2138007LH7OP4V112978-2021-12-31-en.xhtml

ANNUAL REPORT 2021

ANNUAL

REPORT

Faroese Company Registration No. 1724

2021

ANNUAL REPORT 2021

Contents

Chairman’s Statement 4

Statement by the Management and the Board of Directors 6

Outlook 10

Bakkafrost at a Glance 14

Key Figures 17

Main Events 18



STRATEGY 19

Business Objectives and Strategy 20

Business Model 22

Outline of Bakkafrost’s History 23

The Value Chain 24



PERFORMANCE 35

Operational Review 36

Financial Review 41

Farming Segment – Faroe Islands (FO) 44

Farming Segment – Scotland (STC) 46

VAP Segment 48

FOF Segment 50

Market Review 53



RISKS 66

Risks and Risk Management 67



GOVERNANCE 74

Corporate Governance 75

Corporate Responsibility and Sustainability 77

Shareholder Information 79

Directors and Management 80

 Directors’Proles 81

 GroupManagement’sProles 83

Statement by the Management

and the Board of Directors on the Annual Report 84

Independent Auditor’s Report 85

CONTENTS

ANNUAL REPORT 2021

Contents

FINANCIAL STATEMENTS AND NOTES

– BAKKAFROST GROUP 90

Consolidated Income Statement 94

Consolidated Statement of Comprehensive Income 95

Consolidated Statement of Financial Position 96

Consolidated Cash Flow Statement 98

Consolidated Statement of Changes in Equity 99

NOTES TO THE CONSOLIDATED FINANCIAL

STATEMENTS – BAKKAFROST GROUP 100



NOTES – SECTION 1 BASIS OF PREPARATION 101



NOTES – SECTION 2 RESULTS FOR THE YEAR 104



NOTES – SECTION 3 ASSETS AND LIABILITIES 115



NOTES – SECTION 4 CAPITAL STRUCTURE

AND FINANCING ITEMS 140



NOTES – SECTION 5 OTHER DISCLOSURES 147

FINANCIAL STATEMENTS – P/F BAKKAFROST 155

P/F BAKKAFROST – Income Statement 157

P/F BAKKAFROST – Statement of Financial Position 158

P/F BAKKAFROST – Cash Flow Statement 160

P/F BAKKAFROST – Statement of Changes in Equity 161

P/F BAKKAFROST – NOTES TO THE

FINANCIAL STATEMENTS 162

APPENDIX 170

Quarterly Financial Figures 2019-2021 170

Market Announcements Published in 2020 173

Financial Calendar for 2022 174

Glossary 175

CONTENTS

Chairman’s

Statement

PROVIDING HEALTHY AND SUSTAINABLY PRODUCED

FOOD FOR THE WORLD’S GROWING POPULATION

In September 2021, Bakkafrost held its bi-annual Capital

Markets Day in the Faroe Islands, where the Group’s invest-

ment plan for 2022-2026 and strategy was disclosed. The

large smolt strategy is the main game changer for operation

inScotland,reducingbiologicalrisk,improvingefciency,re-

ducing cost, and providing an opportunity for further sustainable

growth. Another strategic priority is the “One Company” pillar

of the strategy, whereby the Faroese and Scottish operations

gradually evolve into one, building on the strengths and

best practices of both.

Given our location in the North-Atlantic Ocean and the

challenge of ensuring enough healthy and sustainably

produced food for the world’s growing population, we see it

as our obligation to increase our production of salmon. Salm-

on is amongst the most sustainable and resource-efcient

sources of healthy animal protein. Bakkafrost is uniquely

located in one of the best natural environments for salmon

farming, with excellent and sustainable access to marine raw

materialforshfeedproduction.Withthedisclosedinvest-

ment plan, Bakkafrost expects to grow harvest volumes to

150,000 tonnes head-on gutted weight in 2026 while simul-

taneously building production capacity for 180,000 tonnes

and preparing for further growth.

In many ways, 2021 has been a turning point for Bakkafrost.

Being the second year of market disruption caused by the

Covid-19 pandemic, early signs of normalisation emerged

duringthersthalfof2021.Overall,Bakkafrosthasman-

aged well during the pandemic. Employee safety has been

the top priority, and Bakkafrost has adapted the operation

and kept everyone safe. The high level of productivity has

also been maintained, and Bakkafrost has been able to nav-

igate well through the rough seas of new and altered market

conditions. During 2021 we have steadily unwound from the

pandemic, and Bakkafrost’s operation has been less and less

affected.

There are two main risks in salmon farming: market risk and

biology. Bakkafrost has been hard hit in Scotland on both

risksduringthepasttwoyears.WhenBakkafrostacquired

The Scottish Salmon Company in Q4 2019, it was fully known

thatthiswasaturnaroundcase,requiringsignicantinvest-

ments to be made and taking some years to transform the

operation.Therstyearsduringthetransitionperiodwere

expectedtobe difcult. However,beingsimultaneously hit

bytheCovid-19marketdisruptionandsignicantbiological

challenges in Scotland in the second half of the year was not

foreseen.

Many improvements have already been made in Bakkafrost’s

operation in Scotland. This includes investments in hatchery

capacity and marine farming operations. In addition, best

practices have been shared across the Faroe Islands and

Scotland to extract and implement the best of two worlds.

WebelievethatwiththechangesalreadymadeinScotland,

currently ongoing and planned for 2022, the operation in

Scotland is out of the deep valley and will begin to see im-

provement.

Bakkafrost’s operation in the Faroe Islands is robust. Sig-

nicant investments have been made in increased hatch-

ery capacity to produce large smolt of around 500g. Also,

production capacity is grown throughout the value chain

to build a production capacity of 100,000 tonnes head-on

guttedweight.Notallplannedinvestmentsarenalised,but

progressasplanned.2021wastherstyearwherethein-

creased production capacity, driven by larger smolt, were

seen in Bakkafrost’s Faroese harvest volumes. This is only

RÚNI M. HANSEN

Chairman of the Board

CHAIRMAN’S STATEMENT

ANNUAL REPORT 2020

ANNUAL REPORT 2021

the beginning as the full effect of the large smolt strategy

has not yet materialised, but this will gradually reveal itself

in the coming years.

Wehavecommittedourselvestoreduceourscope1&2car-

bon emissions by 50% and our scope 3 carbon emissions by

52%in2030.Wehavealsocommittedourselvestonet-zero

in 2050.

Looking ahead at the salmon market, the winds have

changed.Intherstquarter of 2022, salmon pricesareat

a record high, and demand is strong from the retail and the

foodservice market.

The supply and demand balance outlook are supportive of

strong salmon prices.

Weare concernedabout the warin Ukraine and the tragic

consequences for people across the region, and hope for a

quick resolution.

RETURN TO SHAREHOLDERS

The Board of Directors will propose a dividend of DKK 5.14

per share at the Annual General Meeting convened on 29

April 2022. This corresponds to a total dividend of DKK 304

million.

THANK YOU TO OUR EMPLOYEES

On behalf of the Board of Directors, I express our apprecia-

tion to all employees in the Bakkafrost Group for their com-

mitment and hard work in 2021.

CHAIRMAN’S STATEMENT

ANNUAL REPORT 2021

MARKET – NAVIGATING CHALLENGING WATERS

The salmon market was highly volatile in 2021. Prices on

the spot market varied signicantly during the year, and

the demand in different market segments and geographies

changed. At the beginning of the year, the market was still

considerably hampered by the Covid-19 pandemic, which neg-

atively affected the foodservice market. In Q1, salmon prices

weremuch lower than in any rst quarter of the preceding

veyears.Inweek2theFishPoolIndexwasaslowas43,58

NOK/kg. During Q2, the market conditions improved, and pric-

es strengthened. In Q3 and Q4, prices were at the upper end of

the normal price range for these quarters. In the second half of

Q4,spotpricesincreasedsignicantly,peakingat74,78NOK/

kg in week 50.

The global sales of salmon grew 9% in 2021, compared to

2020. All main markets grew, and of the larger markets, the

US market grew impressively by 13% in volume. In most main

markets, the retail segment has developed strongly with high

demands from retailers. So far, this strong demand from the

retail market has persisted.

In 2021, we gradually increased our sales to the foodser-

vice segment, as Covid-restrictions were eased, and demand

picked up. From the Faroe Islands Bakkafrost sold 33% of the

harvested volume to the retail market, compared to 47% in

2020. Bakkafrost has good capacity to produce retail products

in the VAP segment and has a strategy of selling around

40% of the harvest volume to the retail market. However, the

foodservice market is important to Bakkafrost as we usually

achieve a higher price premium.

Bakkafrost had revenues of 5,554 mDKK in 2021 and an oper-

ational EBIT of 821 mDKK. This is an improvement from 2020,

but not satisfactory. 2021 can be regarded as two very differ-

enthalves.ThersthalfoftheyearwasthestrongestH1ever

since 2018, and the second quarter was solid. H2, on the other

hand,wasweakduetosignicantbiologicalchallengesinour

Scottish operation.

STRONG BIOLOGY IN THE FAROE ISLANDS

– SCOTLAND WAS CHALLENGING BUT WITH

A STRONG LONG-TERM OUTLOOK

Bakkafrost harvested 96.9 thousand tonnes of salmon head-

on gutted weight in 2021. 67.2 thousand tonnes hereof were

harvestedintheFaroeIslands.Thisissignicantlymorethan

previous years and marks the beginning of annual increasing

harvest volumes in the Faroe Islands. This is a result of our

large investments in the Faroese value chain and increased

hatchery capacity for large smolt. Growing larger smolt

comes with new challenges, and learnings have been done.

But more importantly, we have gained a lot of knowledge of

great value for implementing the large smolt strategy in our

operation in Scotland. These learnings have also been imple-

mented and tested in the Faroe Islands, and we have seen

the positive effects already. The harvest in the Faroe Islands

in 2021 was based on smolt transferred at 274g. The trans-

ferred smolt weight in 2021 was however 382g, we there-

fore will see a gradual reduction in the production cycle in

nextcoupleofyears.Wehaveobservedimprovedbiological

performanceoftheseshintheseawhichwebelieverelates

to the larger and more robust smolt.

In 2021, we continued to improve our feed conversion ratio,

reaching an impressive bFCR of 1.055 vs 1.076 in 2020 for

the full year in the Faroe Islands. The growth has all time

high. However, we have had more issues with sea lice in the

second half of the year. This was caused by a Covid-related

delayinttingnewdelousingequipmentonboardM/SMar-

tin, our main delousing service vessel. The delay hindered

us from following our successful and preventive delousing

strategy, which aims at ensuring low sea lice levels before

the autumn. As a result, the elevated sea lice levels required

more aggressive treatments, including treatment of large

sh,whichincreasedthemortalityintheFaroeIslands.

Statement by

the Management

and the Board

of Directors

STATEMENT BY THE MANAGEMENT AND THE BOARD OF DIRECTORS

ANNUAL REPORT 2021

In 2021, we also decided to synchronise two farming sites in

the Faroe Island, A-72 Haraldsund and A-73 Viðareiði. This

was done to reduce future biological risk. The consequence

was a one-off reduction of the average harvest weight due to

thesmallershharvestedfromA-72.

In Scotland, we had severe mortality in Q3 and Q4, with a

total of 262 mDKK in exceptional mortality costs. The un-

derlyingissuewaslinkedtothereducedgillhealththesh

develops due to the extended growth cycle in the marine en-

vironment, up to 22 months, due to the small average smolt

sizeonrelease.Theshareexposedtohazardsthatimpair

their gills during this period. Late in Q3 and into Q4, there

was a signicant bloom of hydrozoans and micro-jellysh,

which deteriorated the gill health even more and led to very

high mortality across several sites. In short, the micro-jelly-

shbloomontopofreducedgillhealthwasadeadlycocktail.

In the future, our freshwater treatment capacity will be ex-

panded with two new freshwater treatment vessels. This

summer, we will permanently have two freshwater vessels in

Scotland and one vessel with freshwater treatment capacity

intheFaroeIslands.Treatingtheshregularlywithfreshwa-

terisanefcientwaytorinsethegillsoftheshandrestore

theirgillhealth.Asaresult,theshbecomemorerobust.

In the longer term, the growth cycle in the marine envi-

ronment in Scotland will be halved down to 10-12 months,

as we raise the average smolt size to 500g. Thiswill bea

game-changerandreducethebiologicalrisksignicantly.

Our investments in new modern hatcheries in Scotland are

ongoing.Asignicantmilestonewillbereachedbytheend

of 2022, when the fourth expansion phase of our Applec-

rosshatcherywillbecompleted,signicantlyincreasingour

smoltproductioncapacityandaverageweight.Wealsolook

forward to commencing the construction of our next large

hatchery in Scotland, which is expected to start in 2022.

In 2021, we continued the implementation of a range of tech-

nical and procedural improvements in the Scottish farming

operation,includingarevisedfarmingstrategy.Webelievein

asignicantimprovementintheoperationasthenewfarm-

ing strategy reveals its strengths and as the investments in

the value chain starts to have an impact.

SIGNIFICANT FEED SYNERGIES

One of the planned synergies with the acquisition of The

Scottish Salmon Company relates to feed production and

sale. During 2021, we gradually increased the supply of feed

from Havsbrún to Scotland. From the beginning of 2022, all

our seawater farming sites in Scotland are supplied with feed

from Havsbrún. Consequently, external feed sales at Havs-

brún were only 3% (16% in 2020) of the total feed sold and

will reduce even more in the future, as the internal feed con-

sumptionincreaseswiththegrowingharvestvolumes.With

STATEMENT BY THE MANAGEMENT AND THE BOARD OF DIRECTORS

ANNUAL REPORT 2021

the increasing feed volume and changed feed consumption

proleinducedbythefarmingoperationinScotland,Havs-

brúncanutilisetheproductioncapacitymoreefciently.

MASSIVE RESEARCH AND

DEVELOPMENT ACTIVITIES

Bakkafrost needs to improve its operation continuously.

Therefore, we have extensive research and development ac-

tivities deeply embedded in the entire value chain, through

which innovative solutions emerge. 2021 has been another

busy year regarding R&D. Some examples are outlined be-

low. These examples are not exhaustive, and more details are

found in our sustainability report.

In 2021, we conducted feed trial projects to optimise feed

recipes and the absorption of nutrients and minerals, im-

provingshhealthandreducingthebenthicload.Wehave

also researched biomarkers to be used in an early warning

systemforshhealth.

Inourfreshwaterdivision,wehaverenedarangeofparam-

eters important for improving large smolt's robustness and

biologicperformanceandmadesignicantimprovements.

Wehavealsocontinuedourfundingofcollaborativeresearch

projects to improve knowledge on biodiversity of benthic

macrofauna in Faroese fjords and establish a baseline bio-

logical diversity state undisturbed from anthropogenic im-

pact. This even includes developing a classication system

for benthic macrofauna analysis in Faroese fjords to assess

aquaculture's potential environmental effects.

Concerning biodiversity, we are engaged in a project to un-

derstand better the interaction between salmon farming and

the wild trout population.

Environmental monitoring is also an area where we have

R&Dprojects.Thisincludesmonitoringsolutionsforarange

of environmental parameters (e.g. temperature, oxygen, al-

gae, pH, salinity, hydrocarbons, sea currents – to mention a

few).

We have also developed an inspiring new Digital Manage-

ment tool to simulate sea lice development, used for proac-

tive sea lice treatment planning.

Finally,ourbroodstockprogrammeisasignicantR&Dpro-

jectinitsentirety.Wehavealreadymadeexcitingdiscoveries

that will be important to reduce the risk for diseases like CMS.

STATEMENT BY THE MANAGEMENT AND THE BOARD OF DIRECTORS

ANNUAL REPORT 2021

SUSTAINABILITY IS DEEPLY EMBEDDED IN

OPERATION AND STRATEGY

The world is facing enormous challenges with the overall

environmental footprint, and the challenges will be even

moresignicant as the world’spopulation grows. Overthe

nextveyears,wewillincreaseourproductionsignicant-

ly, reaching 150,000 tonnes head-on gutted weight in 2026.

Hence, it is vital that we rmly address the sustainability

challenges.Wehavesetseveralsustainabilitycommitments,

includinghalvingourscope1,2&3carbonin2030.These

targets are science-based and in line with the Paris Treaty.

Bakkafrost has a long value chain, which gives us more au-

tonomy to seek opportunities to reduce our environmental

footprint. For example, we rely on air cargo to overseas

markets. To reduce our carbon emission from air freight, we

have decided to acquire our own cargo plane to set up direct

transport to the US market. This enables us to shorten the

own distance and omit the weight of ice. The result is a

reduced carbon emission for the fresh salmon sold to the US

by around 40-50%.

PEOPLE

In 2021, we had two main priorities regarding our employ-

ees. Employee health and safety has been our main concern

duringtheCovid-19pandemic.Wehavecontinuouslymon-

itored and responded to the development of the pandemic

and have managed to keep everyone safe.

ONE COMPANY

Theothermainpriorityisensuringthatwefullybenetfrom

thecollectiveknowledgeandcompetenciesintheGroup.We

have focused on collaboration and knowledge transfer, main-

lybetweentheFaroeseandScottishorganisations.Wehave

exchanged best practices and will continue to develop this

and organisational simplicity via our strategic focus, named

“One Company“.

AMBITIOUS CAPEX PROGRAM ON TRACK

In September 2021, we held our Capital Markets Day in the

Faroe Islands, where we presented our strategy and ve-

year 6.2 bnDKK investment program. The ambition is to

transform the operation in Scotland, bringing it to a level

more comparable with the operation in the Faroe Islands. It

will also increase our total production capacity to 180,000

tonnes head-on gutted weight in 2026. The expected harvest

volume will be 150,000 tonnes.

Both in Scotland and the Faroe Islands, the large smolt strat-

egy is the primary enabler to reduce the operational risk,

increase efciency and drive growth. In the Faroe Islands,

we have come a long way with the necessary investments in

hatcheries. The ongoing expansion of the hatcheries at Gly-

vradal and Norðtoftir progress well. In the Faroe Islands, our

aim is to produce 23 million smolts at 500g in 2026.

In Scotland, the Applecross hatchery is the rst large ex-

pansion equipped with RAS technology, and in 2021 we re-

leasedtherstsmolts fromthe facility producedafter the

RASexpansion3.Wealsostartedthe4thexpansionphase,

nalisinginlate2022.Thiswillbringtheproductioncapacity

from Applecross to 8 million smolts at 250g and will have a

signicantpositiveimpactonreducingthebiologicalriskin

farming in Scotland. Expansion 5 and 6 has also been started

and will be completed 2023 increasing the production capac-

ity to 10 million smolts at 500g..

STRONG FINANCIAL POSITION

In December 2021, Bakkafrost entered a term sheet for a sus-

tainability-linked revolving multicurrency nancing agree-

mentof700mEUR. Withthisagreement,wehaveensured

the funding of our investment program for 2022–2026.

The applicable interest margin depends on Bakkafrost’s per-

formance against several sustainability KPIs. These include

increasingthe survivabilityrate ofthe sh, decreasingthe

biological feed conversion ratio and generating our own pro-

duction of renewable energy.

The Bakkafrost Group’s interest-bearing debt was DKK 2,126

million at the end of 2021, compared with DKK 1,753 million

at year-end 2020. The Group had undrawn committed credit

facilities of DKK 3,063 million at the end of 2021.

TheBakkafrostGroupmadeaprotofDKK964millionfor

2021, compared with DKK 462 million for 2020. Bakkafrost’s

equity ratio was 64% at the end of 2021, compared to 66%

at the end of 2020.

The management of Bakkafrost and our dedicated and talent-

ed employees look forward to an exciting year ahead of us.

STATEMENT BY THE MANAGEMENT AND THE BOARD OF DIRECTORS

ANNUAL REPORT 2021

Outlook

MARKET

Supply increase of 8.8% in 2021

The supply of salmon increased 8.8% in 2021, compared to

2020. All markets had good growth, except Japan and China

where the growth was 1% and 3% respectively.

37% higher salmon prices in Q4 2021

Salmon prices were higher in 2021, compared to 2020. This

was especially the case in H2 2021 and in Q4 2021 prices

increased to levels around 37% higher than in Q4 2020 as the

market conditions continued to improve. This positive devel-

opment is expected to continue as Covid-19 restrictions are

lifted.

Negative growth in H1 2022

In H1 2022, the global supply growth of Atlantic salmon is

expected to be negative with around 7%, compared to H1

2021. Overall, the market supply of salmon in 2022 is ex-

pected to increase around 1%, compared to 2021, including

inventory movements.

Bakkafrost has a strong focus on ensuring a well-balanced

owtothedifferentmarketstoincreasediversicationand

mitigate the market risk.

FARMING

The biological growth rate in the Faroese farming operation has

been strong in this quarter. Also, the biological feed conversion

ratio has been lower than ever before. However, sea lice levels

have been higher than normal which has required more treat-

ments resulting in higher mortality. This summer (2022) a new

7,000m3 wellboat with freshwater production capability is

deliveredtoBakkafrost.Thiswillbringasignicantupliftof

the freshwater treatment capacity in the Faroe Island.

Bakkafrostcontinuestoincreasetheaveragesmoltsize,but

the effects on the biological performance have not yet fully

materialised. The salmon harvested in the Faroe Islands in

2021 were released as smolt late 2019 and in 2020 with

an average smolt weight of around 274g. In comparison, the

average weight of the smolt released in 2021 in the Far-

oe Islands was 382g and will be ready for harvest in 2022

and early 2023. These smolt have performed very well after

being released and a lot of knowledge has been gained re-

garding the large smolt strategy. This knowledge is valuable

as the large smolt strategy is being implemented in Scotland

during the coming years.

To meet future demand for large smolt, the existing hatcher-

ies at Norðtoftir and Glyvradalur are currently being expand-

ed. In addition, Bakkafrost plans to construct a new hatchery

at Ónavík, enabling Bakkafrost to produce more than 23 mil-

lion smolts of 500g in the Faroe Islands in 2026.

The farming operation in Scotland has been very challenged

in this quarter. The main root-cause of the mortality in Scot-

land is compromised gill health in combination with second-

arycomplications,suchasbloomsofmicro-jellysh/hydro-

zoansandshhandlingduringnecessarytreatments.Latein

the quarter, the situation stabilised on somewhat elevated

mortality rates, which for a few sites remained until end of

January 2022.

Bakkafrost will more than triple the freshwater treatment

capacity in 2022 with two new wellboats with large fresh-

water treatment capability. These vessels are expected to be

in operation in Q2 and Q3 2022 respectively and will play an

important role in mitigating compromised gill health, hence

improvingoverallshhealthandsignicantlyreducingthe

risk of mortality caused by secondary complications.

Bakkafrost’s implementation of the large smolt strategy in

Scotland is progressing well and the current expansion phase

oftheApplecrosshatcheryisexpectedtobenalisedbythe

end of 2022. By then, the hatchery will have the capacity to

produce around 8 million smolts at 250g. Further planned

expansion and new hatcheries will increase the production

capacity up to more than 18 million smolts of around 500g

in 2026. In Q4 2021 the average weight of released smolt in

Scotland increased 9% to 105g, compared to 96g in Q4 2020.

In 2022 the average weight of the released smolt in Scotland

is expected to be around 120g. The real impact of our fresh-

water investments is expected in 2023.

Having large smolt in Scotland will transform the biological

risk in the marine farming operation. It will however take

time for Bakkafrost to materialise this as it takes time to

build the necessary hatchery capacity.

SMOLT RELEASE

Bakkafrost expects to release around 14.9 million smolts of

around 500g in 2022 in the Faroe Islands, compared to 14.4

million smolts in 2021, 14.3 million smolts in 2020, 12.7 mil-

lion smolts in 2019 and 12.6 million smolts in 2018. The

smolt release in Scotland in 2022 is expected to be 10.8 mil-

lion smolts of around 120g, compared to 11.1 million smolts

in 2021, 10.4 million smolts in 2020, 12.4 million smolts in

2019 and 8.6 million smolts in 2018. The number and the

average weight of smolts released are key elements of pre-

dicting Bakkafrost’s future production.

Harvest volumes for 2022 in the Faroe Islands are expect-

ed to reach 68,000 tonnes gutted weight and 35,000 tonnes

gutted weight in Scotland, giving a total of 103,000 tonnes

gutted weight.

OUTLOOK

ANNUAL REPORT 2021

The estimates for harvest volumes and smolt releases in both

geographies are dependent on biological development.

VAP (VALUE ADDED PRODUCTS)

Bakkafrost’shighly exiblevaluechain includesastate-of-

the-art VAP factory with high capacity. This enables Bakka-

frost to adapt well to the rapidly changing market situations.

Bakkafrost’s long-term strategy is to sell around 40% of the

harvested volumes of salmon as VAP products on contracts.

Thecontractsareatxedpriceswithadurationofbetween

6 to 12 months.

For 2022 Bakkafrost has signed contracts covering around

32% of the expected harvest volumes in the Faroe Islands

and Scotland combined.

FOF (FISHMEAL, OIL AND FEED)

Theoutlookforproductionofshmealandshoilisdepend-

ent on the availability of raw material.

The ICES 2022 recommendation for blue whiting is 753 thou-

sand tonnes, which is a 19% reduction from the recommen-

dation for 2021.

Bakkafrostexpectstheproductionvolumesofshmealand

shoilin2022tobeonsimilarlevelsasin2021.

Havsbrún’s sales of sh feed in 2022 is expected to be

around 130,000 tonnes.

ThemajormarketforHavsbrún´sshfeedisthelocalFar-

oese market, primarily BakkafrostFO’s internal use of sh

feed, and the feed used in the Scottish farming operation.

INVESTMENTS

On the Capital Markets Day on 14-15 September 2021,

Bakka frost announced a 6.2bn DKK investment plan for

2022-2026. The investments will enable transformation of

the operation in Scotland and provide sustainable growth in

the Faroe Islands as well as Scotland.

The main purpose of the investments in Scotland is to rep-

li cate Bakkafrost’s successful operation in the Faroe Islands.

Bakkafrostwill build 3 large energy-efcient hatcheries in

6.2bn DKK Investment programme 2022-2026

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2022 2023 2024 2025 2026

Marine

Freshwater&Broodstock

FOF

Other

Processing

FSV

Fig. 1

INVESTMENT PLAN (MDKK)

OUTLOOK

ANNUAL REPORT 2021

Scotland, enabling the implementation of Bakkafrost’s large

smolt strategy and giving an annual production capacity

above 18 million smolt at 500g. Having large smolt in Scot-

land will transform the performance, lower the biological risk

and increase harvest volumes. In addition to building hatch-

ery capacity, Bakkafrost plans to build a new processing

plant to strengthen processing capabilities and Bakkafrost

will also invest in more treatment vessel capacity to improve

mitigation of biological risk. Further, Bakkafrost will make

investments in marine site development.

The investments in the Faroe Islands include increasing an-

nual hatchery production capacity to above 23 million smolt

at 500g, investments in a broodstock facility and expansion

of feed production capacity.

With the investment plan Bakkafrost expects to sustaina-

bly grow total annual harvest volumes to 150,000 tonnes in

2026. Over the same period, the total annual production ca-

pacity in Bakkafrost’s value chain will reach 180,000 tonnes

gutted weight.

FINANCIAL

The long-term market balance in the global market for salm-

on products will most likely remain favourable for Bakka-

frost.Bakkafrosthasalongvaluechainandacost-efcient

production of high-quality salmon products and will likely

maintainthenancialexibilitygoingforward.

In December 2021, Bakkafrost entered into a term sheet for

a sustainability-linked 700 mEUR multicurrency revolving

credit facility agreement with an additional accordion option

of150mEUR.Thefacilityhasatenorofveyearsandthe

facility agreement was signed in March 2022. In combina-

tion with Bakkafrost’s high equity ratio, the facility gives the

necessary nancial strength and exibility for the Group's

investment plans aimed at signicant organic growth and

structural cost reductions in Scotland. It will also enable

M&A’sand further organic growth opportunities as well as

support an unchanged dividend policy in the future.

OUTLOOK

ANNUAL REPORT 2021

OUTLOOK

FAROE ISLANDS

SCOTLAND

DENMARK

ENGLAND

UNITED STATES OF AMERICA

LEGEND TO MAP SYMBOLS

Headquarters, Administration & Sales

Fishmeal, Fish oil & Fish feed

Broodstock, Hatcheries & Farming

Harvest & Processing

Farming Service Vessels, Packaging & Biogas

BIOGAS

FISHMEAL

FISH OIL

FARMING

FISH FEED

HATCHERIES

SALES

PACKAGING

FSV (FARMING SERVICE VESSELS)

HARVESTING

PROCESSING

Administration & Sales

Processing

Administration & Sales

Processing

Sales

BROODSTOCK

Administration & Sales

Broodstock, Hatcheries & Farming

Harvest & Processing

Farming Service Vessels

BAKKAFROST

Salmon, fishmeal, fish oil and fish feed producer

Location: Faroe Islands

Headquarters: Glyvrar, Eysturoy

Production and business-to-business sale: salmon, fishmeal, fish oil and fish feed

Longest integrated value chain in the industry

Listed on: Oslo Stock Exchange with ticker code BAKKA

ANNUAL REPORT 2021

Bakkafrost at a Glance

BAKKAFROST AT A GLANCE

ANNUAL REPORT 2021

Facilities and locations

CONSTRUCTION/EXPANSION

Faroe Islands

Scotland

FAROE ISLANDS SCOTLAND

HARRIS AND LEWIS

SOUTH UIST

NORTH UIST

GLYVRAR

FUGLAFJØRÐUR

KLAKSVÍK

TÓRSHAVN

VÁGUR

LOCH CARRON

APPLECROSS

LOCH FYNE

LOCH STRIVEN

LOCH TORRIDON

CAIRNDOW

MARYBANK

STORNOWAY

(SMOKEHOUSE)

LOCH ROAG

SKYE

MULL

JURA

ISLAY

GIGHA

ARRAN

EDINBURGH

FISHMEAL/OIL & FEED FACTORY

HATCHERIES

FARMING SITES

BROODSTOCK

HARVEST FACTORIES

PROCESSING PLANT

PACKAGING FACTORY

HEADQUARTERS

SALES OFFICES

BIOGAS

LEGEND TO MAP SYMBOLS

BAKKAFROST AT A GLANCE

ANNUAL REPORT 2021

Key Figures

(DKK 1,000)

Income Statement 2021 2020 2019 2018 2017

Operating revenues 5,553,849 4,651,892 4,511,107 3,177,422 3,770,049

Operational EBIT * 821,194 621,158 1,325,100 1,074,912 1,377,647

Operational EBITDA * 1,351,628 1,067,923 1,635,215 1,273,810 1,561,237

Earnings before interest and taxes (EBIT) 1,144,685 691,123 1,019,217 1,184,233 649,104

Earnings before taxes (EBT) 1,137,662 625,984 981,916 1,172,066 623,884

Net earnings 964,036 462,845 801,885 960,292 511,402

Earnings per share before fair value adjustments

of biomass and provision for onerous contracts (DKK) 10.28 6.20 19.04 16.44 21.08

Earnings per share after fair value adjustments

of biomass and provision for onerous contracts (DKK) 16.32 7.83 15.53 19.74 10.52

Statement of Financial Position

Total non-current assets 10,059,184 9,224,680 8,670,109 3,396,036 3,023,807

Total current assets 4,568,984 3,983,644 4,431,296 2,406,487 2,131,709

TOTAL ASSETS 14,628,168 13,208,324 13,101,405 5,802,523 5,155,516

Total equity 9,347,545 8,729,487 8,496,875 4,077,029 3,626,429

Total liabilities 5,280,623 4,478,837 4,604,530 1,725,494 1,529,087

TOTAL EQUITY AND LIABILITIES 14,628,168 13,208,324 13,101,405 5,802,523 5,155,516

Net interest-bearing debt 2,125,811 1,752,751 1,018,685 495,479 258,070

Equity share 64% 66% 65% 70% 70%

*Aligned for fair value adjustments of biomass, onerous contracts provision, income from associates, revenue tax and other non-operating related adjustments

Fig. 2

KEY FIGURES

ANNUAL REPORT 2021

Main Events

September

• Bakkafrost announced a 6.2

billion DKK investment program

for 2022-2026 on the Capital

Market Day in the Faroe Islands

• Farming supply vessel M/S

Bakkanes commenced its

operation in Scotland

• Sudden bloom of hydrozoans and

micro-jellysh in Scotland cause

beginning mass-mortality

• Synchronised harvest of farming

sites A-72 Haraldsund and

A-73 Viðareiði to reduce future

biological risk

October

• Mortality

rates in

Scotland peak

November

• Energy Globe Foundation

announce Bakkafrost-

owned biogas plant FÖRKA

as National Winner of

Energy Globe Awards

• Groundworks for

Bakkafrost’s new

broodstock facility at

Skálavík is completed

December

• Bakkafrost enters into a

committed term sheet for a

sustainability-linked EUR 700

million multicurrency revolving

credit facility with a tenor of

ve years.

• Prot warning released

providing update on mortalities

in October and November 2021

April

• Bakkafrost purchases M/S Bakkanes

for Scottish operations to develop

farming operations in Scotland and

strengthen biological performance

July

• Farming supply vessel

M/S Martin resumes

delousing operation

in the Faroe Islands

after being equipped

with new delousing

technology

February

• Bakkafrost signs

contract with

MEST shipyard to

build fully electric

workboat

• Bakkafrost enters

an agreement

with MOWI on

site exchange in

Isle of Harris to

create operational

efciency as

well as further

improvement of

health management

of stock

March

• Launches its fourth

sustainability report

• Bakkafrost installs the longest

sea cable in the Faroe Islands

(5.6 km), providing a remote

farming site with electrical

power from land

May

• Bakkafrost Feed division, Havsbrún, is recognized

with BAP certication (Best Aquaculture Practices),

which covers the entire aquaculture supply

chain. With the BAP certication, Havsbrún is an

approved provider of feed to Bakkafrost Scotland,

holding a 4-star BAP certication

June

• Bakkafrost signs

contract with

MEST shipyard

to repurpose

M/S Bakkanes to

farming service

vessel

• Contract signed

with Notec for

expansion of

the Glyvradal

hatchery in the

Faroe Islands

January

• Bakkafrost and 10 other

businesses in the Faroe Islands

join forces to work together

on a three-year corporate

sustainability initiative

August

• Bakkafrost and

Notech partner

on progressive

RAS technology

programme for

Bakkafrost’s future

hatcheries in

Scotland

MAIN EVENTS

STRATEGY

ANNUAL REPORT 2021

Main Events

September

• Bakkafrost announced a 6.2

billion DKK investment program

for 2022-2026 on the Capital

Market Day in the Faroe Islands

• Farming supply vessel M/S

Bakkanes commenced its

operation in Scotland

• Sudden bloom of hydrozoans and

micro-jellysh in Scotland cause

beginning mass-mortality

• Synchronised harvest of farming

sites A-72 Haraldsund and

A-73 Viðareiði to reduce future

biological risk

October

• Mortality

rates in

Scotland peak

November

• Energy Globe Foundation

announce Bakkafrost-

owned biogas plant FÖRKA

as National Winner of

Energy Globe Awards

• Groundworks for

Bakkafrost’s new

broodstock facility at

Skálavík is completed

December

• Bakkafrost enters into a

committed term sheet for a

sustainability-linked EUR 700

million multicurrency revolving

credit facility with a tenor of

ve years.

• Prot warning released

providing update on mortalities

in October and November 2021

April

• Bakkafrost purchases M/S Bakkanes

for Scottish operations to develop

farming operations in Scotland and

strengthen biological performance

July

• Farming supply vessel

M/S Martin resumes

delousing operation

in the Faroe Islands

after being equipped

with new delousing

technology

February

• Bakkafrost signs

contract with

MEST shipyard to

build fully electric

workboat

• Bakkafrost enters

an agreement

with MOWI on

site exchange in

Isle of Harris to

create operational

efciency as

well as further

improvement of

health management

of stock

March

• Launches its fourth

sustainability report

• Bakkafrost installs the longest

sea cable in the Faroe Islands

(5.6 km), providing a remote

farming site with electrical

power from land

May

• Bakkafrost Feed division, Havsbrún, is recognized

with BAP certication (Best Aquaculture Practices),

which covers the entire aquaculture supply

chain. With the BAP certication, Havsbrún is an

approved provider of feed to Bakkafrost Scotland,

holding a 4-star BAP certication

June

• Bakkafrost signs

contract with

MEST shipyard

to repurpose

M/S Bakkanes to

farming service

vessel

• Contract signed

with Notec for

expansion of

the Glyvradal

hatchery in the

Faroe Islands

January

• Bakkafrost and 10 other

businesses in the Faroe Islands

join forces to work together

on a three-year corporate

sustainability initiative

August

• Bakkafrost and

Notech partner

on progressive

RAS technology

programme for

Bakkafrost’s future

hatcheries in

Scotland

MAIN EVENTS

STRATEGY

ANNUAL REPORT 2021

Business Objectives

and Strategy

VISION

To be a signicant contributor

in fullling the world’s growing

demand for healthy and

sustainably produced protein

MISSION

To produce the best salmon

in the world!

VALUES

To be responsible, respectful,

persistent, efcient and

ambitious

Bakkafrost’svisionistobeasignicantcontributorinfulll-

ing the world’s growing demand for healthy and sustainably

produced protein. Our mission is to produce the best salmon

in the world.

Bakkafrost’s experience within the seafood industry dates

back to 1968, and since then, our priority has been to run

a healthy, attractive and competitive cost-conscious salmon

farming group.

Our strategy is focused on sustainable value creation. This

extends beyond healthy nancial returns, to the strength,

capability and reputation of the business, the quality of our

workforce, and collective social and environmental wellbe-

ing.Werecognizethatbyinvestinginthehealthofourbusi-

ness, our people, our salmon, the environment and the com-

munities in which we operate, we will be in a better position

to achieve this.

Today,ourvebusinessobjectivesare:

• Growth

Westriveforacontinuousmarketdrivengrowthofharvest

volumes as well as of the value of our products, while build-

ing strategic strongholds in selected markets.

• One Company

Wewillbeoneunitedcompanywhereouremployeesshare

values,identityandcultureandoperateefciently“asone”

according to best practices and within simple organisational

and governance structures.

• Differentiation

We differentiate ourselves by increasing brand awareness,

based upon the provenance, superior quality, taste and nutri-

tionalproleofoursalmonwithfulltraceability.

• SSC Turnaround

We will transform the performance of our Scottish opera-

tion through targeted investments and applied best practic-

es, which will reduce biological risks, reduce costs, improve

product quality, enable simpler processes and release syn-

ergies.

• Sustainability

Weembedsustainabilitydeeplyinourdecision-makingpro-

cesses and demonstrate our commitment to sustainability

through our actions and achievements for which we aspire to

be acknowledged as industry leading. See our sustainability

report www.bakkafrost.com/sustainability for more informa-

tion on our progress in 2021.

BUSINESS OBJECTIVES AND STRATEGY

STRATEGY

ANNUAL REPORT 2021

Our core values, which support our performance and guide

ourbehaviour,reectourcommitmenttocreatinglong-term

value for our customers, shareholders and the society by

acting responsibly, showing respect, and being persistent,

efcientandambitious.

In 2021, we reviewed our corporate strategy and aligned our

strategic objectives with our Healthy Living Plan, outlined in

our sustainability report.

BUSINESS OBJECTIVES AND STRATEGY

STRATEGY

ANNUAL REPORT 2021

Business Model

Bakkafrost is probably the most vertically integrated salmon farming company in the world, which gives Bakkafrost full control

and responsibility over all aspects of production. This enables Bakkafrost to have optimal control over the quality of its salmon

and the costs of production.

Fig. 3

RESOURCES

VALUES CREATED

CORPORATE STRATEGY

Satisedcustomers

Shareholders returns

Tax contributions

Community investments

Satisedemployees

Shareholder Capital

SkilledWorkforce

Licences

Natural Resources

PristineWaters

GeographicalDiversication

Growth ambition

One Company

Best practice processes

Embedded Sustainability

FISHMEAL

FISH OIL

FISH FEED

BROODSTOCK

HATCHERIES

BIOGAS

FARMING

FSV

HARVESTING

PROCESSING

PACKAGING

SALES/MARKETING

Heritage

Provenance

Longest integrated value chain

in the salmon industry

Optimal farming conditions

High levels of Omega 3

Healthy Omega 3-6 Ratio

High quality

Sustainableshmeal,

shoilandshfeed

Lower than average feed

conversion ratio

DIFFERENTIATORS BRANDINGENABLERSVALUE CHAIN

BUSINESS MODEL

STRATEGY

ANNUAL REPORT 2021

Outline of

Bakkafrost’s History

For more details on Bakkafrost’s history,

please visit www.bakkafrost.com/about/history

1968

The Bakkafrost business is established by the two brothers

HansandRólandJacobsen.Therstprocessingplantisbuilt

the same year. The third brother, Martin Jakobsen, joins the

company in 1971.

1979

Bakkafrost starts sh farming activities – one of the rst

companies in the Faroe Islands to do so.

1995

Bakkafrost builds a factory for value adding salmon at Glyv rar.

Although the investment is limited and the capacity is low, this

is Bakkafrost’s starting point of value-added salmon production.

2006

The Bakkafrost Group grows through acquisitions and merg-

ers with several farming companies. Bakkafrost’s farming op-

erationincreasessignicantly,bothonlandandatsea.

2018

Bakkafrost starts the integration of the Faroese broodstock

programme. Bakkafrost’s new hatchery at Strond starts oper-

ation. Bakkafrost closes the acquisition of the business and

assets in the US salmon importer North Landing.

Bakkafrost updates the investment programme for 2018-

2022 focusing on growth to 100,000 tgw in the Faroe Is-

lands.

2019

Bakkafrost acquird The Scottish Salmon Company PLC, an in-

tegrated salmon farming business in Scotland with focus on

traceability and total supply chain integrity.

Bakkafrostissuednewsharesforthersttimesincelisting

onOsloBørstonancetheacquisition.

2020

First biogas produced at the new biogas plant and sold the

rstKWh’sofrenewableelectricity.

Received ASC certication for the last farming site and is

now100%ASCcertiedintheFaroeIslands.

2010

The shareholders of Bakkafrost and Vestlax agree to merge

the companies. Vestlax Group’s shareholders agree to be

remunerated in Bakkafrost shares. The Vestlax Group is a

farming company with a harvest factory in Kollafjørður. The

Bakkafrost Group is an integrated farming company, ranging

fromsmoltproduction,shfarming,productionofpackaging

materialstonishedVAPproductsandSales.

