DKK 2.79 billion at the end of the first quarter of 2025.⁹ The company actively monitors its liquidity and maintains sufficient committed credit facilities to cover forecasted borrowings and investment needs, thereby limiting refinancing risk.⁴⁷ This prudent financial management ensures the company is well-capitalized to fund its large-scale investments while retaining the capacity to withstand potential industry downturns.

Strategic Outlook: Growth, Challenges, and Key Variables

Growth Trajectory to 2028

Bakkafrost has set an ambitious growth target, aiming to increase its annual harvest volume to 165,000 tonnes by 2028.⁹ Starting from a 2024 harvest of 90,700 tonnes, this target implies a compound annual growth rate of approximately 12.5%, a rate significantly above projected industry supply growth. This growth is almost entirely contingent on the successful execution of the turnaround and expansion in Scotland. Achieving this goal requires the large smolt strategy to deliver on its promise of higher survival rates and improved biological performance, which would allow for increased stocking densities and greater license utilization. While the target provides a clear strategic roadmap, it should be viewed as a “stretch goal” with a high degree of execution dependency. Any significant delays in the ramp-up of the Applecross hatchery or unforeseen biological setbacks could push the achievement of this target beyond the 2028 timeframe.

Navigating Key Headwinds

• Biological Risks: Biological risk remains the most significant operational headwind. Despite recent progress, the Scottish farming environment is inherently more challenging than that of the Faroe Islands. The company’s 2024 de-risking strategy, which involved concentrating harvesting in the first half of the year to avoid the high-risk third quarter, underscores this reality.²⁴ Even the highly stable Faroese operations are not immune to shocks, as demonstrated by an outbreak of Infectious Salmon Anemia (ISA) at one site in May 2024, which necessitated an early harvest.¹⁵ On a positive note, the company’s investments in freshwater treatment capabilities, including new service vessels, have proven highly effective, leading to record-low sea lice levels in both operating regions.¹⁵
• Regulatory Risk – The Faroese Tax Change: A pivotal development for Bakkafrost is the new tax regime in the Faroe Islands, set to take effect on January 1, 2025. The previous system was a highly volatile revenue-based tax that could reach up to 20%, calculated on spot market prices. This structure created significant uncertainty and penalized the company for entering into fixed-price contracts for its value-added products, especially during periods of high spot prices.²⁵ The new regime replaces this with a more stable hybrid system: a reduced maximum revenue tax of 7.5% combined with a new 12% special corporate tax levied only on the profits from marine farming operations.²⁵ This new structure, secured by a broad, long-term political agreement until 2032, represents a major de-risking event. It provides the predictability and stability necessary for long-term strategic planning and should allow Bakkafrost to re-engage its VAP segment more fully with long-term contracts, thereby reducing earnings volatility.
• Market & Input Cost Risk: Bakkafrost’s profitability is directly exposed to the global salmon price, which can fluctuate significantly. The weaker prices experienced in the second half of 2024 and the first quarter of 2025 negatively impacted margins, illustrating this sensitivity.⁹ Additionally, the company is exposed to inflationary pressures on its key inputs, primarily fish feed ingredients and energy.⁴⁹ Its vertical integration in feed production provides some mitigation, as it allows for greater control over feed composition and costs. Lower raw material sourcing costs in 2024 are expected to translate into reduced farming costs in 2025, providing a near-term tailwind.¹⁵

Management Quality and Governance

Bakkafrost is led by a highly experienced and long-tenured management team, which provides a high degree of strategic continuity. CEO Regin Jacobsen has led the company since 1989, guiding it through its transformation into a global industry player.⁵⁰ The senior executive team possesses deep industry expertise and maintains a significant ownership stake in the company, which suggests a strong alignment of interests with shareholders.⁵⁰ The Board of Directors is composed of individuals with extensive and relevant experience in the seafood, energy, and finance sectors, ensuring robust corporate governance and strategic oversight.⁵⁰ The management team has demonstrated a clear, long-term vision and a willingness to make difficult, capital-intensive decisions—such as the Scottish acquisition and the large smolt strategy—in pursuit of that vision.

