Grieg Seafood ASA
OSE:GSF
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Welcome to Grieg Seafood's Q1 presentation for 2020. It's really strange times. And it's the first time we are doing this in our headquarter in Bergen. Normally, we do it in Oslo. Also, it's the first time we will do this in English. So with me, I have Atle Harald Sandtorv, the CFO of the company; and myself, that will go through the presentation for Q1. And I think we just move straight over to see the agenda for the day. First, we will go through some highlights for the quarter. Some updates on the COVID-19 situation. The operational review, consisting of all the regions. And Atle Harald will then take the financial review. And in the end, we will look into the outlook and summary for the quarter. And then I think we go straight over to the highlights for 2020. The price achievement impacted -- is impacted by harvest towards the end of the quarter with lower market prices. Good production and low cost in Rogaland, but margin is impacted by our environmental challenges in this, we'll come back to that when they go through Rogaland margin.Margin in Finnmark is negatively impacted by winter ulcers and 1 site affected by ISA that we harvested this quarter. We have had a positive cost development in British Columbia and in Shetland during the quarter. We are focused on ASC certification. I'm proud to say that we have received ASC certification of 5 sites in Finnmark and 3 in BC during this quarter. Other main achievement in the quarter is acquisition of Grieg Newfoundland, with long-term annual harvest potential of 30,000 to 45,000 tonnes. Expected harvest is 24,900 tonnes or close to 25,000 tonnes in the second quarter of 2020, and we maintain our guiding 100,000 tonnes for 2020. If we then move over to financial highlights for Q1, our EBIT is NOK 240 million towards an EBIT in Q1 '19, NOK 267 million, so a little bit down from first quarter '19. Our harvest volume is high compared to normally in Q1. So we have a harvest volume of 18,362 tonnes. And last year, in the second quarter, we had less than 15,000 tonnes. And our EBIT per kilo is NOK 13.09, which was NOK 18.07 in the same quarter last year. So a little bit down from last year but also from Q4 '19. Then an update, which is under the COVID-19 situation, which has affected all of us. Wherever you are in the world, you have been affected by this, and so also Grieg Seafood, and then will come through a small update on what we have done and where we are when it comes to the risk. If you look at the productivity levels is maintained. But our main focus has been our employees and the wellbeing of our employees and the families, that has had the #1 priority. And so far, we are proud to say that we have had no confirmed COVID-19 cases in Grieg Seafood in any other regions. But we also put in place strict measures, implement to lower the risk to safeguard our business. We immediately, when this come up, we set a crisis management team in the head office, but also in all our regions. Remote work and home offices, we have extended and used where it is possible. We have had strict routines on our factories, harvest and production sites to ensure that we have limited physical contact, encourage social distances. Personal and business travel is restricted to a bare minimum. And I think there is less than -- very little going on that front at the time being, using Internet as the working tool. Our operation is running close to capacity -- to normal capacity, with productivity of all our key function maintained. If we then look into the value chain, we see that in our case, [ that has ] had limited supply chain impact in Q1 can be different now in Q2. But if we look upstream, feed -- fish feed, breeding, genetics and the different tools and equipment that we need to maintain our operation, that has only minor impact. And in Bergen, no material impact at all in that area. Looking into smolt production, seawater farming and primary processing has also been quite okay. No impact on the harvest schedules. We have harvested what we should harvest. We have harvest even more than we plan to harvest just to make sure that we have headroom if there should be a difficult market situation or something happened that we need to take down the harvest volume. So in that sense, [ there has ] done a very good job in the seawater and primary processing to make sure that we can keep up with the volume. Downstream, it has been more a challenge. Secondary processing, sales and distribution and within this, also logistics. The HoReCa demand fall-off, but the market increased in retail. It also increased not only in retail, but it also develop the e-commerce, quite significant. We see HoReCa segment now making products and deliver at home, which has not