Bakkafrost is listed on Oslo Børs and broadens its sharehold-

er base. In addition to local Faroese investors, the company

is now owned by international investors from all over Europe

and the USA.

2011

Bakkafrost acquires P/F Havsbrún, a modern, internationally

renownedproducerofshmeal,shoilandshfeed,situat-

ed in the Faroe Islands.

2013

Bakkafrostannouncesitsve-yearinvestmentplantomake

the onshore operation more efcient, to increase organic

growth and to reduce the biological risk.

2016

Bakkafrost updates a new ve-year investment plan with

the same goals as in 2013. Bakkafrost enhances the onshore

operation and aims at producing 500 grams smolt by 2020.

2017

Bakkafrost’s new harvest/VAP factory and the headquarters

inGlyvrararenished.Thepublicisinvitedtovisitthefacil-

ities in September.

FSVs Martin and Róland start operation.

RESOURCES

VALUES CREATED

CORPORATE STRATEGY

Satisedcustomers

Shareholders returns

Tax contributions

Community investments

Satisedemployees

Shareholder Capital

SkilledWorkforce

Licences

Natural Resources

PristineWaters

GeographicalDiversication

Growth ambition

One Company

Best practice processes

Embedded Sustainability

FISHMEAL

FISH OIL

FISH FEED

BROODSTOCK

HATCHERIES

BIOGAS

FARMING

FSV

HARVESTING

PROCESSING

PACKAGING

SALES/MARKETING

Heritage

Provenance

Longest integrated value chain

in the salmon industry

Optimal farming conditions

High levels of Omega 3

Healthy Omega 3-6 Ratio

High quality

Sustainableshmeal,

shoilandshfeed

Lower than average feed

conversion ratio

DIFFERENTIATORS BRANDINGENABLERSVALUE CHAIN

OUTLINE OF BAKKAFROST’S HISTORY

STRATEGY

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

FAROE ISLANDS

SCOTLAND

ANNUAL REPORT 2021

The Value Chain

The Bakkafrost Group controls the entire value chain from

own production of shmeal, sh oil and sh feed to sales

andmarketingofnishedVAPproducts.Controloftheentire

value chain is considered important to ensure availability,

traceabilityandtobeabletocontroltheproductowdaily.

Both customers and processing facilities depend on a daily

availabilityofsalmonanddependentirelyonasteadyow

ofharvestedsh.

The quality of the salmon is the result of the whole opera-

tion,fromproductionofshmealandshoiltotheprocess-

ing of the salmon. The documentation and traceability from

thenishedproductbacktotherawmaterialinthefeedand

the salmon eggs is important for the customers and therefore

important to Bakkafrost.

The control of the entire value chain enables Bakkafrost to

make long-term delivery contracts and long-term customer

relationships without being dependent on any third party

to ensure the quality and predictability of the deliveries. It

furtherenablesbetterutilizationofthefacilitiesthroughout

thevaluechainandpreventssub-optimizationbetweencost

centres.

Bakkafrost continues to improve, adjust, and extend the val-

ue chain on an ongoing basis. In 2018, broodstock and biogas

were added to the value chain. And in 2019, Bakkafrost ac-

quiredTheScottishSalmonCompany,whichisagoodtand

a considerable addition, to the following parts of our value

chain; Broodstock, Hatcheries, Farming, FSV, Harvesting, Pro-

cessing and Sales.

In January 2022, Bakkafrost acquired Munkebo Seafood, a

danish canned seafood producer supplementing Bakkafrost’s

other consumer packaged products. The acquisition is an

addition to the Processing part of the value chain.

Fig. 4

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

FISHMEAL, FISH OIL AND FISH FEED

Bakkafrostsourcesshmaterialstoproduceshmealand

shoil.Thisismainlybasedonvariouspelagicspecies.In

addition to whole sh, we also utilize co-productsof sh

destinedfordirecthuman consumption,suchasshtrim-

mings and sh silage. The demands for high-quality sh

material combined with our processing technology enable

us to manufacture top-quality shmeal, sh oil and sh

feed. Fishmeal is rich in protein with a balanced amino acid

prolewhichmakesitanidealingredientinshfeed.Fish

oil is a great source of energy and contains the essential

and health benecial long-chain omega-3 fatty acids. The

sh material comesmainly fromFaroesevesselsand sh

processing factories, as well as foreign vessels operating in

the North Atlantic.

Asproducersofourownhigh-qualityshfeedingredients,

Havsbrún is uniquely positioned to select the very best

shmealandshoilforourfeedproduction.Theshspe-

cieswhichwetransformtoshmealandshoilconstitutes

a part of the natural food sources which salmon feed on

in the wild. Thus, the main ingredients in our dietary feed

compositionprovidesafoundationforhealtyandefcient

growth for our farmed salmon.

Weexclusivelyusecarbonlteredshoilinourfeed.

We are dedicated to maintaining a high marine prole in

theshfeed,aimingatkeepingthesalmon’sdietasclose

as possible to the natural diet of the wild salmon to create

a nutritious and superior Bakkafrost product for end cus-

tomers.

It is important to us that the raw materials for our feed pro-

ductionareresponsiblysourced.Westronglyprioritizeus-

ingrawmaterialsthataresustainablycertiedinthefeed

production for our salmon.

• 450 tonnes of shmeal daily capacity

• 300 tonnes of sh oil daily capacity

• 700 tonnes of sh feed daily capacity

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

Fig. 5

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

BROODSTOCK

Native Faroese broodstock programme

In April 2018, Bakkafrost took full ownership and respon-

sibility of the Faroese broodstock programme. Bakkafrost

obtained the genome rights in 2021.

The broodstock programme is part of our strategy to max

imizebiosecurity,breedingandgenetics,andtohavethe

longest integrated value chain in the industry.

The programme will enable accelerated development of

more resilient roe – reducing risks of disease in farmed

salmon – but also protect the intellectual capital in the Far

oe Islands, which has been built up over the years with the

programme. The investment into a new broodstock facility

at Skálavík on the island of Sandoy, will provide the nec

essary conditions for the programme to be fully developed

with a highly skilled team of employees.

The breeding programme was resurrected in 2016 with

support from the Government of the Faroe Islands, using

the remaining Faroese salmon. 1.200 families were created,

300 families for each year in a 4-year generation interval.

The selective breeding program uses targeted mating to

concentrate the following important traits: growth, quality

and disease resistance.

Native Hebridean broodstock programme

In Scotland, the Group operates a unique Native Hebride-

an broodstock programme producing pure Scottish Island

salmon, originally bred from wild stock and farmed only

in Hebridean waters, which results in a strong, lean and

noticeablyrmersalmonthanotherAtlanticsalmon.

The broodstock programme is reared under an outsourced

arrangement with a third party.

The Native Hebridean broodstock programme has the

capacity to produce 6 million eggs with the proposed in

vestment to increase to 10 million eggs per year.

• New Native Faroese broodstock facility

in Skálavík in 2023

• Native Hebridean broodstock annual

capacity to produce 6 million eggs

Fig. 6

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

HATCHERIES

The vitality of the sh is essential. Therefore, the selection

of the best genetic properties is vital. The sh’s resistance

todiseasesisanimportantpropertyofthesh.Bakkafrost’s

strategy is to buy high-quality eggs from selected exter-

nal suppliers that invest signicant effortsand resourcesto

improve product quality and performance.

Bakkafrost aims at producing all smolts for release at an aver-

age weight of 500 grams by 2022 in the Faroe Islands and by

2025-2026inScotland.Thebenetsareashorterproduction

time at sea and reduced biological risk.

Hatcheries in the Faroe Islands

Bakkafrost operates six hatcheries in the Faroe Islands. 14.4

million smolts were transferred to the sea in 2021 at an av-

erage weight of 382g. This will increase during 2022 to 14.9

million smolts at 500g per year.

Bakkafrost’s hatcheries are in environments with large quan-

tities of clean fresh water, where no villages or industries

are competing for the water. This is important, as there is

no ground water available in the Faroe Islands. The hatcher-

ies are equipped with closed water circulation systems with

biolters,andtheshtanksareinsidebuildingstolimitthe

effect of external factors, such as weather, birds, and other

pollution. Bakkafrost has highly educated and experienced

staff at the hatcheries; some of whom have been at Bakka-

frost for decades.

In September 2021, Bakkafrost announced the plan to in-

crease the capacity of the hatcheries to a total of 85,600m3.

This will be achieved by increasing the capacity of our cur-

rent hatchery sites in Norðtoftir to 5.3 million smolts, and

Glyvradalur to 3.8 million smolts. Both hatcheries are to be-

gin operation in 2024. In addition, the plan is to build a new

hatchery at Ónavík in Suðuroy. This hatchery is expected to

have an annual production capacity of around 2.4 million

smolts and to begin operation in 2025.

Hatcheries in Scotland

In Scotland, the Bakkafrost Group operates ve freshwater

hatcheries. 11.1 million smolts were transferred to the sea in

2021 at an average weight of 92g. This will increase during

2022 to 10.8 million smolts at around 120g.

Bakkafrost intends to replace these with 3 large and mod-

ern hatcheries with RAS technology over the next 3–5 years.

Thesehatcherieswillbearoundthesamesizeasthehatchery

atStrondin the FaroeIslands. The rstof these hatcheries

will be the Applecross hatchery. Other suitable sites for the

next 2 large hatcheries are currently being investigated. One

will be in the northern part of Bakkafrost’s operations in Scot-

land and one in the southern part.

The annual capacity of our hatcheries in Scotland is circa 6

millionsmoltswithanaveragesizeofjustover85g.

• The new hatchery at Strond in the Faroe

Islands is now fully operational, 9 million

smolts at 500 grams

• Increased capacity in 2024 at Norðtoftir and

Glyvradalur, 9.1 million smolts at 500 grams

• Increased capacity in 2023 at Applecross,

10 million smolts at 500 grams

Fig. 7

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

BIOGAS

The new biogas plant uses waste products from our farms

andothershanddairyfarmerstoproducerenewableen

ergy and fertilizer. The process works by breaking down

the organic matter in the biomass into smaller molecules

through anaerobic digestion. Upon completion of this pro

cess, the biomass is converted into biogas, namely carbon

dioxide and methane (the latter which is used for renewable

energyproduction),anddigestate(whichisusedasfertiliz

er).

The plant has the capacity to convert up to 45-50,000 tonnes

annually of all waste from farms, providing enough renew

able heat for 400 homes and electricity for 1,900 homes.

This saves 11,000 tonnes of CO

emissions (based on the

equivalent fossil fuel replacement) annually.

As well as producing renewable energy, it can produce 45-

50,000tonnesofnaturalliquidfertilizerannually,whichis

redistributed to farmers across the islands, free of charge.

Thefertilizer’shigherabsorptionpotentialisexpectedtode

crease runoff into fjords.

The renewable energy produced will feed into the nation

al grid, contributing to the Faroe Islands’ national target to

have 100% electricity from renewable sources by 2030.

The biogas plant has been in operation for more than a year,

showing good results and reliability.

Our ambitious investment strategy focuses on efcient

growth to meet the growing demand for sustainably pro

duced protein. This includes advancing circular solutions

such as this one, which reduce waste, reduce, and avoid CO2

emissions, and stimulate sustainability through other indus

tries.

Fig. 8

• New biogas plant operational since the

summer of 2020

• 1.8 % of Faroe Island’s total electricity

production in 2021 came from our biogas

plant, Förka

• 35,000 tonnes of natural liquid fertilizer

produced in 2021

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

FARMING

The main goal of the farming operation is to produce salm-

on at a low feed conversion rate and with low mortality.

To reach this goal, Bakkafrost believes the environment is

important and therefore does its utmost to create and main-

taina healthy environmentfor thesh.Followingnational

regulations, external agencies undertake environmental in-

vestigations at each farming location each year. The result of

each survey becomes input data used in the tactical planning

to achieve the best environmental and sustainable farming

results possible.

Thesharefedseveraltimesaday,andthefeedconsump-

tion is monitored continuously.

Farming in the Faroe Islands

Bakkafrost’s 19 salmon farming sites in operation in 2021

extendacross17oftheislands’fjordsandbenetfromex-

cellent water quality and circulation due to strong currents

and cool, steady sea temperatures.

Thesharekept,fedandnurturedinlargeseapens,provid-

ingtheshwithabundantspacetogrowfor14–16months.

Duringthis period, the shgrowsfrom 371g(Q42021) to

a target weight of about 5.8-6.0 kg wfe. This target weight

providesanoptimal breakdown/mixofsizesto serveboth

thefreshshmarketandtheinternalVAPproduction.

Asarule,thelargersharedistributedasfreshsh,andthe

smallershareusedasrawmaterialintheVAPproduction.

Each generation is kept in a separate fjord during the entire

production period. After all locations in a fjord have been

harvested, the fjord is set aside for 2–4 months before a new

generation is released.

Farming in Scotland

The Bakkafrost Group operates 44 marine sites in the unique

naturalenvironmentoftheWestCoastofScotlandand the

Hebridean Islands with 74,765 tonnes of current permitted

licence volume.

Thesharekept,fedandnurturedinlargeseapens,provid-

ingtheshwithabundantspacetogrowforaround16-22

months.Duringthisperiod,theshgrowsfromaround105g

(Q4 2021) up to an average target weight of about 5.5-5.7

kg wfe.

After total harvest, the site is set aside for 2+ months before

a new generation is released.

• 19 farming sites in operation across 17 fjords

in the Faroe Islands

• 44 farming sites in operation across the West

Coast of Scotland and the Hebridean Islands

Fig. 9

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

FARMING SERVICE VESSELS (FSV)

Bakkafrost is continually seeking to improve methods for de-

lousing without using any chemicals and creating lowest pos-

sible stress on the salmon. Bakkafrost uses a combination of

owned and leased vessels.

FSV in the Faroe Islands

Bakkafrost´sFSVeetintheFaroeIslandsconsistofsixves-

sels:Fourliveshcarriersandtwoservicevessels.Novessels

in the Faroe Islands are leased.

The live sh carrier eet again consists of two vessels for

smolttransportandtwovesselsfortransportationofshto

harvest.

Ofthetwovesselsfortransportationofshtoharvest,one

is a medium size live sh carrier (650m

/110 tonnes wfe)

andoneisalargeliveshcarrier(3,000m

/450 tonnes wfe)

equipped with the latest technology and both with closed sys-

tems. In addition to transporting sh to harvest, the larger

liveshcarrierisequippedfortreatmentoftheshinfresh

water.

The two service vessels are equipped with various non-med-

ical systems for lice-treatment, systems for net-cleaning and

are also equipped to do other operations.

As part of the company’s strategy to produce larger quantities

of sustainable farmed salmon, Bakkafrost has ordered a new

wellboat.ThewellboatisbuiltattheSeneshipyardinTurkey

and is expected to be completed in 2022. The new wellboat

is 109 meters long and 22 meters wide. It has a capacity of

10.000 m

, where the four wells have a total capacity of 7.000

of seawater, and the freshwater tanks have a total capacity

of 3.000 m

. The vessel can carry 1.000 tons of salmon.

FSV in Scotland

In Scotland the Bakkafrost Group operates a eet of seven,

one farming service vessel leased from the operation in the

Faroes, four wellboats and two large workboats all under long

termcharteragreementsalongwithaeetofsmallervessels

for site operations which are largely owned.

Fig. 10

• 6 farming service vessels (including 4 live sh

carriers), 53 boats and 23 feed barges in the

Faroe Islands

• 7 farming service vessels, including 3 live sh

carriers, 2 large workboats and 2 treatment

vessels in Scotland

• New farming service vessel to support

biosecurity strategy in 2022 biosecurity

strategy in 2022

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

HARVESTING

Harvesting in the Faroe Islands

IntheFaroeIslands,allBakkafrost´sshisharvestedatthe

harvest factories in Glyvrar and Vágur. The harvest factory in

Glyvrar has a daily capacity of around 400 tonnes wfe and

the harvest factory in Vágur has a daily capacity of around

120 tonnes wfe.

Theshistransportedfromthefarmingsitestotheharvest

factoryinliveshcarrierswithclosedseawatersystems.

Harvesting in Scotland

The Bakkafrost Group operates two harvest stations, Arnish

Point in the North of Scotland and Ardyne in the South. The

total daily capacity is 250 tonnes, 125 tonnes in each factory.

Fish are transported from the farming sites to the harvest

sitesinliveshcarriers.

• Total daily harvesting capacity of 520 tonnes

wfe in the Faroe Islands, and 250 tonnes in

Scotland

Fig. 11

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

Fig. 12

PROCESSING

Processing in the Faroe Islands

The 4,000m

VAP factory at Glyvrar has a production capac-

ity of 100 tons of value-added products a day. The primary

customers for these products are the supermarket chains and

the foodservice segment. The VAP factory also has a daily

capacity of 4 tons for smoked salmon.

Another market segment important for the VAP products is

industrialcustomersbuyingwholelletsforfurtherprocess-

ing and by-products. This market has been developed during

the last decade. The customers in this segment are mainly

European or from the Far East.

Processing in Scotland

The Bakkafrost Group operates two processing plants,

Marybank in the North of Scotland, Cairndow in the South,

and a Smokehouse in Stornoway. Both processing plants are

equipped with pre-rigour lleting, portioning, and packag-

ing facilities. The daily production capacity is 28 tonnes of

value-added products, and 1 tonne smoked of products.

As part of the investment plan 2022–2026, Bakkafrost plans

to build a new state-of-the art processing facility in Scotland.

• 100 tonnes daily secondary processing

capacity in the Faroe Islands

• 28 tonnes daily secondary processing

capacity in Scotland

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

PACKAGING

Bakkafrost has a packaging plant, which is located and

integrated into the Glyvrar processing facility. The packag-

ing plant produces polystyrene boxes for the fresh salmon,

both for sea and air freight. The packaging factory at Glyvrar

meets all Bakkafrost’s needs for polystyrene boxes and has

the equipment to brand the boxes with logo etc.

Fig. 13

• 70,000 tonnes of salmon equivalent,

annual packaging capacity

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

STRATEGY

ANNUAL REPORT 2021

Fig. 14

SALES AND DISTRIBUTION

The Group’s strategy is to balance the sales mix between dif-

ferent geographical markets and different product segments.

The most important markets are the European, US, and Chi-

nesemarkets.Asarule,thewholeshfromtheFaroeIslands

issoldonthespotmarket,whilethewholeshfromScotland

is sold both on the spot market and on long-term contracts.

The VAP products are only sold on long-term contracts.

Bakkafrost believes that its capability to serve these geo-

graphicalmarketswith thetwocategoriesofproductsef-

cientlyreducescross-cycleuctuationsinbothrevenuesand

protability.

The strategy is to offer advantages to the larger supermarket

chains by securing product availability and stable high qual-

ity and preferred products.

Distribution from the Faroe Islands

The current distribution network from the Faroe Islands is

based on transportation by ship to Europe and by plane to

the US and China from the UK and/or Denmark. Bakkafrost

candistributebothfreshandfrozenshtothevariousmar-

kets.

Withthe existingdistributionnetwork,Bakkafrostcanship

products from the Faroe Islands to the UK within 20 hours by

ship and to Denmark within 36 hours. From the UK and Den-

mark, the products are distributed by plane to major airports

in the US and China within 24 hours.

Bakkafrost is in the process of acquiring a cargo plane, which

will be used to transport fresh salmon directly from the Far-

oe Islands to the US market. This will reduce carbon emission

per kg by 40-50% for fresh salmon sold to the US market.

Distribution from Scotland

The distribution network from Scotland is based on trans-

portation by Eurotunnel to Europe and by plane to North

America, Asia and other export markets from the UK.

• Markets served:

WesternEurope(61%)

North America (19%)

Asia (11%)

Eastern Europe (9%)

Other (0%)

FISH FEED HATCHERIESFISH OILFISHMEAL BROODSTOCK BIOGAS

SALES/LOGISTICS

FSV HARVESTING PROCESSINGFARMING

PACKAGING

THE VALUE CHAIN

PERFORMANCE

ANNUAL REPORT 2021

Operational Review

FARMING

Bakkafrost holds sea farming licenses in the north-east and

south parts of the Faroe Islands and licenses in the north-

west of Scotland. The licenses give the right to utilise a giv-

enareaoffjordsforfarmingsh.Farmingauthoritiesfocus

on veterinary and environmental key performing indicators.

Yearly reports and plans, approved by the authorities, are

requested to certify the operation.

The Gulf Stream provides stable farming conditions in the

Faroe Islands and excellent water quality throughout the

year.Thewatertemperatureissteady,withauctuationof

only 4-5 °C during the year. The lowest temperatures, ap-

proximately 6 °C, are usually reached in February, and the

highest temperatures of around 10.5 °C are reached in the

late summer months. Scotland’s farming conditions are also

good, but with higher biological risk due to slightly higher

seawater temperatures between 7 °C and 14.5 °C.

All farm sites in the Faroe Islands and Scotland are environ-

mentally certied and yearly audited by agencies. Salmon

farming in Scotland is one of the most transparent and highly

regulated farming sectors in the UK. Our sites are regularly

audited by various bodies, including Marine Scotland, Scot-

tish Environmental Protection Agency (SEPA), Fish Health In-

spectorate and Scottish Natural Heritage. Bakkafrost is com-

mitted to operating transparently and sharing data on both

a compulsory and voluntary basis through various channels,

including the Scottish Salmon Producers’ Organisation (SSPO)

and Marine Scotland.

Production plans in the Faroe Islands are approved on a year-

ly basis by both veterinary and environmental authorities.

The biological situation and regulatory system in the Faroe

Islands provide the opportunity to grow salmon with a high-

er-than-average weight, which minimises unit costs, biologi-

cal feed conversion rate and gives best in class performance.

The ideal biological situation is crucial for maintaining low

production costs and maximising returns on invested capital.

COST-CONSCIOUS PRODUCER

AND VETERINARY MODEL

Our farming operation in the Faroe Islands has delivered

strong results in production costs compared to peers.

The objective of the Bakkafrost farming method in the Faroe

Islands is to increase biological and veterinary security and

to support a sustainable and healthy operation by total sep-

aration of salmon generations, vaccination against different

diseases (ISA among others), strict regulation of movement

ofequipmentandshandotherregulations.Thismethodis

criticaltoimproveshhealthandreducecosts.

The farming in Scotland differs in biology and legislation

from the farming in the Faroe Islands. Bakkafrost is adapting

the farming methods in Scotland based on the best practices

from the farming operation in the Faroe Islands combined

withkeyinsightsintothespecicfarmingconditionsinScot-

land. The process will take some time to complete. Also, sig-

nicantinvestmentsacrossthevaluechainareneeded.

The farming costs have increased in recent years, partly be-

cause of increased feed and health costs but especially due to

highercostsoflargesmolt.Followingthesignicantinvest-

ments made in the Faroe Islands to enable Bakkafrost’s large

smolt strategy, smolt costs have increased and transcended

into increased total farming costs. Bakkafrost expects the to-

tal farmingcosts to reduceas the benets fromthe larger

smolts and the increased capacity utilisation will fully mate-

rialise. In the Faroe Islands, farming sites have been moved

further out the fjords to more exposed areas, where more

expensive equipment is needed. The plan is also to do so in

Scotland where possible.

OPERATIONAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Salmon feed with high marine content, like the diet in the

wild, is used in both the Faroes and Scotland; this results

inrelativelyhighfeedcosts.However,benetsareevident

inhigherproductionefciency;thisisalsoimpactedbythe

high animal welfare standards, which positively impact non-

feed cost elements.

The health costs mainly relate to treatments against sea lice.

Since 2015, Bakkafrost has mainly used non-medical treat-

ments,includingfreshwater,lukewarmseawaterandushing

with clean seawater with ambient temperature. These me-

chanical treatments resulted in elevated mortality, but after

a start-up phase and more experience and better knowledge

of the equipment and the treatment methods, the mortality

level has improved, but Bakkafrost is continuously improving

these mechanical treatment methods.

Inadditiontothis,Bakkafrostisusinglumpshandwrasse

to reduce the number of sea lice in the Faroe Islands and

Scotland. These initiatives aim to maintain a sustainable,

cost-conscious farming operation.

INVESTMENTS TO REDUCE BIOLOGICAL RISK,

ENABLE ORGANIC GROWTH AND TURNAROUND

SCOTTISH OPERATION

Bakkafrost has invested DKK 5.0 billion since 2015 in all

parts of its value chain.

Bakkafrost has announced a DKK 6.2 billion investment plan

for 2022-2026 for the Group. The goals for the investment

plan are to reduce the biological risk, enable organic growth

andturnaroundtheoperationinScotland.Withtheseinvest-

ments, Bakkafrost will build production capacity of 180,000

tonnes head-on gutted weight and an actual harvest volume

in 2026 of 150,000 tonnes. Also, the investment plan ena-

bles turnaround of the operation in Scotland. A signicant

part of the investment plan is dedicated to build hatchery

capacity for large smolt in the Faroe Islands and Scotland.

The operation in the Faroes is self-supplied with smolt and

aims to have an average weight of 500g for all smolts re-

leased into the sea. Expansions of the hatcheries at Glyvra-

dal and Norðtoftir are in progress and a new hatchery at

Ónavík will be constructed. Once completed, Bakkafrost will

be able to produce more than 23 million smolts with an av-

erage weight of 500g.

TheaveragereleasesizeofsmoltintheFaroeIslandshasin-

creased from around 120g in 2014 to around 382g in 2021.

The investment plan 2022-2026 includes three large hatch-

eries for Scotland, the rst being the Applecross hatchery.

Once completed, these hatcheries will enable the production

of more than 18 million smolts of 500g.

Bakkafrost has invested in new equipment in the farming

operation. Since 2015, Bakkafrost has acquired four ships,

one live sh carrier and threeservice vessels.In addition,

a new 7,000 m

liveshcarrierwascommissionedin2020

for delivery in 2022. In addition, Bakkafrost has a long-term

lease for one large well-boat in Scotland and has secured one

additional 5-year lease for a well-boat commencing in 2022.

Signicantamountshavealsobeeninvestedinnewequip-

ment at Bakkafrost’s farming sites, e.g., new feeding barges,

catamarans and larger pens.

Fig. 15

Fig. 16

Fig. 17

BIOLOGICAL FEED FACTOR FARMING AVERAGE HARVEST WEIGHT FARMING (KG LW)

2017 2018

2019 2020 2021

Mortality % of output

10%

20%

30%

SCT post

SCT pre

Biological feed factor

1.20

1.15

1.10

1.05

1.00

1.25

SCT post

SCT pre

2017 2018

2019 2020 2021

Biological feed factor

5.00

4.50

4.00

3.50

3.00

5.50

6.00

SCT post

2017 2018

2019 2020 2021

SCT pre

MORTALITY % OF OUTPUT FARMING

OPERATIONAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

CERTIFICATES

To ensure prime quality, Bakkafrost has implemented a se-

ries of procedures and quality control systems, not only at

our salmon farms and processing plants, but also for our sup-

pliers. All stages of our Faroese production chain are Global

G.A.P.compliant.OthercerticationsincludeASC,BAP,HAC-

CP, IFS, GMP+, MSC, ISO9001:2008 and BRC. Bakkafrost is

a member of the Global Salmon Initiative (GSI). GSI focuses

on three pillars of sustainability: Reducing environmental

impact, increasing social contribution, and maintaining eco-

nomic growth.

Bakkafrost was proud to reach its goal to have all of its farm-

ingsitesintheFaroeIslandsASCcertiedby2020.TheASC

standard was developed in cooperation with WWF and is

seen as the most stringent standard in the aquaculture indus-

trywithrequirementsregardingshwelfare,sealice,smolt

production, feed production and the environment.

Farming Scotland holds national and international accredi-

tations and certications across the value chain, including

GlobalG.A.P.FarmingScotland,wastherstsalmonproducer

in the EU to be awarded 4-star Best Aquaculture Practice

(BAP)certicationforallitsmarineandprocessingsites,as

well as the feed suppliers. This is the highest designation in

theBAPthird-partycerticationprogramme.Theprocessing

facilities have been awarded the highest level of British Re-

tail Consortium (BRC) Accreditation for food safety, process-

ing, and supply chain management.

GEOGRAPHICAL LOCATION

Salmon farms in the Faroe Islands and Scotland are in areas

with attractive qualities for salmon farming in terms of wa-

ter quality, water temperature and circulation. The Faroese

fjords provide separation between locations, which improves

biological control and area management. Relatively short dis-

tances between farming areas and processing facilities and

well-developedinfrastructureoffercost-efcienttransporta-

tionofbothfeedandshonlandandatsea.

STRONG CUSTOMER BASE

IN ALL MAJOR MARKETS

By focusing on meeting existing customers’ demands, Bakkafrost

benetsfromitslong-termrelationshipswithmanycustomers.

Customer relationships have proven a competitive advantage

through product development and marketing.

Over the past many years, Bakkafrost has developed a differ-

entiated market strategy. This has ensured Bakkafrost a good

market position in the EU, Asia, US, and Eastern Europe.

VAP

Bakkafrost has long-term experience producing and selling

value added products (VAP). Bakkafrost’s long-term strategy

is that VAP products shall represent around 40% of the Far-

oese harvested volumes. The sales of VAP products stabilise

theGroup’searnings,asthe dealsarebasedonxed-price

contracts. The contract prices are not as volatile as the spot

market prices for fresh salmon. There is a time lag between

the increase in the spot prices and a subsequent increase

in the contract prices for VAP products. On the other hand,

when the spot prices decrease, there is a time lag until the

contract prices drop.

In 2021 33% of the Faroese harvest volumes was used in the

VAP segment. The demand from retail was strong driven by

the disruption by Covid-19 pandemic. The VAP segment pro-

duced 22,180 tonnes in 2021, compared to 23,594 tonnes in

2020. Higher spot prices in 2021 compared to 2020 had a

negative effect on the margins in the VAP segment.

PRODUCTION OF FISHMEAL, OIL AND FEED

Havsbrún – FOF segment – performed very well in 2021,

despite lower raw material sourcing and reduced external sale

ofshmealandfeed.Havsbrúnreceived152,383tonnesof

raw materials in 2021, compared to 283,307 tonnes in 2020.

Theproductionofshmealandshoildependsonsourcing

raw materials. The availability is highly related to the quotas

forthepelagicsheryintheNorthAtlantic.Therawmaterial

situation will be volatile in the future. However, quotas for

shingbluewhitinghavedecreasedoverthelastyears.

Besides sourcing wild-caught pelagic sh, Havsbrún also

sourcedoffcuts from pelagic sh factories in the Faroe Is-

lands. In recent years, processing plants for pelagic species

have been built in the Faroe Islands, increasing access to off-

cuts from this production.

Havsbrúnsold16,376tonnesofshmealexternallyin2021,

compared with 18,675 tonnes in 2020. Going forward, the

externalsale ofshmealis likely toreduceasthe internal

consumptionincreases.Externalsaleofshoilin2021was

41 tonnes, compared to 21 tonnes in 2020.

Havsbrún sold 128,489 tonnes of feed in 2021, of which

97% was used internally. In 2020, Havsbrún sold 111,998

tonnes of feed.

100

200

300

400

2015 2016 2017 2018 2019 2020 2021

Average size gram

Million smolt

Smolt – FO

Smolt – SCT

Average size – FO

Average size – SCT

Fig. 18

OPERATIONAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Theworld’stotalshoilproductionhasbeenrelativelysta-

bleformanydecades,whilethedemandforshoilhasin-

creased.Therefore,shoilisexpectedtobeascarceresource

inthefuture,but decreasingsh oil content inthesalmon

feed, led by the major producers, will reduce some demand.

Bakkafrost’sstrategyistohaveahighshoilcontentinthe

feed, resulting in salmon with a high content of omega 3.

PEOPLE

Our most important resource is our employees. For Bakka-

frost to remain a high-performing organisation and expand

our leading market position, it is vital to attract and retain

employees with the right competencies and knowledge.

Therefore, we shall maintain and further strengthen the

focus on HR, work satisfaction, and developing employees’

competencies.

The foundations of our human resource development are

the company culture and the fundamental values of Bakkaf-

rost to be a reliable and responsible partner. Many excellent

results have been achieved during the past years, and we

strive continuously to nurture our company culture.

One of our strategic priorities is to merge the acquired busi-

ness in Scotland with Bakkafrost into “One Company”. Sever-

al workstreams are set up to facilitate collaboration, knowl-

edge sharing, and synthesis of best practices, drawing upon

both organisations' strengths and unique insights. Over time,

company culture and values will also merge, hence becoming

truly “One Company”.

Weaim to continuouslystrengthenour employees'compe-

tencies on all levels in the Group by implementing relevant

training schemes to meet current and future demands for a

qualiedworkforce.SupportingBakkafrost’sstrategyandse-

curing high standards in our business conduct and creating

the best possible value for our customers is essential for all

training efforts.

Bakkafrost’s training is performed as work-related training,

in-house and external courses, and other forms of training.

It is an ongoing process to develop professional competen-

cies further and develop leadership skills at all levels in the

Group.

Weengageandformpartnershipswithlocaleducationalin-

stitutions and experts focusing on health, safety, business,

and commerce education for work-related training, in-house

and external courses, and other forms of training.

During the Covid-19 pandemic in 2020 and 2021, it has been

criticalforustokeepouremployeessafe.Wehavecontinu-

ously monitored the development of the pandemic, adapted

our operation accordingly and managed to keep our employ-

ees safe.

In 2021, the number of full-time equivalent employees in the

Bakkafrost Group was 1,653 employees (FO: 973, SCT/UK:

622 US: 58), compared to 1,699 employees in 2020.

For further information, see our Sustainability Report 2021.

Extruded feed for smolt

Size:3mm Size:4mm Size:6mm Size:9-12mm

OPERATIONAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

FINANCIAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Financial Review

The supply of salmon to the world market increased by

around 9% in 2021 (2020: 4% increase). The average salmon

spot price in 2021 was DKK 42.69, compared to DKK 38.78

in 2020, an increase of 10%.

The prices for value added products (VAP) have been stable

in 2021 and on the same level as in 2020. Important for the

result for the VAP segment are also the raw material prices,

as the VAP segment purchases its raw material based on the

salmon spot market every week. In 2021, the average price

was higher compared to 2020. The margins of Bakkafrost’s

value added production were negatively affected by higher

production costs in 2021 because of lower volumes. The val-

ue-addedproductsaretypicallysoldonxed-pricecontracts

with a duration of 6–12 months, where the prices for value

added products follow the trend on the spot market with a

time lag.

The average feed price during 2021 was higher than the

averagefeedpricein2020.Thereasonfortheuctuations

inthefeedpriceisthemarketsituationforshoilandsh-

meal, which are the main ingredients in Bakkafrost’s salmon

feed.Theuctuationsinthefeedpriceswillbereectedin

the production costs for salmon.

The Bakkafrost Group generated gross operating revenues of

DKK 5,554 million in 2021, compared to DKK 4,652 million

in 2020. The increase in revenue is mainly due to higher

prices and higher volumes of fresh salmon in 2021. Harvest-

ed volumes of salmon increased 13% in 2021, compared to

2020, mostly coming from higher harvested volumes in the

Faroe Islands. The volumes sold as value added products de-

creased 8% in 2021. The Group harvested a total of 96,889

tonnes gutted weight, compared to 85,687 tonnes in 2020.

The external revenue from sales of shmeal decreased in

2021,comparedto2020.Theexternalsalesofshmealde-

creased 15%.

Income statement

DKK 1,000 2021 2020

Operating revenue 5,553,849 4,651,892

Purchase of goods -1,692,501 -2,276,518

Change in inventory and biological assets (at cost)

-178,060 401,679

Salary and personnel expenses -728,423 -690,452

Other operation expenses -1,632,114 -1,062,719

Depreciation -530,434 -446,765

Other income 28,877 44,041

Operational EBIT 821,194 621,158

Fair value adjustments of biological assets 434,868 118,003

Income from associates 30,112 5,546

Revenue tax -141,489 -53,584

EBIT 1,144,685 691,123

EBT 1,137,662 625,984

Taxes -173,626 -163,139

Prot or loss for the period 964,036 462,845

FINANCIAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Operational EBIT was DKK 821 million, compared to DKK

621 million in 2020. A positive fair value adjustment of

the Group’sbiological assets has been recognized in 2021,

amounting to DKK 435 million, compared to an adjustment of

DKK 118 million in 2020. The positive fair value adjustment

mostly relates to higher forward prices.

No provisions are made for onerous contracts, as Bakkafrost

hasnolong-termcontractstodeliverataxedpriceinthe

future with a negative margin.

In 2021, the Group’s associated companies made a net result

to Bakkafrost of DKK 30 million, compared to DKK 6 million

in 2020.

Financial income in 2021 amounted to DKK 5 million, com-

pared to DKK 1 million in 20120. Net interest expenses

amounted to DKK -41 million, compared to DKK -36 million

in 2020. Net currency effects amounted to DKK 39 million,

compared to DKK -13 million in 2020. Other nancial ex-

penses amounted to DKK -11 million, compared to DKK -17

million in 2020. Net taxes amounted to DKK -174 million,

compared to DKK -163 million in 2020.

TheconsolidatednetprottotalledDKK964millionin2021,

compared to DKK 463 million in 2020. Earnings per share

totalled DKK 16.32 in 2021, compared to DKK 7.83 in 2020.

STATEMENT OF FINANCIAL POSITION

The Group’s total assets as at end 2021 amounted to DKK

14,628 million, compared to DKK 13,208 million at the end

of 2020.

The Group’s intangible assets amounted to DKK 4,496 mil-

lion at the end of 2021, compared to DKK 4,493 million at

the end of 2020. Intangible assets comprise primarily of the

acquisition of The Scottish Salmon Company Ltd, the fair

value of acquired farming licences in Scotland and the Faroe

Islands.

Property, plant, and equipment amounted to DKK 4,889 mil-

lion at the end of 2021, compared to DKK 4,221 million at

the end of 2020. In 2021, Bakkafrost made investments in

PP&EamountingtoDKK1,116million,comparedtoDKK836

millionin2020.Themostsignicantinvestments,Bakkafrost

carried out in 2021, were in hatcheries and a new FSV. Other

investments relate mainly to maintenance investments.

Right of use assets amounted to DKK 302 million at the end

of 2021, compared to DKK 353 at the end of 2020.

Investments in associated companies and stocks and shares

amounted to DKK 149 million at the end of 2021, compared

toDKK 122millionat theendof 2020.The increasein -

nancial assets relates to the result from the associated com-

panies.

Bakkafrost had DKK 8 million in long-term receivables at the

end of 2021, compared to DKK 8 million at the end of 2020.

Deferred tax assets amounted to DKK 215 million, compared

to DKK 27 million at the end of 2020.

The Group’s carrying amount (fair value) of biological assets

amounted to DKK 2,448 million at the end of 2021, com-

pared to DKK 2,117 million at the end of 2020. Included in

the carrying amount of the biological assets is a fair value

adjustment amounting to DKK 605 million, compared to DKK

145 million at the end of 2020.

The Group’s total inventories amounted to DKK 709 million

as at year-end 2021, compared to DKK 776 million at year-

end 2020. The inventory primarily represents Havsbrún’s

inventory of shmeal, sh oil and sh feed in addition to

feed at the feed stations, nished VAP products, packing

materials and other raw materials.

The Group’s total receivables amounted to DKK 902 million

as at year-end 2021, compared to DKK 624 million at year-

end 2020.

Cash and cash equivalents at year-end 2021 amounted to

DKK 509 million, compared to DKK 467 million at year-end

2020.

The Group’s equity at the end of 2021 was DKK 9,348

million, compared to DKK 8,729 million at the end of 2020.

The increase in equity is primarily due to the increase of the

positive result for 2021.

FINANCIAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Cash ow

Thetotalcashowfromoperationsin2021wasDKK1,125

million,comparedtoDKK474millionin2020.Thecashow

from operations in 2021 is primarily due to positive results.

Paid taxes and change in receivables had a negative effect

on the cash owfromoperations in 2021. Cash ow from

investment activities amounted to DKK -1,112 million, com-

pared to DKK -816 million in 2020.

For2021,cashowfromnancingamountedtoDKK30mil-

lion, compared to DKK -500 million for 2020. The change

in long-term interest-bearing debt of DKK 405 million had

a positive effect on the cash ow from nancing in 2021.

Other2021guresincludedividendpaidofDKK-216,lease

payments ofDKK-117 and nancial expensesofDKK -56

million.

With the established credit facilities, the Group’s liquidity

and nancial strength is considered good. Bakkafrost had

undrawn credit facilities of approximately DKK 3,063 million

at the end of 2021.

DKK 1,000 2021 2020

EBIT 1,144,685 691,123

Cashowfromoperations 1,124,554 473,970

Cashowfrominvestments -1,112,239 -816,128

Cashowfromnancing 29,903 -500,449

Cash and cash equivalents – opening balance 466,939 1,309,546

Cash and cash equivalents – closing balance total 509,157 466,939

DKK 1,000 2021 2020

Intangible assets 4,495,726 4,493,395

Property, plant and equipment 5,190,883 4,573,791

Financial assets 372,575 157,494

NON-CURRENT ASSETS 10,059,184 9,224,680

Inventory 3,157,596 2,893,056

Receivables 902,231 623,649

Cash and cash equivalents 509,157 466,939

CURRENT ASSETS 4,568,984 3,983,644

ASSETS 14,628,168 13,208,324

Equity 9,347,545 8,729,487

Deferred taxes 1,590,034 1,222,222

Long-term interest-bearing debt 2,634,968 2,219,690

Long-term leasing debt 245,753 265,235

Derivatives 3,207 1,480

Non-current liabilities 4,473,962 3,708,627

Derivatives 4,602 9,710

Trade payables 510,357 563,857

Current tax liabilities 170,997 37,422

Short-term leasing debt 87,668 131,336

Other current liabilities 33,037 27,885

Current liabilities 806,661 770,210

Total liabilities 5,280,623 4,478,837

EQUITY AND LIABILITIES 14,628,168 13,208,324

The Group’s total non-current liabilities amounted to DKK

4,474 million at the end of 2021, compared to DKK 3,709

million at the end of 2020. Deferred taxes amounted to DKK

1,590 million, compared to DKK 1,222 million at the end of

2020.

Long-term debt was DKK 2,635 million at the end of 2021,

compared to DKK 2,220 million at the end of 2020.

Derivatives amounted to DKK 8 million at the end of 2021,

compared to DKK 11 million at the end of 2020.

At the end of 2021, the Group’s total current liabilities were

DKK 807 million, compared to DKK 770 million at the end

of 2020.

Trade payable amounted to DKK 510 million, compared to

DKK 564 million at the beginning of the year.

Long- and short-term leasing debt amounted to DKK 333

million at the end of 2021, compared to DKK 397 million at

the end of 2020.