Valuation Context

Historical Valuation Analysis

Analyzing Bakkafrost’s valuation requires careful consideration of the salmon industry’s inherent cyclicality. Backward-looking valuation multiples, such as the trailing twelve-month (TTM) price-to-earnings (P/E) ratio, can be highly misleading. During periods of low salmon prices and depressed earnings, the P/E ratio can appear artificially inflated, while at the peak of the cycle, it can appear deceptively cheap.

This effect is evident in Bakkafrost’s recent metrics. At the end of 2024, when salmon prices were softening, the company’s P/E ratio was recorded at 36.0.⁵¹ As earnings continued to fall into 2025, various sources reported TTM P/E ratios as high as 65.4 and 80.3, metrics that reflect a cyclical trough in earnings rather than a fundamental overvaluation.⁵¹ In contrast, forward-looking multiples, which are based on analyst expectations of a recovery in earnings, present a more normalized picture. For example, one source cited a forward P/E ratio of a much more reasonable 13.04.⁵³ This discrepancy underscores the importance of evaluating the company’s valuation based on a mid-cycle or normalized earnings basis, rather than on spot earnings.

Peer Group Valuation Benchmarking

Historically, Bakkafrost has often traded at a valuation premium to its peers. This premium can be attributed to its superior and more stable profitability in the Faroe Islands, its differentiated premium product, and the competitive advantages derived from its vertical integration. A comparative analysis shows this premium persists. One source from July 2025 reported Bakkafrost’s P/E ratio at 66.6, significantly higher than Mowi (24.5) and SalMar (31.4).⁵⁴

On an Enterprise Value to EBITDA (EV/EBITDA) basis, a metric often preferred for capital-intensive industries as it is independent of capital structure and depreciation policies, the picture is similar. Bakkafrost’s TTM EV/EBITDA was reported at 16.67.⁵³ This compares to a forward EV/EBITDA multiple of 8.4x for SalMar, which was below its five-year average of 11.5x, and a TTM multiple of 13.9x for Mowi.⁵⁵ The valuation premium for Bakkafrost suggests that the market is willing to pay more for its high-quality Faroese earnings base and is pricing in a degree of success for the strategic initiatives underway in Scotland.

Table 3: Peer Valuation Comparison

Company	Market Cap	Enterprise Value	P/E Ratio (TTM)	EV/EBITDA (TTM)	Dividend Yield (%)
Bakkafrost (BAKKA.OL)	NOK 26.09B	NOK 51.05B	36.7 – 80.3	16.7 – 29.8	3.07%
Mowi (MOWI.OL)	EUR 9.09B	–	21.7 – 27.1	13.9	3.33%
SalMar (SALM.OL)	NOK 66.31B	–	36.4	8.4 (fwd)	4.43%
Grieg Seafood (GSF.OL)	NOK 7.82B	NOK 15.01B	3.37	–	0.00%
Note: Data is compiled from multiple sources with varying dates (2024-2025) and methodologies (TTM vs. forward), and should be viewed as indicative. Market Cap and EV are also subject to daily fluctuation.Sources:.51

Valuation Drivers

The current valuation of Bakkafrost is effectively a referendum on management’s ability to execute its strategic plan in Scotland. The significant premium the company commands, despite the financial drag from its Scottish segment, indicates that the market is ascribing a substantial positive value to the potential of the turnaround. The market appears to be valuing the company on a sum-of-the-parts basis, where the high and stable value of the Faroese “crown jewel” business is recognized, and a significant option value is placed on the future earnings power of a revitalized Scottish operation. Consequently, the company’s stock performance is likely to be disproportionately sensitive to news and data related to the Scottish turnaround. A failure to deliver on the promised improvements in key metrics like survival rates and production volumes could lead to a significant de-rating of the stock, as the justification for its premium valuation would be undermined. Conversely, clear and sustained evidence of success in Scotland could unlock further upside.

Concluding Analysis: Answering the Core Research Questions

This section synthesizes the report’s findings to provide direct, data-supported answers to the key research questions.

1. How sustainable is Bakkafrost’s competitive cost position relative to peers?

Bakkafrost’s competitive cost position is bifurcated. In the Faroe Islands, its cost position is highly sustainable and industry-leading. This is driven by a combination of superior biological control (evidenced by a 93.4% survival rate in 2024), excellent feed efficiency (FCR of 1.11 in 2024), and the structural advantage of its vertically integrated feed production, which allows for cost and quality control that is difficult for peers to replicate.²¹ In

Scotland, its cost position is currently uncompetitive due to historically high mortality rates (15.3% in 2024).³⁵ The sustainability of its future group-level cost position is therefore entirely dependent on the success of the “large smolt” strategy in bringing Scottish operational metrics, and thus its cost structure, closer to Faroese levels.