happened before. A lot more is going on there. We have been able to offload to Europe and the U.S. using truck transport or ground transport. But we have had in -- especially in the beginning of this coronavirus a challenge. There was huge challenges with air transport. And as you might know, a lot of the passenger transport gets disappeared. And the industry, as such, has used the value transport from passenger planes, mainly to transport at least that disappear a huge challenge also getting cargo and plane in place. And as such, also that increased our costs quite significant on the logistics side to the market. The demand was always there, a little bit down for a week -- some weeks, but the biggest challenge was actually to find transport to the market, especially to Asia and overseas markets from our Canadian operation or European operations. In that sense, we have also -- in our view, we are lucky that we have also our operation underground in North America with British Columbia, that has been transported into the North American market. That said, it has been pressure on the prices, somewhat hold up a weak currency, weak NOK. But all in all, I would say that the market has been quite strong, especially when you think the retail sector has lowered the price significantly yet. So in that sense, looking into the market, there has been very little supply or demand impact as such. It has been an impact on price, but the volume going out has been good from all our regions. There will be some -- and in some short-term demand uncertainty. But we hope and believe that this will also have a positive impact longer term. As I said, the demand from HoReCa has shifted towards retail. We see huge increase in retail. Some markets, 25% to 35% increase in volume. The Chinese, Hong Kong and Vietnam, as we have mentioned here, volume has come down in Q1. But as we see it now in April, the last weeks, especially China, which is a huge market, has increased their demand more or less back to what we expect as a normal in this market. Export from British Columbia to China has been a healthy level, that has been challenged with the air transport also in that area. But what we haven't exported from Norway to China has been taken from British Columbia to China. And as you might know, it is also about finding a good home for bigger fish, salmon that we find in China, Korea, Taiwan, et cetera. We believe that we also will have some short-term challenges in the U.K. market due to the supply and volume growth. But we also have managed to have harvested out and sold fish from Norway and U.K. that we now have headroom to maneuver if that should happen something in the market that will influence either the demand or the prices significantly negatively. That said, we also believe that with e-commerce and the home deliveries and the change in the market, as we see now, especially in the retail sector and also the new -- that the HoReCa is grabbing the new opportunities. We think that -- and also recognize that the prices is not coming down to the consumer in the retail sector as of yet. We see, by the way, that there is more promotions coming up as we speak in the retail sector. But we also believe that in the longer term that with new consumers also coming into salmon, which we see maybe 20% to 30% of the new -- the consumers in the short term and never bought salmon before, so it's the first time they buy, which is very positive, if we look in a longer and broader picture its potential for new consumers. We also see that in the market now that gradually the HoReCa segment open. And although they are sitting a lot -- not tight anymore, apart from each other. But gradually, that's coming up and that we -- yes, we hope we soon will see a normal, maybe a new normal situation, but a normal situation going into Q2 and Q3. Then I think we move over to our liquidity and our financial position. Of course, in a crisis, you always look into that. And we have taken some actions already to safeguard. Dividend has been postponed by the Board to be reevaluated at a later stage. We have NOK 200 million drawn from credit facilities in Q1. We have identified NOK 200 million to NOK 300 million in growth investments that can be postponed without delaying any of our 2020 harvest or the long-term growth strategy. We continue to evaluate all operational cost savings and measure and do action according to what is needed.Our long-term strategy remains the same. Of course, the focus is now in the middle part, the cost leadership. We have a very clear focus that within 2025, we want to be a cost leader in all our regions. So in this situation, of course, that has a bit more focus than the growth and the value change repositioning. But all of it is still on our plate, and it's still the same plan as we described