Bakkafrost’s equity ratio was 64% at the end of 2021,

compared to 66% at the end of 2020.

FINANCIAL REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Farming Segment

– Faroe Islands (FO)

The farming FO segment produces high-quality

Atlanticsalmonfromroetoharvestsizesalmon.

Thesalmonissoldtofreshshmarketsglobally

and to the internal VAP production. The farming

sites are in the Faroe Islands.

VOLUMES

The FO farming segment harvested 67,217 tonnes gutted

weight in 2021, compared to 50,700 tonnes gutted weight

in 2020. Farming North harvested 26,082 tonnes gutted

weight in 2021, compared to 31,029 tonnes gutted weight in

2020.FarmingWestharvested32,253tonnesguttedweight

in 2021, compared to 14,415 tonnes in 2020. Farming South

harvested 8,883 tonnes gutted weight in 2021, compared to

5,256 tonnes in 2020.

The FO farming segment released 14.4 million smolts into

the sea in 2021. The smolt release in 2020 was 14.7 million

smolts.

FINANCIAL PERFORMANCE

For 2021, costs of DKK 45 million were related to inci-

dent-based mortality, compared to DKK 36 million for 2020.

Total revenues for FO farming segment in 2021 amounted to

DKK 3,477 million, compared to DKK 2,340 million in 2020,

a change of 49%. Gross external operating revenues for FO

farming segment increased to DKK 2,665 million in 2021,

from DKK 1,549 million in 2020. The volumes sold externally

increased in 2021, compared to 2020. The internal revenue

increased in 2021 from DKK 792 million in 2020 to DKK 811

million in 2021. The volumes sold to the VAP segment were

lower in 2021 than in 2020.

In 2021, operational EBIT totalled DKK 904 million, com-

pared to DKK 448 million in 2020. This corresponds to an

operational EBIT of DKK 13,45 (NOK 18.37) per kg gutted

weight, compared to DKK 8,83 (NOK 12.69) per kg gutted

weight in 2020.

DKK 1,000 2021 2020 Change

Total revenue 3,476,725 2,340,261 49%

EBIT 1,302,738 180,689 621%

Operational EBIT 903,820 447,829 102%

Farming – Operational EBIT/kg (DKK) 13,45 8.83 52%

Harvested volume (tgw) 67,217 50,700 33%

Smolts released (thousand) 14,427 14,693 -2%

FARMING SEGMENT - FAROE ISLANDS (FO)

PERFORMANCE

ANNUAL REPORT 2021

Fig. 22

Fig. 19 Fig. 21Fig. 20

Fig. 23

SMOLT RELEASE – MILLION SMOLTS

TOTAL REVENUE (DKK 1,000) HARVESTED VOLUME (TGW)OPERTIONAL EBIT/KG (DKK)

HARVEST VOLUMES (TGW)

Total revenue (DKK 1,000)

1,000,000

500,000

1,500,000

2017 2018

2019 2020 2021

Farming Segment - FO - Harvest Volume

9.9

12.5

12.7

14.4

2017

2018

2019

2020

2021

14.7

Farming Segment - FO - Harvest Volume

54,600

44,600

57,200

67,200

2017

2018

2019

2020

2021

50,700

Operationel EBIT/kg (DKK)

35.00

30.00

25.00

20.00

15.00

10.00

5.00

2017 2018

2019 2020 2021

Harvested volume TGW

25,000

20,000

15,000

10,000

5,000

2017 2018

2019 2020 2021

FARMING SEGMENT - FAROE ISLANDS (FO)

PERFORMANCE

ANNUAL REPORT 2021

Farming Segment

– Scotland (SCT)

The Scottish farming segment represents the

operating business of The Scottish Salmon Com-

pany which was consolidated from 8 October

2019, when Bakkafrost gained control. The Scot-

tish Salmon Company is committed to producing

thenestqualityScottishSalmon withScottish

Provenance and full traceability. The Scottish

farmingsegmenthassitesacrosstheWestCoast

of Scotland and Hebridean Islands and is export-

ing globally.

VOLUMES

The SCT farming segment harvested 29.672 tonnes gutted

weight in 2021, compared to 34,986 tonnes gutted weight

for the full year 2020.

11,1 million smolts were transferred in 2021, compared to

10,4 million smolts for 2020.

FINANCIAL PERFORMANCE

For 2021, costs of DKK 262 million relate to incident-based

mortality, compared to DKK 90 million for 2020.

In 2021, the operating revenue for the SCT farming segment

was DKK 1,455 million, compared to DKK 1,596 million in

2020.

Operational EBIT amounted to DKK -249 million, compared

to DKK -24 million in 2020. This corresponds to an opera-

tional EBIT of DKK -8.41 (NOK -11,49) per kg gutted weight,

compared to DKK -0,69 (NOK -0,99) per kg gutted weight in

2020.

DKK 1,000 2021 2020 Change

Total revenue 1,455,391 1,595,561 -9%

EBIT -353,669 308,265 -215%

Operational EBIT -249,497 -24,013 -939%

Farming – Operational EBIT/kg (DKK) -8.41 -0,69 -1125%

Harvested volumes (tgw) 29,672 34,986 -15%

Smolts released (thousand) 11,108 10,354 7%

FARMING SEGMENT - SCOTLAND (SCT)

PERFORMANCE

ANNUAL REPORT 2021

Fig. 24

TOTAL REVENUE (DKK 1,000)

Fig. 26

HARVEST VOLUME (TGW)

Fig. 25

OPERATIONAL EBIT/KG (DKK)

Farming Segment - SCT - Total Revenue

200.000

400.000

600.000

2019

2020 2021

Farming Segment - SCT - Operationel EBIT

-45.00

-35.00

-40.00

-25,00

-30,00

-20,00

-15,00

-10,00

-5,00

0,00

5,00

10,00

2019

2020 2021

Farming Segment - SCT - Harvest Volume

2.000

4.000

6.000

8.000

10.000

12.000

2019

2020 2021

Fig. 27 Fig. 28

SMOLT RELEASE – MILLION SMOLTS HARVEST VOLUMES (TGW)

Farming Segment - SCT - Smolt Release

5.7

10.4

11.1

2019

2020

2021

Farming Segment - SCT - Harvest Volume

7,900

29,700

2019

2020

2021

35,000

FARMING SEGMENT - SCOTLAND (SCT)

PERFORMANCE

ANNUAL REPORT 2021

VAP Segment

The VAP (value added products) segment produc-

es skinless and boneless portions of salmon in

the Faroe Islands. The main market for the VAP

products is Europe with increasing sales in other

markets. The VAP products are sold on long-term

xed-pricecontracts.

VOLUMES

Bakkafrost has a long-term strategy of producing 40% of

its harvested salmon as value added products. The output

is predominantly portions for the retail market in Europe,

but some sales are also to the US retail market. The strate-

gy with value added products is – in addition to increasing

the Group’s earnings – to reduce the volatility in Bakkafrost

Group’s net earnings, as these products are sold under differ-

entxed-pricecontractsforaperiodofupto12months.As

there is a time lag between the movement in fresh salmon

prices and the contract prices, Bakkafrost normally makes a

protintheVAPsegment,whenthespotpricesaredecreas-

ing and vice versa, when the spot prices increase during a

period.

In 2021, 33% of the total harvested volumes went to the pro-

duction of VAP products, compared to 47% in 2020.

The VAP production in 2021 was 21,974 tonnes gutted

weight, compared to 23,931 tonnes gutted weight in 2020.

DKK 1,000 2021 2020 Change

Total revenue 1,195,195 1,116,216 7%

EBIT 119,521 139,693 -14%

Operational EBIT 119,521 139,693 -14%

VAP – Operational EBIT/kg (DKK) 5.39 5,92 -9%

VAP produced volume (tgw) 21,974 23,931 -8%

FINANCIAL PERFORMANCE

The contract prices in 2021 have not increased at the same

rate as the spot prices, but the contract prices were on a

higher level than in 2020. The VAP segment’s operating

revenue amounted to DKK 1,195 million in 2021, compared

to DKK 1,116 million in 2020, an increase of 7%.

Operational EBIT in 2021, which is EBIT adjusted for pro-

vision for onerous contracts etc., totalled DKK 120 million,

compared to DKK 140 million in 2020. This corresponds to

an operational EBIT of DKK 5.39 (NOK 7,36) per kg gutted

weight, compared to DKK 5,92 (NOK 8,51) per kg gutted

weight in 2020.

The VAP segment had no onerous contracts neither at the

end of 2021 nor 2020.

VAP SEGMENT

PERFORMANCE

ANNUAL REPORT 2021

Fig. 32 Fig. 33

PRODUCT WEIGHT OF VAP (TGW) DISTRIBUTION OF HARVESTED VOLUMES (%)

Fig. 29

TOTAL REVENUE (DKK 1,000)

Fig.31

VAP VOLUME (TGW)

Fig. 30

OPERATIONAL EBIT/KG (DKK)

VAP Segment - Total Revenue

100,000

200,000

300,000

400,000

2017 2018

2019 2020 2021

2017 201 8

2019 2020 2021

VAP Segment - Operationel EBIT

-15.00

-10.00

-5.00

5.00

10.00

15.00

2017 2018

2019 2020 2021

VAP Segment - VAP Volumes

1,000

3,000

2,000

5,000

6,000

4,000

7,000

VAP - Product weight

19,100

8,400

16,700

23,900

22,000

2017

2018

2019

2020

2021

VAP Segment- Distribution of harvest volumes

0% 25% 50% 75% 100%

2017

2018

2019

2020

2021

Harvested volumes used in Vap production

Harvested volumes sold fresh/frozen

VAP SEGMENT

PERFORMANCE

ANNUAL REPORT 2021

FOF Segment

The FOF (shmeal, -oil and feed) segment pro-

ducesshmeal,shoilandshfeed.Mostofthe

productionis used for sh feed, which is used

internally in the farming segment. The quality of

thesh feedis important tothe quality of the

salmon from Bakkafrost. Fishmeal, sh oil and

shfeedarealsosoldexternally.

VOLUMES

The FOF segment, has over the last couple of years had a

declineinrawmaterialintakeforshmealandshoilpro-

duction.Theproducedshmealandoilwerepartlyusedin-

ternally for feed production, and partly exported. In 2021,

the FOF segment sourced 152,383 tonnes of raw material,

compared to 283,307 tonnes in 2020, which corresponds to

a decrease of 46%. The raw material intake depends on off-

cutsfromthepelagicindustryaswellassheryintheNorth

Atlanticandavailablespeciesofsh.

Theproductionofshmealin2021was34,962tonnes,com-

paredto60,661tonnesin2020.Theproductionofshoilin

2021 was 8,124 tonnes, compared to 9,932 tonnes in 2020.

Theproductionofshoilvaries,dependingonthespeciesof

shavailableforproductionandthetimingofcatches.

The FOF segment sold 128,489 tonnes of feed in 2021, com-

pared to 111,998 tonnes in 2020. Bakkafrost used 124,259

tonnes of sold feed in 2021 internally, corresponding to 97%.

The internal use in 2020 was 94,345 tonnes, corresponding

to 84%.

DKK 1,000 2021 2020 Change

Total revenue 1,659,351 1,418,970 17%

EBIT 305,988 181,610 68%

EBITDA 306,227 207,695 47%

FOF – EBITDA margin 18.5% 14.6% 26%

Sold feed tonnes 128,489 111,998 15%

FINANCIAL PERFORMANCE

Total revenues for the FOF segment in 2021 amounted to

DKK 1,659 million, compared to DKK 1,419 million in 2020,

an increase of 17%.

The external operating revenue for the FOF segment amount-

ed to DKK 238 million in 2021, compared to DKK 391 mil-

lion in 2020. The decrease in external revenue from 2020 to

2021wasmainlyduetolowerexternalsaleofshfeedand

shmeal.

The internal revenue in 2021 amounted to DKK 1,421 mil-

lion, compared to DKK 1,027 million in 2020. The internal

revenue comprises the sales of feed to Bakkafrost’s farming

activities, both in Scotland and the Faroe Islands

EBITDA was DKK 306 million in 2021, compared to DKK 208

million in 2020, and the EBITDA margin was 18.5% in 2021,

compared to 14.6% in 2020.

FOF SEGMENT

PERFORMANCE

ANNUAL REPORT 2021

FISH FEED PRODUCTION VOLUMES (TONNES) SOURCING OF RAW MATERIAL (TONNES)

Fig. 34

TOTAL EBITDA (DKK 1,000)

Fig. 35

SOLD FEED TONNES

Fig. 36

EBITDA MARGIN (%)

Fig. 37 Fig. 38

2017 2018

2019 2020 2021

FOF Segment - Total EBITDA

20,000

40,000

60,000

80,000

100,000

120,000

2017 2018

2019 2020 2021

FOF Segment - Total Feed Sold TGW

10,000

50,000

20,000

30,000

40,000

2017 2018

2019 2020 2021

FOF Segment - EBITDA Margin

10%

20%

15%

30%

25%

35%

FOF Segment - Fish feed production volumes

78,200

80,100

99,200

113,700

128,090

2017

2018

2019

2020

2021

FOF Segment - Sourcing of raw material

342,456

302,465

278,665

283,307

152,383

2017

2018

2019

2020

2021

FOF SEGMENT

PERFORMANCE

ANNUAL REPORT 2021

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Market Review

Bakkafrost is committed to producing; tasty, healthy, sustain-

able, and quality salmon, truly creating value for customers.

This ensures a price premium can be achieved which in turn

reectspositivelyintheGroup’sresults.

The Bakkafrost Group plans to further strengthen this posi-

tion by investing in differentiation and the following USPs

(unique selling points).

ORIGIN

The natural conditions and cold waters in the North Atlantic

around the Faroe Islands as well in Scotland are perfect for

raising salmon. Bakkafrost will further promote this unique

provenance as producing exceptional quality salmon.

LIMITED VOLUMES

Both salmon from The Faroe Islands and Scotland is recog-

nizedgloballyastopquality,butas theFaroeIslands only

produce about 3.0% and Scotland 6.7% of the world’s salmon,

the salmon from these two origins is in high demand. Bakka-

frost salmon is sought after around the world with accepted

premium positioning and is preferred by select customers.

LARGE SALMON

TheFaroeIslandsaquacultureindustryisrecognizedaspro-

ducing the largest Atlantic salmon in the world. In recent

years, a signicant price difference has been evident be-

tweenthe differentsizesofsalmon.Due to lackofsupply,

salmon over 6 kg achieved a considerable price premium.

Withgoodsupplyoflargersizes,Bakkafrostwaswellplaced

tocapitalizeonthisposition.Farminglargesalmonrequires

good biology. The longer the salmon is at sea, the more it

is exposed to different risks as in any natural environment.

SALES AND GEOGRAPHICAL DIVERSIFICATION

The Sales and Marketing Department at Bakkafrost is respon-

sible for the worldwide sales of Bakkafrost Salmon, wheth-

er it is farmed in the Faroe Islands or Scotland. The Group

focusses on direct sales into channels, where the quality

attributes of Bakkafrost Salmon are recognised, and a price

premium is achieved. The strategy continues to ensure geo-

graphicalsalesdiversicationtherebyminimizingtheriskof

marketuctuations.

WORLDWIDE REACH

Bakkafrost uses ship transport and trucking whenever pos-

sible,such asforallfrozenproductsand freshproductsto

nearby markets. Fresh salmon delivered to long-distance

markets such as US and Asia are transported by air.

Fast reliable logistics with global reach is vital for the dis-

tribution of fresh perishable produce which is sought after

around the world. To maintain the leading position, Bakka-

frost works closely with key freight forwarders to ensure ef-

fectivelogisticsandrst-classcustomerserviceworldwide.

This ensures that Bakkafrost´s salmon is always delivered

as fresh as possible by freight carriers to major airports and

then linking with further passenger airlines to diverse world-

wide locations. Bakkafrost expects to have it’s own airplane

in operation in 2022, primarily serving the US market. This

will strengthen Bakkafrost’s position as a supplier of superior

quality fresh salmon.

SEGMENTATION

The Bakkafrost brand is particularly strong in USA, where

demand for salmon over 6 kg is strong, predominantly in the

sushi segment. The market share in China is also strong.

ThestrongsustainabilityproleofBakkafrostSalmonispar-

ticularly important to clients in the premium sushi segment.

Bakkafrost does not use any antibiotics and uses only non-

GMO ingredients in feed.

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Faroe Islands

VAP

Bakkafrost holds a leading position in frozen salmon por-

tions, the main markets are leading European and US retail-

ers. Bakkafrost adds value to VAP production by producing

the highest quality productand is recognized as a reliable

and responsible supplier.

ThediversicationoftheBakkafrostproductmixbringsad-

ditionalbenetsfortheGroup;itensuresincreasedrevenue

stability with 6- and 12-months contracts being negotiated

andoffersanoutletforwholefreshshinadversemarket

conditions.

Fig. 39

FEED

Feedisrecognizedasoneofthemostimportantaspectsin

salmon production regarding the quality of salmon and cost.

VERTICAL INTEGRATION

Bakkafrost is one of the most vertically integrated salmon

farming companies in the world and uniquely produces its

ownshmealandshoil.ThisensuresthatBakkafrosthas

full control and responsibility over all aspects of production

and gives clients unparalleled traceability.

FEED RICH IN MARINE CONTENT

Bakkafrost has an integrated value chain that includes own

productionofshmeal,oilandfeed.Withitsrichaccessto

marine raw material from the waters surrounding the Faroe

Islands, Bakkafrost is uniquely positioned to maintain a sub-

stantially higher marine inclusion in the salmon feed, com-

pared to peers in the industry. The natural diet for wild salm-

on is rich in marine resources. By keeping the Bakkafrost

diet close to this, the Bakkafrost Group is able to have one of

the industry’s best Feed Conversion Ratios (FCR) which is a

keyindicatorofshwelfareandlowproductioncosts.

A diet rich in marine content is also the most important fac-

tor for the quality of Bakkafrost Salmon, as the marine con-

tent ensures the optimum fat content, rich in healthy Omega

3 fatty acids DHA and EPA. The natural diet also ensures

enjoyment in the exceptional taste of Bakkafrost Salmon.

ASC

Bakkafrost is committed to sustainability and care for the

environment in which it operates, this is fundamental for dis-

cerning customers. 100% of Bakkafrost’s sites in the Faroe

IslandsareASCcertied.

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

WORLD SEAFOOD PRODUCTION FOR HUMAN CONSUMPTION AND CONSUMPTION PER CAPITA

Source: Kontali, FAO

Fig. 40

100

120

140

160

180

200

2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E

kilo/Capita

million tonnes

World seafood for human consumption World fishery and aquaculture production Per capita consumption

SEAFOOD CONSUMPTION

In 2019, capturesheries and aquaculture wereestimated

to be about 178 million tonnes, of which roughly 158 mil-

liontonneswereutilizedasfood.Thiscorrespondstoaper

capita consumption of seafood just above 20 kg (live weight

equivalent),withshaccountingforabout18percentofthe

global population's intake of animal proteins and 7 percent of

all proteins consumed.

Overall, global capture sheries production continues to

remain stable above 90 million tonnes, of which about 20

millionisutilizedintheproductionofshmealandshoil.

The share of non-food uses has remained at a steady level

overthelastcoupleofyears.Ascapturesheriesproduction

remains stable, aquaculture production continues to cover

the increasing demand for seafood.

Salmon and trout became the most important commodity

traded in value terms since 2013 and accounted for about

18 percentof the totalvalue ofinternationallytraded sh

products in 2019. The other main groups of exported species

were shrimps and prawns with around 16 percent, followed

by groundsh (10 percent, e.g., hake,cod,haddock, Alaska

pollock) and tuna (9 percent).

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

MAIN MARKETS FOR SALMON

AND CONSUMPTION TRENDS

In 2021, worldwide supply of farmed Atlantic salmon ex-

ceeded 2,85 million tonnes wfe. This corresponds to an in-

crease of 9 % or 230,000 tonnes wfe, which is the highest

growth rate year over year since 2012. Of this increase, sup-

ply to Europe grew by 8% (+95,000 tonnes wfe) and the USA

by 13% (+73,000 tonnes wfe) – accounted for more than 70%

of the global supply growth.

The spread of COVID-19 worldwide in 2020 led to restric-

tions on travel and lockdowns which impacted the demand

from the foodservice industry – in addition to limitations in

global supply chains / logistics. As a result, the global salm-

on market became much more concentrated with increased

dependency on sales through the retail-sector and impacted

both the market balance and price achievement for Atlantic

salmon.Whilethepandemiccontinuedtoimpactthesalmon

market in 2021 – strong demand from particularly the United

States, Southern Europe (France, Spain, Italy) and Asian mar-

ket led to an increase in salmon prices.

European spot prices (Nasdaq 3-6 kg) for Atlantic salmon in

2021 ended on average just above 58 NOK per kg (+5%) or

5.7 EUR per kg (+11%). The Norwegian krone continues to

trend on a historically weak level.

Source: Kontali

PER CAPITA CONSUMPTION OF ATLANTIC SALMON (kg wfe / capita)

Fig. 41

0,5

1,0

1,5

2,0

2,5

3.0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

ES & United Kingdom

USA

Russia

Japan

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Source: Kontali

THE US MARKET

Despite the US being heavily affected by the COVID-19 pan-

demic, both in 2020 and 2021, the supply and consumption

of Atlantic salmon have continued to grow at an impressive

rate.2021 does forthe rsttimeever, representamarket

sizeexceeding600thousandtonneswfeforAtlanticsalmon

only.

Withapopulationof331millionandconsumptioncloseto

630,000 tonnes wfe in 2021, this corresponds to a per cap-

ita consumption of approx. 1.9 kg wfe, indicating about 6-7

meals per capita each year. Salmon was the second-most

consumed seafood specie by US consumers, while shrimp

stillrmlyholdsthetopspot.

Growth to the US market was driven by an increase in suppy

from Chile, Canada and supply growth from Europe. From

Chile, the close to 350,000 tonnes wfe (+8%) also represents

the highest supply share in over a decade (51% of total Chil-

ean exports). Supply growth from both Canada and Norway

exceeded 10,000 tonnes wfe, while UK and the Faroe Islands

growth was closer to 5–6,000 tonnes wfe. Other European

supplies (incl. supply from processing hub) exceeded 10,000

tonnes wfe.

Average export prices for Chilean salmon llets (repre-

sent approx. 40% of the total US market) increased from

7.8 USD/kilogram in 2020 to 10.3 USD/kilogram in 2021 –

corresponds to an increase of 33%. This illustrates the strong

demand growth in the US market.

Fig. 42

Fig. 43

SUPPLY OF ATLANTIC SALMON TO THE US MARKET (TONNES WFE)

100,000

400,000

600,000

2021E2012 2013 2014 2015 2016 2017 2018 2019 2020

Tonnes WFE

Other

USA

United Kingdom

Faroe Islands

Norway

Canada

Chile

SUPPLY OF ATLANTIC SALMON IN THE US MARKET

Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Chile 162,200 191,600 214,700 224,100 217,300 220,400 267,200 284,300 325,100 349,600

Canada 98,200 77,400 55,000 92,900 100,900 92,100 90,500 91,600 92,600 104,400

Norway 23,700 27,000 39,900 51,200 55,700 68,400 67,300 68,300 68,200 81,300

Faroe Islands 13,100 16,400 17,100 14,700 16,900 14,800 12,800 18,500 14,400 20,800

United Kingdom 17,700 16,100 20,400 16,300 12,700 18,000 16,100 20,300 11,500 17,100

USA 9,400 10,100 16,200 13,800 7,700 13,100 7,300 8,100 8,800 6,200

Other 5,700 11,000 10,400 14,600 16,100 19,200 22,300 29,300 40,400 54,200

Total 330,000 349,600 373,700 427,600 427,300 446,000 483,500 520,400 561,000 633,600

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

THE EUROPEAN MARKET

In 2021, the EU market (including the United Kingdom) for

farmed Atlantic salmon increased by 8 %, or 94,000 tonnes

wfe, to a total supply of 1,28 million tonnes wfe. Norway

accountsforapprox.85%ofthetotalsupplyvolume.With

a combined population of 513 million, this corresponds to a

per capita consumption of 2.5 kg wfe per year, indicating 8-9

meals per capita per year.

The COVID-19 pandemic has caused a higher share of sales

from European producers to be allocated in the European

market. The backdrop for this was the logistical challenges

in the airfreight markets and in addition to restrictions and

lockdowns which reduced the demand from the foodservice

segments.Tradeowswereimpactedbyamoreconcentrat-

ed market, with increased dependency on sales through the

retail segment where salmon hubs/countries with secondary

processingcapacitysawasignicantincreaseinvolumein

2020.

During 2021, the global market balance improved. Within

Europe, Germany, France, and the United Kingdom accounted

for approx. 50 % of the total consumption, making them the

largest markets for salmon. Supply growth was notable both

to Italy and Spain (Southern Europe) last year.

Source: Kontali

Fig. 44

Fig. 45

SUPPLY OF ATLANTIC SALMON TO EU AND UK MARKET

Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Norway 761,900 755,500 834,600 912,200 860,200 841,400 910,800 944,500 993,800 1,082,700

United Kingdom 117,000 110,300 117,800 121,100 115,400 124,900 108,000 142,300 152,500 163,300

Chile 27,000 50,200 50,500 44,900 53,900 42,500 40,700 36,200 40,900 28,400

Faroe Islands 36,800 34,300 32,300 20,400 28,400 27,800 20,600 30,800 34,400 50,600

Other/Re-export -9,600 -18,800 -30,100 -27,700 -16,900 -17,100 -25,800 -23,400 -31,400 -39,500

Total 933,100 931,500 1,005,100 1,070,900 1,041,000 1,019,500 1,054,300 1,130,400 1,190,200 1,285,500

SUPPLY OF ATLANTIC SALMON TO THE EU+UK MARKET (TONNES WFE)

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2021E2012 2013 2014 2015 2016 2017 2018 2019 2020E

Other/Re-export

Faroe Islands

Chile

United Kingdom

Norway

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

CHINA AND HONG KONG

In December 2021, China announced a reduction in import

tariffs on various seafood products. Among them are salmon

products, including fresh gutted Atlantic salmon. In gener-

al, the tariff for fresh whole salmon is lowered from 10% in

2021 to 7% starting from January 1st, 2022. The lowering of

ChineseimporttariffswouldbeforthebenetofmostAtlan-

tic salmon producers except those having an FTA with China

with 0% import tariffs (Chile, Iceland and Australia).

From 2015 to 2019 supply of Atlantic salmon to China and

Hong Kong is almost doubled, reaching almost 125,000

tonnes wfe (pre-pandemic). In 2020, supply fell to 83,000

tonnes wfe, and saw a marginal recovery last year + 7% or

close to 90,000 tonnes wfe.

While supply from Norway is relativelyunchanged around

44,000 tonnes wfe – supply from Chile have decreased from

45,000 tonnes wfe in 2019 to 28,000 tonnes wfe in 2020 to

the lowest level since 2014 with sales around 15,000 tonnes

wfe last year. The supply of Faroese salmon to China and

Hong Kong have also seen a notable drop in the correspond-

ing period.

This drop must be seen in relation to logistical challenges –

in addition to measures / perceived risk to limit the spread

of the Coronavirus. Historically, supply to China has been

mainlyfreshwholesalmonandlargesizes(6+kg),withthe

foodservice segment covering a high share of consumption.

SUPPLY OF ATLANTIC SALMON TO CHINA AND HONG KONG (TONNES WFE)

Source: Kontali

Fig. 46

Fig. 47

SUPPLY OF ATLANTIC SALMON TO CHINA AND HONG KONG

Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Norway 32,370 32,190 34,140 31,110 16,480 17,860 30,920 42,990 32,540 44,710

Chile 5,470 10,750 19,960 18,270 29,280 27,790 44,770 45,540 28,580 15,110

United Kingdom 8,120 12,200 16,430 14,920 12,250 12,660 12,370 10,900 3,300 7,100

Denmark 90 300 350 130 80 340 330 320 230 60

Australia 270 230 940 6,420 1,360 9,630 6,770 7,590 10,700 13,990

Faroe Islands 6,780 9,710 11,050 9,520 10,410 8,730 10,620 14,690 6,200 6,430

Canada 600 410 280 2,430 5,790 2,120 5,090 870 530 320

Others 6,060 10,090 3,240 2,570 12,220 18,590 800 960 870 1,380

Total 59,760 75,880 86,390 85,370 87,870 97,720 111,670 123,860 82,950 89,100

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2021E2012 2013 2014 2015 2016 2017 2018 2019 2020

Other

Canada

Faroe Islands

Australia

Denmark

United Kingdom

Chile

Norway

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Source: Kontali

GLOBAL SUPPLY OF ALL FARMED AND WILD SALMONIDS (TONNES WFE)

Fig. 49

Fig. 48

HISTORICAL SUPPLY OF ALL SALMONIDS

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Atlantic salmon 1,998,550 2,041,250 2,229,000 2,317,900 2,161,100 2,293,100 2,402,750 2,577,800 2,711,500 2,896,700

Small trout 524,600 570,000 550,600 565,600 610,600 626,500 660,400 685,100 718,400 741,800

Chum 294,700 338,300 321,900 338,100 280,900 261,100 268,600 229,000 164,800 196,000

Pink 410,300 580,600 307,900 398,900 354,300 448,400 591,400 525,100 279,400 550,000

Large trout 385,900 320,600 307,300 280,400 278,200 259,100 264,800 297,600 313,900 282,900

Sockeye 142,300 133,200 173,700 190,300 183,000 173,700 171,600 178,500 138,900 155,100

Coho 191,000 176,800 200,400 190,600 151,800 194,900 211,100 234,700 232,600 243,500

Chinook 18,800 19,500 18,800 20,900 19,200 19,900 19,800 20,900 20,900 21,400

Total 3,966,150 4,180,250 4,109,600 4,302,700 4,039,100 4,276,700 4,590,450 4,748,700 4,580,400 5,087,400

1,500,000

3,000,000

4,500,000

6,000,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Chinook

Coho

Sockeye

Large trout

Pink

Chum

Small trout

Atlantic salmon

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

Source: Kontali

GLOBAL HARVEST OF

FARMED ATLANTIC SALMON

Norway is the largest producing country of Atlantic salm-

on in the world and accounted for 53% of global production

in 2021. During the past few years, increased MAB capacity

throughboththetrafc-lightsystemandnewdevelopment

licenses have allowed for increased stocking and growth.

However, during the same period, sea lice regulation and

high treatment frequency have limited productivity (lost

feeding days impacting the smolt yield potential).

The second largest producing country of Atlantic salmon,

Chile, accounting for 25% of the global production in 2021.

Chile has recovered biology-wise since the ISA-crisis in

2008–2009 and has seen improved productivity year after

year. Following the heavy losses caused by the Algae bloom

crisis in 2016, the Chilean industry has continued to show

improvements in key production parameters. After the all-

time high harvested volume in 2020, there was a 7% de-

crease in 2021. The new year had a challenging start with

a deadly algae bloom in January which resulted in losses of

about 3,500 tonnes according to Sernapesca.

In other European farming regions, the total harvest vol-

ume increased 19%. Production in North America (Canada)

and Ireland continued at a stable level, Australia increased

their production and Russia is now producing above 20,000

tonnes wfe.

Ireland has a steady production below 20,000 tonnes wfe. In

addition, the global harvest volume from landbased (grow-

out) plants is estimated to be approximately 10,000 tonnes

wfe in 2021.

Fig. 50

HARVEST OF ATLANTIC SALMON IN TONNES (TONNES WFE)

Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Norway 1,183,100 1,143,600 1,199,000 1,234,200 1,171,100 1,207,800 1,253,400 1,333,400 1,369,100 1,532,100

Chile 364,000 468,100 582,900 598,200 504,400 564,200 660,100 690,300 778,500 720,400

UK 159,400 157,800 170,500 166,300 157,400 177,200 152,100 190,500 178,300 199,700

North America 156,100 135,400 119,000 155,400 168,500 158,700 165,000 158,300 156,800 160,500

Faroe Island 70,300 72,600 82,700 75,600 77,300 80,300 71,700 86,600 80,600 105,500

Ireland 15,600 10,600 12,300 15,700 15,800 17,000 14,300 15,500 15,800 15,900

Australia 40,000 39,000 42,000 53,600 49,600 63,100 62,300 60,900 82,800 87,800

Iceland 3,250 3,350 4,400 3,600 8,100 11,600 13,600 24,500 31,200 41,500

Russia 6,000 10,000 14,500 13,600 5,000 8,600 5,400 11,400 10,500 23,000

Others 300 300 300 300 300 300 450 300 300 300

Landbased RAS 100 300 1,500 1,400 3,500 4,200 4,400 6,100 7,700 10,000

*Total 1,998,150 2,041,050 2,229,100 2,317,900 2,161,000 2,293,000 2,402,750 2,577,800 2,711,600 2,896,700

Fig. 51

GLOBAL HARVEST OF ATLANTIC SALMON (TONNES WFE)

750,000

1,500,000

2,250,000

3,000,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Landbased RAS

Others

Russia

Iceland

Australia

Ireland

Faroe Island

North America

Chile

Norway

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

SUPPLY OF FARMED ATLANTIC SALMON

FROM THE FAROE ISLANDS

The biological performance of the Faroese salmon has over

the last decade been the best in the world with high survival

rates and high average harvest weights. This has led to the

highest smolt yield in the industry.

The Faroese industry has faced biological challenges with

shhealthissueslikegilldisease(e.g.,lossesin2017),high-

er levels of sea lice, and extraordinary events like losses due

to bad weather which have periodically affected production

over the past 5 years. In 2021, record high volumes of At-

lantic salmon were harvested, with a supply estimated just

above 105,000 tonnes wfe (+30%).

Faroese export to Russia, USA and Denmark accounted for

approx. 60% of the total supply in 2021 – around 20,000

each. Spain, Netherlands, United Kingdom, France, Italy,

and Germany are other important markets in Europe. China

remains within the top 5 markets for Faroese salmon, but

where supply is notably lower compared to pre-pandemic

levels.

Source: Kontali

Fig. 53

Fig. 52

FO SUPPLY OF ATLANTIC SALMON

Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Russia 7,997 2,613 15,465 25,660 19,798 24,096 23,812 18,276 19,465 23,665

USA 13,085 16,394 17,105 14,671 16,908 14,820 12,829 18,469 14,392 20,812

China 6,738 9,603 10,945 9,505 10,305 8,556 10,615 14,539 6,052 6,561

Denmark 4,806 1,447 2,122 5,489 5,010 4,920 7,654 10,860 11,896 19,420

United Kingdom 9,466 10,199 9,050 4,633 8,024 5,621 6,538 5,015 3,877 5,140

Spain 33 0 0 0 19 92 306 3,973 5,444 8,483

Germany 8,637 11,439 11,256 5,404 8,156 10,916 1,421 2,646 2,984 1,410

Netherlands 1,466 906 176 138 651 1,056 460 2,150 1,651 6,154

Italy 25 75 0 253 363 404 599 1,776 1,550 3,052

France 5,304 3,938 3,663 1,740 3,061 1,557 1,375 1,352 2,722 3,341

All other markets 13,056 15,071 11,557 7,266 5,780 7,273 5,183 7,399 9,280 8,240

Total 70,613 71,685 81,339 74,759 78,075 79,311 70,792 86,455 79,311 106,278

SUPPLY OF ATLANTIC SALMON FROM THE FAROE ISLANDS TO DIFFERENT MARKETS (TONNES WFE)

(ILLUSTRATES THE MARKET DIVERSIFICATION)

30,000

60,000

90,000

120,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021

All other markets

France

Italy

Netherlands

Germany

Spain

United Kingdom

Denmark

China

USA

Russia

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

CHANGE IN MARKET SUPPLY

AND MARKET PRICES

Pre-pandemic or during Q1 2020, salmon prices averaged

around 70 NOK / kilo – a period with limited global growth

and the European market not yet impacted by Covid-19.

During the pandemic, the salmon processing industry in Eu-

rope has had a historically important role with their capaci-

ty and opportunity to absorb larger volumes, producing and

increasingsalesofsmokedsalmon,freshllet,andfrozen

products to the retail sector. Poland, the largest salmon hub

for secondary processing, noted a signicant increase in

supply in the second half of 2020. Spot prices were at the

lowest point during Q4 2020 – low NOK 40-ties, approach-

ing an average cost of production in Norway.

This illustrates the increased dependency and market con-

centration which continued to impact the market into 2021.

However, strong demand from particularly the United States,

Southern Europe (France, Spain, Italy) and the Asian market

gradually restored the market balance. The gradual return of

high-value segments (e.g. foodservice and overseas market)

and organic growth in demand for Atlantic salmon resulted

in spot prices in December 2021 at the pre-pandemic lev-

el.Inthersttwomonthsof2022,demandhasremained

strong(normalization)combinedwithlimitedglobalgrowth

for fresh salmon.

SUPPLY AND MARKET PRICES

Source: Kontali

Fig. 54

Change in global

market supply of

farmed Atlantic

salmon from the

previous year

Change in European

spot prices — fresh

Atlantic salmon

(Nasdaq 3-6 kg in

NOK) from the

previous year

-60%

-40%

-20%

20%

40%

60%

80%

2016 20 17 2018 2019 2020 2021

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

TOP 15 – FARMING COMPANIES (SALMONIDS)

In 2020, the world’s largest 15 salmon farming companies

harvested approximately 2 million tonnes wfe of salmonids

(Atlantic Salmon, Coho Salmon, Chinook, Big Trout), repre-

senting 64 % of the total harvest quantity. In Norway, these

companies made up 59 % of the total harvest and 69 % in

Chile.

* Aquachile, Salmones Magellanes, Los Fiordos and Friosur merged in 2018. The company is controlled by Agrosuper

** Volumes from Scottish Sea Farms (50% stake) not included. Owned 50/50 by Lerøy Seafood and Salmar

*** Bakkafrost acquired The Scottish Salmon Company in 2019

**** Excluding UK operations, acquired by Scottish Sea Farms, pending approval from EU competition authorities in Dec 2021

***** Mowi has 48% ownership in Nova Sea.

Source: Kontali

Fig. 55

TOP 15 SALMON FARMING COMPANIES IN 2020

(HARVEST VOLUME, ALL FARMED SALMONID SPECIES)

Group Head off. Total Norway United K Chile North Am. Faroe Isl. Australia Other

MOWI NO 488,800 291,100 58,600 71,800 48,900 9,600 8,900

AQUACHILE* CL 248,000 248,000

LERØYSEAFOODGROUP** NO 189,800 189,800

MITSUBISHI/CERMAQ NO 184,800 73,100 93,400 18,300

SALMAR** NO 179,400 167,000 12,400

COOKEAQUACULTURE CA 119,500 29,000 28,500 62,000

MULTIEXPORT CL 99,200 99,200

BAKKAFROST*** FO 95,200 38,900 56,300

AUSTRALISSEAFOOD CL 87,500 87,500

GRIEGSEAFOOD**** NO 79,000 55,400 23,600

SALMONESBLUMAR CL 66,400 66,400

SALMONESCAMANCHACA CL 56,600 56,600

NOVASEA***** NO 47,300 47,300

TASSAL AU 45,500 45,500

NORDLAKS NO 44,000 44,000

Top15 2,031,100 867,700 126,500 751,400 152,800 65,900 8,900 57,900

Global harvest-Farmed Salmonids 3,168,900 1,461,500 183,300 1,066,700 166,500 80,600 16,300 194,000

Share 64% 59% 69% 70% 92% 82% 55%

30%

MARKET REVIEW

PERFORMANCE

ANNUAL REPORT 2021

BUSINESS REVIEW – FISH FEED

The total feed consumption of ocean-farmed salmonids has

seen an increase of approximately 1 million tonnes over the

past decade, to almost 4.7 million tonnes of feed in 2021.

Norway and Chile accounts for approximately 60 % of this

increase. The granting of new license capacity and increased

smolt stocking in Norway has facilitated production growth and

increased feed consumption over the last few years. In Chile,

both higher stocking and improved productivity (increased

weights) have driven the growth. Growth has also been notable

in other European farming regions and in Australia and Russia.

Landbased grow-out production remains on a marginal level.

The share of marine ingredients in feed for farmed salmonids

has shown a decreasing trend over the last decade. However,

shmealandshoilpricesstillimpactthefeedpricedeliv-

ered to farmers.

In2021,globalshmealproductionremainedrelativelysta-

ble, increasing by 2% to around 5.1 million tons. Two success-

fulshingseasonsinPeruliftedtheoutputby18%toabove

1.2 million tons while the production in Northern Europe de-

creased due to lower landings of blue whiting and sandeel.

DespitehigherlandingsinPeru,shoilproductiondecreased

around 4% due to low oil yield in the anchoveta landings.

Pricesforshmealhasremainedremarkablystablethrough-

out the last year, considering the high price level on substi-

tutes like soy and rape. The successful production season in

Peruandhigherlandingsofshforreductionin theNorth

Atlantic(capelinetc.)willprobablykeepshmealpricesona

reasonable level in the coming months as well.

Source: Kontali

Loweroutputofshoilhasalreadyaffectedthepricelevel,

and we have seen increasing prices in Europe and Peru over

the past weeks.

China is increasingly consuming a larger share of the global

shmealproductionas importsreachedan all-timehigh at

1.8 million tonnes in 2021, a 28% increase from the year

before. Of this, 56% of the volumes were sourced from Peru.

The Chinese pig inventory appears to have recovered, which

hasincreasedthedemandforshmeal.

Fig. 57

Fig. 56

ESTIMATED FEED CONSUMPTION/SALE TO SALMONIDS

Country 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E

Norway 1,652 1,618 1,738 1,743 1,704 1,822 1,837 1,965 2,120 2,184

Chile 1,255 1,209 1,263 1,239 1,036 1,191 1,269 1,406 1,374 1,295

UK 210 223 231 245 244 241 249 273 291 276

North America 235 202 235 255 264 282 289 307 286 274

Faroe Islands 89 96 98 103 107 101 102 108 117 125

Others 280 291 324 346 344 383 393 431 471 536

Total 3,721 3,639 3,889 3,931 3,699 4,020 4,139 4,490 4,659 4,690

750

1,500

2,250

3,000

2016 2017 2018 2019 2020 2021

Fishmeal

Fishoil

Soyameal

Rape oil

Wheat

Maize

DEVELOPMENT IN FISH FEED (RAW MATERIAL PRICES LAST 5 YEARS. USD/TONNE)

MARKET REVIEW

RISKS

Risk Management

The Bakkafrost Group is exposed to several risks, which will

always be a natural part of our business activities. Therefore,

risk management is crucial so that the risks Bakkafrost is

exposedtoandthepotentialnancialimpactisreducedto

an acceptable level.