2. What is the company’s exposure to salmon price cycles and how does it manage this volatility?

The company’s earnings are highly exposed to the cyclicality of global salmon prices, which remains the primary driver of its profitability and stock price volatility. Its primary tool for managing this volatility is its flexible value chain, particularly the Value-Added Products (VAP) segment. By adjusting the volume of fish directed to the VAP segment (sold on fixed-price contracts) versus the fresh segment (sold on spot prices), the company can modulate its exposure to price fluctuations. The new, more stable Faroese tax regime, effective in 2025, is a significant positive development in this regard, as it removes a key disincentive for using long-term contracts and should enable the company to increase its contract share, thereby reducing earnings volatility.¹⁰

3. How effectively has management navigated recent biological and regulatory challenges?

Management has demonstrated a proactive and strategic approach to navigating challenges. The response to the persistent biological issues in Scotland has been the formulation and execution of a comprehensive, capital-intensive large smolt strategy, a long-term solution rather than a short-term fix. The initial results of this strategy, seen in the improved survival rates in 2024, suggest it is beginning to prove effective.¹⁴ In response to the volatile and punitive former tax regime in the Faroe Islands, management made the rational decision to curtail VAP production to mitigate financial risk.⁴⁸ This demonstrates a disciplined and adaptive management style.

4. What is the realistic growth potential given environmental and regulatory constraints?

The company’s stated growth target of reaching a 165,000-tonne harvest by 2028 is ambitious, implying a CAGR of over 12% from 2024 levels.⁹ Given that the Faroese operations are mature and constrained by existing licenses, nearly all of this growth must come from Scotland. This makes the target highly dependent on flawless execution of the turnaround and the successful ramp-up of the Applecross hatchery. Given the inherent risks in aquaculture and the operational challenges already encountered, a more realistic base-case scenario might see this target achieved on a slightly longer timeline, perhaps closer to 2030. The ultimate potential is capped by the total licensed MAB in its operating regions.

5. How does the company’s capital intensity compare to peers and what drives these differences?

Bakkafrost’s capital intensity is currently very high relative to its peer group. This is driven by the strategic decision to undertake a massive DKK 6.3 billion investment program between 2024 and 2028, primarily to build new, large-scale RAS hatcheries in both Scotland and the Faroe Islands.⁹ While peers also invest in maintenance and some growth projects, Bakkafrost’s concurrent, large-scale build-out in two regions is unique in its scale and ambition. This period of high capital expenditure is a strategic choice aimed at lowering long-term operational costs and de-risking the business model, but it temporarily elevates its capital intensity above the industry norm.

6. What are the key operational metrics investors should monitor going forward?

The most critical operational metrics for investors to monitor are those that signal the progress of the Scottish turnaround. These are, in order of importance:

1. Survival Rate (%) in Scotland: This is the single most important indicator of biological control and future cost reduction. A consistent trend towards the company’s target of >88% would be a major positive catalyst.
2. Harvest Volume (tonnes) from Scotland: This will indicate whether the company is on track to meet its ambitious growth targets.
3. Average Weight of Transferred Smolt (grams) in Scotland: This is a key leading indicator of the large smolt strategy’s implementation and future marine performance.
4. Feed Conversion Ratio (FCR) in Scotland: Improvement in this metric will signal enhanced biological health and feed efficiency.

7. How does the current valuation reflect the cyclical nature of the business and long-term growth prospects?

The current valuation appears to be looking through the current cyclical trough in salmon prices and earnings. Backward-looking multiples like the TTM P/E are inflated and misleading.⁵¹ Forward multiples, based on an expected earnings recovery, appear more reasonable.⁵³ The valuation reflects a tale of two components: a high premium for the stable, high-quality earnings of the Faroese business, and a significant, embedded option value on the success of the long-term growth and margin expansion story in Scotland. The premium valuation relative to peers suggests the market has a degree of confidence in management’s ability to execute this turnaround, but it also creates vulnerability to any significant operational missteps or delays.

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