in Q3 2019. At the bottom of our hearts, sustainability is really the key for us and will always be a part of the strategy and all actions that we are doing. Moving on to the next page. We have also just reorganized Grieg Seafood to have a team that is able to deliver on these targets that we have set for 2025, short term, of course, corona and 100,000 tonnes is actually what is focused, but we are not losing the site of the 2025 either. So what we have done is after getting in Newfoundland in place, we have divided our farming operation into 2 separate areas: one area called Farming Europe and one area for farming in North America, which consists of British Columbia and Newfoundland. I think with this reorg, with the support from a new technology department, we will manage to reach our target. This we will come back to later, but this is a new structure for the company from this week. That said, I think we should move into the different regions and the review for Q1 2020, in Page #13. Sustainability, as I said, is close to our heart. And with all that we are doing in all of our regions and all our actions, that is a part of rethinking everything. I will not spend time on this slide now, but it is a part of the deck. Moving into Grieg Seafood Rogaland. We had a result of an EBIT of NOK 171.5 million in Q1 and NOK 145 million in the same quarter last year. Our harvest volume was close to 7,000 tonnes. Last year, it was 5,700 tonnes, and we had an EBIT per kilo for NOK 24.70 versus an EBIT NOK 25.30 in the same quarter last year. We are quite satisfied with the result in Rogaland, I will come back to why. Our operational performance in Rogaland is driven by favorable biological condition, the temperature has been good the whole winter. Yes, there has been some issues with the lice and treatment. And in one of our site, we lost and had emergency harvest due to a bit rough wind direction and current direction for a longer period. And when we then had to treat the fish for sea lice, we lost some significant volume of fish after a week -- a week after treatment. And we also have to emergency harvest the rest on a lower average weight, that was taken care of in a good way. But of course, it has cost implications, but it also have a price implication since the average rate of the fish was significantly lower than we expected it to be in Q2. But our earnings are driven by good market prices in the beginning of the year, offset by unfavorable volume distribution. 50% of the volume that we harvested in Rogaland was harvested in March and when the prices move significantly down compared to what it has been in January and February. We expect to harvest 4,000 tonnes in the second quarter of 2020, with a little bit higher cost due to lower harvest volume. Still, we maintain our guiding in Rogaland on our 25,000 tonnes target to be the same as we had actually for 2019. Moving on to Finnmark. We had a result of NOK 30 million compared to NOK 143 million same quarter last year with an EBIT of NOK 4.44 per kilo, which is some NOK 20 below same quarter last year. We have 1,000 tonnes more harvested in the region compared to 2019. And this is absolutely not satisfying, but there is reasons for it, but the results should have been at least NOK 100 million better in this region. I will now try to explain why it is not. Grieg Seafood Finnmark, our price achievement on cost is affected by harvest of fish at one site, that was affected by ISA. And that site, we have to harvest out within April 4. And so we did. The average rate was 2.9 to 3 kilo gutted weight equivalent. And there was significant winter ulcers on this fish. Several of this fish was affected. And then we had achieved a very low price point due to the size of the fish. Secondly, we achieved a very low price point because of the quality of the fish. And thirdly, 50% of the fish sold in Finnmark. Finnmark was also sold in March.That said, our survival rate has moved down, unfortunately, due to this, to high mortality on the fish that is affected by the winter ulcers. Having said that, I am quite proud of that we have now got 5 new sites, ASC certified in Finnmark, bringing the total to 15 sites at all in that area. And that means that 75% of all our activities in Finnmark is ASC certified. We have always had a challenge with having too little location, too little sites for our operation, which is now the biggest one in the company. And during this quarter, we was also granted a new site up in Hammerfest that will support our strategy for growth. We expect 7,000 tonnes of harvest in Q2 with some lower cost. The average rate will improve quite significant, but we will still have issues with the winter ulcers in to -- and in second quarter. And that will have an impact on the price and the quality. We expect to harvest