Bakkafrost has general operational and business risks aris-

ing from the normal business activities in the value chain.

In addition to the operational risks, Bakkafrost is exposed to

marketsandnancialrisksarisingfromthenormalbusiness

activities in the value chain.

RISK MANAGEMENT STRUCTURE AND PROCESS

TheBoardofDirectorshasthenalresponsibilityfortherisk

management of the Group. The Board of Directors determines

the framework for identifying and mitigating risks. The Audit

Committee supervises risk management.

The Group Management is responsible for the daily compli-

ance with the risk management framework and the Group’s

day-to-day risk management. The Group Management as-

sesses the Group’s principal risks on an ongoing basis, based

on weekly or monthly reporting from the organisation on

business activities, market development, technology etc. The

continuous risk assessment is followed up yearly with an

extensive risk analysis for the whole Group. The risks are

assessedandquantied,andreportedtotheGroupManage-

ment. The latest analysis of the Group’s risks was in Decem-

ber 2021.

Around year-end, the status of main risks is reported to the

Audit Committee and is approved by both the Audit Commit-

tee and the Board of Directors.

OPERATIONAL RISKS

Farming

One of the most signicant risk factors, Bakkafrost is ex-

posed to is the biological risk in the seawater grow-out stage.

Examplesofsuchrisksaredirectthreatstothesh,suchas

diseases, sea lice and algae blooms. Although comprehensive

measures are put in place to mitigate negative impact arising

from exposure to such threats, there is always a variation in

key performance indicators such as mortality, growth, yield

per smolt, price achievement versus reference prices, feed

conversion ratio, costs of mechanical and medicinal treat-

ment and required fallowing time between generations for

sites or larger geographic areas. The impact from being ex-

posed to such risks can vary from minor cost variations to a

complete wipe-out of the biomass in a vast geographic area.

Due to exceptionally good mitigating measures in the Faroe

Islands, the outcome on key performance indicators has been

attractive in recent years. However, the corresponding scores

have generally been less attractive in Scotland and have had

signicantly higher volatility. Bakkafrost’s investment plan

forScotlandisexpectedtoreducetherisksignicantly.

Althoughoperationalrisksaretoacertainextentreectedin

budgets using estimates for mortality and the percentage of

shwhosequalityisdowngradedinconnectionwithprimary

processing, such risks might, if they occur, materially affect

Bakkafrost’sresultsandnancialcondition.Bakkafrost’sop-

erationscanalsobemateriallyimpactedbywhatisclassied

as normal operating risks, e.g., quality from suppliers and

sub-suppliers, etc. The salmon farming industry is associated

with a high level of biological risk, and Bakkafrost aims at

reducing that risk through the entire production cycle using

systematic group-wide biosecurity auditing.

Mortality

The farming industry in the Faroe Islands has experienced

a lower mortality rate than the rest of the farming industry

in the last decade. However, in recent years, Bakkafrost ex-

perienced an increase in the mortality rate mainly due to a

shift from medical to mechanical lice treatment and some in-

cident-based cases. The increase in mortality in recent years

demonstratesthat changes in farmingmethodscan signi-

cantly impact mortality. Bakkafrost is continuously working

on reducing mortality to have a 94% survival rate in the Far-

oe Islands. In Scotland, the survival rate is expected to be

somewhat lower, and Bakkafrost targets 88% in 2026.

Price premium

Bakkafrost has had a higher price achievement for the Faro-

ese and Scottish salmon than reference prices in recent years.

This price premium is based on, amongst other things, brand,

salmonqualityandsize.Thispricepremiumcanonlybeob-

tained if Bakkafrost as a Group differentiates from the rest

of the farming industry. Bakkafrost Group strives to maintain

this position in the market.

Storms

The growth rate of farmed salmon depends, among other

things, on weather conditions. Unexpected warm or cold

temperatures can signicantly negatively impact growth

rates and feed consumption. Bakkafrost operates at sea

under sometimes challenging conditions. This can result in

incidents or necessary measures that may have signicant

cost implications, e.g., unexpected maintenance/repairs or

escaped sh, even if Bakkafrost continually reduces risks

using experience with equipment, location, and operational

organisation. Bakkafrost’s facilities are in areas where the

weather conditions are well known and the facilities well se-

cured. However, other weather conditions, such as storms or

oods,couldalso lead to unexpectedlosses at facilities.In

recent years, Bakkafrost has moved several farming sites in

the Faroe Islands to more exposed areas but simultaneously

upgraded the farming equipment to more robust equipment

to mitigate the risk of storms.

RISKS AND RISK MANAGEMENT

RISKS

ANNUAL REPORT 2021

Disease

Theoperationofshfarmingfacilitiesinvolvesconsiderable

risk regarding diseases. In the case of an outbreak of disease,

Bakkafrostwill, in addition to the direct loss of sh, incur

substantial costs in the form of premature harvesting, loss

ofqualityofharvestedshandsubsequentperiodicreduced

production capacity. Examples of diseases being prevalent

in the Faroe Islands in recent years are Amoebic gill disease

(AGD), Bacterial kidney disease (BKD), Infectious salmon

anaemia (ISA), Cardiomyopathy syndrome (CMS) and Heart

and skeletal muscle inammation (HSMI). Corresponding

diseases prevalent in Scotland are, in addition to the above,

Pancreas disease (PD) as an example.

Bakkafrost’s large smolt strategy and investments in fresh-

water treatment capacity play essential roles in mitigating

these risks.

Sea lice

Sea lice is one of the most signicant risks and challenges

in the farming industry globally. Increased number of sea

lice may cause stress, which can lead to diseases. Bakkafrost

has procedures for reducing the number of sea lice with dif-

ferent types of treatment. The procedures are improved con-

tinuously.

Bakkafrostuses lumpsh as cleaner sh for sea lice. Lump-

shistheonlycleanershusedintheFaroeIslands,whilea

combinationoflumpshandwrasseisusedinScotland.These

cleanershareessentialpreventivemeasuresagainstsealice.

Bakkafrostusesafreshwaterbathon-boardliveshcarriers

and lukewarm seawater treatments in farming service vessels

as a sea lice treatment. Additionally, Bakkafrost strives to im-

prove delousing methods continuously.

Escapes

Bakkafrost has a zero tolerance for the escape of farmed

salmon. However, the company operates many seawater

sites, each exposed to risks linked to bad weather, handling

ofsh,changingofnets,operationsofworkboatsandwell

boats,predators,etc.Thedirectnancialexposuretoescapes

ismoderateduetothegeographicdiversicationofthesites.

The indirect effects such as the spread of diseases, negative

impact on wild salmon, governmental penalties and negative

publicity are hard to quantify for the accounts of Bakkafrost

and the society. Procedures, quality assurance systems and

new technological solutions, such as predator-resistant nets,

are essential elements to mitigate the risk of escapes.

Smolt

The smolts are produced in freshwater hatcheries on land.

Therefore, enough freshwater is critical for smolt production

as reduced freshwater intake can severely affect the water

quality in the hatcheries and cause mortality. In the Faroe Is-

lands, Bakkafrost’s hatcheries use water-recycling technology

(RAS), whereby more than 97% of the freshwater is recycled.

Thissignicantly reducestherisk offreshwatershortage.In

Scotland, Bakkafrost’s hatcheries are in part ow-through

hatcheries but will all be replaced by modern RAS-based

hatcheries over the following years.

Bakkafrost releases millions of smolt per year. A limited ca-

pacity in the wellboats for smolt transport can necessitate

smolt transportation under sub-optimal conditions such as

bad weather. This can strain the released smolt, leading to

higher mortality. Bakkafrost is constantly improving handling

procedurestooptimiseshwelfare.Transportofshhaveim-

proved considerably over the years, and a lot of this is caused

by improved knowledge and experience of the workers.

In 2022, Bakkafrost will increase the wellboat capacity

signicantly. This will help mitigate the risk associated with

the smolt transfer.

Roe

Essential to a good smolt production is the quality of roe.

Bakkafrost is dependent on external providers of roe. Poor

roe quality reduces the survival of fry in start feeding and

affects the whole salmon production chain. Bakkafrost is

ramping up its own roe production from the Faroese and Na-

tive Hebridean strains, which Bakkafrost owns. This reduces

dependence on external providers of good quality roe, and

Bakkafrost will control the productions. Also, this will reduce

the risk of importing foreign pathogens into the stocks.

Raw materials for shmeal, sh oil and sh feed

Theproductionofshmeal,shoilandshfeedfollowestab-

lished methods with automated and controlled processes. As

theself-sufcientoperatorofshmeal,shoilandshfeed,

Bakkafrost is exposed to certain risks which may require the

purchaseof sh feed from a third party.For example, Bak-

kafrost is vulnerable to food safety incidents, downtime, and

possibleinsufcientsupplyofrawmaterialinput.Unexpected

shortfalls in raw material due to limited catch volumes or lim-

iteddeliveryorpurchaseofshorsupplyofsubstitutescould

affect the volumes produced in the factory. This may result in

incidents or necessarymeasures with signicant costimpli-

cations. Bakkafrost is continually working on reducing risks.

TheCompany’sshmeal,shoilandshfeeddepartmentat

Havsbrún’s facilities are in the Faroe Islands, in which case

the Company’s business could be materially adversely affect-

ed directly from any trade restrictions or indirectly through

restrictions on ocean harvests or quotas. Although any salmon

farmer,beinganetbuyerofshfeed,isindirectlyexposedto

the same risk factors, this risk is usually mitigated contractu-

ally through third-party replacement obligations.

RISKS AND RISK MANAGEMENT

RISKS

ANNUAL REPORT 2021

Feed contaminants

Through its use of different types of raw materials and ingre-

dients and its production processes, the feed may be exposed

to contamination by several undesirable substances. Most

contaminants are accumulated in organisms, such as marine

wildcatchusedtoproduceshmealandshoil.These con-

taminants are deposited into the organism’s fat, and the con-

centration is greater the higher up the food chain. Authorities

set maximum allowable levels for the most critical contami-

nants. These limits are continuously monitored by the author-

ities and may be altered. There is also the possibility of “new”

contaminants being added periodically to the list.

Generally, contamination may occur either accidentally or de-

liberately through malicious product tampering. Such contam-

inationcanaffecttheenvironment,shhealth,andfoodsafe-

ty,potentiallynegativelyimpactingthepublic’scondencein

eating salmon. Any of these events could hurt Bakkafrost’s op-

eratingresultsandnancialcondition.Futurelegislationmay

increase the risk of non-compliance and the cost of ensuring

compliance. The reputation risk associated with non-compli-

ancemaybesignicantevenifthereisnoimpactontheen-

vironment,shhealthorfoodsafety.

The Company´s feed department, Havsbrún, operates sever-

al controls to reduce the risk of contamination. Examples of

measures and controls included in HACCP and ISO procedures

includesupplierauditsandsupplierspecicationsofrawma-

terials, targeted sourcing of raw materials, regular raw mate-

rialandnishedfeedqualitycontrolanalyses,proceduresfor

cleaningshoils,etc.andstrictplantsecurityprocedures.The

risks, however, can never be eliminated.

Contaminantsthatmaybeariskforshfeedinclude,butare

not limited to, organic contaminants such as dioxins and DL-

PCBs, mycotoxins, pesticides, antioxidants such as Ethoxyquin

andBHT,brominatedameretardantsandbacterialcontam-

what changes should be made to reduce all possible risks of

re.Toreducetheriskofrespreading,thelargeproduction

facilities and hatcheries are divided into several separate

recellswithautomaticreextinguishingsystems.Thewalls

withinrecellsarecoveredwithresafematerialandthe

staffaretrainedinhandlingrehandlingincidents.

IT RISKS

Cyber security

With the increased use of technologies such as the inter-

net to conduct business, the Group and its customers and

service providers are susceptible to operational information

security and related “cyber” risks both directly and indirect-

ly. This could result in material adverse consequences for

the Group and the shareholders, such as causing disruptions

and impacting business operations, potentially resulting in

nanciallosses. Ingeneral,cyberincidents canresultfrom

deliberate attacks or unintentional events. Cyber incidents

include, but are not limited to, gaining unauthorised access to

digital systems (e.g., through “hacking” or malicious software

coding) for purposes of misappropriating assets or sensitive

information, corrupting data (e.g. ransomware), or causing

operational disruption. Cyber-attacks may also be carried

out in a manner that does not require gaining unauthorised

access, such as causing denial-of-service attacks on web-

sites (i.e., efforts to make network services unavailable to

intended users). In recent periods, examples have shown that

large industrial groups can be subject to complete shutdowns

because of cyber-attacks. For Bakkafrost, such an incident

would require personnel to apply manual backup systems to

the extent possible. The most exposed area of the Company’s

value chain in case of cyber-attacks is hatcheries, process-

ing and sales. For shorter periods, harvestable sh can be

held in seawater sites pending a solution to such an adverse

event,implyingadelayinprotsandcashows.

ination and inorganic contaminants such as lead, mercury,

arsenic, and cadmium.

Even though all tests show that the levels of pollutants in the

Bakkafrost salmon are well within the safety limits imposed

by, e.g., the European Union, Bakkafrost has from early 2015

cleanedtheshoilusedforBakkafrost’ssalmonfeedforDL-

PCBs and other pollutants. Since early 2018, the antioxidant,

Ethoxyquin has been replaced with a natural antioxidant.

Through accidents or tampering, the feed may also be con-

taminated by other inorganic substances such as mineral oil,

physical objects, etc. Several substances in addition to the list

above are being monitored.

Fish meal spontaneous combustion

Spontaneous combustion is a serious risk that could occur

whenshmealisstoredinsilosortransportedoverseas,al-

though very improbable. To avoid this, Havsbrún adds nat-

uralantioxidantstotheshmealduringproduction.Thead-

dition of an antioxidant is done according to requirements

from IMO to prevent spontaneous combustion of shmeal

stored and transported overseas. IMO is a specialised agency

of the UN, the global standard-setting authority for the safe-

ty, security, and environmental performance of internation-

alshipping.Bynotaddingantioxidantstotheshmeal,the

possibility of spontaneous combustion would be present, in-

creasingtheriskofanexplosion/re.Theantioxidantdosage

is based on research results from an IFFO report combined

with equivalent internal research based on Havsbrún's stor-

age and transport conditions.

Fire in production facility or hatchery

AreoccurrenceinoneofBakkafrost’slargeproductionfa-

cilities or hatcheries could be severe. To mitigate the risk of

re, regular re-technological inspections and assessments

are made by 3rd parties who also advice on and supervise

RISKS AND RISK MANAGEMENT

RISKS

ANNUAL REPORT 2021

The IT risks are assessed continuously, based on the impor-

tance of a potential event for Bakkafrost operations and the

likelihood that the event may occur.

MARKET RISKS

Price on farmed salmon

The Company’s nancial position and future development

depend considerably on the price of farmed salmon, which

has historically been subject to substantial uctuations.

Therefore, farmed salmon is a commodity, and it is reason-

able to assume that the market price will continue to follow

a cyclical pattern. The balance between the total supply and

demand for farmed salmon is a crucial parameter.

Ination

Theinationrateshaveincreasedingeneral.Inationcould

affect revenues and the cost of operation, and the planned

investments.Inrecentyears,therehasbeensignicantina-

tion on vegetable ingredients for feed production. Bakkafrost

islessexposedtotheinationofvegetablefeedingredients

than its competitors due to the much lower vegetable content

in the Havsbrún feed. Also, Bakkafrost’s low feed conversion

ratio compared to competitors and compared to other animal

(non-salmon) protein producers can give Bakkafrost a

competitive advantage.

Price on shmeal and sh oil

Bakkafrost’s nancial position and future developmentde-

pend to some extent on the price of shmeal and sh oil,

whichhave historicallybeensubject tosubstantialuctua-

tions.Fishmealandshoilarecommodities,anditisreason-

able to assume that the market price will continue to follow

a cyclical pattern. The balance between the total supply and

demandforshmealandshoiliscritical.Decreasedsupply

may cause prices to increase. This could, in turn, impact the

company’sprotabilityandcashposition.

Price on sh feed

Feedcostsaccount fora signicant proportion of the total

production costs within the salmon farming segment, and

feedpriceuctuationscouldsubstantiallyimpactprotabili-

ty.Feedpricesareaffectedbyboththeglobalmarketforsh-

meal and marine/animal/vegetable oils, and the feed industry

is dominated by a small number of large, global producers.

Natural limitations in the marine resource base could lead to

globalshortagesofshmealandshoilforshfeedproduc-

tion. However, the feed producers have come a long way in

their efforts to replace some of the marine-based input fac-

tors with vegetable raw materials. Furthermore, the produc-

tionofshfeedisanintegratedpartofBakkafrost’svalue

chain and thus reducing this risk.

Customer and market dependency

Singlelarge customersorspecic marketsaccountingfora

large share of sales can constitute a risk to future revenues.

Bakkafrost maintains a diversied sale strategy, spreading

the sale across many customers in several markets. Bakkaf-

rost’s strategy is to sell around 30-40% of the harvest volume

to the retail segment, whereas the remaining share is sold to

thefoodservicemarket.Inaddition,Bakkafrosthastheex-

ibility and necessary production capacity to adapt the pro-

duction to changes in demand, as demonstrated during the

Covid-19 pandemic.

FINANCIAL, LEGAL & REGULATORY RISKS

Macro-economic factors

Bakkafrost operates in different countries and sells its prod-

ucts all over the world. Hence, Bakkafrost is subject to mac-

roeconomic changes, whether local, regional or global. Such

changes can be positive and negative to Bakkafrost and can

signicantlyimpactBakkafrost.TheCovid-19pandemicand

theongoingconictbetweenRussiaandUkrainearerecent

examplesoftheworldeconomy,marketandtradeowcan

bedisrupted.Thisincreasesthelevelofnancialuncertainty

signicantly.

Bakkafrostmaintainsa diversiedapproachtothe market,

spreading the risk by selling products to different geograph-

ic markets and selling to different channels (retail vs food

service).Beingpresentindifferentmarkets,whicharenot-

nancially dependent on each other, lowers this risk. Likewise,

Bakkafrost seeks to source raw materials and services from

many suppliers to avoid relying on single suppliers.

Foreign exchange risk

Bakkafrost trades in the world market for farmed salmonids.

The revenues and accounts receivable are predominantly de-

nominated in DKK, EUR, USD and GBP, but to some small ex-

tent also in other foreign currencies. Accounts payables are

primarily in DKK, USD, GBP and NOK. As a group, Bakkafrost

hassignicantnaturalhedging.Forthosecurrenciesnotfully

hedged,uctuationsinforeignexchangeratespresenta-

nancialrisktoBakkafrost.TheCompany’snanceagreement

is a 700 mEUR multicurrency facility giving Bakkafrost the

possibility to request other currencies at utilisation.

Bakkafrost’s foreign exchange risk is partly mitigated through

the natural hedging within the Group. Intragroup transactions

and external trade balance reduce the Group’s foreign ex-

change rate exposure to the reporting currency. A hedging

strategy for the remaining net exposure to foreign exchange

rates is implemented to reduce the risk further. The perfor-

RISKS AND RISK MANAGEMENT

RISKS

ANNUAL REPORT 2021

mance of the hedging strategy is reviewed monthly, and the

Board oversees the strategy.

Insurance risk

Bakkafrosthassignicantassetsandtradeowsatrisk,and

risk mitigation is sought through insurance. The insurance

market has tightened in recent years, and the insurance mar-

ket has become less competitive. To get appropriate insurance

cover at competitive prices, Bakkafrost offers its insurances

to international insurance companies, and Group policies are

sought where feasible. External benchmarking is performed

regularly, and brokers are used to negotiating terms and pull

quotesforabroadereldofinsuranceproviders.

Tax risk

The Bakkafrost Group is complex, with subsidiaries in sev-

eral jurisdictions. This increases the risk of non-compliance

with local tax rules, and transfer pricing rules becomes more

complicated. To mitigate this risk, Bakkafrost relies on tax

and legal advice and relevant services from acknowledged

competent external advisors/experts covering the jurisdic-

tions where Bakkafrost has its operation. Bakkafrost also

maintainsarmtransferpricingpolicyanddocumentation.

Credit risk

The risk that counterparties do not have the nancial

strength to meet their obligations is considered relatively

low since historically, losses due to bad debts have been

small. Bakkafrost has guidelines to ensure that sales are

made only to customers that have not previously had pay-

ment problems and that outstanding balances do not exceed

xedcreditlimits.Mostaccountsreceivablesareinsured,but

as not all receivables are insured, Bakkafrost must accept a

certain risk element in accounts. Bakkafrost has implement-

ed strong internal controls to reduce the credit risk. This in-

cludes centralised weekly monitoring of debtors’ balances,

and any non-standard credit terms need to be approved by

the Credit Committee.

Liquidity risk

LiquidityriskistheriskthatBakkafrostwillnotmeetits-

nancial obligations as they fall due. Liquidity risk is managed

by maintaining a exible nancial structure, secured using

established borrowing facilities. Bakkafrost’s objective is to

havesufcientcash,cashequivalentsormedium-termcredit

facilities to meet its borrowing requirement in the short term.

Unused credit facilities and terms are described in Note 3.11.

Capital structure and equity

The prime objective of Bakkafrost’s capital management is

to ensure that it maintains a good credit rating to achieve

favourable borrowing terms. By ensuring a good debt-to-eq-

uity ratio, Bakkafrost will support its business operations.

Bakkafrost manages and changes its capital structure in re-

sponsetoanongoingassessmentofthenancialconditions

under which the business operates. It’s short- and medi-

um-term outlook, including any adjustment in dividend pay-

outs, buyback of its own shares, capital reduction or issue of

new shares.

Regulatory

Due to environmental or animal welfare concerns, regulatory

imposition may materially impact the Company’s operations

and nancial condition. The Company emphasises organis-

ing its operations so that the risk for unexpected measures

is reduced. Still, there will always be a latent risk that the

regulatory authorities will impose restrictions and/or sudden

changes in the industry framework.

Salmon farming is regulated by licenses. The Group has

a good dialogue with the Faroese and Scottish authorities

regarding the prerequisites and restrictions connected to a

farming license.

In Scotland, all licenses and consents, policies and regulations

are overseen by the Scottish Environment Protection Agency

(SEPA).

Theauthoritiesmaywithdrawlicensesforshfarmingoper-

ations if substantial preconditions have been changed since

the license was issued, if the license goes against overall de-

velopment plans and protective measures, or if the licensee

breaches the conditions set in connection with the issuance

of the license. The license may also be withdrawn if the com-

pany breaches the rule on maximum ownership of licenses

or does not use the license. The license may also be revoked

if the environmental license of the company is repealed.

In the Faroese Islands, a salmon farming license is issued

for a period of 12 years from the date of issue. The Faroese

government may prolong the license period. If the company

fullstheconditionsin thelicenseandifacontinuationof

the activities is not contrary to overall development plans,

which have been adopted, it must be assumed (but there can

be no assurance) that the company has a legal claim to have

the license period prolonged.

Under the Act on Environmental Protection and under

existing practice, the relevant environmental authorities may

demand a reduction in the stocking of fry, compared to the

last stocking, in case examinations of the seabed or other en-

vironmental studies show that pollution of the environment

exceeds certain specied limits. The Faroese environment

has become the subject of increasing attention and publici-

ty about aquafarming. Therefore it can be expected that the

rules in this area may become stricter or that existing prac-

tice will become stricter.

GeographicaldiversicationbyacquiringTheScottishSalm-

on Company has reduced the likelihood of regulatory changes

having devastating effects on a group level. In addition, con-

tinuous dialogue with regulators and politicians in the Faroes

andScotlandisperformedtobeabletoinuenceregulatory

changes and be prepared for changes. The dialogue occurs

directly and via memberships in industry organisations such

as Havbúnaðarfelagið and Salmon Scotland (former SSPO).

RISKS AND RISK MANAGEMENT

RISKS

ANNUAL REPORT 2021

Bakkafrost continuously monitors if the company complies

with legal and regulatory requirements, such as veterinary

regulations,foodsafety,humansafety,nancialregulations,

tax, corporate laws etc. This responsibility is unambiguous-

ly split between several parts of the organisation, e.g. the

QualityDepartment(FO),BiologyDepartment(SCO),Health&

Safety and Finance. External advice and assistance are used

when needed – e.g. lawyers and renowned professional ser-

vicesrms.

ESG RISK

ESG rating and stakeholder management risk

Sustainability is increasingly becoming a key priority to gov-

ernments, the public, NGOs, customers, investors and the

nancialmarketasawhole.Duetotheinherentcomplexity

in the “measurement of sustainability”, stakeholders are in-

creasingly relying on ESG ratings before making decisions on

buying Bakkafrost’s salmon, shares or providing nancing.

It is increasingly important to demonstrate to stakeholders

clearly and convincingly that Bakkafrost takes its ESG re-

sponsibility seriously. Failing in this can negatively affect

license to operate, sales, share price, and access to capital.

Bakkafrost has strengthened the capabilities and capacity

to engage with organisations providing ESG ratings. Active

dialoguewith themostimportantand inuentialratingor-

ganisations will increase transparency and accurately picture

Bakkafrost’ssustainabilityproleandachievements.

External dependencies for ESG commitments

Bakkafrosthassetseveralambitioustargets:thescope1&2

carbonemissionreductiontargetsfor2030andthenet-ze-

ro target for 2050. To reach these targets, the main hurdle

is that Bakkafrost relies on deregulation of the electricity

marketintheFaroeIslandsoraccesstosufcientamounts

of renewable energy to power its operation, primarily at

Havsbrún. Although the declared 2030 goal from the Faro-

ese Government is to have 100% renewable electricity in the

Faroesin2030,thereisasignicantriskthatthiswillnotbe

achieved. Also, it is uncertain if the offered electricity prices

in the Faroese national grid will be competitive compared to

non-renewable alternatives.

To mitigate this risk, Bakkafrost actively engages stakehold-

erstofacilitatethetransitiontocost-efcientsolutionsfor

powering Bakkafrost with renewable energy. This includes

lobbying the political system and cooperation with the Faro-

ese national electricity company, SEV.

RISKS

ANNUAL REPORT 2021

GOVERNANCE

ANNUAL REPORT 2021

Corporate

Governance

BAKKAFROST’S GOVERNANCE MODEL

P/F Bakkafrost is dedicated to maintaining high standards

of corporate governance. The company endeavours to be in

compliance with the Norwegian corporate governance re-

gime, as detailed in the Norwegian Code of Practice for Cor-

porate Governance, published on 14 October 2021 by the

Norwegian Corporate Governance Board (the “Code of Prac-

tice”). The recommendation may be found at www.nues.no.

Besides the Corporate Governance description in our annual

report, Bakkafrost publishes a more detailed report on Cor-

porate Governance, which may be found on our website.

Bakkafrost does not comply with the following recommenda-

tions in the Norwegian Code of Practice for Corporate Gov-

ernance:

• Section 3 stipulates, “that mandates granted to the board

should be limited in time to no later than the date of the

next annual general meeting”.

Bakkafrost’s Articles of Association § 4A gives the Board of

Directorsauthorizationtoincreasethesharecapitaluntil

the ordinary general meeting of the company in 2022, and

§4BgivestheBoardofDirectorsauthorizationtobuyown

shares on behalf of the company until the annual general

meeting is held in 2022. According to the Faroese company

law, a company may in its Articles of Association decide

that the AGM may give the Board of Directors authority

to increase the share capital and buy own shares. This

permission may last for more than one year. For practi-

cal reasons, this has been implemented into the Articles of

Association of P/F Bakkafrost. It is the Board’s view that

if shareholders nd this authorization unacceptable, the

Board will support a change to the Articles of Association.

SHAREHOLDERS

GENERAL MEETING

Bakkafrost’s shareholders

exercise their rights at the

General Meeting.

BOARD OF DIRECTORS

Consists of 3-7 members,

which are elected every

year. The Board of Directors

is responsible for the overall

management of Bakkafrost.

GROUP EXECUTIVE

MANAGEMENT

The Group Executive

Management is responsible

for the day-to-day

management of Bakkafrost.

NOMINATION COMMITTEE

Consists of four members,

which are elected by AGM.

Recommends candidates

for election to the Board of

Directors and Directors’ fees.

AUDIT COMMITTEE

Consists of three members

from the Board of Directors

and is chaired by the Board

of Directors’ Chairman.

CORPORATE GOVERNANCE

GOVERNANCE

ANNUAL REPORT 2021

Bakkafrost’s Governance Model

To ensure adherence to the principles, the company has elab-

oratedspecicinstructionsregardingrulesofprocedurefor

the Board of Directors, instructions for the Nomination Com-

mittee,instructionsfortheChiefExecutiveOfcerandother

management, guidelines with regards to values and ethics,

instructions for the Audit Committee, an investor relations

policy, guidelines relating to takeover bids and guidelines for

related-party transactions.

Shareholders and General Meeting

Shareholders exercise their rights at Bakkafrost’s general

meeting – such as appointing Bakkafrost’s Nomination Com-

mittee, Board of Directors and auditor.

The procedures at Bakkafrost’s general meeting follow the

standard rules stipulated in the Faroese company law and

Bakkafrost’s Articles of Association.

Nomination Committee

The Nomination Committee recommends candidates for elec-

tion to the Board of Directors and the Directors’ fees. The

deadline for submitting proposals to the Nomination Com-

mittee is 31 January.

Bakkafrost’s General Meeting elects the members, hereun-

der its chairman, for the Nomination Committee for a period

of two years, unless the General Meeting decides otherwise.

The remuneration payable to the Nomination Committee’s

members is also determined by the General Meeting.

The regulations governing the work of the Nomination Com-

mittee are incorporated in Bakkafrost’s Articles of Associa-

tion.

At the end of 2021, the members of the Nomination Com-

mittee were:

• Gunnar í Liða (Chairman)

• Eyðun Rasmussen

• Rógvi Jacobsen

• Leif Eriksrød

Board of Directors

Bakkafrost’s Board of Directors is responsible for the overall

management of the company and appoints a management

of one or several managers to manage the daily business of

Bakkafrost. The Board of Directors sets out the strategy for

Bakkafrost and decides major investments and divestments.

The Board of Directors is also responsible for ensuring that

Bakkafrost has at any time an appropriate capital base, key

policies and controls and for reviewing audit matters. The

Board of Directors is responsible for Bakkafrost’s Risk Man-

agement and material operational decisions.

The majority of the members of the Board of Directors

shall be residents in the Faroe Islands. The chairman of the

Board of Directors is elected by the general meeting, whilst

the vice-chairman is appointed by the Board of Directors.

The Board of Directors shall have between three and seven

members. Information about the members of the Board of

Directorsmaybefoundin“Directors’Proles”intheAnnual

Report.

The Board of Directors has laid down detailed rules regard-

ing its activities in a working procedure, which is reviewed

regularly.

The Board of Directors held ten meetings in 2021. Below

undereachDirector’sproleisdisclosedeachDirector’spar-

ticipation in the Board meetings held during 2021.

The members of the Board of Directors receive a xed

remuneration, which is approved by the general meeting. The

members of the Board of Directors that are not employed by

Bakkafrost are not part of Bakka frost’s share savings plan

for employees.

Audit Committee

The Audit Committee is a sub-committee of the Board of Di-

rectors and assists the Board of Directors in overseeing the

nancial and non-nancial reporting process, nancial and

business-related risks, internal controls, and compliance with

statutory and other requirements from the public authorities.

The Audit Committee decides the framework of Bakkafrost’s

external auditors, evaluates the auditors’ independence and

qualications.

Thecompany’sauditcommitteemetvetimesduring2021

to review accounting and operational issues in detail. The

committee consists of Rúni M. Hansen (Chairman), Øystein

Sandvik and Teitur Samuelsen.

Group Executive Management

The Group Executive Management leads Bakkafrost’s dai-

ly business and shall adhere to any decisions made by the

Board of Directors as well as to any rules and requests from

the Board of Directors.

The Board of Directors has in executive instructions laid down

specicrulesregardingtheauthorityanddutiesoftheGroup

Executive Management. The Board of Directors also decides

the employment conditions of the Group Executive Manage-

mentandgivesmorespecicrulesregardingitswork.

The Group Executive Management consist of CEO Regin

Jacobsen, CFO Høgni D. Jakobsen and managing director of

Havsbrún Odd Eliasen. Information about the Group Exec-

utive Management may be found in “Group Managements’

Proles”intheAnnualReport.

CORPORATE GOVERNANCE

GOVERNANCE

ANNUAL REPORT 2021

Corporate

Responsibility

and Sustainability

Governance and management

Bakkafrost’s core values specify an intent to act responsi-

bly, this includes thinking long-term on economic, social, and

environmental issues. The company follows a precautionary

approach to the management of sustainability risk through

our risk assessment process. The process allocates responsi-

bilityforthemitigationofsignicantoperationalrisks.Risks

are monitored throughout the supply chain and reported in-

ternally on a regular basis and externally on an annual basis

in the Annual Report and Sustainability Report.

TheAuditCommitteeassiststheBoardinoverseeingnan-

cial and business-related risks, internal controls and compli-

ance with statutory and other requirements from public au-

thorities. Sustainability strategy, management and reporting

is overseen by the Board of Directors and is the day-to-day

responsibility of Bakkafrost’s Management Team.

Sustainability is covered in Bakkafrost’s corporate strategy

and management plans and will continue to be integrated

into these in 2021, through the Healthy Living Plan.

Compliance and ethical conduct

Bakkafrost acts in accordance with strict national workplace

health and safety, environmental, and sh health and wel-

fare regulation in the Faroes. The company has an ongoing

commitmenttohavezerocasesofnon-compliance.

The company upholds and promotes good business practice

throughout the value chain, consistent with Bakkafrost’s core

values and principles. Its values guide its behaviour and ap-

proach to creating long-term value for customers, sharehold-

ers and society and are outlined in Bakkafrost’s Code of Con-

duct, which aims to create a sound corporate culture. The Code

requires all employees to observe high standards of business

and personal ethics in the conduct of their duties and responsi-

bilities. They must employ a fair and honest approach in every

dealing with fellow employees and all external stakeholders.

Further commitment to voluntary sustainability standards

andcerticationsisoutlinedbelow.

Workplace and human rights

The company is committed to respecting the protection of

human rights and to making sure that it is not complicit in

human rights abuses.

Its Code states a commitment to ensure that neither Bakka-

frost nor its business partners shall exploit children as a

labour force. This is supported by the standards, suppliers

are asked to sign up to, when entering into agreements.

Bakkafrost’s Code of Conduct also outlines its approach to

creating optimal working conditions and culture, including a

commitment to create a professional and positive work en-

vironment which is inclusive and free from discrimination.

In 2018, Bakkafrost strengthened its commitment in this area

by signing up to the ten principles of the UN Global Com-

pact to pledge to protect human rights; respect the freedom

of association and the right to collective bargaining; and to

have a workforce free from forced/compulsory/child labour

and discrimination. The company communicates its progress

against these principles annually in the Healthy Living Sus-

tainability Report.

Human capital

Bakkafrost employs 1,653 employees in the Faroe Islands,

UK, Scotland, and the USA. It acknowledges that to achieve

its mission and meet its strategic objectives, it must have a

capable and engaged workforce, which is committed to its

core values.

The company is dedicated to having a diverse and inclusive

workplace, to attract and retain talent and expertise, to build

workforce competency and maintaining high employee en-

gagement. The 2023 Healthy Living Plan outlines areas in

CORPORATE RESPONSIBILITY AND SUSTAINABILITY

GOVERNANCE

ANNUAL REPORT 2021

which the company will increase focus to strengthen its

human capital.

Health, safety and wellbeing

Protecting human capital involves maintaining a high stand-

ard of occupational health and safety and creating a healthy

working culture.

The company’s Code outlines its intention to ensure a sys-

tematic approach to attaining an injury and accident-free

workplace. This is achieved through a set of guidelines based

on the highest health, safety and environment standards.

Employees receive regular training on these.

Product quality and safety

Through various best practice standards and certication

programmes (outlined below), Bakkafrost ensures indus-

try-leading product quality and safety standards. A compre-

hensive internal control system is in place, which is regularly

inspected by the authorities; this involves daily product test-

ing and monitoring for compliance with national health and

food safety regulations. As well as ongoing adherence to the

highest standards, the company has made a commitment to

maintain our high omega 3 levels and maintain high custom-

er product quality scores.

Biosecurity, sh health and welfare

Bakkafrost is committed to upholding leading welfare stand-

ards and reducing the use of chemicals and medicines in

thepreventionofdiseaseandsealice.Theexperiencedsh

healthteam–madeupofcertiedveterinarians,biologists,

and assistants – has a strategy in place to achieve this, which

includes surveillance across all sites to ensure that optimal

health and welfare is always maintained. The company has

madeacommitmenttomaintainhighshsurvivalrates,to

maintain an industry-leading approach to animal welfare and

tohavezeroshescapes.

Environmental management and sustainable feed

Bakkafrostiscommittedtominimizingpollutionoftheenvi-

ronment from each stage of the value chain. The company’s

Code outlines an intention to strive to be market leading in

environmental protection. All employees will be required to

bear in mind the environmental effects work-related activi-

ties have on nature and the environment and apply environ-

mentally friendly solutions to the extent reasonably possible.

Thecompanyisfocusedonoptimizingitsefcientuseoffos-

sil fuels and has made a series of commitments towards the

health of the environment, including meeting a third-party

environmental standard, reducing the impact from packaging

on the environment and reducing its GHG emissions.

Collaboration and certication

As well as collaborating with the salmon industry through the

Faroese Aquaculture Association and the Global Salmon Ini-

tiative (GSI). Bakkafrost subscribes to several external stand-

ardsandcerticationprogrammestoensureproductsustain-

ability, quality and safety. The entire value chain in the Faroe

Islands – feed production, broodstock, hatcheries, farming

sites,andharvestingandprocessingplant– iscertiedac-

cording to the international GLOBAL G.A.P. standard, which

focusesonfoodsafetythroughouttheproduction,shwel-

fare, health and safety and environmental management. Our

value chain also has the Ohne Gentechnik Non-GMO add on.

The operation in Scotland is accredited according to BAP (4-

star) and BRC for the processing plants and the smokehouse.

Bakkafrost’s harvesting and value-added product (VAP) pro-

duction have the Aquaculture Stewardship Council (ASC)

ChainofCustodycertication,andtheVAPproductioniscer-

tied according to the BRC and IFS food safety standards.

Theshmeal,oilandfeedproductionatHavsbrúnholdsmul-

tiple certications; all units are certied to ISO9001:2015,

andthe shmealand shoildivisioniscertiedaccording

totheGMP+standards,theIFFORScerticationandtheMSC

Chain of Custody standard. Our salmon meal and oil also

have GMP+.

AllfarmingsitesintheFaroeIslandsareASCcertied.

Responsible leadership and value generation

The considerable value generated by Bakkafrost to the Faroe

Islands through employment, taxes and returns, means it has

a big responsibility to everyone with an invested interest

in the company. The company has made a commitment to

demonstrate responsible leadership at both a local and in-

ternational level and increase transparency on issues of high

stakeholder interest, such as community investment.

Further information on Bakkafrost’s management approach

to these issues, its plan to meet its commitments and its

2021 performance against them, can be found in Bakkaf-

rost’s 2021 Healthy Living Sustainability Report.

CORPORATE RESPONSIBILITY AND SUSTAINABILITY

GOVERNANCE

ANNUAL REPORT 2021

Shareholder

Information

Information to shareholders has high priority in Bakkafrost.

The company aims at maintaining a regular dialogue with

the Group’s shareholders through the formal channel of stock

exchange announcements, interim reports, annual reports,

annual general meetings and presentations to investors and

analysts.

AUDITORS

The consolidated accounts have been audited by P/F Januar,

løggiltgrannskoðanarvirki(StateAuthorizedPublicAccountants),

which is also the auditor of the parent company and all its sub-

sidiaries, registered in the Faroe Islands. Auditor for subsidiaries

- Bakkafrost UK Ltd is Forrester Boyd Chartered Account-

ants, Grimsby

- Bakkafrost USA LLC is CliftonLarsenAllen Llp, New Jersey.

- TheScottishSalmonCompanyPlcisAzets,Glasgow.

DIVIDEND POLICY

Bakkafrost aims to give its shareholders a competitive re-

turn on their investment, both through payment of dividends

from the company and by securing an increase in the value

of the equity through positive operations.

Generally, the company should pay dividends to its share-

holders, but it is the responsibility of the Board of Direc-

tors to make an overall assessment to secure the company a

healthy capital base, both for the daily operations and for a

healthy future growth of the company.

A long-term goal for the Board of Directors is that 30–50% of

adjusted EPS shall be paid out as dividends.

Bakkafrost’snancialposition isstrongwitha healthybal-

ance sheet, a competitive operation and undrawn available

credit facilities.

PARENT COMPANY’S FINANCIAL STATEMENTS

AND ALLOCATION OF PROFIT FOR THE YEAR

TheparentcompanyP/FBakkafrosthadanetprotofDKK

312 million for 2021. The Board of Directors has decided

to propose to the Annual General Meeting that DKK 5.14

(approximately NOK 6.99*) per share shall be paid out as

dividends. This corresponds to DKK 304 million (NOK 413*

million).

The Board thereby proposes the following allocation of funds:

- Result for 2021: DKK 312 million

- Transferred to other equity: DKK 8 million

- Total provision for dividends: DKK 304 million

After the payment of dividends, the distributable equity to-

tals DKK 8,901 million.

SHAREHOLDERS, CAPITAL AND VOTES

P/F Bakkafrost had on 31 December 2021, a total of

59,143,000 shares outstanding, each with a nominal value of

DKK 1. Of the 59,143,000 shares outstanding, P/F Bakkafrost

holds 67,835 treasury shares as at 31 December 2021.

Ticker code: BAKKA

LARGEST SHAREHOLDERS

These shareholders held directly or indirectly more than 5%

of the shares in the company as at 31 December 2021: Odd-

vør Jacobsen, Regin Jacobsen and Folketrygdfondet..

* The dividend per share in NOK is subject to changes, depending on the currency

rate NOK/DKK. The currency rate NOK/DKK will be announced on ex-date.

SHAREHOLDER INFORMATION

GOVERNANCE

Directors and Management

GOVERNANCE

ANNUAL REPORT 2021

Directors’ Proles

RÚNI M. HANSEN

Chairman of the Board

Born 1967. Faroese citizen. He joined the Board in 2009 and has

beenChairmansince.Thetermofofceexpiresin2022.Heiscon-

sidered to be independent. Executive Chairman of the industry hold-

ing company Tjaldur. Chairman of the Board of Mintra. Mintra is a

listed company on Oslo Euronext Growth

Education:

MSc. in Economics and Business Administration, Copenhagen

Business School. Postgraduate, Lancaster University.

Board meetings in 2021:

Participated in all 10 Board meetings in 2021.

Number of shares held in Bakkafrost:

Holds 10,761 shares - no change in portfolio in 2021.

Mr Hansen is a member of The UN Global Compact´s Platform

forSustainableOceanBusiness.HewasamemberoftheWorld

Economic Forum´s Agenda Council on the Arctic from 2012 to

2016. Mr Hansen has extensive experience in the seafood in-

dustry and the international energy industry. He was among

other members of Equinor´s Exploration Executive team. Dur-

ing his time in Equinor (former Statoil), he has been based

in London, Copenhagen, Oslo and The Faroe Islands. Prior to

Equinor (Statoil) he was in the seafood and shipping industry.

JOHANNES JENSEN

Deputy Chairman of the Board

Born1962.Faroesecitizen.HejoinedtheBoardin2009and

hasbeenDeputyChairmansince.Thetermofofceexpires

in 2022. He is considered to be independent. Managing Di-

rectoratP/FGist&Vist.

Education:

MBA, Lancaster University Management School.

Board meetings in 2021:

Participated in all 10 Board meetings in 2021.

Number of shares held in Bakkafrost:

Holds no shares – no change in portfolio in 2021.

Mr Jensen has extensive experience in seafood and market-

ing. He had a long career at Faroe Seafood, where he was

Marketing Director from 1992 to 2001. Mr Jensen is present-

ly also Chairman of P/F Frost and of P/F Visit Faroe Islands.

TEITUR SAMUELSEN

Board member

Born 1972. Faroese citizen. He joined the Board in 2016.

Thetermof ofceexpiresin 2022. He is consideredto be

independent. Managing Director at P/F Eystur- og Sandoyar-

tunlar.

Education:

MSc.inBusinessEconomics&Auditing,CopenhagenBusiness

School.

Board meetings in 2021:

Participated in all 10 Board meetings in 2021.

Number of shares in Bakkafrost:

Holds 100 shares – no change in portfolio in 2021.

Mr Samuelsen has extensive experience in accounting and

nance.HehasworkedatKMPGandDongE/PinDenmark

and has been CFO at Atlantic Petroleum (2005-2009) and

Bakkafrost (2009-2014). Mr Samuelsen is presently a mem-

ber of the Board of Directors at Betri Trygging.

DIRECTORS’ PROFILES

GOVERNANCE

ANNUAL REPORT 2021

ANNIKA FREDERIKSBERG

Board member

Born1971.Faroesecitizen.ShejoinedtheBoardin2008.The

term of ofce expires in 2022. She is not considered to be

independent. Sales Manager at Bakkafrost.

Education:

Basic Vocational Course, Commercial Line, Faroese Business

School.

Board meetings in 2021:

Participated in all 10 Board meetings in 2021.

Number of shares in Bakkafrost:

Holds directly and indirectly 16,250 shares – change in port-

folio in 2021: +187 shares.

Mrs Frederiksberg has extensive experience in the salm-

on industry and sales. She has been part of Bakkafrost’s

administration team and sales team for over 25 years.

ØYSTEIN SANDVIK

Board member

Born1948.Norwegiancitizen.HejoinedtheBoardin2013.

The term of ofce expires in 2022. He is considered to be

independent.

Education:

Bank Economist.

Board meetings in 2021:

Participated in all 10 Board meetings in 2021.

Number of shares in Bakkafrost:

Holds no shares – no change in portfolio in 2021.

Mr Sandvik has extensive experience in the nance sector

and seafood. He has held several positions at Nordea Bank

Norgewithinshfarmingandshery.MrSandvikispresently

a member of the Board of Directors of Coldwater Prawns of

Norway AS.

EINAR WATHNE

Board member

Born1961.Norwegiancitizen.HejoinedtheBoardin2019.

The term of ofce expires in 2022. He is considered to be

independent.

Education:

Master in Animal Nutrition at NMBU.

Ph.D. in Aquaculture, NMBU.

MBA, Handelshøyskolen BI.

Board meetings in 2021:

Participated in all 10 Board meetings in 2021.

Number of shares in Bakkafrost:

Holds no shares – no change in portfolio in 2021.

MrWathnehasextensiveexperienceintheseafoodbusiness.

MrWathnehasheldpositionsasCEOinCargillandEWOS.

DIRECTORS’ PROFILES

GOVERNANCE

ANNUAL REPORT 2021

REGIN JACOBSEN

Chief Executive Ofcer

Born 1966. Faroese citizen. Mr Jacobsen has been Chief

ExecutiveOfcerofBakkafrostsince1989.

Education:

Graduate Diploma in Business Administration and Accounting

(HD-R), Aarhus School of Business.

Number of shares held in Bakkafrost:

Holds 4,617,351 shares at year-end 2021.

Changes in portfolio in 2021: +596 shares.

Mr Jacobsen has extensive experience in the salmon indus-

tryandnances.HewastheFinancialManagerofBakkafrost

beforehebecameChiefExecutiveOfcerofBakkafrost.

HØGNI DAHL JAKOBSEN

Chief Financial Ofcer

Born1972.Faroese&Swedishcitizen.MrJakobsenhasbeen

ChiefFinancialOfcerofBakkafrostsince2019.

Education:

Business Design, Henley Business School.

MSc in Business Administration and Computer Science (cand.

merc.dat), Copenhagen Business School.

Number of shares held in Bakkafrost:

Holds directly and indirectly 74,593 shares at year-end

2021.

Changes in portfolio in 2021: +74,181 shares.

Mr Jakobsen has extensive experience in the management

consulting sector. Before joining Bakkafrost, he has held

positions as Senior Partner in Quorum Consulting and been

Management Consultant at PA Consulting Group.

ODD ELIASEN

Managing Director of Havsbrún

Born 1965. Faroese citizen.MrEliasenhas been Managing

Director of Havsbrún since 2012.

Education:

TeacherCerticateExam,UniversityoftheFaroeIslands.

Number of shares held in Bakkafrost:

Holds 184,969 shares at year-end 2021.

Changes in portfolio in 2021: +490 shares.

MrEliasenhasbroadexperienceintheshfarmingindustry

andhasbeenanactiveplayerinrestructuringtheshfarm-

ing industry in the Faroe Islands. He has been responsible

for Havsbrún’s farming activities and has held various board

positions in the industry. Mr Eliasen was a board member of

Bakkafrost from 2006 to 2012.

Group Management’s Proles

GROUP MANAGEMENT PROFILES

ANNUAL REPORT 2021

Statement by

the Management

and the Board of

Directors on the

Annual Report

Today, the Management and the Board of Directors have con-

sidered and approved the Annual and Consolidated Report

andAccountsofP/FBakkafrostforthenancialyear1Jan-

uary 2021 to 31 December 2021.

The Annual Report has been prepared in accordance with the

International Financial Reporting Standards as adopted by

the EU and Faroese disclosure requirements for listed com-

panies.

In our opinion, the accounting policies used are appropriate,

and the Annual and Consolidated Report and Accounts gives

atrueandfairviewoftheGroup'sandparentcompany's-

nancial positions at 31 December 2021, as well as the results

of the Group's and the parent company's activities and cash

owsforthenancialyear1January2021to31December

2021.

In our opinion, the management's review provides a true and

fair account of the development in the Group's and the par-

entcompany'soperationsandnancialcircumstances,ofthe

resultsfortheyearandof theoverallnancialpositionof

the Group and the parent company as well as a description of

themostsignicantrisksandelementsofuncertaintyfacing

the Group and the parent company.

We recommend that the annual report be adopted at the

annual general meeting.

Glyvrar, 31 March 2022

Management:

Regin Jacobsen

CEO

The Board of Directors of P/F Bakkafrost

Rúni M. Hansen Johannes Jensen Øystein Sandvik

Chairman of the Board Deputy Chairman of the Board Board Member

Annika Frederiksberg Teitur Samuelsen Einar Wathne

Board Member Board Member Board Member

STATEMENT BY THE MANAGEMENT AND THE BOARD OF DIRECTORS ON THE ANNUAL REPORT

ANNUAL REPORT 2021

Independent

Auditor’s Report

To the Shareholders of P/F Bakkafrost

Opinion

Wehaveauditedtheconsolidatednancialstatementsand

parentcompanynancialstatementsofP/FBakkafrostand

its subsidiaries (the Group), which comprise the consolidated

statementofnancialpositionasatDecember31,2021,and

the consolidated statement of comprehensive income, con-

solidated statement of changes in equity and consolidated

statementofcashowsfortheyearthenended,andnotes

totheconsolidatednancialstatementsandparentcompa-

nynancial statements,including asummaryof signicant

accounting policies.

In our opinion, the accompanying consolidated nancial

statementsandparentcompanynancialstatementsgivea

trueand fairviewoftheconsolidatednancial position of

the Group and the parent company as at December 31, 2021,

and of its consolidated nancial performance and its con-

solidatedcashowsfortheyearthenendedinaccordance

with International Financial Reporting Standards (IFRSs) as

adopted by the EU. Our opinion is consistent with our audi-

tor’s long-form report to the audit committee and the board

of directors.

Basis of opinion

We conducted our audit in accordance with International

Standards on Auditing (ISAs) and additional requirements

applicable in the Faroe Islands. Our responsibilities under

those standards and requirements are further described in

the Auditor’s Responsibilities for the audit of the Consolidat-

ednancialstatementsandparentcompanynancialstate-

ments section of our report.

We are independent of the Group in accordance with the

International Ethics Standards Board for Professional

Accountants (IESBA Code) and the additional ethical require-

mentsapplicableintheFaroeIslands,andwehavefullled

our other ethical responsibilities in accordance with these

requirements and the IESBA Code.

To the best of our knowledge and belief, prohibited non-

audit services referred to in article 5(1) of Regulation (EU) no

537/2014 were not provided.

Webelievethattheauditevidencewehaveobtainedissuf-

cientandappropriatetoprovideabasisforouropinion.

Appointment

P/F Januar was rst appointed auditors of P/F Bakkafrost

on18April2013forthenancialyear2013.Wehavebeen

reappointed by shareholders on AGMs for an annual engage-

ment every year since.

Key Audit matters

Key audit matters are those matters that, in our professional

judgment,wereofmostsignicanceinourauditofthecon-

solidated nancial statements of the current period. These

matters were addressed in the context of our audit of the

consolidatednancialstatementsasawhole,andinforming

our opinion thereon, and we do not provide a separate opin-

ion on these matters.

INDEPENDENT AUDITOR’S REPORT

ANNUAL REPORT 2021

Responsibilities of Management and Those Charged

with Governance for the Consolidated nancial

statements and parent company nancial statements

Management is responsible for the preparation and fair pres-

entationoftheconsolidatednancialstatementsandparent

company nancial statements in accordance with IFRSs as

adopted by the EU, and for such internal control as manage-

ment determines is necessary to enable the preparation of

consolidated nancial statements and parent company -

nancial statements that are free from material misstatement,

whether due to fraud or error.

Inpreparingtheconsolidatednancialstatementsandparent

companynancialstatements,managementisresponsiblefor

assessing the Group’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless manage-

ment either intends to liquidate the Group or to cease opera-

tions, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the

Consolidated nancial statements and parent company

nancial statements

Our objectives are to obtain reasonable assurance about

whether the consolidated nancial statements and parent

companynancialstatements,asawhole,arefreefromma-

terial misstatement, whether due to fraud or error, and to is-

sue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance, but is not a guarantee

that an audit conducted in accordance with ISAs will always

detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be

expectedtoinuencetheeconomicdecisionsofuserstaken

onthebasisoftheseconsolidatednancialstatementsand

parentcompanynancialstatements.

Key Audit matter Our response to the matter during our audit

Biomass at cost

Biomass at marine sites is not accurately ascertainable prior to

harvest and material accounting estimates are applied at the

balance sheet date regarding existence and valuation. Estimates

are based on information on the number at launch, feeding,

sea temperature, exposure to daylight and treatment for lice

and other health issues, and knowledge about how salmon

responds to these factors in terms of growth rate, mortality, feed

consumption ratio, and liability to stress and decease. Material

inherent risk is related to biomass at sea.

Summary of audit approach

During our audit, we:

• Applied our experience and knowledge about the characteristics

of the salmon production process when considering the

accounting estimates.

• Assured ourselves, that the estimates are based on factual data

and data which can be supported empirically.

• Assured ourselves, that management is applying estimates in

a way consistent with knowledge of the production process,

and that the estimates are performed consistently, and that the

estimates are free from bias.

• Assured ourselves of the ability of management to perform

these estimates by examining estimates made by management

at prior balance sheet dates on a back-end basis.

Biomass at Fair Value according to IAS41

Measuring biomass at fair value includes present value

calculations based on complex inputs regarding the properties

of existing biomass and forecast regarding growth and mortality

rates from the balance sheet date to harvest, quality distributions,

as well as market conditions at expected harvest date.

Summary of audit approach

During our audit, we:

• Reviewedandreconciledthecompany-speciccharacteristicsof

inputs into the valuation models

• Reconciled inputs into the calculations model to observable

market conditions at the balance sheet date.

• Reviewed the calculation model and ascertained that it is

comparable to industry standards.

• On a sample bases reperformed net present value calculation

Valuation of licenses and goodwill

The group has acquired production licenses at signicant

amounts as part of business combinations where the group is

identiedasacquireeaccordingtoIFRS 3.DuringthePurchase

Price Allocation process, licenses and goodwill at material

amountswereidentied.Carryingamountsarecalculatedusing

generally accepted valuation models, based on unobservable

inputs according to level 3 inputs in IFRS13.

Summary of audit approach

During our audit, we:

• Reviewed impairment model, and ascertained that it is built on

observable assumptions

• Aligned inputs to board approved plans and budgets, and

historical performance of the individual licenses

• Reviewed valuation models for mathematical coherence and

reperformed calculations on a test basis.

• Reviewedandchallengedtheindeniteusefullifeassumptions.

INDEPENDENT AUDITOR’S REPORT

ANNUAL REPORT 2021

As part of an audit in accordance with ISAs as adopted by

the EU and additional requirements applicable in the Faroe

Islands, we exercise professional judgment and maintain pro-

fessionalscepticismthroughouttheaudit.Wealso:

• Identify and assess the risks of material misstatement of

theconsolidatednancialstatementsandparentcompany

nancialstatements,whetherduetofraudorerror,design

and perform audit procedures responsive to those risks,

andobtainauditevidencethatissufcientandappropriate

to provide a basis for our opinion. The risk of not detecting

a material misstatement resulting from fraud is higher than

for one resulting from error, as fraud may involve collu-

sion, forgery, intentional omissions, misrepresentations, or

the override of internal control.

• Obtain an understanding of internal control relevant to

the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the pur-

pose of expressing an opinion on the effectiveness of the

Group’s internal control.

• Evaluate the appropriateness of accounting policies used

and the reasonableness of accounting estimates and relat-

ed disclosures made by management.

• Conclude on the appropriateness of management’s use of

the going concern basis of accounting and, based on the

audit evidence obtained, whether a material uncertainty

exists related to events or conditions that may cast signif-

icant doubt on the Group’s ability to continue as a going

concern. If we conclude that a material uncertainty exists,

we are required to draw attention in our auditor’s report to

therelateddisclosuresintheconsolidatednancialstate-

mentsandparentcompanynancialstatementsor,ifsuch

disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up

to the date of our auditor’s report. However, future events

or conditions may cause the Group to cease to continue as

a going concern.

• Evaluate the overall presentation, structure and content

oftheconsolidatednancialstatementsandparentcom-

pany nancial statements, including the disclosures, and

whethertheconsolidatednancialstatementsandparent

company nancial statements represent the underlying

transactions and events in a manner that gives a true and

fair view.

•Obtainsufcientappropriateauditevidenceregardingthe

nancialinformationoftheentitiesorbusinessactivities

within the Group to express an opinion on the consolidated

nancial statementsand parent company nancial state-

ments. We are responsible for the direction, supervision

andperformanceofthegroupaudit.Weremainsolelyre-

sponsible for our audit opinion.

We communicate with those charged with governance re-

garding, among other matters, the planned scope and tim-

ingoftheauditandsignicantauditndings,includingany

signicant deciencies in internal control that we identify

during our audit.

Wealsoprovidethosechargedwithgovernancewithastate-

ment that we have complied with relevant ethical require-

ments regarding independence, and to communicate with

them all relationships and other matters that may reason-

ably be thought to bear on our independence, and where

applicable, related safeguards.

From the matters communicated with those charged with

governance, we determine those matters that were of most

signicanceintheauditoftheconsolidatednancialstate-

mentsandparentcompanynancialstatementsofthecur-

rent period and are therefore the key audit matters. We

describe these matters in our auditor’s report unless law or

regulation precludes public disclosure about the matter or

when, in extremely rare circumstances, we determine that

a matter should not be communicated in our report because

the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benets of such

communication.

Statement on the management’s review

Management is responsible for the management’s review.

Our opinion on the consolidated nancial statements and

parent company nancial statements does not cover the

management’s review, and we do not express any kind of

assurance opinion thereon.

In connection with our audit of the consolidated nancial

statementsandparentcompanynancialstatements,ourre-

sponsibility is to read the management’s review and, in doing

so, consider whether the management’s review is materially

inconsistentwiththeconsolidatednancialstatementorour

knowledge obtained during the audit, or whether it other-

wise appears to be materially misstated.

Further, it is our responsibility to consider whether the man-

agement’s review provides the information required by the

International Financial Reporting Standards as adopted by

EU and further requirements in the FaroeIslands nancial

statements act.

Based on the work we have performed, we believe that the

management’s review is in accordance with the consolidat-

ednancialstatementsandparentcompanynancialstate-

ments and that it has been prepared in accordance with the

requirements of the International Financial Reporting Stand-

ards as adopted by EU and further requirements in the Faroe

Islandsnancialstatementsact.

Wedidnotidentifyanymaterialmisstatementintheman-

agement’s review.

INDEPENDENT AUDITOR’S REPORT

ANNUAL REPORT 2021

Report on compliance with the ESEF Regulation

As part of our audit of the Consolidated Financial Statements,

we performed procedures to express an opinion on whether

the Consolidated Financial Statements of P/F Bakkafrost for

thenancialyear1Januaryto31December2021withthe

lename[2138007LH7OP4V112978-2021-12-31-en.zip]isprepared,inallma-

terial respects, in compliance with the Commission Delegated

Regulation (EU) 2019/815 on the European Single Electronic

Format (ESEF Regulation) which includes requirements relat-

ed to the preparation of the annual report in XHTML format

and iXBRL tagging of the Consolidated Financial Statements.

Managementisresponsibleforpreparingaconsolidated-

nancial statement that complies with the ESEF Regulation.

This responsibility includes:

• The preparing of the annual report in XHTML format.

• The selection and application of appropriate iXBRL tags,

including extensions to the ESEF taxonomy and the

anchoring thereof to elements in the taxonomy, for all

nancialinformationrequiredtobetaggedusingjudge-

ment where necessary.

• Ensuring consistency between iXBRL tagged data and

the Consolidated Financial Statements presented in hu-

man-readable format; and

• For such internal control as Management determines

necessary to enable the preparation of a consolidated

nancialstatementthatiscompliantwiththeESEFReg-

ulation.

Our responsibility is to obtain reasonable assurance on

whether the Consolidated Financial Statement is prepared, in

all material respects, in compliance with the ESEF Regulation

based on the evidence we have obtained and to issue a re-

port that includes our opinion. The nature, timing and extent

of procedures selected depend on the auditor’s judgement,

including the assessment of the risks of material departures

from the requirements set out in the ESEF Regulation, wheth-

er due to fraud or error. The procedures include:

• Testing whether the Consolidated Financial Statement is

prepared in XHTML format.

• Obtaining an understanding of the company’s iXBRL

tagging process and of internal control over the tagging

process.

• Evaluating the completeness of the iXBRL tagging of the

Consolidated Financial Statements.

• Evaluating the appropriateness of the company’s use of

iXBRL elements selected from the ESEF taxonomy and

the creation of extension elements where no suitable

elementintheESEFtaxonomyhasbeenidentied.

• Evaluating the use of anchoring of extension elements

to elements in the ESEF taxonomy; and

• Reconciling the iXBRL tagged data with the audited Con-

solidated Financial Statements.

In our opinion, the Consolidated Financial Report of P/F

Bakkafrostforthenancialyear1Januaryto31December2021

withthelename[2138007LH7OP4V112978-2021-12-31-en.zip]

is prepared, in all material respects, in compliance with the

ESEF Regulation.

Tórshavn, 31 March 2022

Januar P/F

løggilt grannskoðanarvirki

StateauthorizedPublicAccountants∙ Company reg.no. 5821

Heini Thomsen

State Authorised Public Accountant

John Michal Petersen

State Authorised Public Accountant

ANNUAL REPORT 2021

Financial

Statements

and Notes

BAKKAFROST GROUP

ANNUAL REPORT 2021

BAKKAFROST GROUP

Table of Contents

Consolidated Income Statement for the year ended 31 December 94

Consolidated Statement of Other Comprehensive Income for the year ended 31 December 95

Consolidated Statement of Financial Position as at 31 December 96

Consolidated Cash Flow Statement for the year ended 31 December 98

Consolidated Statement of Changes in Equity as at 31 December 99

NOTES – SECTION 1 – BASIS OF PREPARATION 100

Thesectiongivesanoverviewofthenancialaccountingpoliciesingeneralandanoverviewofthemanagement’skeyaccountingestimates

Note 1. General Information 101

Note1.1SummaryofSignicantAccountingPolicies 101

Note 1.2 Basis of Presentation 101

Note 1.3 Consolidation Principles 101

Note 1.4 Translation of Foreign Currencies 102

Note1.5ClassicationPrinciples 102

Note 1.6 Functional Currency 102

Note 1.7 New standards 102

Note 1.8 Accounting Estimates 103

Note 1.9 iXBRL Reporting 103

TABLE OF CONTENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

NOTES – SECTION 2 – RESULTS FOR THE YEAR 104

This section gives more details on the results for the year, including operating segments, taxes and employee costs.

Note 2.1 Revenues 104

Note 2.2 Major Customers 104

Note 2.3 Operating Segment Information 105

Note 2.4 Salaries and other Personnel Expenses 109

Note 2.5 Other Operating Expenses 111

Note 2.6 Research and Development Expenses 111

Note 2.7 Net Financial Items 112

Note 2.8 Tax 113

NOTES – SECTION 3 – ASSETS AND LIABILITIES 115

This section gives more details on the assets that form the basis for the activities of Bakkafrost, and the related liabilities.

Note 3.1 Intangible Assets 115

Note 3.2 Property, Plant and Equipment 119

Note 3.3 Leasing 121

Note 3.4 Companies in the Group 123

Note 3.5 Shares and Holdings in other Companies 125

Note 3.6 Inventory 126

Note 3.7 Biological Assets 127

Note 3.8 Accounts Receivables and other Receivables 130

Note 3.9 Cash and Cash Equivalents 131

Note 3.10 Share Capital and Major Shareholders 132

Note 3.11 Interest-bearing Debt 134

Note 3.12 Mortgages and Guarantees 137

Note 3.13 Derivatives 138

Note 3.14 Provisions 139

TABLE OF CONTENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

NOTES – SECTION 4 – CAPITAL STRUCTURE AND FINANCING ITEMS 140

Thissectiongivesaninsightintothecapitalstructureandnancingitems.

Note 4.1 Financial Risk Management 140

Note 4.2 Categories and Fair Value of Financial Instruments 145

Note 4.3 Earnings per Share 146

NOTES – SECTION 5 – OTHER DISCLOSURES 147

This section gives more details on the statutory notes that have secondary importance from the perspective of Bakkafrost.

Note 5.1 Capital Commitments 147

Note 5.2 Related-Party Transactions 148

Note 5.3 Business Combinations 149

Note 5.4 Events after the Date of the Statement of Financial Position 150

Note 5.5 Auditor’s Fees 151

Note 5.6 Going Concern 152

Note 5.7 Alternative Performance Measures 152

TABLE OF CONTENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

Consolidated

Income Statement

FOR THE YEAR ENDED 31 DECEMBER

*Operational EBIT is EBIT before fair value adjustment of biomass, onerous

contracts, income from associates and revenue tax

DKK 1,000 2021 2020

Operating revenue 5,553,849 4,651,892

Purchase of goods -1,692,501 -2,276,518

Change in inventory and biological assets (at cost) -178,060 401,679

Salary and personnel expenses 2.4 -728,423 -690,452

Other operating expenses 2.5 -1,632,114 -1,062,719

Depreciation 3.1/3.2/3.3 -530,434 -446,765

Other income 2.5 28,877 44,041

Operational EBIT* 821,194 621,158

Fair value adjustments of biological assets 3.7 434,868 118,003

Income from associates 30,112 5,546

Revenue tax – FO -141,489 -53,584

Earnings before interest and taxes (EBIT) 1,144,685 691,123

Financial income 2.7 5,415 1,399

Financial expenses 2.7 -40,608 -36,317

Net currency effects 2.7 38,761 -13,096

Othernancialitems 2.7 -10,591 -17,125

Earnings before taxes (EBT) 1,137,662 625,984

Taxes 2.8 -173,626 -163,139

Prot or loss for the period continuing operations 964,036 462,845

Prot or loss for the year attributable to

Non-controlling interests -17 0

Owners of P/F Bakkafrost 964,053 462,845

964,036 462,845

Earnings/Diluted earnings per share (DKK) 4.3 16.32 7.83

CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

Consolidated

Statement of Other

Comprehensive

Income

FOR THE YEAR ENDED 31 DECEMBER

DKK 1,000 2021 2020

Prot for the year 964,036 462,845

Change in tax rate on equity posted PPA in prior years -193,574 0

Adjustment related to purchase price allocation 0 16,253

Changesonnancialderivatives  12,928 602

Hereof income tax effect -1,972 -83

Reserve to share based payment 1,570 1,170

Currency translation differences 36,139 -44,305

Reclassication-Currencytranslationdifferencesfund  -24,452 0

Reclassication-BiomassFairvalueadjustmentsfund  24,452 -134,819

Reclassication-Retainedearningsfund  0 134,819

Net other comprehensive income to be reclassied to prot or loss in subsequent periods -144,909 -26,363

Net other comprehensive income not to be reclassied to prot or loss in subsequent periods 0 0

Other comprehensive income -144,909 -26,363

Total comprehensive income for the year net tax 819,127 436,482

Total comprehensive income attributable to

Non-controlling interests -17 0

Owners of P/F Bakkafrost 819,144 436,482

819,127 436,482

CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

Consolidated

Statement of

Financial Position

AS AT 31 DECEMBER

DKK 1,000 Note 2021 2020

ASSETS

Non-currents assets

Intangible assets 4,495,726 4,493,395

Total intangible assets 3.1 4,495,726 4,493,395

Property, plant and equipment 3.2 4,888,778 4,220,599

Right of use assets 3.3 302,105 353,192

Total property, plant and equipment 5,190,883 4,573,791

Investments in associated companies 3.4 93,904 67,141

Investments in stocks and shares 3.5 55,321 55,318

Long-term receivables 3.8 8,102 8,101

Deferred tax assets 2.8 215,248 26,934

Total non-current nancial assets 372,575 157,494

TOTAL NON-CURRENT ASSETS 10,059,184 9,224,680

Current assets

Biological assets (biomass) 3.7 2,448,290 2,117,024

Inventory 3.6 709,306 776,032

Total inventory 3,157,596 2,893,056

Accounts receivable 3.8 620,324 490,075

Tax receivables 109,701 72,143

Other receivables 3.8 172,206 61,431

Total receivables 902,231 623,649

Cash and cash equivalents 3.9 509,157 466,939

TOTAL CURRENT ASSETS 4,568,984 3,983,644

TOTAL ASSETS 14,628,168 13,208,324

CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

DKK 1,000 Note 2021 2020

EQUITY AND LIABILITIES

Equity

Share capital 3.10 59,143 59,143

Other equity 9,288,269 8,670,344

Non-controlling interest 133 0

Total equity 9,347,545 8,729,487

Non-current liabilities

Deferred taxes 2.8 1,590,034 1,222,222

Long-term interest-bearing debt 3.11 2,634,968 2,219,690

Long-term leasing debt 3.3 245,753 265,235

Derivatives 3.13 3,207 1,480

Total non-current liabilities 4,473,962 3,708,627

Current liabilities

Financial derivatives 3.13 4,602 9,710

Trade payables 510,357 563,857

Current tax liabilities 2.8 170,997 37,422

Short-term leasing debt 3.3 87,668 131,336

Other current liabilities 33,037 27,885

Total current liabilities 806,661 770,210

TOTAL LIABILITIES 5,280,623 4,478,837

TOTAL EQUITY AND LIABILITIES 14,628,168 13,208,324

CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

Consolidated Cash

Flow Statement

FOR THE YEAR ENDED 31 DECEMBER

Accounting Policies

The Group’sstatementof cash owshowsa breakdownof

the Group’soverall cash ow into operating, investing and

nancingactivities.Thecashowstatementispreparedac-

cording to the indirect method. The statement shows the in-

dividual activity’s impact on cash and cash equivalents. The

cashowderivingfromtheacquisitionandsaleofbusiness-

es is presented under investing activities.

DKK 1,000 Note 2021 2020

Cash ow from operations

EBIT 1,144,685 691,123

Adjustments for write-downs and depreciation 3.1/3.2/3.3 530,434 446,501

Adjustments for fair value adjustments on biomass 3.7 -434,868 -118,003

Adjustments for income from associates -30,112 -5,546

Adjustments for currency effects 45,160 -65,402

Taxes paid -54,327 -189,132

Change in inventory 142,314 -309,873

Change in receivables -493,831 48,252

Change in current debts 275,099 -23,950

Cash ow from operations 1,124,554 473,970

Cash ow from investments

Proceedsfromsaleofxedassets  667 18,412

Paymentsmadeforpurchaseofxedassets 3.2 -1,115,680 -836,383

Purchase of shares and other investments 2,775 1,843

Change in long-term receivables -1 0

Cash ow from investments -1,112,239 -816,128

Cash ow from nancing

Change in revolving credit facilities 404,600 -107,451

Acquisition of minorities 0 -167,620

Financial income 3,542 1,399

Financial expenses -56,427 -53,442

Lease payment -116,897 -134,569

Proceeds/Acquisition of treasury shares 10,957 -38,766

Dividend paid -215,872 0

Cash ow from nancing 29,903 -500,449

Net change in cash and cash equivalents in period 42,218 -842,607

Cash and cash equivalents – opening balance 466,939 1,309,546

Cash and cash equivalents – closing balance total 509,157 466,939

CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

ANNUAL REPORT 2021

Consolidated

Statement of

Changes in Equity

AS AT 31 DECEMBER

Restricted equity comprises equity in which dis-

tribution to the shareholders may only take place

adhering to specic procedures prescribed by the

Faroese Limited Companies Act. Restricted equi-

ty consists of Equity Recognition Surplus and Fair

Value Adjustments of Biomass. Free equity may be

readily distributed to the shareholders, or otherwise

disposed of, after due approval by the AGM. The

compositionofequitymaybespeciedasfollows:

DKK 1,000

Equity 01.01.2021 59,143 4,027,375 -37,672 6,229 34,545 -14,829 215,872 145,387 4,293,437 0 8,729,487

Consolidated prot 0 0 0 0 0 0 0 434,868 529,185 -17 964,036

Change in tax rate on equity posted PPA in prior years 0 0 0 0 0 0 0 0 -193,574 0 -193,574

Changesinnancialderivatives 0 0 0 0 0 12,928 0 0 0 0 12,928

Hereof tax effect 0 0 0 0 0 -1,972 0 0 0 0 -1,972

Share-based payment 0 001,570 0 00 0 0 01,570

Currency translation differences 0 0 0 0 36,139 0 0 0 0 0 36,139

Reclassification between funds 0 0 0 0 -24,452 0 0 24,452 0 0 0

Total other comprehensive income 0 0 0 1,570 11,687 10,956 0 24,452 -193,574 0 -144,909

Total comprehensive income 0 0 0 1,570 11,687 10,956 0 459,320 335,611 -17 819,127

Treasury shares 0 010,905 0 0 00 03,748 0 14,653

Addition of non-controlling interests 0 0 0 0 0 0 0 0 0 150 150

Paid-out dividend 0 0 0 0 0 0-215,872 0 0 0-215,872

Proposed dividend 0 0 0 0 0 0303,995 0-303,995 0 0

Total transaction with owners 0 0 10,905 0 0 0 88,123 0 -300,247 150 -201,069

Total changes in equity 0 0 10,905 1,570 11,687 10,956 88,123 459,320 35,364 133 618,058

Total equity 31.12.2021 59,143 4,027,375 -26,767 7,799 46,232 -3,873 303,995 604,707 4,328,801 133 9,347,545

Equity 01.01.2020 59,143 4,027,375 -68 5,059 78,850 -15,348 0 162,203 4,012,041 167,620 8,496,875

Consolidated prot 0 0 0 0 0 0 0 118,003 344,842 0 462,845

Adjustment related to purchase price allocation 0 0 0 0 0 0 0 0 16,253 0 16,253

Changes in financial derivatives 0 0 0 0 0 602 0 0 0 0 602

Hereof tax effect 0 0 0 0 0 -83 0 0 0 0 -83

Share-based payment 0 001,170 0 00 0 0 01,170

Currency translation differences 0 0 0 0 -44,305 0 0 0 0 0 -44,305

Reclassification between funds 0 0 0 0 0 0 0 -134,819 134,819 0 0

Total other comprehensive income 0 0 0 1,170 -44,305 519 0 -134,819 151,072 0 -26,363

Total comprehensive income 0 0 0 1,170 -44,305 519 0 -16,816 495,914 0 436,482

Treasury shares 0 0-37,604 0 0 00 01,354 0-36,250

Change in non-controlling interests 0 0 0 0 0 0 0 0 0 -167,620 -167,620

Proposed dividend 0 0 0 0 0 0 215,872 0-215,872 0 0

Total transaction with owners 0 0 -37,604 0 0 0 215,872 0 -214,518 -167,620 -203,870

Total changes in equity 0 0 -37,604 1,170 -44,305 519 215,872 -16,816 281,396 -167,620 232,612

Total equity 31.12.2020 59,143 4,027,375 -37,672 6,229 34,545 -14,829 215,872 145,387 4,293,437 0 8,729,487

Capital

Premium

Reserve

Treasury

Share-

Based

Payment

Currency

translation

differences Derivatives

Dividend

Total

Equity

Non

controlling

interest

Fair value

adjustments

Retained

Earnings

CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

Notes to the

Consolidated

Financial

Statements

BAKKAFROST GROUP

100

SECTION 1

101

ANNUAL REPORT 2021

NOTES – SECTION 1

Basis

of Preparation

This section gives an overview of the nancial accounting

policies in general and an overview of the management’s key

accounting estimates.

NOTE 1. GENERAL INFORMATION

P/F Bakkafrost (“company”) is a public limited company dom-

iciled in the Faroe Islands at Bakkavegur 9, Glyvrar.

P/F Bakkafrost was listed on Oslo Stock Exchange in 2010

with the ticker code: BAKKA.

NOTE 1.1 SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

The principal accounting policies applied in the preparation

oftheseconsolidatednancialstatementsaresetoutbelow.

These policies have been consistently applied to all periods

presented.

NOTE 1.2 BASIS OF PRESENTATION

The Annual Report comprises the income statement, state-

mentofcomprehensiveincome,statementofnancialposi-

tion,specicationofchangesinequity,cashowstatement

and note disclosures for the Group. The accounting year

equalsthecalendaryear.Thenancialstatementswerefor-

mally drawn up in accordance with International Financial

Reporting Standards (IFRS) and the interpretations issued by

the International Accounting Standards Board as approved

by the European Community and the additional requirements

in the Faroese Financial Reporting act.

The Annual and Consolidated Report and Accounts for the

period 1 January to 31 December 2021 comprises both the

Consolidated Annual Report and Accounts for P/F Bakka-

frost and its subsidiaries (Group) and the separate Annual

Accounts for the parent company.

Thenancialstatementswereformallyauthorizedforissue

by the Board of Directors on 30 March 2022.

The Annual Report has been prepared on a historical cost

basis except for where IFRS requires recognition at fair value,

mainly valuation of licences, which are acquired by business

combinations, and of biomass.

Preparationofthenancialstatementsinvolvestheuseof

estimates and assumptions. Changes in estimates and esti-

mated assumptions are accounted for when they occur. De-

scriptions about the various estimates applied are given in

the notes to the accounts where relevant.

NOTE 1.3 CONSOLIDATION PRINCIPLES

TheconsolidatednancialstatementsincludeP/FBakkafrost

and the subsidiaries over which P/F Bakkafrost has con-

trollinginuenceeitherbyshareholdingorbyagreement.A

controlling interest is normally deemed to exist when own-

ership directly or indirectly exceeds 50 percent of the vot-

ing rights. Controlling interest may also exist by nature of

agreement. Similarly, limitations in voting rights by agree-

ment may impede exercise of control, and the investment

concerned will be considered an associate.

Newly acquired subsidiaries are included from the date on

which a controlling interest is secured, and divested subsid-

iaries are included up until the date of divestment. The con-

solidated accounts have been prepared in accordance with

uniform accounting principles for similar transactions in all

companies included in the consolidated accounts.

All material transactions and balances between Group Com-

panies have been eliminated.

Shares in subsidiaries have been eliminated in the consoli-

datednancialstatementsinaccordancewiththeacquisition

method. This means that the acquired company’s assets and

liabilities are reported at fair value at the date of acquisition,

withanyexcessvaluebeingclassiedasgoodwill.Wherethe

fair value of the assets acquired exceeds the payment made,

the difference is treated as negative goodwill in the Income

Statement.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 1

102

ANNUAL REPORT 2021

Whensharesareacquiredinstages, thevaluebasis ofthe

assets and liabilities is the date, the Group was formed. Later

acquisition of assets in existing subsidiaries will not affect

the value of assets or liabilities, except for goodwill, which is

calculated with each acquisition.

InvestmentsincompaniesinwhichtheGrouphasasigni-

cantinuence(associatedcompanies)aretreatedinaccord-

ance with the equity method in the consolidated accounts. A

considerableinuenceisnormallydeemedtoexistwhenthe

Group owns 20–50 percent of the voting capital. The Group’s

shareoftheprotsinsuchcompaniesisbasedonprotafter

tax, less internal gains, and depreciation on excess value due

to the cost price of the shares being higher than the acquired

portionofbook equity.Inthe IncomeStatement,theprot

share is presented on a separate line, while the assets are

presentedinthestatementofnancialpositionasnon-cur-

rentnancial assets.The accountingprinciples usedbyas-

sociated companies have been changed where necessary to

achieve consistency with the principles used by the Group.

NOTE 1.4 TRANSLATION OF FOREIGN

CURRENCIES

Foreachindividualentity,whichisrecognizedintheconsoli-

dated accounts, a functional currency is determined in which

the entity measures its results and nancial position. The

functional currency is the currency of the primary economic

environment in which the entity operates. Transactions in

other currencies than the functional currency are transac-

tions in a foreign currency.

A foreign currency transaction is, on initial recognition, re-

corded in the functional currency at the spot exchange rate

between the functional currency and the foreign currency on

the date of the transaction.

At each balance sheet date, receivables, payables, and oth-

er monetary items in foreign currency are translated to the

functional currency using the closing rate. Exchange differ-

ences arising on the settlement of monetary items or on

translating monetary items, at rates different from those at

which they were translated on initial recognition during the

period or in previous nancial statements, shall be recog-

nizedintheincomestatementundernancialrevenuesand

expenses.

On consolidation, the results and nancial position of the

Group’s individual entities with different functional curren-

cies than the Group’s presentation currency (DKK) are trans-

lated into the Group’s presentation currency using the fol-

lowing procedure:

• Assets and liabilities are translated at the closing rate at

the date of the balance sheet.

• Income and expenses are translated at exchange rates at

the dates of the transactions.

• Allresultingexchangedifferencesarerecognizeddirectly

in equity as a separate component of equity. For practical

reasons an average rate for the period that approximates

the exchange rates at the dates of the transactions is used.

NOTE 1.5 CLASSIFICATION PRINCIPLES

Biomassisrecognizedat fair valuein the StatementofFi-

nancial Position. Changes in biomass and inventory meas-

ured at cost are presented as a one-line item in the Income

Statement. Biomass at cost consists of all production costs.

The biomass is then adjusted to fair value, i.e., market value

lessnishingcosts,byaddingorsubtractinganIFRSadjust-

ment. The IFRS adjustment is the difference between bio-

mass measured at cost and measured at fair value.

Cash and cash equivalents consist of cash in hand and bank

deposits. Assets, which form part of the production cycle or

falldueforpaymentwithin12months,areclassiedascur-

rentassets.Otherassetsareclassiedasnon-currentassets.

Liabilities, which form part of the production cycle or fall

dueforpaymentwithin12months,areclassiedascurrent

liabilities. Other liabilities are classied as non-current lia-

bilities.

Dividendproposalsarenot classiedasliabilities until the

parent company has assumed an irrevocable obligation to

pay the dividend, normally when dividend proposals have

been approved by the Annual General Meeting.

Nextyear’sinstalmentsonlong-termdebtsareclassiedas

current liabilities.

Changes in the fair value of biological assets are presented

on a line item separately from biomass changes measured at

costunderoperatingprot/loss.Thisallowsthereaderofthe

FinancialReporttodeterminebothproductionefciencyand

biomass at fair value.

NOTE 1.6 FUNCTIONAL CURRENCY

The consolidated accounts are presented in Danish Kroner

(DKK), which is the Group’s functional and presentation cur-

rency. All transactions in foreign currencies are translated

intoDKKatthe timeof transaction.Inthe statementof-

nancial position, monetary items in foreign currencies are

translated at the exchange rate in effect on the statement of

nancialpositiondate.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 1

103

ANNUAL REPORT 2021

NOTE 1.7 NEW STANDARDS

Standards and interpretations, which are issued at the date

of the Group’s Financial statements, but will become effective

later, are disclosed below. The disclosures contain standards

including amendments, which may inuence recognition or

measurements in the Financial statements, alter existing dis-

closures or require additional disclosures when effective at a

future date. The standards are implemented as they become

effective.

New standards, regulating issues not relevant to the Group or

withinsignicant impact ontheGroup,areomittedfromthis

narrative.

New standards effective from 1 January 2021 and

Only minor adjustments have been made in standards and

interpretations (IFRIC) which are effectivefor the nancial

year 2021. Neither are new standards nor amendments to

these from 2022 and forth expected to have any impact on

the Bakkafrost Group.