some 38,000 tonnes in 2020. That means that we maintain our guiding also in this region. The next region is Shetland. Our result in Shetland is NOK 13.9 million, which is significant up from the minus NOK 25 million in Q1 '19. Our harvest volume is a little bit up 2,000 tonnes versus 1,800 tonnes in Q1 '19. And the EBIT per kilo is up positive to NOK 6.80 versus minus NOK 14 -- close to NOK 14 in same quarter '19. So if we look into why. We have a good -- achieved good prices, somewhat impacted by the reduced superior quality, but then offset a bit by the currency effect. Our initiative to improve biological performance, including more robust smolt has increased the 12-month survival rate to 88% compared to 85% under 12 months for last quarter. High sea temperature -- high sea lice pressure and treatment during this quarter, but underlying, the cost is improving quarter-by-quarter. We expect to harvest 3,900 tonnes in the second quarter in 2020, and we also expect that the cost to gradually come down in the longer term. So total, we will have 17,000 tonnes in 2020 on -- in our Shetland region. Then the last region that's operating with fish, Grieg Seafood British Columbia. We achieved a result of close to NOK 40 million. Last year, we had a result of NOK 22.7 million, so it's up some NOK 20 million. Harvest volume was 2,500 tonnes versus 1,500 tonnes Q1 '19. And our EBIT per kilo is up roughly NOK 1 from NOK 14.54 in Q1 '19, up to NOK 15.68 in Q1 2020. The reason is, actually, we have achieved a high average harvest weight. And the quality of the fish has been good, and we have achieved good prices. Our survival rate is also coming up in British Columbia. So we are moving from 87% to 89%. We have also, in British Columbia, managed to certify 3 sites, the first site during this quarter. We have the expansion on Gold River going on but we have delayed it by purpose due to the COVID-19. So we take a decision to delay it to make sure that the workers coming from the outside, not contaminate the people working in the operation as such. So to be cautious, we have done this as a risk management for our Gold River factory. We expect the highest volume ever in the Q2 in British Columbia, so we expect 10,000 tonnes coming out of the water in second quarter in BC. And we also expect that the cost gradually will decrease going forward. For the year, we maintain our guiding on 20,000 tonnes. Then the fifth region with no fish in the water yet, is Grieg Seafood Newfoundland. We finalized the transaction in April 15. And in this area, we have got -- we'll have 11 licenses with the potential of producing somewhere between 30,000 tonnes and 45,000 tonnes in this quarter. We have already achieved -- the 3 first licenses is in hand, and there is actually 5 pending at the moment, 5 new ones pending at the moment in different stages. The first half is planned in '22-'23, the end of '22, beginning of '23. And we expect at least to reach harvest volume of 15,000 tonnes by the end of 2025. The Newfoundland is in operation, is very occupied for a time being. We're building up the smolt facility which is RAS facility, AquaMaof is the supplier. The first phase is done, but the remaining CapEx is roughly CAD 60 million for Phase 1 construction under of the RAS facility. That will be completed in 2021. The smolt production will start actually this summer, Q2, Q3. And the first smolt expect really to see in June, July, August in 2021. So that was a short update on the operation. And with that, I will hand the word over to our CFO, Atle Harald, to go through the financials.
Thank you, Andreas. Then we are moving to the financials. And we are starting with the P&L. Looking first at the revenue that was NOK 2 billion in the quarter, that is from up compared to the Q1 2019 and mainly driven by higher harvest volume. The EBITDA was NOK 360 million and depreciation was NOK 120 million. That is sum up, and that needs to be seen in connection with the growth strategy that the company has. The EBIT was NOK 240 million, and the fair value was negative this quarter with NOK 778 million. The main reason for that is the spot prices and forward prices moving down in the quarter. Then the EBIT after fair value was NOK 538 million negatively. The net financial was NOK 37 million, a little bit higher than normal and impacted by hedging instrument, especially related to interest rates that was negatively. Profit before taxes then was negative with NOK 575 million. Estimated tax was NOK 130 million, giving us a result after taxes of NOK 444 million. Then we are moving to an analyze of EBIT per kilo and the cost development. In Q1 2019, we had an EBIT per kilo of NOK 18. The prices moved -- is down in this quarter with NOK 2.32. And the main reason for that is, first, that we was harvesting a little