NOTE 1.8 ACCOUNTING ESTIMATES

Thepreparationofnancialstatementsin accordancewith

IFRS requires the management to make judgement estimates

and assumptions that affect the application of accounting

principles and carrying amounts of assets and liabilities, in-

come, and expenses. The estimates and underlying assump-

tions are based on experience and other factors perceived to

be relevant and probable when the judgements were made.

Estimates are reviewed on an on-going basis, and actual val-

ues and results may deviate from the initial estimates. Revi-

siontoaccountingestimatesarerecognizedintheperiodin

which the estimates are revised. The evaluations and esti-

mates,deemedtobeofgreatestsignicanceforBakkafrost

Group’s Financial Statements, are described in the notes.

NOTE 1.9 iXBRL REPORTING

We are required to le our annual report in the European

Single Electronic Format (‘ESEF’) using the XHTML format and

to tag the primary consolidated nancial statements using

Inline eXtensible Business Reporting Language (iXBRL). The

iXBRLtagscomplywiththeESEFtaxonomy.Whereanan-

cial statement line item is not dened in the ESEF taxon-

omy, an extension to the taxonomy has been created. The

annual report submitted to the Faroese Financial Supervi-

sory Authority consists of the XHTML document together

withcertaintechnicalles,allincludedinaZIPlenamed

2138007LH7OP4V112978-2021-12-31-en.zip.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

104

ANNUAL REPORT 2021

NOTES – SECTION 2

Results for

the Year

This section gives more details on the results for the year,

including operating segments, taxes, and employee costs.

NOTE 2.1 REVENUE

Revenue is measured at the fair value of the consideration

received or receivable for the sale of goods and services in

theordinarycourseofbusiness.Revenueisrecognizednetof

discounts, VAT and other sales related taxes.

The revenue of the Group is mainly from sales of salmon,

shmeal,shoilandshfeed.Salesrevenueisrecognized

when the goods are delivered, and both title and risk have

passed to the customer. This will normally be upon delivery.

NOTE 2.2 MAJOR CUSTOMERS

In2021,therewerenomajorcustomers–asdenedinIFRS

8.34, compared to one major customer in 2020 of DKK 570

million, corresponding to 52% of the VAP operation revenue.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

105

ANNUAL REPORT 2021

NOTE 2.3 OPERATING SEGMENT INFORMATION

Value Added Fishmeal, Bakkafrost

2021 – DKK 1,000 Farming FO Products oil and feed Farming SCT Eliminations Group

External operating revenue 2,665,396 1,195,195 237,867 1,455,391 0 5,553,849

Internal operating revenue 811,326 0 1,421,484 0 -2,232,810 0

Total operating revenue 3,476,722 1,195,195 1,659,351 1,455,391 -2,232,810 5,553,849

Depreciationandamortization -278,395 -21,316 -30,057 -200,666 0 -530,434

Operating expenses -1,241,170 -243,032 -1,353,124 -1,163,882 -229,890 -4,231,098

Internal operating expenses -1,052,267 -811,326 0 -369,217 2,232,810 0

Other income 0 0 0 28,877 0 28,877

Operating EBIT 904,890 119,521 276,170 -249,497 -229,890 821,194

Fair value adjustments on biological assets 539,040 0 0 -104,172 0 434,868

Income from associates 294 0 29,818 0 0 30,112

Revenue tax -141,489 0 0 0 0 -141,489

EBIT 1,302,735 119,521 305,988 -353,669 -229,890 1,144,685

Netnancialitems 9,774 -692 1,905 -18,010  -7,023

Earnings before taxes 1,312,509 118,829 307,893 -371,679 -229,890 1,137,662

Taxes -217,365 -22,067 -55,420 79,020 42,206 -173,626

Net earnings 1,095,144 96,762 252,473 -292,659 -187,684 964,036

Operating EBITDA 1,183,285 140,837 306,227 -48,831 -229,890 1,351,628

INVESTMENTS

Property, plant and equipment 601,185 720 29,430 436,533 1,067,868

Depreciation -278,395 -21,316 -30,057 -200,666 -530,434

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

106

ANNUAL REPORT 2021

Value Added Fishmeal, Bakkafrost

2020 – DKK 1,000 Farming FO Products oil and feed Farming SCT Eliminations Group

External operating revenue 1,548,623 1,116,216 391,491 1,595,561 0 4,651,891

Internal operating revenue 791,638 0 1,027,480 0 -1,819,118 0

Total operating revenue 2,340,261 1,116,216 1,418,971 1,595,561 -1,819,118 4,651,891

Depreciationandamortization -239,814 -19,530 -30,912 -156,508 0 -446,764

Operating expenses -773,619 -165,355 -1,211,275 -1,358,626 -119,135 -3,628,010

Internal operating expenses -878,999 -791,638 0 -148,481 1,819,118 0

Other income 0 0 0 44,041 0 44,041

Operating EBIT 447,829 139,693 176,784 -24,013 -119,135 621,158

Fair value adjustments on biological assets -214,275 0 0 332,278 0 118,003

Income from associates 719 0 4,827 0 0 5,546

Revenue tax -53,584 0 0 0 0 -53,584

EBIT 180,689 139,693 181,611 308,265 -119,135 691,123

Netnancialitems -52,661 -631 -12,069 222 0 -65,139

Earnings before taxes 128,028 139,062 169,542 308,487 -119,135 625,984

Taxes -30,445 -25,032 -30,517 -98,887 21,742 -163,139

Net earnings 97,583 114,030 139,025 209,600 -97,393 462,845

Operating EBITDA 687,643 159,223 207,696 132,495 -119,135 1,067,922

INVESTMENTS

Property, plant and equipment 582,419 3,334 30,866 246,837 863,456

Depreciation -239,814 -19,530 -30,912 -156,508 -446,764

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

107

ANNUAL REPORT 2021

2021 2020

FARMING FO – DISTRIBUTION OF HARVESTED VOLUMES tgw % tgw %

Harvested FO volume used in VAP production 21,974 32.7% 23,931 47.2%

HarvestedFOvolumesoldfresh/frozen 45,243 67.3% 26,769 52.8%

Total harvested volumes 67,217 100.0% 50,700 100.0%

FOF SEGMENT – DISTRIBUTION OF FEED tonnes % tonnes %

Volumes used internally 124,259 96.7% 94,345 84.2%

External sold 4,230 3.3% 17,653 15.8%

Total Sold volumes 128,489 100.0% 111,998 100.0%

PRODUCTION OF FISHMEAL AND FISH OIL tonnes % tonnes %

Fishmeal 34,962 81.1% 60,661 85.9%

Fish oil 8,124 18.9% 9,932 14.1%

Total production 43,086 100.0% 70,593 100.0%

FARMING SCT – DISTRIBUTION OF HARVESTED VOLUMES tgw % tgw %

Harvestedvolumesoldfresh/frozenandother 29,672 100.0% 34,986 100.0%

Total harvested volumes 29,672 100.0% 34,986 100.0%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

108

ANNUAL REPORT 2021

GEOGRAPHIC BREAKDOWN OF SALES REVENUES BASED ON SEGMENTS AND CUSTOMER LOCATION

2021 – DKK 1,000 Farming FO VAP FOF Farming SCT Total

WesternEurope 1,170,908 896,396 237,867 1,178,867 3,484,038

North America 693,003 179,279 0 145,539 1,017,821

Asia 453,117 11,952 0 130,985 596,054

Eastern Europe 346,501 107,568 0 0 454,069

Rest of the world 1,866 0 0 0 1,866

Total 2,665,396 1,195,195 237,867 1,455,391 5,553,849

2020 – DKK 1,000 Farming FO VAP FOF Farming SCT Total

WesternEurope 473,616 941,027 391,491 1,443,510 3,249,644

North America 594,301 94,001 0 87,573 775,875

Asia 300,792 43,929 0 11,585 356,306

Eastern Europe 179,733 37,259 0 0 216,992

Rest of the world 181 0 0 52,893 53,074

Total 1,548,623 1,116,216 391,491 1,595,561 4,651,891

The Group has four reportable segments in accordance with

IFRS 8, Operating Segments. The Group’s main strategic business

areaisaquaculture,whichconsistsoffoursegments:shfarm-

ing Faroe Islands and Scotland, value added products (VAP) and

productionandsalesofshmeal,shoilandshfeed(FOF).

The same accounting principles, as described for the consolidat-

ednancialstatements,havebeenappliedforthesegmentre-

porting. Intersegment transfers or transactions are entered into

under normal commercial terms and conditions, and the meas-

urement used in the segment reporting is the same as used for

the third party’s transactions. The pricing principle between the

VAP and Farming FO segments is based on market reference

prices for spot sale, and the pricing principle between the FOF

and the Farming segments is based on quarterly contracts.

ACCOUNTING POLICIES SEGMENT REPORTING

Farming FO including sales of fresh sh

Fish farming involves the breeding and on-growing of salmon

as well as the harvesting, sales, and distribution of salmon. The

Group has production facilities around the Faroe Islands. There

are no signicant differences in the production properties of

the licences, and the Group therefore reports the farmed sal-

monids, including the sale of fresh salmon, as one segment. The

salmon is sold on the spot market for salmon products and to

foreign seafood processing companies.

Farming SCT

The Farming SCT segment comprises the total operation in The

Scottish Salmon Company Ltd, which Bakkafrost gained control

over on the 8 October 2019. The operation is in Scotland and

includessalmon farming,harvest,lleting,sales andadminis-

tration.

Value added products (VAP)

Asignicantshareofthefarmedproductsisvalueaddedatthe

factory in Glyvrar. The outputs of the factory are predominantly

portionsfortheretailmarket.Thebusinesssegmentdenition

is based on the distinction between output sold to the industrial

market and the value-added products for the end-consumers in

the retail market.

Fishmeal, sh oil and sh feed (FOF)

Fishmeal,shoilandshfeedinvolvetheproductionandsale

ofshmeal,shoilandshfeed.Theproductionofshmeal,

shoil andsh feedareoperatedbyBakkafrost’ssubsidiary

Havsbrún, located in Fuglafjørður.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

109

ANNUAL REPORT 2021

NOTE 2.4 SALARIES AND OTHER PERSONNEL EXPENSES

DKK 1,000 2021 2020

Wagesandsalaries   613,756 598,550

Share based payment 3,547 3,676

Social security taxes 45,825 34,025

Pension expenses 48,392 42,656

Otherbenets   16,903 11,545

Total payroll expenses 728,423 690,452

Average number of full-time employees 1,653 1,699

REMUNERATION TO CORPORATE MANAGEMENT

DKK 1,000 Total

Salary and other benets paid Salary Bonus Pension Other 2021

ChiefExecutiveOfcer 2,099 0 168 89 2,356

Managing Director 1,727 58 140 0 1,925

ChiefFinancialOfcer 1,362 58 109 89 1,618

Total remuneration 5,188 115 417 178 5,898

DKK 1,000 Total

Salary and other benets paid Salary Bonus Pension Other 2020

ChiefExecutiveOfcer 2,145 0 146 89 2,380

Managing Director 1,703 115 124 0 1,942

ChiefFinancialOfcer 1,328 115 98 89 1,630

Total remuneration 5,176 230 368 178 5,952

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

110

ANNUAL REPORT 2021

Remuneration to corporate management

The total remuneration to the corporate management con-

sistsofbasicsalary(mainelement),benetsin-kindandpen-

sion schemes, but varies from person to person. The Group’s

ChiefExecutiveOfcerdeterminestheremunerationstooth-

er management in agreement with the Chairman of the Board

of Directors. The total remuneration is determined based on

the need to offer competitive terms in the various business

areas. The remunerations should promote the Group’s com-

petitiveness in the relevant labour market.

The total remuneration must neither pose a threat to Bakka-

frost’s reputation nor be market leading but should ensure

that Bakkafrost attracts and retains senior executives with

the desired skills and experience. The basic salary is subject

to an annual evaluation and is determined based on general

salary levels in the labour market.

Notice of Termination and Severance Payment

Bakkafrost may terminate employment by giving Group Man-

agement Executives a notice period. The company’s period of

noticefortheGroup’sChiefExecutiveOfceris24months.

The company’s period of notice for other Group Management

Executives covers a period from 6 to 12 months.

SHARE-BASED PAYMENT

In 2021, Bakkafrost implemented a share-based bonus

scheme for all employees in the Group. According to the

scheme, all employees are awarded free bonus shares de-

pendent on achieved performance against certain KPIs and

Bakkafrost Group’s adjusted earnings per share being above

a certain threshold. The bonus shares are awarded quarterly

as restricted shares units which are released pursuant only

to the Annual General Meeting resolution to pay dividends

to the shareholders. Employees still employed two calendar

years after being awarded bonus shares, will receive free

loyalty shares.

Each quarter, the Board reviews and determines the param-

etersusedinthebonusscheme–e.g.overallsizeofbonus

pool, KPIs and thresholds. The Board has the right to decide,

in its sole discretion, whether the bonus scheme will be con-

tinued in the following quarter, and the terms of the plan.

SHARE SAVING PLAN

Bakkafrost has established a share saving plan for its em-

ployees in the Faroe Islands. In 2022, the plan will be ex-

tended to all employees of the Group. It is the Board's inten-

tion that the plan shall be a continuing part of the company's

employee incentive scheme. The Board shall, however, have

the right to decide, in its sole discretion, whether the plan

will be extended in the future, and the terms of the plan

Employees may invest up to 5% of their base salary in Bak-

kafrost shares. The saved amount is deducted from the

monthly net salary and used to purchase Bakkafrost shares

on behalf of the employees. The purchase will be made from

Bakkafrost's treasury shares or on the market. An employee

may not change the savings amount during the year, but an

employee may cancel the subscription during the year. The

purchase price and the number of shares acquired by the

company will be reported in accordance with the applicable

regulations.

After a lock-in period of two calendar years, one extra share

will be awarded for each share purchased. Shares transferred

to employees are acquired by the company on the market.

LOANS TO EMPLOYEES

As at 31.12.2021, there are no loans to employees.

ACCOUNTING POLICIES SHARE-BASED

PAYMENTS

The share saving plan liabilities and payroll expense have

been allocated over the employees' contribution period. The

contribution period is from when the employee signed the

share saving plan and until the shares are granted. The fair

value of these liabilities will be determined using the number

of shares contracted at the start of the share saving plan,

using the share price on the date of the employee signature,

adjustment is made for estimated leavers of the share saving

plan. The difference between the fair value and the share

Fees paid to the Board of Directors

DKK 1,000 2021 2020

Rúni M. Hansen** Chairman of the Board 482 479

Johannes Jensen Deputy Chairman of the Board 274 271

Annika Frederiksberg* Member of the Board 219 217

EinarWathne MemberoftheBoard  236 231

Teitur Samuelsen ** Member of the Board 263 262

Øystein Sandvik** Member of the Board 283 278

Total remuneration 1,757 1,738

* Annika Frederiksberg is also an employee in the Bakkafrost Group. For this, she received DKK 656 thousand (2020: DKK 651 thousand).

** Member of the audit committee. Salary includes fee to the audit committee

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

111

ANNUAL REPORT 2021

NOTE 2.5 OTHER OPERATING EXPENSES AND OTHER INCOME

DKK 1,000 2021 2020

Maintenance -187,655 -161,327

Operating expenses -291,690 -175,788

Health -227,542 -127,605

Freight -629,123 -424,575

Energy -226,988 -167,999

Other costs -69,116 -5,425

Other operating expenses total -1,632,114 -1,062,719

R&DexpendituretaxcreditinSCT   28,877 44,041

Other income total 28,877 44,041

R&Dexpenditureoccursthroughoutthevaluechain.R&Dis

built in the Bakkafrost business model DNA.

Bakkafrost has a continual development of the entire value

chain. This is not seen as R&D but is an integratedpart of

other operating expenses and salaries.

ThefocusofBakkafrost’sR&Deffortshasbeenevaluatedand

slightly improved during recent years. Lice abatement, bio-

mass control and smolt quality remain high priorities, and

the development and improvement of vaccines, nutrition and

feeding, as well as operating technologies, are equally top-

ical. In addition, Bakkafrost continuously performs assess-

ments of its own operating practices.

Bakkafrost aims to expand its R&D activities in feed and

feeding and sees a substantial need for greater focus on basic

knowledgeofhowthesharefedandhowwecanmaintain

a healthy salmon. The past year has proven to be above our

expectations in terms of production improvements in farm-

ing.Weareconvincedthat ouradaptionofthe mixofraw

material has resulted in better nutritional quality in the feed.

NOTE 2.6 RESEARCH AND DEVELOPMENT EXPENSES

It is Bakkafrost’s clearly expressed goal to initiate better and

more comprehensive research into these issues under large-

scale conditions.

Bakkafrost focuses on reducing biological risk continuously

and has made several new investments and procedures to

diminish this risk. Bakkafrost focuses on using non-medical

methods in treatments against sea lice and has invested in

new technology to follow this strategy.

price,whenthesharesaregranted,willbebookedasanan-

cialitemintheincomestatement.Theliabilityisrecognized

in other equity reserves within equity.

PENSIONS

TheGroupoperatesadenedcontributionpensionscheme.

Pension premiums are charged to the Income Statement as

they accrue. The Group has no additional pension liabilities

towards the employees, apart from these periodical pay-

ments.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

112

ANNUAL REPORT 2021

NOTE 2.7 NET FINANCIAL ITEMS

DKK 1,000 2021 2020

Realisedprotonnancialderivatives   4,942 0

Othernancialincome   473 1,399

Financial income 5,415 1,399

Interest expenses on long-term loans -31,958 -33,512

Interest expenses on credit lines -403 -2,476

Interest expenses on IFRS 16 (leases) -7,468 -10,382

Interest expenses on accounts payable -779 -329

Financial expenses -40,608 -46,699

Other exchange differences 38,761 -13,096

Net currency effects 38,761 -13,096

Othernancialexpenses   10,591 -6,743

Other nancial items -10,591 -6,743

Net nancial items -7,023 -65,139

ACCOUNTING POLICIES FINANCIAL INCOME

Interest income is recognized on an accrual basis. Divi-

dendincomeisrecognized,whentheshareholders’rightto

receive a dividend has been approved by the Annual General

Meeting.

BORROWING COSTS

Borrowingsisrecognizedinitiallyatfairvalue,netoftrans-

action costs incurred. Borrowings is subsequently stated at

amortizedcost;anydifferencebetweentheproceeds(netof

transaction costs) and the redemption value is recognized

in the income statement over the period of the borrowings.

Borrowings is classied as a current liability, unless the

Group has an unconditional right to defer settlement of the

liability for at least 12 months after the balance sheet date.

Bakkafrost has a large-smolt strategy and aims at increasing

smolt size to around 500 grams smolts in 2022 the Faroe

Islands. The strategy is also pivotal to the turnaround of the

operation in Scotland. The benets are shorter production

time at sea and reduced biological risk. The hatchery at

Strond, Klaksvík, is an essential part of this plan for the Far-

oe Islands. This hatchery is fully operational and can produce

9 million smolts at 500g. In addition, Bakkafrost is expand-

ing Faroese hatchery capacity of the hatcheries at Glyvradal,

Norðtoftir and the new hatchery at Ónavík. In Scotland, three

large hatcheries will be built, the rst being the hatchery

at Applecross. All Bakkafrost’s hatcheries will be based on

state-of-the-art technology and advanced RAS (water recir-

culation) systems. The capacity growth from these invest-

ments is crucial to enable harvest volume growth to 150,000

tonnes for the Group in 2026.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

113

ANNUAL REPORT 2021

Specications of temporary differences and deferred tax

DKK 1,000 2021 2020

Temporary Temporary

Deferred tax assets Differences Deferred tax Differences Deferred tax

Licences 0 0 0 0

Property, plant and equipment 32,450 8,037 43,483 8,224

Financial assets 0 0 0 0

Biomass 175,529 36,248 104,415 18,460

Receivables 1,995 359 1,318 224

Derivatives (Equity posted) 5,099 1,275 147 25

Losses carried forward 677,309 169,329 0 0

Total temporary differences 215,248 26,933

NOTE 2.8 TAX

The tax expense for the year breaks down as follows:

DKK 1,000 2021 2020

Tax payable 171,283 38,783

Tax credit -1,151 -23,974

Change in deferred tax 3,494 148,330

Tax expense on ordinary prot 173,626 163,139

Tax payable 170,997 38,783

Tax payable in the statement of nancial position 170,997 38,783

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 2

114

ANNUAL REPORT 2021

Normal tax rate for countries in the Group:

- Faroe Islands 18%

- UK/Scotland 19% and 25% from 2022

- Norway 23%

- USA 28%

Reconciliation from nominal to actual tax rate

DKK 1,000 2021 2020

Protbeforetax   1,137,662 625,984

Expected tax at nominal tax rate 178,385 106,417

Permanent differences* -4,759 56,722

Calculated tax expense 173,626 163,139

Effective tax rate excl. equity entries 15.26% 26.06%

ACCOUNTING POLICIES

Thetaxexpenseismatchedagainsttheprotorlossbefore

tax, as it appears in the accounts. Tax ascribable to equity

transactions is taken to equity. The tax expense comprises

tax payable (tax on the year’s direct taxable income) and

changes in net deferred taxes. Deferred tax liabilities and

deferred tax assets are presented net in the statement of

nancialpositiontotheextentthattaxassetsandliabilities

can be netted against each other.

Deferredtaxinthestatementofnancialpositionisanom-

inal amount calculated based on temporary differences be-

tween accounting and tax values at their intended use, as

well as the taxable loss carried forward at the end of the

nancialyear.

SIGNIFICANT ASSUMPTION ACCOUNTING

FOR DEFERRED TAX LIABILITIES

Theaccountingofdeferredtaxesreectstax ratesand tax

laws that have been enacted or substantively enacted by the

dateofthestatementofnancialposition.Therecognitionof

adeferredtaxassetisbasedonexpectationsofprotability

in the future. In addition, there are many transactions and

calculations during the ordinary course of business for which

the ultimate tax determination is uncertain.

Deferred taxes are calculated using the nominal tax rate ac-

cording to IAS 12.

SIGNIFICANT ASSUMPTION ACCOUNTING

FOR DEFERRED TAX ASSETS

Deferred tax assets, including tax loss carry forwards, are

assessedonceayear.Lossesarerecognizedifitislikelythat

theywillbeutilizedintheforeseeablefuture.

DKK 1,000 2021 2020

Temporary Temporary

Deferred tax liabilities Differences Deferred tax Differences Deferred tax

Licences 3,601,916 874,182 3,624,015 680,554

Property, plant and equipment 1,539,529 353,079 1,562,011 269,909

Financial assets 92,302 16,614 78,742 13,610

Biomass 1,892,013 340,562 1,413,357 258,023

Receivables 0 0 0 0

Currency effects 1,219 240 0 0

Derivatives (Equity posted) 0 0 0 0

Other differences 21,428 5,357 510 126

Total temporary differences 1,590,034 1,222,222

Deferred tax assets -215,248 -26,933

Deferred tax liabilities 1,590,034 1,222,222

Deferred tax liabilities (+) / assets (-) 1,374,786 1,195,289

*WherofDKK-4.6million,relatestochangeinthetaxratechangeinScotlandfrom19%to25%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

115

ANNUAL REPORT 2021

NOTES – SECTION 3

Assets and

Liabilities

This section gives more details on the assets that form the

basis for the activities of Bakkafrost and the related liabil-

ities.

NOTE 3.1 INTANGIBLE ASSETS

DKK 1,000 Goodwill Licences Brands Total

Acquisitions costs as at 01.01.21 666,950 3,720,158 108,400 4,495,508

Currency translation differences 2,369 0 0 2,369

Acquisitions costs as at 31.12.21 669,319 3,720,158 108,400 4,497,877

Depreciations and impairments 01.01.21 -2,113 0 0 -2,113

Depreciation during the year -38 0 0 -38

Accumulated impairments/depreciation and write-downs as at 31.12.21 -2,151 0 0 -2,151

Net book value as at 31.12.21 667,168 3,720,158 108,400 4,495,726

DKK 1,000 Goodwill Licences Brands Total

Acquisitions costs as at 01.01.20 568,885 3,720,158 108,400 4,397,443

Additions in the year as a result of acquisitions 114,245 0 0 114,245

Currency translation differences -16,180 0 -16,180

Acquisitions costs as at 31.12.20 666,950 3,720,158 108,400 4,495,508

Impairments 01.01.20 -1,756 0 0 -1,756

Depreciation during the year -357 0 0 -357

Accumulated impairments/depreciation and write-downs as at 31.12.20 -2,113 0 0 -2,113

Net book value as at 31.12.20 664,837 3,720,158 108,400 4,493,395

In the Faroe Islands, Bakkafrost operates its sea farming ac-

tivityin14 identiable CGUs basedonsingle or groupsof

sea farming licenses, seven out of which are issued by the

government without consideration, and hence are not capi-

talized.ThesebelongtotheNorthregion.

The other seven CGUs were acquired as part of business com-

binations. Respectively, when acquiring the Vestlax Group,

Havsbrún Group and Faroe Farming, hence three groups of

CGUs.ThesebelongtotheWestregion.Theseareconsidered

assignicantincomparisontothetotalcarryingamountof

goodwillandintangibleassetswithindeniteusefullives.

In Scotland, Bakkafrost operates its sea farming activity in

7identiableCGUsbasedongroupsofseafarminglicenses.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

116

ANNUAL REPORT 2021

Impairment testing

The Group tests intangible assets annually for impairment or

more frequently if there are indications that the assets are

impaired. The annual impairment test is performed at year-

end.TheGrouphassubstantialassetswithindenitelivesin

the form of licenses. The licenses are subject to impairment

testing in combination with goodwill in the annual test. The

Groupidentieseachfarmingzone,whichmaycontainone

or several licences or farming sites, as one cash-generating

unit.

The procedure of impairment testing

Impairment testing is carried out by calculating the net pres-

ent value of estimatedfuturecash ows (value in use) for

the cash-generating unit in line with IAS 36 and comparing

the net present value of the cash ow towards the carry-

ing amount of net assets held by the cash-generating unit

(CGU).Thecashowusedinthecalculationsrepresentsthe

management’s best estimate at the time of reporting. If the

carrying amount is higher than the calculated value in use,

theassetsareconsideredimpaired.Theestimatedcashow

is based on an assumption of continued operation. The ba-

sisfortheestimatedcashowisthestrategicplan forthe

following years. The strategic plans have been reviewed and

the targets approved by the Group management.

The considered operating conditions are costs of feed, smolt,

harvest, packaging, transport, and other costs. Other operat-

ing conditions considered the same are mortality, production

time, fallowing and harvest weight. CAPEX is also assumed

to be the same for all CGUs over the calculated period. All

CGUs are calculated with the same WACC. If there will be

variances between the assumptions for the different CGUs in

the future, this will be incorporated into the impairment test.

Indications of impairment

Theimpairmenttestingatyear-enddidnotresultinidenti-

cation of impairment losses. Intangible assets were tested for

impairmenttoevaluateifthecashowfromaconservative

estimatewassufcienttosupportthecarryingamountofnet

assets.Thetestconrmedtheassetvalues.

The key assumptions

The key assumptions in the calculations of value in use are

harvestvolume,prices,andcosts,henceEBIDTAandWACC.

Amongstotherassumptionsareination,CAPEX,andtermi-

nal growth.

In general, the value in use has been determined based on

future strategic plans considering the expected development

in both macroeconomic and company-related conditions.

The assumptions used, rest on uncertainty regarding pro-

duct prices, input prices, biological performance, and future

regula tory frameworks. Costs can normally be estimated

withmoreaccuracythanincome.Asprotabilityinthesal-

mon farming industry historically has been very volatile, de-

pen ding on developments in the prices of salmon. Bakkafrost

usesbudgetsandlong-termplansfortherstveyearsof

the analysis but returns to long- term historic averages for

protabilityinthesixthyearandterminalperiod.

The key assumptions used in determining the value in use are::

• Harvested volume is based on the current stocking plans

foreachunit,andforecastedguresforgrowth,assumed

harvestweightandmortality,basedonhistoricalgures.

• The costs are based on the Groups own assumptions, based

on historical costs and expectations. The costs are expect-

ed to remain stable but are calculated to increase with an

inationrateofFO:0.9%andSCT:2,3%.

• The forward prices are based on the Fish Pool index –

which is a part of Oslo Børs ASA – at the day of the calcula-

tion. The long-term forward prices are based on third-par-

ties’ sources.

• The WACCis8.9% (2020: 7.2%) pre-taxandcalculatedin

accordancewithIAS36. TheWACCmodelis usedfores-

timating the discount rate. The input data for the model

is updated each year for the annual impairment test. The

choiceofinputdataforthemodelsignicantlyinuences

the outcome of the model, and to ensure that there is as lit-

tle uncertainty as possible with regards to the calculation

oftheWACC,third-partysourcesareusedwhereavailable

(interest, ination, beta).The discount rateis based on a

ve-yearaverageforten-yearbondsissued bythe Dan-

ish government, with an adjustment margin for the food

industry in the EU.

• TheinationissettoFO:0.9%andSCT:2,3%.forthebudget

period. This is done based on third-parties’ sources. The

terminal growth is set to 0%.

• Capital expenditure (CAPEX). In the 5-year forecast period,

the capital expenditure necessary to meet the expected

growthinrevenueand protistakenintoconsideration.

Capital expenditures are aligned with the growth and re-

placement plans. Capital expenditure to comply with cur-

rent laws and regulations has been included. Capex related

tocommittedand approvedefciencyimprovementpro-

grammes has also been included to support the inclusion

ofthebenetsintheappliedmargin.Changesinapplicable

laws and regulations may affect future estimated capital

expenditureneeds;thisisnotreectedintheguresused

in the impairment test. Beyond the forecast period, capital

expenditure will in general equal depreciation and relate

to maintenance investments.

Sensitivity

In connection with the impairment testing of intangible as-

sets, a sensitivity analysis has been carried out. Sensitivity

analysis has been performed for each of the dened cash

generatingunits.Withtheassumptionsused,theheadroom

is DKK 10,900 million (DKK 9,459 million).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

117

ANNUAL REPORT 2021

ACCOUNTING POLICIES

Intangible assets that are purchased individually are capital-

izedatacquisitioncost.Intangibleassetsacquiredinconnec-

tionwiththepurchaseofabusinessentityarecapitalizedat

acquisition cost when the criteria for separate recognition

are met.

Intangible assets with a limited economic lifespan are depre-

ciated systematically. Intangible assets are written down to

therecoverableamountiftheexpectednancialbenetsdo

not cover their carrying amount.

Costs relating to research and development are charged as

expenses as they accrue. R&D costs are capitalized in the

statementofnancialposition,whenitcanbedemonstrated

thattherelevantR&Dprojectscarryeconomicbenets,that

theycanbetechnicallynalized,andthatthecompanyin-

tendstoandisnanciallyabletoreaptheeconomicbenets.

Sea farming licences, which are purchased either as part of an

acquisition or business combination according to IFRS 3, are

capitalizedat costless accumulatedwrite-downsaccording

to a PPA analysis. Sea farming licences in the Faroe Islands

and Scotland are considered perpetual, given that certain

preconditions regarding environmental protection and ani-

mal welfare are met. Consequently, sea farming licences are

not depreciated systematically, but are subject to an annual

impairment test. If the carrying amount exceeds the recov-

erable amount, licences are considered impaired, and write-

downs are entered and charged to the Income Statement.

Theassessmentofindenitelifeisreviewedannuallytode-

terminewhethertheindenitelifecontinuestobeappropri-

ate.Ifnot,thechangeinusefullifefromindenitetoniteis

made on a prospective basis.

Licenses with indenite useful lives

TheseafarminglicensesintheFaroeIslandsaredenedas

the right to utilize a given area of fjords for farming sh.

There are no provisions as to the maximum allowed biomass

at the given site, but the legislation has imposed strict meas-

ures to regulate the farming activity to be environmentally

sustainable.

The sea farming licenses in the Faroes are issued with a nom-

inal lifespan of 12 years. Licenses are renewed, unless there

isaspecicreasonagainstrenewal,basedonfailuretofull

the veterinary conditions set by the authorities. In connec-

tion with renewal of licenses, authorities may only decline

renewalifspeciclegislationonareaplanning,animalwel-

fare or environmental protection conicts with renewal of

the licenses. Special emphasis is to be placed on the fact that

it is renewals of existing licenses. This means that sea farm-

ing licenses are operated in a 12-year rolling lifespan system,

where the licenses are renewed every 12th year. In the very

rare cases, where the authorities have declined to renew li-

censes to use locations for other purposes, the farmers have

obtained licenses from the authorities at other locations.

The sea farming licenses in Scotland are perpetual if certain

environmental, operational, and biological conditions speci-

edinthelicensescontinuetobemet.

The Group has therefore decided to account for sea farming

licenses,whicharecapitalized,followingtheprovisionsfor

intangiblerightswithindeniteusefullives.

GOODWILL

Whenthecompanyassumescontroloveraseparatebusiness

entity for a consideration that exceeds the fair value of the

individual assets, the difference is entered as goodwill in the

statementofnancialposition.

Goodwill deriving from purchases of subsidiaries and asso-

ciates is presented under intangible assets. Goodwill is not

depreciated but is tested for impairment annually or more

often if there are indications that its value is lower than the

carrying amount. When assessing the need to write-down

goodwill, this is assigned to relevant cash ow generating

unitsorgroups,whichareexpectedtobenetfromtheac-

quisition.

Write-downs are performed in accordance with an assess-

ment of the recoverable value of each of the cash-ow

generating units to which the goodwill is assigned. To iden-

tify the Group’s cash-ow generating units, the assets are

grouped according to the lowest level to which separate and

independentcashowsmaybeascribed.Recoverablevalue

is calculated based on value in use. This is arrived at by esti-

matingfuturecashows.

If the calculated value in use is less than the carrying amount

of the cash-ow generating unit, goodwill is written down

rst,andthenotherassetsasrequired.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

118

ANNUAL REPORT 2021

SPECIFICATION OF CGUS – BOOKED VALUE TESTED AND SENSITIVITY

Sensitivity analyses and booked value per CGU:

CGUs

DKK 1,000

31.12.2021

The Scottish Salmon Company acquisition**** 4,006,820 1,906,234 5,913,054 8.9% 18,845 382,619 2,378,574 -1,599,072

Vestlax acquisition* 132,708 1,318,791 1,451,499 8.9% 7,450 57,039 365,472 -269,400

Havsbrún acquisition** 157,430 301,696 459,126 8.9% 2,250 188,862 1,210,119 -892,012

Faroe Farming acquisition*** 82,000 955,167 1,037,167 8.9% 4,300 109,008 514,853 -698,458

TOTAL 4,378,958 4,481,888 8,860,846 32,845 737,528 4,469,018 -3,458,942

31.12.2020

The Scottish Salmon Company acquisition**** 4,006,820 574,114 4,580,934 7.2% 23,083 311,560 379,700 -362,679

Vestlax acquisition* 132,708 1,338,793 1,724,535 7.2% 7,900 41,453 212,495 -154,003

Havsbrún acquisition** 157,430 482,380 580,033 7.2% 2,250 145,545 746,094 -540,723

Faroe Farming acquisition*** 82,000 736,823 972,295 7.2% 4,200 77,378 396,657 -287,473

TOTAL 4,378,958 3,132,110 7,857,797 37,433 575,936 1,764,946 -1,344,878

* 4 CGUs in 7 licenses.. Acquired in 2010.

** 2 CGUs in 7 licenses. Acquired in 2011.

*** 1 CGU in 7 licenses.. Acquired in 2016.

**** 7 CGUs in 44 licenses. Acquired in 2019.

*****Otherassetsconsistofgoodwill,PP&E,inventory,receivables,etc.whichcanbeallocatedtoCGUsoraredirectlyattributabletoCGUs.       

Licenses

Other

assets*****

Total

booked

value

tested WACC

Number

of smolts

(1,000)

EBITDA

change

of +/-1%

WACC

change

of -1%

WACC

change

of +1%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

119

ANNUAL REPORT 2021

Plant machinery

Land operating Other

and euipment, operating Assets under

DKK 1,000 buildings xtures etc. equipment Vessels construction Total

Acquisition costs as at 01.01.21 1,936,967 2,746,675 406,493 450,899 387,946 5,928,980

Reclassication 83,078 61,012 57,444 53,117 -52,912 201,739

Acquisitions during the year 72,206 432,757 41,218 81,455 440,231 1,067,867

Disposals and scrapping during the year -2,519 -96,842 -5,023 -373 0 -104,757

Currency translation differences 29,383 85,994 -51,101 57,555 7,280 129,111

Acquisition costs as at 31.12.21 2,119,115 3,229,596 449,031 642,653 782,545 7,222,940

Accumulated depreciations and write-downs as at 01.01.21 -381,949 -1,043,442 -164,346 -118,644 0 -1,708,381

Reclassication -44,377 -141,158 -16,205 0 0 -201.739

Depreciations during the year -80,574 -277,445 -45,526 -30,403 0 -433,948

Accumulated deprecations and write-downs on disposals and scrapping 2,519 94,787 4,239 242 0 101,787

Currency translation differences -13,552 -75,851 -1,083 -1,394 0 -91,880

Accumulated depreciations and write-downs as at 31.12.21 -517,933 -1,443,109 -222,921 -150,199 0 -2,334,162

Net book value as at 31.12.21 1,601,182 1,786,487 226,110 492,454 782,545 4,888,778

Acquisition costs as at 01.01.20 1,491,693 2,326,299 343,733 427,014 633,683 5,222,422

Reclassication 343,386 172,562 847 977 -539,554 -21,781

Acquisition of subsidiary 145,918 356,500 62,418 26,846 293,556 885,238

Acquisitions during the year -33,008 -93,169 -386 -690 0 -127,253

Disposals and scrapping during the year -11,022 -15,517 -119 -3,248 261 -29,645

Acquisition costs as at 31.12.20 1,936,967 2,746,675 406,493 450,899 387,946 5,928,980

Accumulated depreciations and write-downs as at 01.01.20 -317,266 -905,920 -132,983 -85,755 0 -1,441,924

Depreciations during the year -67,607 -216,699 -33,882 -33,613 0 -351,801

Accumulated deprecations and write-downs on disposals and scrapping 1,825 82,909 386 603 0 85,723

Currency translation differences 1,099 -3,732 2,133 121 0 -379

Accumulated depreciations and write-downs as at 31.12.20 -381,949 1,043,442 -164,346 -118,645 0 -1,708,381

Net book value as at 31.12.20 1,555,018 1,703,233 242,147 332,254 387,946 4,220,599

NOTE 3.2 PROPERTY, PLANT AND EQUIPMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

120

ANNUAL REPORT 2021

Description of depreciations Estimated lifetime Depreciation method Scrap value

Land and buildings 10-25 years linear 10%

Plant,machinery,operatingequipment,xturesetc. 3-20years linear 0%-10%

Other operating equipment 3-8 years linear 0%

Ships 25 years linear 10%

ACCOUNTING POLICIES

Property, plant, and equipmentiscapitalizedat acquisition

cost,lessaccumulateddepreciationandwritedowns.When

assets are sold, or divested, the book value is deducted, and

any loss or gain entered to the Income Statement. Ordinary

depreciation commences from the date on which the asset

goes into normal operation and is calculated based on its

economic lifespan. Depreciation is assigned in a straight line

over the expected economic lifespan of the assets, taking

into consideration the estimated residual value.

If an asset comprises signicant components with varying

lifespan, these components are depreciated separately. The

scrap value of the property, plant, and equipment as well as

the depreciation period and depreciation method employed

are reassessed annually.

Facilities under construction are not depreciated. Deprecia-

tion is charged to expenses when the facilities are ready for

use. If the situation or circumstances indicate that the carry-

ing amount of an asset cannot be recovered, an assessment is

made about whether to write-down its value. If the recover-

able value of the assets is less than the carrying amount and

the impairment is not expected to be temporary, the assets

are written down to the recoverable value. The recoverable

value is the greater of net sales price or value in use. Value in

useisthepresentvalueofthefuturecashows,whichthe

asset will generate.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 3

121

ANNUAL REPORT 2021

NOTE 3.3 LEASING

Right of use

Land, buildings Ships and

DKK 1,000 & property other equipment Total

Beginning balance 01.01.21 107,108 239,376 346,484

Additions 10,322 10,752 21,074

Adjustments 17,267 305 17,572

Depreciation -7,835 -88,632 -96,468

Effect of changes in currency exchange rate 0 13,443 13,443

Ending balance 31.12.21 126,861 175,244 302,105

Lease liability

Beginning balance 01.01.21 -136,031 -252,182 -388,213

Additions -9,962 -3,878 -13,840

Effect of changes in currency exchange rate 0 1,898 1,898

Adjustments -17,266 -304 -17,570

Lease payments 12,769 102,482 115,251

Interests -2,554 -5,050 -7,604

Effect of changes in currency exchange rate 0 -23,344 -23,344

Ending balance 31.12.21 -153,043 -180,378 -333,421

Current lease liability -9,399 -78,608 -87,668

Non-current lease liability -143,644 -101,769 -245,753

Maturity analysis, undiscounted cash ow

Up to 1 year 87,668

1-2 years 51,216

2-3 years 48,550

3-4 years 46,710

4-5 years 11,257

More than 5 years 88,020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

122

ANNUAL REPORT 2021

Right of use

Land, buildings Ships, boats and

DKK 1,000 & property plant & equipment Total

Beginning balance 01.01.20 133,717 199,106 332,823

Acquisition costs from merged company -2,586 -17,179 -19,765

Additions 0 189,019 189,019

Adjustments -12,590 -9,848 -22,438

Depreciation -11,281 -119,426 -130,707

Effect of changes in currency exchange rate 178 4,081 4,259

Ending balance 31.12.20 107,439 245,754 353,193

Lease liability Land, buildings Ships, boats and

& property plant & equipment Total

Beginning balance 01.01.20 135,140 198,253 333,393

Additions 15,772 196,360 212,132

Effect of changes in currency exchange rate 0 -8,497 -8,497

Lease payments -12,745 -121,824 -134,569

Interests 2,566 7,816 10,382

Effect of changes in currency exchange rate -2,962 -13,306 -16,268

Ending balance 31.12.20 137,771 258,801 396,572

Maturity analysis, undiscounted cash ow

Up to 1 year 131,337

More than 1 year 265,235

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

123

ANNUAL REPORT 2021

Bakkafrost has applied the rules for short-term leases and leas-

es with low value leasing assets and has expensed these in the

Income Statement. The amount is not material to the Group.

Accounting policies

Basedontheaccountingpolicyapplied,Bakkafrostrecognizes

a right-of-use asset and a lease liability at the commencement

date of the contract for all leases, conveying the right to control

theuseofanidentiedassetforaperiod.Thecommencement

date is the date on which a lessor makes an underlying asset

available for use by a lessee.

Therightofuseassetsisrecognizedatcost.Thecostofthe

asset consists of the total discounted lease payments (the

lease obligation), plus lease payments paid at contract of the

agreement (e.g., upfront payments) less any lease incentives re-

ceived, plus any costs directly related to the conclusion of the

agreement and the obligation to demolish or restore the asset

after use.

Subsequent measurement of the leasing asset is done according

to the same practice as for similar assets, that is owned by the

company.Thismeansthatleasedassetsareclassiedastangi-

blexedassets,evenifitislegallyarightofuseasset.

Theleaseobligationisrecognizedatthepresentvalueofthe

lease payments obtained by discounting the lease payments,

using the company's marginal borrowing rate, since the internal

ratecannotbereasonablydened.

Theleasepaymentsconsistofthexedleasepayments,guar-

anteed residual values and payment for exercise of purchase

option or payment for cancellation of lease when considered

reasonably certain that the options are exercised. In addition,

variable lease payments which are adjusted, based on an index,

whereas consumption-based leasing payments are not recog-

nizedaspartofthecostoftheleaseassetandliability.

The lease payments are distributed between an instalment por-

tion and an interest portion. The lease obligation is recalculated

at a constant interest rate, corresponding to the discount rate

used. At initial recognition, the value of the leased asset cor-

responds to the value of the lease obligation, unless upfront

payments and/or there are recovery obligations regarding the

asset.

The Group chose to apply the two practical exceptions in IFRS

16 regarding short term leases and low value assets. Short

term leases represent lease agreements shorter than 12 months

from the date of the contract, and low value assets represent

lease agreements that are lower than DKK 35,000 each.

NOTE 3.4 COMPANIES IN THE GROUP

The consolidated accounts for 2021 include the following subsidiaries and associates:

Subsidiary Companies Nominal

Currency Nature of Business Head Ofce Ownership share capital

Bakkafrost Farming P/F DKK Salmon farming Glyvrar 100% 19,762

Bakkafrost Processing P/F DKK Value adding of salmon (VAP) Glyvrar 100% 150,000

Bakkafrost Sales P/F DKK Sales of salmon and VAP products Glyvrar 100% 667

Bakkafrost Packaging P/F DKK Production of styrofoam boxes Glyvrar 100% 8,022

HavsbrúnP/F DKK Productionandsalesofshmeal,shoilandshfeed Fuglafjørður 100% 2,000

Bakkafrost UK Ltd. GBP Sales of salmon Grimsby 100% 2£

Bakkafrost USA LLC USD Sales of salmon Clifton,New Jersey 100% 2 mUSD

FörkaP/F DKK Productionofbiogasandfertilizer Glyvrar 100% 5,000

The Scottish Salmon Company Limited GBP Salmon Farming Edinburgh 100% 20,000,000

Scottish Salmon 2020 (Jersey) Limited GBP In liquidation Edinburgh 100% 17,530,000

07.07.2021 P/F DKK Freight transportation of goods Tórshavn 70% 350

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

124

125

ANNUAL REPORT 2021

Carrying Carrying

Associated Companies Head Net Share of value value

DKK 1,000 Ofce Ownership Additions the result 2021 2020

Pelagos P/F Fuglafjørður 30% 0 28,420 88,307 59,887

Salmon Proteins P/F* Eiði 79% -2,033 376 4,864 6,521

Svínoyar rognkelsisstøð Sp/f Svínoy 42% 0 0 733 733

Total 93,904 67,141

Total assets Total assets Equity Equity Result Result

2021 2020 2021 2020 2021 2020

Pelagos P/F 540,104 331,598 291,441 197,645 97,495 18,519

Salmon Proteins P/F* 9,557 9,539 6,183 8,277 407 341

Svínoyar rognkelsisstøð Sp/f** 8,386 6,896 -842 -5 -837 -1,480

*Voting rights 30%. The voting rights are limited in the Articles of Association of P/f Salmon Proteins.

**Information from 2020

NOTE 3.5 SHARES AND HOLDINGS IN OTHER COMPANIES

Carrying Carrying

DKK 1,000 amount amount

Companies 2021 2020

Others 55,321 55,318

Total 55,321 55,318

ACCOUNTING POLICIES

Shares and holdings in which the Group does not have signicant inuence are valued at cost as fair value cannot be

measured reliably.

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NOTE 3.6 INVENTORY

DKK 1,000 2021 2020

Raw materials and goods in-progress 514,977 576,355

Finished goods 194,329 199,677

Total inventory 709,306 776,032

Raw materials primarily consist of raw material to produce

shmeal,shoilandshfeedandpackagingmaterialsused

in processing.

Goodsin-progressincludesemi-nishedproductsandspare

parts.

Finished products include all products ready for sale, such

asshfeed,freshandfrozenwholesalmon,aswellaspro-

cessed salmon products.

Inventories are measured at full cost price.

ACCOUNTING POLICIES

Inventories consist of inventories in the Farming FO unit,

Farming SCT unit, VAP unit and the FOF unit.

FARMING FO AND FARMING SCT

Inventoriesincludemainlyfeed,packagingmaterialsandn-

ished goods. Inventories of goods are stated at the lower of

costandnetrealizablevalue.

The cost of processed goods is a full production cost that in-

cludes direct material and personnel costs, and a percentage

of indirect processing costs. Interest costs are not included

in the value of inventory.

The cost price of purchased goods is the acquisition price.

Cost is based on the FIFO principle.

Net realizable value is estimated sales price less selling

expenses.

VAP

Inventories consist of raw material, additives, packaging ma-

terialandnishedgoods.RawmaterialintheVAPunitcon-

sist basically of processed salmonids. Raw material is meas-

ured at fair value at the time of harvesting.

Packaging material and additives are valued at the lesser of

cost or expected sales price less sales costs. The FIFO princi-

ple is used concerning the periodic assignment of inventory

costs.

Finishedgoodsininventory,freshorfrozen,aremeasuredat

the lesser of cost or the expected sales price less sales costs.

In a case, where the cost price exceeds the sales price less

sales cost, impairment is entered and charged to the Income

Statement.

The cost price of goods produced in-house is the full pro-

duction cost, including production costs, which can be only

indirectly allocated to produce goods, less general adminis-

tration costs.

FOF

Raw materials and purchased commodities are valued at the

lowerof historicalcost and net realizable value in accord-

ance with the FIFO principle.

Finishedgoodsareshmeal,oilandfeedreadyfordelivery

tocustomer,valuedatthelowerofcostand netrealizable

value. The cost of nished goods includes any processing

costs that have incurred. Processing costs consist of logistics,

handling and storage costs.

The cost price of goods produced in-house is the full pro-

duction cost, including production costs, which can be only

indirectly allocated to produce goods, less general adminis-

tration costs.

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NOTE 3.7 BIOLOGICAL ASSETS

DKK 1,000 2021 2020

Biological assets carrying amount 01.01. 2,117,024 1,901,730

Increase due to production or purchases 3,158,703 3,012,251

Reduction due to harvesting or sale (costs of goods sold) -2,931,526 -2,761,374

Reduction due to mortality (costs of incidents-based mortality) -307,551 -125,806

Fair value adjustment at the beginning of the period reversed -145,387 -27,695

Fairvaluereclassicationcurrencytranslationdifferencesprioryear -24,452 0

Fair value adjustments at the end of the period 604,707 145,387

Reversal of elimination at the beginning of the period 80,083 59,121

Eliminations -134,193 -80,083

Currency translation differences 30,881 -6,507

Biological assets carrying amount 31.12. 2,448,289 2,117,024

Cost price biological assets 1,946,894 2,058,228

Fair value adjustments at the end of the 604,707 145,387

Eliminations -134,193 -80,083

Currency translation differences 30,881 -6,508

Biological assets carrying amount 2,448,289 2,117,024

Biomass on average (tonnes)

< 1 kg 5,070 5,777

1 < 2 kg 7,673 10,258

2 < 3 kg 10,026 10,880

3 < 4 kg 13,538 11,921

4 kg < 22,288 25,642

Volume of biomass at sea 58,595 64,478

Number of sh on average (thousand)

< 1 kg 9,770 11,960

1 < 2 kg 5,255 6,192

2 < 3 kg 3,873 4,338

3 < 4 kg 3,920 3,415

4 kg < 4,595 5,324

Total number of sh at sea 27,413 31,229

2021 2020

Harvested volumes 96,889 85,686

Number of smolts released (thousand)

Q1 4,044 3,295

Q2 5,233 5,757

Q3 7,022 6,577

Q4 9,236 9,418

Total number of smolts released 25,535 25,047

Sensitivity analysis of biomass DKK 1,000

Change in discount rate +1% -150,709 -150,403

Change in discount rate -1% 167,502 169,708

Change in sales price +5 DKK 423,223 466,110

Change in sales price -5 DKK -423,223 -465,110

Change in biomass volume +1% 8,982 5,414

Change in biomass volume -1% -8,982 -5,414

One year forward prices in EUR FCA Oslo*

At year end 6.72 4.36

Q1 (forward) 6.86 4.85

Q2 (forward) 6.81 5.39

Q3 (forward) 5.66 5.10

Q4 (forward) 6.15 5.25

* Source Fish Pool

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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VALUATION OF BIOLOGICAL ASSETS

IAS 41 requires biomass to be accounted for at the estimated

fair value net of sales costs and harvesting costs. The calcu-

lation of the estimated fair value is based on market prices

forharvested sh. Inthe accounts, thechangein estimated

fair value is entered to the Income Statement on a continuous

basis.

The Group’s biological assets are salmon at all stages of the life

cycle.Theshisdividedintotwomaingroups,dependingon

thestageofthelifecycle.Therstgroupisshproducedon

landinfreshwater.Thesecondis,whenthesharereleased

to sea.

Fortherstgroup,historicalcostisdeemedareasonableap-

proach to fair value, as there is little biological transforma-

tion. This assessment must be seen in the light of the fact

that smolts are currently released to sea at a stage when their

weight is still relatively low.

For the second group, the fair value is calculated by applying

a present value model at level 3 in the fair value hierarchy in

IFRS 13. In accordance with the principle in IFRS 13 for highest

and best use, the Group considers optimal harvest weight to

be for Farming FO 5.2 kg gutted weight (6.3 kg live weight)

and for Farming SCT 4.9 kg gutted weight (6.0 kg live weight).

The valuation model

The valuation model calculates the net present value of ex-

pectedcashowfrombiologicalassets.

Changes to estimated fair value of biological assets are pre-

sented on the line Fair value adjustments of biological assets

in the Income Statement.

The measurement unit is the individual sh. However, for

practicalreasons, cash ows and estimates arecarriedout

per locality.

Main components in the model are:

• Volume

• Production costs

• Sales price

• Discount rate

Volume

Estimated harvest volume is based on the actual number of

shintheseaonthe balance sheet date,minus estimated

future mortality from balance sheet date and multiplied by

optimalharvestweightpersh.

Future monthly mortality is estimated to be for Farming FO

0.9% (0.6%) and for Farming SCT 1.5% (1.0%) of the number of

incomingshpermonth.

Cost

Estimated future costs are based on the Group´s prognoses

per locality. Cost comprises mainly feed, production, harvest,

and transport costs.

Price

Estimated sales prices are based on externally quoted prices

from Fish Pool with adjustments to local conditions.

Fish Pool is a marketplace for nancial purchase and sale

agreementsforsuperiorNorwegiansalmonsize3-6kggut-

ted weight. The volume on Fish Pool is, however, limited. This

marketmaythereforebeconsideredinsufcientlyactiveand

effective. Despite this, Bakkafrost’s opinion is that the ob-

servable forward prices are the best approach to a price for

the sale of salmon.

The prices are reduced for harvesting costs, freight costs to

market to arrive at a net value back-to-farm and for Farming

FOalsorevenuetax.Thevaluationalsoreectstheexpected

quality grading.

Discounts

The estimatedfuture cash ow is discounted monthly. The

monthly discount rate on 31 December 2021 is 6% (6%) per

month for Farming FO and 4% (6%) per month for Farming

SCT. The discount rate considers a risk adjustment and time

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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The risk adjustment considers the volatility in volume, cost,

and price.

Mortality

Mortality above normal will be accounted for when a farming

site either experiences elevated mortality over time or mor-

tality due to an incident.

Costsrelatedtoabnormalmortalitywillberecognizedinthe

Income Statement and presented on the line for changes in

inventory,whilenormalmortalityisclassiedaspartofpro-

duction costs.

Bakkafrost uses a common indicator and threshold for all

farming sites to assess normal and abnormal mortality. In-

dication of abnormal mortality is when a farming site in a

month registers mortality exceeding 1.5% for Farming FO and

4%forFarmingSCToftheincomingnumberofsh.Amore

detailed assessment is then carried out to evaluate, whether

mortality is abnormal. These assessments consider the cause

ofmortalityandthesizeofthesh.

SIGNIFICANT ASSUMPTIONS SENSITIVITY

The estimate of fair value of biomass will always be based on

uncertain assumptions, even though the company has built

substantial expertise in assessing these factors.

The Group considers three components to be key param-

eters for valuation. These are: average price, monthly dis-

count rate and estimated biomass volume. In the table above

a simulated sensitivity analysis to changes in fair value of

the biological assets is portrayed in the event of changes in

these parameters.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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NOTE 3.8. ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

DKK 1,000 2021 2020

Accounts receivable 620,356 490.116

Provisions for bad debts -32 -41

Net accounts receivables 620,324 490,075

VAT 78.227 12.087

Other 93.979 49.344

Tax receivables 109.701 72,143

Other receivables 281.907 133,574

Total short-term receivables 902,231 623,649

Long-term receivables* 8,102 8,101

Total accounts receivable and other receivables 910,333 631,750

AGE DISTRIBUTION OF ACCOUNTS RECEIVABLE

DKK 1,000 2021 2020

Receivables not overdue 508,400 420,212

Overdue 0–6 months 103,258 66,194

Overdue more than 6 months 8,666 3,669

Total 620,324 490,075

* Loan to assoicates

The Group’s exposure to credit risks related to accounts receivable is disclosed in Note 4.1.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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CURRENCY DISTRIBUTION OF RECEIVABLES

DKK 1,000 2021 2020

DKK 92,104 59,217

EUR 318,369 113,778

USD 126,231 214,800

GBP 66,754 80,200

NOK 2,803 16,567

Others 14,063 5,512

Total 620,324 490,075

CURRENCY EXPOSURE TO ACCOUNTS RECEIVABLE

The Group holds accounts receivable in foreign currencies amounting to DKK 528 million at year-end 2021.

(2020: DKK 431 million).

Belowispresentedthebookvalueofreceivablesspeciedincurrency,translatedintoDKKemployingthecurrencyvalueat

31.12.

ACCOUNTING POLICIES

Accounts receivable and other receivables are presented at

face value less provisions for bad debts. Provisions for bad

debts are made based on an individual assessment of the re-

ceivables concerned. Due to insignicant costand the short

creditperiod,amortizedcostisequivalenttofacevalueless

foreseeable losses.

NOTE 3.9 CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of short-term bank deposits

and were DKK 509 million at year-end 2021, compared to

DKK 467 million at year-end 2020.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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NOTE 3.10 SHARE CAPITAL AND MAJOR SHAREHOLDERS

Share capital:

DKK 1,000 2021 2020

Share capital at 1 January 59,143 59,143

Share capital at 31 December 59,143 59,143

The parent company's share capital comprises:

DKK No. of Shares Face Value Share Capital

Ordinary shares 59,143,000 1 59,143,000

Total share capital 59,143,000

Reconciliation of outstanding shares: 2021 2020

Outstanding shares at 1 January 59,044,071 59,142,108

Purchase of treasury shares 0 -134,500

Sale of own shares to cover the employee bonus program 31,094 36,463

Outstanding shares at 31 December 59,075,165 59,044,071

Treasury shares at 31 December 67,835 98,929

SHAREHOLDERS

These shareholders held directly or indirectly more than 5%

of the shares in the company as at 31 December 2021: Odd-

vør Jacobsen, Regin Jacobsen and Folketrygdfondet.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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ANNUAL REPORT 2021

Name Position No. of shares Shareholding

Rúni M. Hansen Chairman of the Board 10,761 0.02%

Johannes Jensen Deputy Chairman of the Board 0 0.00%

Teitur Samuelsen Member of the Board 100 0.00%

Annika Frederiksberg Member of the Board 16,250 0.03%

Øystein Sandvik Member of the Board 0 0.00%

EinarWathne MemberoftheBoard 0 0.00%

ReginJacobsen ChiefExecutiveOfcer 4,617,351 7.81%

Odd Eliasen Managing Director 184,969 0.31%

HøgniD.Jakobsen ChiefFinancialOfcer 74,593 0.13%

Shares owned directly and indirectly by the members of the Board of Directors and Group Management:

Dividend

The Board has proposed a dividend per share of DKK 5.14

for 2021. DKK 216 million were paid out for 2020. The div-

idends proposed are to be approved at the Annual General

Meeting and if approved, the total dividend payment will

amount to DKK 304 million. The dividend proposal has not

beenrecognizedas a liability at 31 December2021 but is

presented as an item within equity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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ANNUAL REPORT 2021

NOTE 3.11 INTEREST-BEARING DEBT

DKK 1,000 2021 2020

Long-term interest-bearing debt 2,634,968 2,219,690

Total long-term interest-bearing debt 31.12. 2,634,968 2,219,690

Total interest-bearing debt 2,634,968 2,219,690

Cash and cash equivalents -509,157 -466,939

Net interest-bearing debt 2,125,811 1,752,751

ThematuritystructureoftheGroup’snancialcommitments

is based on undiscounted contractual payments. As the credit

limit is not necessarily in the same currency of debt drawn,

currencyuctuationsaffecttheamountavailableunderthe

facilities at any time.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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ANNUAL REPORT 2021

The maturity plan of the Group's interest-bearing debt is as follows

2021 2020

DKK 1,000 Carrying Contractual Carrying Contractual

amount payments amount payments

Credit facilities -2,634,968 -2,648,059 -2,219,690 -2,237,307

Gross interest-bearing debt -2,634,968 -2,648,059 -2,219,690 -2,237,307

Credit line 5,205,550 3,444,396

Bank guarantees -17,200 -17,200

Available credit lines 2,553,382 1,207,506

Cash and cash equivalents 509,157 466,939

Total available credit lines 3,062,539 1,674,445

REMAINING PERIOD

31.12.2021 1–3 months 3–12 months 1–5 years > 5 years Total

Interest-bearing bank loans 0 0 2,634,968 0 2,634,968

Accounts payable and other debt 543,394 170,997 0 0 714,391

REMAINING PERIOD

31.12.2020 1–3 months 3–12 months 1–5 years > 5 years Total

Interest-bearing bank loans 0 0 2,219,690 0 2,219,690

Accounts payable and other debt 591,742 37,422 0 0 629,164

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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The difference between the carrying amount and the total

expected payments in the table above is due to upfront ar-

rangement and legal fees incurred in connection with the re-

nancingofthecreditfacilities.Onelong-termbankborrow-

ing is drawn from a revolving credit facility, under which the

Group may draw and pay down any amount. The contractual

paymentsillustratedinthetableabovedonotreectrollo-

ver dates of loans drawn but are based on the maturity date

of the credit facilities.

INTEREST-BEARING DEBT IN MORE DETAIL

Financing of the Bakkafrost Group is mainly executed by the

parentcompany.Subsidiariescanonlyenterexternalnanc-

ing if it is seen favourable for the whole Bakkafrost Group.

New sustainability-linked nancing

In December 2021 The Group entered a term sheet for a sus-

tainability-linked EUR 700 million multicurrency revolving

creditfacilitywithatenorofveyears.TheFacilityAgree-

ment was signed in March.

ThepurposeoftheFacilitywastorenanceBakkafrost'sex-

isting bank facilities as well as general corporate purposes

including acquisitions. The Facility will serve as a robust and

exiblenancialframeworkfortheGroup'sinvestmentplans

aimed at organic growth for the Group and structural cost

reductions in Scotland, as described at the Capital Markets

Day 2021.

As The Facility is sustainability-linked means that the margin

payable will be linked to Bakkafrost's performance against

certain sustainability KPIs, consistent with the Group's over-

allESGtargetsandambitions.TheFacilityincludesexibility

for the parties to agree an additional amount of up to EUR

150 million during the tenor. The principal nancial cove-

nants of the Facility are: (1) an equity ratio of no less than

Maturity analysis – contractual payments

DKK 1,000 2022 2023 2024 2025 2026

Long-term credit facilities 0 0 0 0 2,634,968

Gross interest-bearing debt 0 0 0 0 2,634,968

Reconciliation of development in interest-bearing debt

2020 Cash ows Acquistion Reclassication FX movements 2021

Long term interest-bearing debt 2.219.690 415.278 0 0 0 2.634.968

Total interest-bearing debt 2.219.690 415.278 0 0 0 2.634.968

2019 Cash ows Acquisition Reclassication FX movements 2020

Long term interest-bearing debt 2,328,232 -108,542 0 0 0 2,219,690

Total interest-bearing debt 2,328,232 -108,542 0 0 0 2,219,690

35% and (2) an interest coverage ratio (EBITDA to net interest

payable) of no less than 2x. The Bakkafrost Group complied

with these covenants at the end of 2021.

Coöperatieve Rabobank U.A, DNB Bank ASA and Nordea

Bank ABPm (Filial i Norge), have agreed to continue their

support as lenders.

At the end of 2021, the Group had unused committed credit

facilities of DKK 3,063 million (DKK 2,163 million). In addi-

tion, the Group has an accordion of EUR 150 million.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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NOTE 3.12 MORTGAGES AND GUARANTEES

Carrying amount of debt secured by mortgages and pledges

TheBakkafrostGrouphasagroupnancing.TheGroupcom-

panies are liable jointly and severely for the balance without

limitations for each other.

As part of the guarantees are also any insurance refunds.

In addition, the shares in larger subsidiaries have been

pledged to the bank syndicate.

DKK 1,000 2021 2020

Long-term debt to nancial institutions 2,634,968 2,219,690

Carrying amount of assets pledged as security for recognized debt

Licences 3,720,158 4,493,395

Property, plant and equipment 3,606,250 3,320,949

Biological assets (biomass) 2,448,289 2,117,024

Inventory 703,600 763,146

Total 10,478,297 10,694,514

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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NOTE 3.13 DERIVATIVES

DKK 1,000 2021 2020

Currency swaps regarding forward contracts 7,809 6,449

Interest and currency swaps 0 4,741

Derivatives total 7,809 11,190

The fair value of derivatives held at the balance sheet date can be allocated as follows:

Recognized in Recognized in

the Income Recognized the Income Recognized

Fair Value Statement in equity Fair Value Statement in equity

DKK 1,000 2021 2021 2021 2020 2020 2020

Currency derivatives 7,809 0 7,809 6,449 0 6,449

Interest and currency derivatives 0 0 0 4,741 0 4,741

Total 7,809 0 7,809 11,190 0 11,190

The expected timing of the effect on the income statement is as follows:

Interest and Interest and

Currency currency Total Currency currency Total

derivatives derivatives 2021 derivatives derivatives 2020

Withinoneyear 4,602 0 4,602 6,212 3,498 9,710

Betweenoneandveyears 3,207 0 3,207 237 1,243 1,480

Afterveyears 0 0 0 0 0 0

Total 7,809 0 7,809 6,449 4,741 11,190

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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ANNUAL REPORT 2021

FINANCIAL INSTRUMENTS

InaccordancewithIFRS9,nancialinstrumentsfallingwith-

inits remitare classiedinto thefollowingcategories:fair

value with changes in value entered to the Income State-

ment, hold until maturity, loans and receivables, available for

sale, and other liabilities.

Financial instruments at fair value with changes in value

entered to the Income Statement

Financial instruments, which are held primarily for buying

orsellingintheshortterm,areclassiedasbeingheldfor

trading purposes. These instruments are included in the cat-

egoryofnancialinstrumentsrecognizedatfairvaluewith

changes in value entered to the Income Statement alongside

forwardcurrencycontracts,whicharerecognizedatfairval-

ue with changes in value, entered to the Income Statement.

Hedge accounting

Interest rate swaps and forward currency settlement con-

tracts are used as hedges of its exposure to foreign currency

risk, interest expenses and instalment payments in foreign

currencies.Thehedgesarecashowhedges.

The effective portion of the gain or loss on the hedging in-

strumentis recognizeddirectly in other comprehensivein-

comeinthecashowhedgereserve.

Amounts recognized as other comprehensive income are

transferred to the Income Statement, when the hedged trans-

actionaffectsprotorloss,andwhennancialliabilitiesare

settled,suchaswhenthehedgednancialincomeornan-

cialexpenseisrecognized.

If the forecast transactions or commitments are no longer ex-

pected to occur, the cumulative gain or loss, previously rec-

ognizedinequity,istransferredtotheIncomeStatement.If

the hedging instrument expires or is sold, terminated, or ex-

ercised without replacement or rollover, or if its designation

as a hedge is revoked, any cumulative gain or loss, previ-

ouslyrecognizedinothercomprehensiveincome,remainin

othercomprehensiveincomeuntilrmcommitmentaffects

protorloss,orsettlementpaymentsaremade.

NOTE 3.14 PROVISIONS

Aprovisionisrecognizedwhen,andonlywhen,thecompa-

ny has a valid liability (legal or self-imposed) deriving from

an event which has occurred, and when it is probable (more

likely than not) that a nancial settlement will take place

because of that liability, and when the amount in question

canbereliablyquantied.Provisionsarereviewedoneach

closingdate,andthelevelreectsthebestestimateforthe

liability. The Group has no provisions as per 31 December

2021.

PROVISIONS FOR ONEROUS CONTRACTS

ACCOUNTING POLICIES

The Group enters sales contracts for value added salmon

products (VAP) on an on-going basis. The contracts involve

physical settlement, and deliveries associated with the con-

tracts form part of the Group’s normal business activities.

The contracts contain no built-in derivative elements.

With respect to xed-price contracts, which result in the

Group being obligated to sell salmon products at a price

less than production cost (including fair value adjustment of

raw materials at the point of harvesting), the contracts are

considered onerous, and provisions are calculated and en-

teredtothestatementofnancialposition.Theprovisionis

charged to the Income Statement.

SIGNIFICANT ASSUMPTION

The company holds long-term sale contracts related to salm-

on products. These contracts do not contain any elements

of embedded derivatives and are therefore not treated as

nancialinstruments.Thecontractsaresettled,basedexclu-

sively on the assumption that delivery of salmon products

should take place. The contracts are not tradable, nor do they

contain a clause for settlement in cash or cash equivalents.

Provisions are made for estimated onerous contracts that

obligethe Group tosellsh at a pricelessthan calculated

production costs including raw materials, biomass, measured

at fair value.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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NOTES – SECTION 4

Capital

Structure and

Financing Items

This section gives an insight into the capital structure and

nancingitems.

NOTE 4.1 FINANCIAL RISK MANAGEMENT

CAPITAL MANAGEMENT

The Group’s objective, when managing capital, is to maintain

a capital structure able to support the operations and max-

imizeshareholdervalue.Thefarmingbusinessischaracter-

izedbypricevolatilityandchallengingproductiondynamics.

The Group must be nancially solid in order to be able to

copewithuctuationsinprotsandnancialposition,and

the consolidated equity ratio shall at no time be lower than

35 percent. At 31 December 2021, the Group’s equity ratio

was 64 percent.

The Group manages the capital structure and adjusts corre-

sponding to changes in the underlying economic conditions.

In December Bakkafrost entered a term sheet for a sustaina-

bility-linked EUR 700 million multicurrency revolving credit

facilitywithatenorofveyears.Thefacilityagreementwas

signed in March 2022.

According to the Group’s dividend policy, under normal cir-

cumstances, average dividends over several years should be

30to 50percentof theadjustednetprot.The Boardhas

proposedadividendofDKK5.14pershareforthenancial

year 2021, corresponding to a distribution to shareholders

of DKK 304 million.

At 31 December 2021, net interest-bearing debt amounted

to DKK 2,126 million. Note 3.10 provides an overview of the

debt’smaturityproleandinformationonthedebt’snan-

cial covenants. Bakkafrost complied with the covenants loan

agreements at the end of 2021.

FINANCIAL RISK MANAGEMENT

The Group has exposure to the following risks from its use

ofnancialinstruments:marketrisk,liquidityriskandcred-

it risk. This note presents information about the Group’s

exposure to each of these risks, the Group’s objectives, poli-

cies and procedures for measuring and managing risks.

Further quantitative disclosures are included throughout

theseconsolidatednancialstatements.

The main objective of Bakkafrost’s nancial risk manage-

ment policies is to ensure the ongoing liquidity of the Group,

denedasbeingatalltimesinapositiontomeettheliabil-

ities of the Group as they fall due. This also includes being

abletomeetnancialcovenantsonGroupdebtundernormal

circumstances.

Concerning insurance coverage, the Group insures against

material risks, where the insurance is economically viable.

The balance between the amount covered by insurance and

what is left to own risk varies, depending on the nature of

the risk, the value of the assets and prospective liabilities

and the cost, actual coverage and the availability of insur-

ance.

The Board of Directors believe that the most important meas-

ureagainstanyriskistohaveastrongnancialposition.At

31 December 2021, the Group’s equity ratio was 64%.

Risk management policies and procedures are reviewed reg-

ularlytoreectchangesinmarketconditionsandtheGroup’s

activities.

FINANCIAL RISK

FinancialriskcanbedenedastheriskthattheGroupwill

notbeabletomeetitsnancialobligations.

In addition to bank loans, the Group has nancial instru-

ments such as accounts receivables, cash, shares, accounts

payables, etc., which are ascribable directly to day-to-day

business operations.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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The Group uses nancial derivatives, mainly currency for-

ward contracts. The purpose of these instruments is to man-

age the currency risks arising from the Group’s operations.

TheGroupdoesnotemploynancialinstruments,including

nancialderivatives,forthepurposeofarbitrage.

Themostimportantnancialrisks,towhichthecompanyis

exposed, are interest rate risk, foreign exchange risk, liquidity

risk and credit risk. The management monitors these risks on

an on-going basis and draws up guidelines, for how these

should be managed.

MARKET RISK

Marketrisk can be dened as the risk that the Group’sin-

comeandexpenses,futurecashowsorfairvalueofnan-

cialinstrumentswilluctuatebecauseofchangesinmarket

prices. Market risk comprises three types of risk: currency

risk, interest rates risk and other price risk (such as commod-

ity prices and salmon spot prices).

Market risk is monitored and actively managed by the Group.

Exposuretotheserisksisreducedbydiversication,suitable

controls and business tactics. In some cases, market risks are

transferred to third parties via contractual price adjustment

clauses,butrarelybymeansofnancialderivatives.

Foreign exchange risk

Because of the international nature of its operations, the

Group is exposed to uctuations of foreign currency rates.

For risk management purposes, three types of currency ex-

posurehavebeen identied: Translationalexposure,Trans-

actional exposure and Economic currency exposure:

Translational exposure

Bakkafrost has subsidiaries abroad in Scotland, England, USA

and Denmark. Thus, Bakkafrost faces currency risks arising

from the translation of subsidiaries whose functional curren-

cy differ from the presentation currency of the Group. The

exposure related to equity of foreign subsidiaries is gener-

ally not hedged.

Transactional exposure

Most of the operating companies in the Group are exposed to

changes in the value received or paid under foreign currency

denominated committed transactions. For the farming seg-

ments, exposure arises mainly from export sales, while for

the FOF segment, exposure results from the sourcing of raw

materials in the international commodities markets.

The Group has normally a net positive cash ow exposure

from USD and EUR and a net negative cash ow expo-

sure from DKK, GBP, and NOK. The predominant exposure

comes from the USD. The Group has therefor a policy for a

12-months hedging programme of USD/DKK. The Group cur-

rently hedges up to 26% of the 12-months exposure from

USD/DKK.

Thetablebelowsummarizestheforeigncurrencyexposure

on the net monetary position of all Group entities against

theirfunctionalcurrency.Theexposureontranslatingthe-

nancial statements of subsidiaries into the presentation cur-

rency is not included in the analysis.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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Exposure to currency risk Currency

DKK 1,000

2021 EUR/DKK GBP/DKK USD/DKK NOK/DKK JPY/DKK

Cash and cash equivalents 203,593 0 181,144 0 15,018

Accounts receivable 318,369 66,785 203,383 14,063 2,803

Trade payables -1,253 -88,590 -9,992 0 0

Interest-bearing debt -706,468 -716,025 0 -8,905 0

Forward contracts 0 0 -249,562 7,873 0

Net exposure -185,759 -737,830 124,973 13,031 17,821

2020 EUR/DKK GBP/DKK USD/DKK NOK/DKK JPY/DKK

Cash and cash equivalents 211,736 0 125,532 0 9,239

Accounts receivable 113,778 80,200 214,800 16,566 0

Trade payables -35,530 -125,931 -26,581 -37,265 0

Interest-bearing debt -706,733 -724,465 0 -9,075 0

Forward contracts 0 0 0 11,190 0

Net exposure -416,749 -770,196 313,751 -18,584 9,239

Sensitivity analysis Currency

DKK 1,000

2021 EUR/DKK GBP/DKK USD/DKK NOK/DKK JPY/DKK Result

Net exposure -185,759 -737,830 124,973 13,031 17,821

Historical volatility for the last 5 years 0.28% 7.19% 6.65% 9.31% 7.21%

Total effect on Prot of +movements -520 -53,050 8,311 1,213 1,285 -42,761

Total effect on Prot of -movements 520 53,050 -8,311 -1,213 -1,285 42,761

2020 EUR/DKK GBP/DKK USD/DKK NOK/DKK JPY/DKK Result

Net exposure -416,749 -770,196 313,751 -18,584 9,239

Historical volatility for the last 5 years 0.31% 8.63% 7.08% 9.05% 8.71%

Total effect on Prot of +movements -1,292 -66,468 22,214 -1,682 805 -46,423

Total effect on Prot of -movements 1,292 66,468 -22,214 1,682 -805 46,423

The analysis is based on the currencies that the Group is

most exposed to at the end of 2021. The reasonable shifts

in exchange rates in the table above are based on 5 years

historical volatility.

If the relevant cross foreign exchange rates moved by the

amounts showed in the table above, the effect on the Group’s

net income would be DKK -43 million (2020: DKK -46 mil-

lion).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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Currency forward contracts as at 31 December 2021

Bakkafrost Group buys Bakkafrost Group sells

DKK 1,000

DKK 249,562 USD 39,247

NOK 10,950 DKK 7,873

Currency forward contracts as at 31 December 2020

Bakkafrost Group buys Bakkafrost Group sells

DKK 1,000

NOK 138,730 GBP 12,684

Signicant exchange rates (average) during the year EUR/DKK GBP/DKK USD/DKK NOK/DKK JPY/DKK

2021 743.70 865.25 629.18 73.18 5.73

2020 743.93 823.78 605.76 70.53 5.88

Interest rate risk

The Group is exposed to increase in interest rates as a result

ofhavingdebtwithoatinginterestrateterms.Anincreased

costofborrowingmightadverselyaffecttheGroup’sprota-

bility.TheGroupdoesnothavexedinterestratedebt.

Accordingtothe Group’snancepolicy,themain objective

of interest rate risk management activities should be to min-

imizetheriskofbreachoftheGroup’sdebtcovenantsand

toavoidsituationsofnancial distressthatmightjeopard-

izestrategicexibility.Tradingininterestratederivativesis

undertaken to cover existing exposures. Purely speculative

transactions are not allowed.

TheGrouphas no xedrateliabilities and is thereforenot

exposed to the risk that changes in interest rates might drive

changes in market value of outstanding debt.

A 100 basis points increase in interest rate at the reporting

date would have a negative impact on the income statement

amounting to DKK 26 million (2020: DKK 17 million), based

on NIBD.

Price risk

The farming segments are sensitive to uctuations in the

spot prices of salmon, which are determined by global supply

and demand. The impact of changes in salmon spot prices is

partlymitigatedbylong-termcontractsatxedpricesinthe

VAPsegment and nancial contracts,however, due tolong

productioncycles,itisdifculttorespondquicklytoglobal

trends in market prices. Salmon is to a large extent traded

based on spot prices, although this would vary with different

markets and with the market position of the Group.

Other price risk

The Group’s FOF segment is active in the international com-

modity markets. A large portion of raw materials needed in

production is contracted in advance of periodic sales price

regulations, this way the risk associated with increases in

commodity prices is effectively transferred to feed custom-

ers, mainly inside the Group. Constraints in the availability

of certain raw materials might result in increased sourcing

costs in those cases, where an unexpected surge in sales vol-

ume makes it necessary to purchase raw materials outside of

previously negotiated purchase agreements. Under these cir-

cumstances, it might not be possible to charge the customers

withtheincreasedcost,andprotabilitywouldthussuffer.

Liquidity risk

Liquidity risk arises from the Group’s potential inability to

meet its nancial obligations towards suppliers and debt

capital providers. The Group’s liquidity situation is closely

monitoredandrollingforecastsofcashowsandcashhold-

ings are prepared regularly.

Liquidityriskis managed throughmaintaining exibilityin

funding by securing available committed credit lines, pro-

videdbyourbank,andthroughmaintainingsufcientliquid

assets with the same relationship bank.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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The Group seeks to maintain committed facilities to cover

forecastborrowingsfor the next 24 months, plus nancial

headroom to cover the planned investments and unforeseen

movements in cash requirements. Please also refer to Note

3.11 for information on committed credit facilities, available

credit lines, and maturity of interest-bearing debt.

In addition to the above-described sources of liquidity, Bak-

kafrost monitors funding options available in the capital

markets as well as trends in the availability and cost of such

fundingwithaviewtomaintainnancialexibilityandlim-

itingrenancingrisk.Bakkafrost’soverallliquidityasat31

December 2021 included DKK 509 million (2020: DKK 467

million) (see Note 3.11) of cash and cash equivalents held in

various currencies.

Credit risk

Credit risk represents the accounting loss that would have

to be recognizedif other parties failed to perform as con-

tractedand isrelatedtonancialinstrumentssuchascash

and cash equivalents, receivables and derivative nancial

instruments.

Bakkafrost has a Group-wide credit management policy,

governed by Bakkafrost’s credit committee. The committee

is responsible for granting credits to the Groups customers.

In general, Bakkafrost uses credit insurance, bank guaran-

tees, parent company guarantees, or other securities such as

pledges on biological assets, thus reducing the actual risk on

outstandingreceivablessignicantly.Historically,lossesdue

to bad debts have been low in Bakkafrost. Recoverable Tax

and VAT, included in the balance, also reduces the risk. In

addition to such risk mitigating measures, the Group focuses

on detailed credit management in operating companies, sup-

ported by regular follow up by central functions.

The concentration of credit risk is at the outset not con-

sidered signicant, since the Group’s customers represent

various industries and geographic areas. Counterparty risk

against nancial institutions is not considered signicant,

due to limited liquid assets and low traded volumes in deriv-

atives. For these transactions, the Group relies upon Nordic

relationship banks, other relationship banks or widely recog-

nizedcommodityexchanges.

Thecarryingamountofnancialassetsrepresentsthemax-

imum credit exposure. The maximum exposure to credit risk

at the reporting date consists of accounts receivables, oth-

er receivables and cash and cash equivalents and amounts

to DKK 1,411 million as at 31 December 2021 (2020: DKK

1,091 million). For the age distribution of accounts receiva-

ble, please refer to Note 3.8.

Credit Risk 2021 2020

Accounts receivable 714,304 490,075

Other receivables 78,227 61,431

Tax receivables 109,700 72,143

Cash and Cash equivalents 509,157 466,939

Total 1,411,388 1,090,588

Bakkafrost has implemented a Group-wide cash management

policywiththeoverallobjectiveofminimizingcashholdings,

while ensuring sufcient liquidity to meet business needs,

avoid shortage of cash and limit the need for borrowing. The

cashmanagementiscarriedoutfromtheGroup’sheadofce.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

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NOTE 4.2 CATEGORIES AND FAIR VALUE

OF FINANCIAL INSTRUMENTS

Fair value of nancial instruments

Allassets/liabilities,forwhichfairvalueisrecognizedordis-

closed, arecategorized within the fair valuehierarchy, de-

scribed as follows, based on the lowest level input that is

signicanttothefairvaluemeasurementasawhole:

Level 1: Quoted market prices in an active market (that are

unadjusted) for identical assets or liabilities.

Level 2: Valuation techniques (for which the lowest level in-

putthatissignicanttothefairvaluemeasurementisdirect-

ly or indirectly observable).

Level 3: Valuation techniques (for which the lowest level in-

putthatissignicanttothefairvaluemeasurementisun-

observable).

For biological assets, the fair value calculation is done using

a valuation model (level 3 in the valuation hierarchy), where

the value is estimated based on observable market prices

per period end. For more information on these calculations,

refer to Note 3.7.

Forassets/liabilitiesthatarerecognizedatfairvalueonare-

curring basis, the Group determines, whether transfers have

occurred between Levels in the hierarchy by reassessing cat-

egorization(based on the lowestlevelinputthat is signi-

cant to the fair value measurement).

There have been no transfers into or out of Level 3 fair value

measurements.

DKK 1,000

Assets and liabilities measured at fair value Fair value Cost amount Level 1 Level 2 Level 3

Biological assets (biomass) 2,448,289 1,843,582 0 0 2,448,289

Assets measured at fair value 31-12-21 2,448,289 1,843,582 0 0 2,448,289

Liabilities measured at fair value 31-12-21 0 0 0 0 0

Biological assets (biomass) 2,117,024 1,971,637 0 0 2,117,024

Assets measured at fair value 31-12-20 2,117,024 1,971,637 0 0 2,117,024

Liabilities measured at fair value 31-12-20 0 0 0 0 0

As at December 31st the Group held the following classes of assets/liabilities measured at fair value:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 4

146

ANNUAL REPORT 2021

DKK 1,000 2021 2020

ProtfortheyeartotheshareholdersofP/FBakkafrost   964,036 462,845

Fair value adjustment of biomass (IAS 41) -434,868 -118,003

Tax on fair value adjustment 78,276 21,241

Adjusted prot for the year to shareholders of P/F Bakkafrost 607,444 366,083

Ordinary shares as at 01.01. 59,143,000 59,143,000

Emission – increase of share capital 0 0

Ordinary shares as at 31.12. 59,143,000 59,143,000

Time-weighted average number of shares outstanding through the year 59,090,092 59,090,092

2021 2020

Earnings per share

Basic (DKK) 16.32 7.83

Diluted (DKK) 16.32 7.83

Adjusted earnings per share (before fair value adjustments

of biomass and provision for onerous contracts (adjusted EPS)

Basic (DKK) 10.28 6.20

Diluted (DKK) 10.28 6.20

NOTE 4.3 EARNINGS PER SHARE

Bakkafrost Group has no stock option programme running at present.

Earnings per share (EPS)

Basic earnings per share

Basic EPS is calculated by dividing the prot attributable

to equity holders of the company by the weighted average

number of ordinary shares in issue during the year, exclud-

ing ordinary shares purchased by the company and held as

treasury shares.

Diluted earnings per share

Diluted earnings per share are adjusted for the dilution effect

of issued share options. Bakkafrost has no share options out-

standing.

Adjusted earnings per share

Adjusted EPS is based on the reversal of certain fair value

adjustments shown in the table above, as it is Bakkafrost’s

viewthatthisgureprovidesamorereliablemeasureofthe

underlying performance.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 5

147

ANNUAL REPORT 2021

NOTES – SECTION 5

Other

Disclosures

This section gives more details on the statutory notes that have

secondary importance from the perspective of Bakkafrost.

The Group had capital expenditure committed but not provided in these accounts at the date of the Statement of Financial

Position of approximately DKK 750 million. DKK 651 million for 2022 and DKK 99 million for 2023.

NOTE 5.1. CAPITAL COMMITMENTS

2021 2022 2023

Total contractual new Hatchery stations in the Faroe Islands 163.204 99.065

Total contractual new marine sites and development of an existing freshwater site in Scotland. 163.400 0

Total contractual other PPE investments 324.600 0

Total 651,204 99,065

2020 2021 2022

Total contractual new Hatchery stations in the Faroe Islands 340,883 202,587

Total contractual new marine sites and development of an existing freshwater site in Scotland. 102,216 0

Total contractual other PPE investments 109,692 269,253

Total 552,791 471,840

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 5

148

ANNUAL REPORT 2021

DKK 1,000 2021 2020

Based on key personnel

Purchase – Betri Trygging P/F 42,593 35,495

Accounts payable – Betri Trygging P/F 50 717

Revenues–Gist&VistP/F   919 806

Purchase–Gist&VistP/F   106 24

Accountsreceivable–Gist&VistP/F   59 92

Revenues – Frost P/F 0 8

Purchase – Frost P/F 669 3,289

Accounts payable – Frost P/F 77 592

Purchase – Vest Pack P/F 0 15,293

Accounts payable Vest Pack P/F 0 1,579

Purchase – Tjaldur P/F 81,766 66,397

Accounts payable – Tjaldur P/F 5,375 6,903

Purchase – Eystur- og Sandoyartunlar P/F 704 63

Accounts payable – Eystur- og Sandoyartunlar P/F 2 3

Based on association

Revenues – FF Skagen A/S 14,019 0

Purchase – FF Skagen A/S 0 98

Accounts payable – FF Skagen A/S 0 83

Revenues – Pelagos P/F 27 0

Purchase – Pelagos P/F 51,401 40,752

Accounts – Pelagos P/F 4,028 0

Revenues – Salmon Proteins P/F 8,005 560

Accounts receivable – Salmon Proteins P/F 131 91

Accounts payable – Salmon Proteins P/F 1,941 0

Revenues – Svínoyar Rognkelsisstøð SP/F 411 591

Purchase – Svínoyar Rognkelsisstøð SP/F 6,137 7,439

Accounts receivables – Svínoyar Rognkelsisstøð SP/F 8,102 8,101

Accounts payable – Svínoyar Rognkelsisstøð SP/F 722 0

NOTE 5.2 RELATED-PARTY TRANSACTIONS

Related parties are in this respect considered as persons or

legalentities,whichdirectlyorindirectlypossesssignicant

inuenceontheBakkafrostGroupthroughshareholdingor

position and vice versa. Related party transactions are at

arm’s length terms.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 5

149

ANNUAL REPORT 2021

There have been no new business combinations in 2020

or 2021.

In a transaction closed on 1 January 2022, Bakkafrost has

acquired 90% of the shares in Munkebo Seafood A/S. The

deal was jointly made with the General Manager of Munke-

bo Seafood. The shares were acquired from Paul Lybech,

who has been engaged with Munkebo Seafood for almost

25 years. Following the transaction, the General Manager

holds 10% of the shares in Munkebo Seafood A/S while

Bakka frost holds 90% of the shares.

Munkebo Seafood A/S was founded in 1974 and has since

theformationbeenengagedinproductionofcannedsh

at the factory in the city of Munkebo in Denmark. Today,

the company operates a modern canning facility and offers

a wide range of products, of which a larger share is based

on salmon. Bakkafrost has been one of the largest sup-

pliers of raw materials for Munkebo Seafood for the past

few years, making Munkebo Seafood a great extension of

Bakkafrost'svaluechain.Withaplannedincreaseinpro-

duction of salmon over the coming years, from Bakkaf-

rost's farms in the Faroe Islands and in Scotland, Munkebo

Seafood will have a strengthened raw material base and

Bakkafrost will strengthen the ability to further increase

the value derived from its salmon by-products.

The operations of Munkebo Seafood will remain un-

changed. Munkebo Seafood has around 40 employees, and

the products are currently sold mainly within the EU mar-

ket to retail customers. The key employees of Munkebo AS

will continue.

There is considerable spare production capacity for future

growth within the current facility.

With the acquisition of Munkebo Seafood, Bakkafrost

can now offer a wider range of products. Bakkafrost of-

fersfresh,frozen,andsmokedsalmonproducts,andnow

canned food is added. Bakkafrost has a global sales net-

work, and Munkebo Seafood's products will now be offered

in a wider market as a supplement to Bakkafrost's other

consumer packaged products.

The fair value of intangible assets has been determined on

anestimatedfairvalue.Fairvaluehas beenidentiedin

customer relationship employing generally accepted valu-

ation techniques. The market value of the customer rela-

tionship is measured to DKK 6.2 million.

The fair value of property, plant and equipment has been

determined based a 3rd party valuation.

The fair value of receivables has been determined based

an estimate of an age-distributed debtor list and historical

guresondoubtfuldebtors.

The fair value of the inventory has been determined based

on inventory lists, historical sales data, and subtraction of

obsolete goods.

NOTE 5.3 BUSINESS COMBINATIONS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 5

150

ANNUAL REPORT 2021

Book value Fair Value

DKK 1,000 31/12/2021 adjustment Fair value

Goodwill 0 7,586 7,586

Intangible assets 7 0 7

Property, plant, and equipment – incl. IFRS 16 13,665 0 13,665

Account’s receivables 8,480 0 8,480

Inventories 21,238 0 21,238

Other current assets, excluding cash and bank 2,202 0 2,202

Total assets 45,592 7,586 53,178

Deferred taxes and other taxes 1,091 1,157 2,248

Long-term liabilities, interest-bearing 7,405 0 7,405

Accounts payable 13,733 0 13,733

Other payable 4,404 0 4,404

Liabilities 26,633 1,157 27,790

Net assets 18,959 6,429 25,388

SECTION 5

151

ANNUAL REPORT 2021

NOTE 5.5 AUDITOR’S FEES

Fees paid to auditors (ex. VAT) break down as follows:

DKK 1,000 2021 2020

Statutory auditing 1,262 1,357

Tax advisory services 55 50

Other services 300 407

Total auditor’s fees 1,617 1,814

NOTE 5.4 EVENTS AFTER THE DATE OF THE

STATEMENT OF FINANCIAL POSITION

This is regarding new information regarding the company’s

nancialpositiononthestatementofnancialposition,which

isreceivedafterthedateofthestatementofnancialposi-

tion,hasbeenrecognizedintheannualaccounts.Eventsafter

thedateofthestatementofnancialposition,whichdonot

affect the company’s nancial position on the statement of

nancial position date, but which will affect the company’s

futurenancialposition,aredisclosedifmaterial.

SECTION 5

152

ANNUAL REPORT 2021

NOTE 5.7

ALTERNATIVE PERFORMANCE MEASURES

TheGroupsnancialinformationispreparedinaccordance

withinternationalnancialreportingstandards(IFRS).Inad-

dition, the management’s intention is to provide alternative

performance measures, which are regularly reviewed by the

management to enhance the understanding of the company’s

performance,butnotreplacingthenancialstatementspre-

pared in accordance with IFRS. The alternative performance

measures presented may be determined or calculated dif-

ferently by other companies. Bakkafrost’s experience is that

these APM’s are frequently used by analysts, investors and

other parties.

TheseAPM’sareadjustedIFRSmeasuresdened,calculated

and used in a consistent and transparent manner over the

years and across the company where relevant.

NIBD

Net interest-bearing debt consists of both current and

non-current interest-bearing liabilities, less related current

andnon-currenthedginginstruments,nancialinstruments,

such as debt instruments and derivatives, and cash and cash

equivalents. The net interest-bearing debt is a measure of the

Group’s net indebtedness that provides an indicator of the

overall balance sheet strength. It is also a single measure that

can be used to assess both the Group’s cash position and its

indebtedness. The use of the term ‘net debt’ does not neces-

sarily mean that the cash included in the net debt calculation

is available to settle the liabilities included in this measure.

Net debt is an alternative performance measure as it is not

denedinIFRS.ThemostdirectlycomparableIFRSmeasure

is the aggregate interest-bearing liabilities (both current and

non-current) and cash and cash equivalents. A reconciliation

from these to net debt is provided below.

31.12.2021 31.12.2020

DKK 1,000

Cash and cash equivalents -509,157 -466,939

Long- and short-term interest-bearing debt 2,634,968 2,219,690

Net interest-bearing debt 2,125,811 1,752,751

NOTE 5.6 GOING CONCERN

WithreferencetotheGroup’sprots,nancialstrengthand

long-termforecastsfortheyearsahead,itisconrmedthat

thenancialstatementsfor2021arebasedontheassump-

tion that Bakkafrost is a going concern. In the opinion of the

Board,theGroup’snancialpositionisgood.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

SECTION 5

153

ANNUAL REPORT 2021

DKK 1,000 2021 2020

EBIT 1,144,685 691,123

Fair value adjustments of biological assets -434,868 -118,003

Income from associates -30,112 -5,546

Revenue tax – FO 141,489 53,584

Operational EBIT 821,194 621,158

Operational EBIT

Operational EBIT is EBIT aligned for fair value adjustments,

onerous contracts provisions, income from associates and

revenue tax – FO.

Operational EBIT is a major alternative performance measure

in the salmon farming industry. A reconciliation from EBIT to

Operational EBIT is provided below.

Operational EBIT per kg:

EBITDA

Earnings before interest, tax, depreciations and amortiza-

tions(EBITDA)isakeynancialparameterforBakkafrost’s

FOF segment. EBITDA before other income and other expens-

esisdenedasEBITDAlessgainsandlossesondisposalsof

xedassetsandoperationsandisreconciledinthesection

Group overview. This measure is useful to users of Bakkaf-

rost’s nancial informationin evaluatingoperatingprota-

bility on a more variable cost basis, as it excludes deprecia-

tionsandamortizationexpensesrelatedprimarilytocapital

expenditures and acquisitions, which occurred in the past,

nonrecurring items, as well as evaluating operating perfor-

mance in relation to Bakkafrost’s FOF segments competitors.

The EBITDA margin presented is dened as EBITDAbefore

other income and other expenses divided by total revenues.

Farming FO segment::

Operational EBIT Farming FO segment

Total harvested volumes FO (gw)

VAP segment:

Operational EBIT VAP segment

Total volumes produced (raw material gw)

Farming FO and VAP segment:

Operational EBIT Farming FO and VAP segment

Total harvested volumes FO (gw)

Farming SCT segment:

Operational EBIT Farming SCT segment

Total harvested volumes SCT (gw)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

154

ANNUAL REPORT 2021

DKK 1,000 2021 2020

ProtfortheyeartotheshareholdersofP/FBakkafrost   964,036 462,845

Fair value adjustment of biomass -434,868 -118,003

Tax on fair value adjustment and onerous contracts provisions 78,276 21,241

Adjusted prot for the year to shareholders of P/F Bakkafrost 607,444 366,083

Time-weighted average number of shares outstanding through the year 59,064,994 59,090,092

Adjusted earnings per share (before fair value adjustment of

biomass and provisions for onerous contracts) (adjusted EPS) 10.28 6.20

Adjusted EPS

Adjusted EPS is based on the reversal of certain fair value

adjustments shown in the table above, as it is Bakkafrost’s

viewthatthisgureprovidesamorereliablemeasureofthe

underlying performance.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - BAKKAFROST GROUP

155

Financial

Statements

P/F BAKKAFROST

156

ANNUAL REPORT 2021

P/F BAKKAFROST

Table of Contents

P/F BAKKAFROST – Income Statement for the year ended 31 December 157

P/F BAKKAFROST – Statement of Financial Position as at 31 December 158

P/F BAKKAFROST – Cash Flow Statement for the year ended 31 December 160

P/F BAKKAFROST – Statement of Changes in Equity as at 31 December 161

Note 1 – Accounting Policies 162

Note 2 – Salaries and other Personnel Expenses 162

Note 3 – Net Financial Items 163

Note 4 – Property, Plant and Equipment 164

Note 5 – Subsidiaries and Associates 165

Note 6 – Investments in Stocks and Shares 167

Note 7 – Share Capital and Major Shareholders 167

Note 8 – Tax 168

Note 9 – Security Pledges and Contingent Liabilities 169

Note 10 – Related-Party Transactions 169

P/F BAKKAFROST - FINANCIAL STATEMENTS AND NOTES

157

ANNUAL REPORT 2021

DKK 1,000 Note 2021 2020

Operating revenue 163,467 164,253

Salary and personnel expenses 2 -38,205 -36,395

Other operating expenses -97,291 -100,522

Depreciation 4 -29,500 -29,642

Earnings before interest and taxes (EBIT) -1,529 -2,306

Dividends from subsidiaries 282,140 989,908

Income from other investments in shares 6 50 36

Financial income 3 44,227 17,187

Net interest expenses 3 -31,501 -21,110

Net currency effects 3 31,014 1,350

Othernancialexpenses  3 -5,822 -6,175

Earnings before taxes (EBT) 318,579 978,890

Taxes 8 -6,655 1,834

Prot to shareholders of P/F Bakkafrost 311,924 980,724

Distribution of prot

Dividend proposed 303,995 215,872

Retained earnings 7,929 764,852

Distribution in total 311,924 980,724

P/F BAKKAFROST

Income Statement

FOR THE YEAR ENDED 31 DECEMBER

P/F BAKKAFROST - FINANCIAL STATEMENTS

158

ANNUAL REPORT 2021

DKK 1,000 Note 2021 2020

ASSETS

Non-current assets

Intangible assets 1,000 1,000

Total intangible assets 1,000 1,000

Property, plant and equipment

Land, buildings and other real estate 4 219,864 226,706

Plant, machinery and other operating equipment 4 90,477 107,423

Total property plant and equipment 310,341 334,129

Non-current nancial assets

Investments in subsidiaries 5 5,575,253 5,576,500

Investments in stocks and shares 6 750 1,273

Total non-current nancial assets 5,576,003 5,577,773

TOTAL NON-CURRENT ASSETS 5,887,344 5,912,902

Inventory 31,059 23,840

Total inventory 31,059 23,840

Receivables from Group companies 6,422,500 5,041,764

Accounts receivable 24,753 2,780

Other receivables 23,279 17,592

Total receivables 6,470,532 5,062,136

Cash and cash equivalents 400,145 348,385

TOTAL CURRENT ASSETS 6,901,736 5,434,361

TOTAL ASSETS 12,789,080 11,347,263

P/F BAKKAFROST

Statement of

Financial Position

AS AT 31 DECEMBER

P/F BAKKAFROST - FINANCIAL STATEMENTS

159

ANNUAL REPORT 2021

DKK 1,000 Note 2021 2020

EQUITY AND LIABILITIES

Equity

Share capital 7 59,143 59,143

Other equity 9,146,165 9,038,737

Total equity 9,205,308 9,097,880

Non-current liabilities

Long-term interest-bearing debt 9 2,634,362 2,219,652

Deferred taxes 8 10,116 11,471

Total non-current liabilities 2,644,478 2,231,123

Current liabilities

Derivatives 3.12 4,721 0

Payables to Group companies 905,003 0

Current tax liabilities 7,559 0

Accounts payable 15,527 12,619

Other short-term liabilities 6,484 5,641

Total current liabilities 939,294 18,260

Total liabilities 3,583,772 2,249,383

TOTAL EQUITY AND LIABILITIES 12,789,080 11,347,263

P/F BAKKAFROST - FINANCIAL STATEMENTS

160

ANNUAL REPORT 2021

DKK 1,000 Note 2021 2020

Cash ow from operations

EBIT -1,529 -2,306

Adjustments for write-downs and depreciation 4 29,500 29,642

Adjustments for net currency effects 3 31,014 1,350

Adjustments for share-based payment 2 601 810

Taxes paid 8 1,099 -4,284

Change in inventory -7,219 -5,392

Change in receivables -27,660 -17,675

Change in current debts 5,397 1,930

Cash ow from operations 31,203 4,075

Cash ow from investments

Increase of share capital in subsidiaries, etc., net 5 1,770 -167,807

Paymentsmadeforpurchaseofxedassets  4 -5,712 -256

Cash ow from investments -3,942 -168,063

Cash ow from nancing

Changes in interest-bearing debt (short and long) 415,560 508,347

Financial income 3 44,227 17,187

Financial expenses 3 -37,323 -27,285

Financing of associates/subsidiaries -475,733 -1,527,431

Acquisition/sale treasury shares 11,499 -37,616

Dividend from subsidiaries 282,140 989,908

Dividend paid -215,872 0

Cash ow from nancing 24,498 -76,890

Net change in cash and cash equivalents 51,759 -240,878

Cash and cash equivalents – opening balance 348,386 589,264

Cash and cash equivalents – closing balance total 400,145 348,385

P/F BAKKAFROST

Cash Flow

Statement

FOR THE YEAR ENDED 31 DECEMBER

P/F BAKKAFROST - FINANCIAL STATEMENTS

161

ANNUAL REPORT 2021

P/F BAKKAFROST

Statement of

Changes in Equity

AS AT 31 DECEMBER

Share Share-

premium Treasury based Proposed Retained

DKK 1,000 Share capital account shares payment Derivatives dividends earnings Total

1 January 2021 59,143 3,838,206 -37,685 1,354 0 215,872 5,020,990 9,097,880

Net annual prot 0 0 0 0 0 0 311,924 311,924

Other comprehensive income:

Fairvalueadjustmentonnancialderivatives 0 0 0 0 -3,871 0 0 -3,871

Total other comprehensive income 0 0 0 0 -3,871 0 0 -3,871

Total comprehensive income 0 0 0 0 -3,871 0 311,924 308,053

Transaction with owners:

Treasury shares 0 0 10,958 0 0 0 3,748 14,706

Share-based payment 0 0 0 217 0 0 0 217

Dividend treasury shares 0 0 0 0 0 0 324 324

Paid-out dividends 0 0 0 0 0 -215,872 0 -215,872

Proposed dividends 0 0 0 0 0 303,995 -303,995 0

Total transaction with owners 0 0 10,958 217 0 88,123 -299,923 -200,625

Total changes in equity 0 0 10,958 217 -3,871 88,123 12,001 107,428

31 December 2021 59,143 3,838,206 -26,727 1,571 -3,871 303,995 5,032,991 9,205,308

1 January 2020 59,143 3,838,206 -68 1,001 -520 0 4,254,784 8,152,546

Net annual prot 0 0 0 0 0 0 980,724 980,724

Other comprehensive income:

Fairvalueadjustmentonnancialderivatives 0 0 0 0 520 0 0 520

Total other comprehensive income 0 0 0 0 520 0 0 520

Total comprehensive income 0 0 0 0 520 0 980,724 981,244

Transaction with owners:

Treasury shares 0 0 -37,617 0 0 0 1,354 -36,263

Share-based payment 0 0 0 353 0 0 0 353

Proposed dividends 0 0 0 0 0 215,872 -215,872 0

Total transaction with owners 0 0 -37,617 353 0 215,872 -214,518 -35,910

Total changes in equity 0 0 -37,617 353 520 215,872 766,206 945,334

31 December 2020 59,143 3,838,206 -37,685 1,354 0 215,872 5,020,990 9,097,880

P/F BAKKAFROST - FINANCIAL STATEMENTS

162

ANNUAL REPORT 2021

DKK 1,000 2021 2020

Wagesandsalaries   30,834 27,754

Share based payments 601 810

Social security taxes 1,349 1,773

Pension expenses 2,153 1,995

Otherbenets   3,268 4,063

Total payroll expenses 38,205 36,395

Average number of full-time employees 66 63

P/F BAKKAFROST

Notes to the

Financial Statements

NOTE 1. ACCOUNTING POLICIES

Thenancialstatementshavebeenpreparedinaccordance

with the International Financial Reporting Standards (IFRS),

endorsed by the European Union (EU), and the additional

requirements according to the Faroese Financial Reporting

Act. The accounting policies applied to the consolidated ac-

counts have also been applied to the parent company, P/F

Bakkafrost. The notes to the consolidated accounts provide

additional information to the parent company’s accounts,

whichisnotpresentedhere separately.Thecompany’s-

nancial statements are presented in DKK. Investments in

subsidiaries are measured at historic cost unless there is

any indication of impairment. In case of impairment, an in-

vestment is written down to fair value.

NOTE 2. SALARIES AND OTHER PERSONNEL EXPENSES

REMUNERATION TO SENIOR EXECUTIVES AND AUDITORS

For details of remuneration paid to senior executives, see

notestotheconsolidatednancialstatements.Thecompany

paid DKK 586,000 (DKK 954,000) for audit service, DKK

55,000 (DKK 50,000) for tax advisory and DKK 97,500 (DKK

379,500) for other service. Please also see note 5.5 in the

consolidatednancialstatements.

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

163

ANNUAL REPORT 2021

NOTE 3. NET FINANCIAL ITEMS

DKK 1,000 2021 2020

Interests received from Group companies 43,303 16,289

Realizedprotonnancialderivatives   861 0

Othernancialincome   63 898

Financial income 44,227 17,187

Interest expenses on long- and short-term loans -31,500 -21,110

Interest expenses on accounts payable -1 0

Financial expenses -31,501 -21,110

Other exchange differences 31,014 1,350

Net currency effects 31,014 1,350

Othernancialexpenses   -5,822 -6,175

Other nancial items -5,822 -6,175

Net nancial items 37,918 -8,748

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

164

ANNUAL REPORT 2021

Land and Other

DKK 1,000 buildings equipment Total

Acquisition cost as at 01.01.21 289,773 178,737 468,510

Disposals and scrapping during the year 0 -787 -787

Acquisitions during the year 4,638 1,234 5,872

Acquisition cost as at 31.12.21 294,411 179,184 473,595

Accumulated depreciation and write-down as at 01.01.21 -63,067 -71,315 -134,382

Depreciations during the year related to disposals 0 628 628

Depreciations during the year -11,480 -18,020 -29,500

Accumulated depreciation and write-down as at 31.12.21 -74,547 -88,707 -163,254

Net book value as at 31.12.21 219,864 90,477 310,341

Acquisition cost as at 01.01.20 415,940 52,313 468,253

Reclassication -126,167 126,167 0

Acquisitions during the year 0 257 257

Acquisition cost as at 31.12.20 289,773 178,737 468,510

Accumulated depreciation and write-down as at 01.01.20 -67,622 -37,117 -104,739

Reclassication 15,982 -15,982 0

Depreciations during the year -11,427 -18,216 -29,643

Accumulated depreciation and write-down as at 31.12.20 -63,067 -71,315 -134,382

Net book value as at 31.12.20 226,706 107,423 334,129

AsignicantpartofBakkafrost’sbuildingsislocatedonrentedland.

Estimated lifetime Depreciation method Scrap value

Land and buildings 15-25 years linear 10%

Other operating equipment 3-8 years linear 0%

NOTE 4. PROPERTY, PLANT AND EQUIPMENT

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

165

ANNUAL REPORT 2021

NOTE 5. SUBSIDIARIES AND ASSOCIATES

DKK 1,000 2021 2020

Acquisition cost as at 01.01. 5,579,266 5,411,459

Additions during the year -1,247 167,807

Acquisition cost as at 31.12. 5,578,019 5,579,266

Re-evaluations as at 01.01. -2,766 -2,766

Re-evaluations as at 31.12. -2,766 -2,766

Net book value as at 31.12. 5,575,253 5,576,500

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

166

ANNUAL REPORT 2021

Carrying Carrying

Cost amount in amount in

DKK 1,000 Method Head Voting P/F Bakkafrost P/F Bakkafrost

Company Yes/No Ofce Ownership share 2021 2020

Bakkafrost Processing P/F Yes Glyvrar 100% 100% 258,591 258,591

Bakkafrost Sales P/F Yes Glyvrar 100% 100% 879 879

Bakkafrost Packaging P/F Yes Glyvrar 100% 100% 7,781 7,781

Bakkafrost Farming P/F Yes Glyvrar 100% 100% 314,887 314,887

Havsbrún P/F Yes Glyvrar 100% 100% 908,884 908,884

Bakkafrost UK Ltd Yes Grimsby 100% 100% 4,649 4,649

Bakkafrost Danmark ApS Yes Glyvrar 100% 100% 50 50

Scottish Salmon Company Ltd Yes Edinburgh 100% 100% 4,074,182 4,075,779

Förka P/F Yes Glyvrar 100% 100% 5,000 5,000

07.07.2021 P/F Yes Tórshavn 70% 70% 350 n/a

Total subsidiaries 5,575,253 5,576,500

P/F Bakkafrost and subsidiaries, the Group, own a total of 78.7% in P/F Salmon Proteins, which is an associated company on the Group level.

P/F Bakkafrost owns 14.23% in P/F Salmon Proteins and this is classed in investment in stocks and shares.

Excess

dividends Result Result

DKK 1,000 Dividends* on result 2021 2020

Bakkafrost Farming P/F 316,840 193 317,033 192,196

Bakkafrost Sales P/F 205,298 2,110 207,408 -2,181

Bakkafrost Packaging P/F 15,324 -155 15,169 202

Bakkafrost Processing P/F 75,074 0 75,074 140,064

Havsbrún P/F 267,873 -15,403 252,470 119,020

Bakkafrost UK Ltd. 0 3,754 3,754 3,340

Bakkafrost Danmark ApS 0 -6 -6 -7

Scottish Salmon Company 0 -253,231 -253,231 -163,185

Förka P/F 0 2,430 2,430 -2,678

07.07.2021 P/F 0 -56 -56 0

Total revenue Group contribution 880,409 -260,364 620,045 -286,771

* Dividends from subsidiaries paid out in 2022

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

167

ANNUAL REPORT 2021

NOTE 6. INVESTMENTS IN STOCKS AND SHARES

DKK 1,000 2021 2020

Acquisition cost as at 01.01. 183 183

Acquisition cost as at 31.12. 183 183

Re-evaluations as at 01.01. 1,090 1,053

Dividend -573 0

Re-evaluations during the year 50 37

Re-evaluations as at 31.12. 567 1,090

Net book value as at 31.12. 750 1,273

Sharesandholdings,inwhichtheGroupdoesnothavesignicantinuence.Thesearevaluedusingtheequitymethodoratcost

since fair value cannot be measured reliably.

NOTE 7. SHARE CAPITAL AND MAJOR SHAREHOLDERS

DKK 1,000 2021 2020

Share capital at 31.12. 59,143 59,143

The share capital is distributed into shares of DKK 1 and multiples thereof. For shareholders holding more than 5% in the

Company as at 31 December 2021, see Group Accounts.

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

168

ANNUAL REPORT 2021

NOTE 8. TAX

The tax expense for the year breaks down as follows:

DKK 1,000 2021 2020

Tax payable -6,737 1,819

Change in deferred tax 82 15

Tax expense on ordinary prot -6,655 1,834

Tax in the statement of nancial position

Deferred tax 10,116 11,471

Tax in the statement of nancial position 10,116 11,471

Specicationoftemporarydifferences  

Property, plant and equipment 60,883 63,691

Swaps -4,683 0

Total temporary differences 56,200 63,691

Deferred tax liabilities (+) / assets (-) 10,116 11,471

Reconciliation from nominal to actual tax rate

Protbeforetax   318,579 978,890

Expected tax at nominal tax rate (18%) -57,344 -176,200

Permanent differences, including Group contribution without tax effect (18%) 50,785 178,183

Other permanent differences (18%) -96 -149

Calculated tax expense -6,655 1,834

Effective tax rate -2.09% 0.19%

As Parent company in the Bakkafrost Group, Bakkafrost P/F

is the administrating company in the Group Joint Taxation

and is liable towards the Faroese Tax Authorities for taxes

payable on behalf of its subsidiaries.

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

169

ANNUAL REPORT 2021

NOTE 9. SECURITY PLEDGES AND CONTINGENT LIABILITIES

Carrying amount of debt secured by mortgages and pledges:

DKK 1,000 2021 2020

Long-termdebttonancialinstitutions   2,634,362 2,219,652

Total 2,634,362 2,219,652

Carrying amount of assets pledged as security for recognized debt

Property, plant and equipment 219,864 226,706

Total 219,864 226,706

ThecompanyparticipatesinaGroupnancingfortheBakka-

frost Group. In connection to this, the company has together

with other Group companies pledged licenses, property, plant

and equipment, shareholdings, inventory and receivables as

surety for the Group’s total debt to the banks. In addition, the

Group companies have guaranteed severally and jointly for

the balance without limitations for each other.

NOTE 10. RELATED-PARTY TRANSACTIONS

The company operates cash pooling arrangements in the

Group. Further, the company extends loans to subsidiaries

andassociatesattermsandconditionsreectingprevailing

market conditions for corresponding services, allowing a

margin to cover administration and risk. The company allo-

cates costs for corporate staff services and shared services

to subsidiaries and renting of buildings.

The total amounts for rent are DKK 21.2 million (2020: DKK

21.2 million), allocation of administration etc. DKK 84.4

million (2020: DKK 82.1 million), nancial incomes of DKK

15.9million(2020:DKK16.7million)andnancialexpens-

es amounting to DKK 0.0 million (2020: DKK 0.4 million).

The principle of arm’s length is used in all transactions with

related parties.

As part of the guarantees are also any insurance refunds.

In addition, the shares in larger subsidiaries have been

pledged to the bank syndicate.

P/F BAKKAFROST - NOTES TO THE FINANCIAL STATEMENTS

170

ANNUAL REPORT 2021

APPENDIX

Quarterly nancial gures 2019-2021

DKK 1,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

Operating revenue 963,709 946,506 996,050 1,604,842 1,255,226 1,134,222 1,123,147 1,139,297 1,175,637 1,617,534 1,272,362 1,488,316

Purchase of goods -361,540 -366,899 -274,775 -351,707 -415,276 -642,818 -574,394 -726,135 -288,602 -399,307 -496,680 -507,912

Change in inventory and biological assets (at cost) 34,013 134,296 -34,510 -163,222 -56,667 215,285 22,773 220,288 -7,375 -79,924 30,181 -120,942

Salary and personnel expenses -114,552 -117,690 -95,713 -184,806 -148,713 -159,987 -135,441 -164,206 -167,570 -184,782 -177,607 -198,464

Other operating expenses -200,153 -199,656 -218,367 -360,611 -267,470 -249,039 -248,265 -297,945 -357,934 -419,751 -434,744 -419,685

Depreciation -53,773 -57,793 -69,304 -129,245 -119,017 -115,766 -85,157 -126,825 -130,655 -126,281 -122,967 -150,531

Other income 0 0 0 0 0 0 0 44,041 0 0 0 28,877

Operational EBIT 267,704 338,764 303,381 415,251 248,083 181,897 102,663 88,515 223,501 407,489 70,545 119,659

Fair value adjustments on biological assets 17,871 -65,536 -69,804 -103,098 -410,711 426,650 124,429 -22,365 284,622 176,486 113,713 -139,953

Income from associates 6,947 -4,408 7,620 3,653 0 0 0 5,546 1,317 3,081 7,963 17,751

Revenue tax – FO -31,994 -32,031 -20,616 -14,487 -19,132 -22,633 -9,353 -2,466 -20,363 -41,152 -30,645 -49,329

Earnings before interest and taxes (EBIT) 260,528 236,789 220,581 301,319 -181,760 585,914 217,739 69,230 489,077 545,904 161,576 -51,872

Net interest revenue 111 638 850 3,397 803 344 101 151 120 2,239 1,073 110

Net interest expenses -1,865 -2,534 -3,011 -9,704 -9,527 -10,057 -6,446 -10,287 -7,605 -10,908 -7,784 -10,566

Net currency effects 1,425 -4,760 5,165 -14,500 15,448 -2,554 -12,284 -13,706 18,901 -1,992 6,552 22,401

Othernancialexpenses -864 -974 -935 -9,740 -6,015 -2,355 -3,919 -4,836 -7,025 -5,438 -3,319 -3,782

Earnings before taxes (EBT) 259,335 229,159 222,650 270,772 -181,051 571,292 195,191 40,552 493,468 529,805 158,098 -43,709

Taxes -46,499 -40,557 -41,715 -51,260 33,070 -99,611 -18,369 -78,229 -85,736 -101,678 -26,796 40,584

Prot or loss for the period 212,836 188,602 180,935 219,512 -147,981 471,681 176,822 -37,677 407,732 428,127 131,302 -3,125

Earnings per share (DKK) 4.37 3.88 3.67 4.25 -2.50 7.98 2.99 -0.64 6.90 7.25 2.22 -0.05

Diluted earnings per share (DKK) 4.37 3.88 3.67 4.25 -2.50 7.98 2.99 -0.64 6.90 7.25 2.22 -0.05

*Operational EBIT is EBIT before fair value of biomass, onerous contracts and income from associates, and revenue tax – FO

APPENDIX

171

ANNUAL REPORT 2021

DKK 1,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

ASSETS

Non-current assets

Intangible assets 391,042 390,456 390,456 4,395,687 4,386,056 4,377,948 4,491,387 4,493,395 4,493,081 4,494,960 4,495,225 4,495,726

Property, plant and equipment 3,004,587 3,112,331 3,215,676 3,780,499 3,762,740 3,894,070 3,977,620 4,220,599 4,405,542 4,549,575 4,742,180 4,888,778

Right of use assets 0 0 0 332,824 480,085 431,525 380,121 353,192 337,739 314,509 308,919 302,105

Financial assets 115,725 111,268 494,006 119,084 119,116 116,712 116,702 122,459 123,204 124,225 132,313 149,225

Long-term receivables 7,688 3,446 3,446 4,422 4,422 4,422 8,737 8,101 8,202 8,101 8,204 8,102

Deferred tax assets 0 0 0 37,593 37,840 35,718 58,238 26,934 0 0 0 215,248

Total non-current assets 3,519,042 3,617,501 4,103,584 8,670,109 8,790,259 8,860,395 9,032,805 9,224,680 9,367,768 9,491,370 9,686,841 10,059,184

Current assets

Biological assets (biomass) 1,290,944 1,231,495 1,268,948 1,901,729 1,492,337 1,903,359 2,146,338 2,117,024 2,441,083 2,489,210 2,703,268 2,448,290

Inventory 562,817 697,073 534,057 548,508 523,833 720,764 613,505 776,032 772,024 809,443 690,251 709,306

Total inventory 1,853,761 1,928,568 1,803,005 2,450,237 2,016,170 2,624,123 2,759,843 2,893,056 3,213,107 3,298,653 3,393,519 3,157,596

Financial derivatives 0 0 575 0 0 0 0 0 0 6,805 6,412 0

Accounts receivable 429,608 371,960 356,026 625,993 629,372 563,364 524,943 490,075 548,537 618,859 645,983 824,004

Other receivables 22,444 28,884 35,970 45,520 22,780 11,236 57,546 133,574 61,171 84,598 152,506 78,227

Total receivables 452,052 400,844 392,571 671,513 652,152 574,600 582,489 623,649 609,708 710,262 804,901 902,231

Cash and cash equivalents 341,574 322,694 2,611,554 1,309,546 801,079 454,389 445,929 466,939 373,706 552,981 373,318 509,157

Total current assets 2,647,387 2,652,106 4,807,130 4,431,296 3,469,401 3,653,112 3,788,261 3,983,644 4,196,521 4,561,896 4,571,738 4,568,984

TOTAL ASSETS 6,166,429 6,269,608 8,910,714 13,101,405 12,259,660 12,513,507 12,821,066 13,208,324 13,564,289 14,053,266 14,258,579 14,628,168

APPENDIX

172

ANNUAL REPORT 2021

DKK 1,000

Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

EQUITY AND LIABILITIES

Equity

Share capital 48,858 48,859 53,658 59,143 59,143 59,143 59,143 59,143 59,143 59,143 59,143 59,143

Other equity 4,240,869 4,035,000 5,984,391 8,270,112 8,070,356 8,522,287 8,702,346 8,670,344 9,120,850 9,336,906 9,464,500 9,288,269

Non-controlling interests 0 0

0 167,620 0 0 0 0 0 0 0 133

Total equity 4,289,727 4,083,859 6,038,049 8,496,875 8,129,499 8,581,430 8,761,489 8,729,487 9,179,993 9,396,049 9,523,643 9,347,545

Non-current liabilities

Deferred and other taxes 581,371 622,500 672,628 1,123,796 1,097,117 1,181,972 1,218,379 1,222,222 1,288,242 1,367,759 1,409,473 1,590,034

Long-term interest-bearing debt 862,944 1,066,266 1,340,073 2,328,231 1,789,537 1,570,512 1,702,579 2,219,690 2,312,487 2,456,065 2,359,589 2,634,968

Long-term leasing debt 60,816 71,445 71,109 225,585 261,105 249,178 287,937 265,235 235,552 249,024 247,076 245,753

Financial derivatives 0 0 0 1,966 1,966 1,282 -1,077 1,480 0 0 0 3,207

Total non-current liabilities 1,505,131 1,760,211 2,083,810 3,679,578 3,149,725 3,002,944 3,207,818 3,708,627 3,836,281 4,072,848 4,016,138 4,473,962

Current liabilities

Financial derivatives 613 0 0 13,493 13,158 18,042 17,371 9,710 4,649 2,251 2,994 4,602

Short-term leasing debt 0 0 0 107,808 201,047 195,140 130,043 131,336 143,271 97,669 93,487 87,668

Accounts payable and other debt 370,958 425,538 788,855 803,651 766,231 715,951 704,345 629,164 400,095 484,449 622,317 714,391

Total current liabilities

371,571 425,538 788,855 924,952 980,436 929,133 851,759 770,210 548,015 584,369 718,798 806,661

Total liabilities

1,876,702 2,185,749 2,872,665 4,604,530 4,130,161 3,932,077 4,059,577 4,478,837 4,384,296 4,657,217 4,734,936 5,280,623

TOTAL EQUITY AND LIABILITIES

6,166,429 6,269,608 8,910,714 13,101,405 12,259,660 12,513,507 12,821,066 13,208,324 13,564,289 14,053,266 14,258,579 14,628,168

APPENDIX

173

ANNUAL REPORT 2021

Market

Announcements

Published in 2021

Exclusive Invitations, Managements', Board of Directors' and

large shareholders'notication of trade and notication of

trade regarding Bakkafrost's Share Savings Plan

Q1 2021

4 January 2021: Q4 2020 Trading Update

23 February 2021: Financial Calendar

23 February 2021: Q4 2020 Interim Results and Full Year 2020

23 February 2021: Key Information Regarding Cash Dividend for Bakkafrost

10 March 2021: Annual Report 2020

16 March 2021: Notice to the Annual General Meeting

Q2 2021

6 April 2021: Q1 2021 Trading Update

9 April 2021: Protocol from Annual General Meeting

9 April 2021: Sustainability Report 2019

12 April 2021: Ex dividend DKK 3.65 today

12 April 2021: Payment of dividend in NOK on 30 April 2021

11 May 2021: Q1 2021 Interim Results

Q3 2021

1 July 2021: Q2 2021 Trading Update

24 August 2021: Q2 2021 Interim Results

13September2021:CapitalMarketsDayWebcast–14September2021

14 September 2021: Capital Markets Day presentation 14 September 2021

Q4 2021

4 October 2021: Q3 2021 Trading Update

7 October 2021: Financial Calendar

3 November 2021: Q3 2021 Interim Results

10December2021:Renancing

19 December 2021: Update on the continued effects from previously disclosed biological challenges

All market announcements are available on www.bakkafrost.com

and www.newsweb.no.

APPENDIX

174

ANNUAL REPORT 2021

Financial Calendar

for 2022

Annual General Meeting will take place at Bakkavegur 9, Glyvrar, Faroe Islands.

Pleasenotethatthenancialcalendarissubjecttochange.

Any changes will be announced via Oslo Børs, and the Group’s website, www.bakkafrost.com, will be updated accordingly.

 29 April 2022 Annual General Meeting

 10 May 2022 Presentation of Q1 2022

 23 August 2022 Presentation of Q2 2022

 8 November 2022 Presentation of Q3 2022

APPENDIX

175

ANNUAL REPORT 2021

Glossary

AGM: Annual General Meeting

ASC: Aquaculture Stewardship Council

CGU: Cash-generating Unit

EBT: Earnings Before Tax

EBIT: Earnings Before Interest and Tax

EBITA: EarningsBeforeInterest,AmortizationandTax

EBITDA: Earnings Before Interest, Tax, Depreciation and

Amortization

EPS: Earnings Per Share

FIFO: First in First out

FOF: Fishmeal, Oil and Feed

FO: Faroe Islands

HACCP: HazardAnalysesCriticalControlPoint

IAS: International Accounting Standards

IFRS: International Financial Reporting Standards

ISO: InternationalOrganizationforStandardization

LW: LiveWeight

NIBD: Net Interesting Bearing Debt

PP&E: Property, Plant and Equipment

R&D: Research and Development Costs

SCT: Scotland

SSC: The Scottish Salmon Company Plc

TGW: TonnesGuttedWeight

USP: Unique Selling Points

VAT: Value Added Tax

VAP: Value Added Products; Value Added Production

WACC: WeightedAverageCostofCapital

WFE: WholeFishEquivalent

APPENDIX

Bakkafrost P/F • Bakkavegur 9 • PO Box 221 • FO-625 Glyvrar

Tel +298 40 50 00 • Fax +298 40 50 09 • bakkafrost@bakkafrost.com • www.bakkafrost.com