bit late in the quarter. The main harvest was late in the quarter, and the other thing was also the quality of the fish in Finnmark. The cost was moving up then impacting the EBIT negatively with NOK 3.43. And the main reason for that is the biology in Finnmark with winter ulcers and ISA. Elimination and headquarter costs impacted the EBIT positively NOK 0.78 leaving us with NOK 13 in EBIT per kilo for Q1 2020. Looking at the costs in Q2, we are guiding that a little bit down due to that the biology in Finnmark have improve a little bit. We will still have some challenges with the biology in Finnmark, but some better, and we also do harvest a little bit higher volume in Q2. So some down on the cost in Q2 for the company. Then looking at the cash flow. We are doing an analyze of the cash flow from the cash into the quarter, that was NOK 250 million. Then we had an EBITDA of NOK 361 million. And on the negative side, the working capital are NOK 457 million, and that's impacted by an increased value of biomass in this quarter. Also negative impacted on the cash flow is the investment that was NOK 160 million. On the positive side, we had the financial with NOK 208 million and other items of NOK 113 million, leaving us with a cash of NOK 280 million at the end of the quarter. Then looking at the financial position. The total balance of the company is now NOK 9.4 billion. We have an equity of NOK 3.8 billion. That's an equity ratio of 40%. Return on capital employed was 15%, that's down from Q1 2019 that was 19%. Then a little bit about the financial position. The net interest-bearing debt according to bank covenants, was NOK 2.2 billion. That's up compared to Q1 2019, and this needs to be seen in relation with our connection with the growth that we have in the company. Looking at the net interest-bearing debt on EBITDA, that was 1.5 and compared to covenants, that is 4.5. So we are comfortable with that situation. At the end of the quarter, we had undrawn facility, bank facility with close to NOK 600 million. And adding cash, that leaves us with free liquidity of more than NOK 800 million, and this is a position that we are comfortable with. Then looking at the investments. The maintenance investment we are guiding for in 2020 are NOK 250 million, still the same, and we are looking at growth investment of close to NOK 400 million. But we also have to say that we have identified, as Andreas was touching upon, NOK 200 million to NOK 300 million that we could move on this one. That also includes the Newfoundland transaction that was closed in Q2 with a cash impact of NOK 620 million. The last thing we are guiding on investment is the remaining investment on the RAS facility, which is CAD 60 million. And this is an investment that we expect to be done in 2020 and 2021. Then I will pass the word back to Andreas to take us through the outlook and summary.
Thank you, Atle Harald. Then we will have a look into the outlook and the summary for Q1 2020. If we look at the supply worldwide, we believe now the -- still that the growth this year will be somewhere between 3% and 4% on a global basis. That said, we think Norway will have a growth of 3%, which is significantly down from the growth that we saw in 2019. Chile will be on the same level, 5% as the way it was in 2019. North America, we don't see any growth coming, a stable production in that area. And U.K. had a huge growth in 2019. We will not see any more growth there. It will be roughly the same as it was last year or in 1% or so. Looking into Grieg Seafood's estimate for a year. We maintain our guiding for 100,000 tonnes for the year, where second quarter will have a volume close to 25,000 tonnes -- 24,900, with a little bit lower volume in Rogaland in the second quarter, Finnmark will be the same level. But where we see the huge growth from our site now is in British Columbia, which will increase the volume at 7,500 tonnes, up to 10,000 tonnes all in all. And Shetland somehow growth also up to 3,900 tonnes in the second quarter. So for the year, the company aim to reach growth of 21%. If I should summarize this quarter, it has, of course, the end of the quarter was very much impacted by the COVID-19 situation and the underlying demand is good. We have had vertical challenges in Finnmark, which we have spoke about, that has impacted the quarter very negatively. But it's -- in the rest of the regions, there has been a very good performance also going into second quarter. We have had said no major impact of the COVID-19, but we are following that situation very closely. Acquisition of Grieg Newfoundland was completed in April. We have a contract share for Norway of 26% and 10% for U.K. in second quarter. And we have target to harvest close to 25,000 tonnes in the second quarter and maintain our target -- maintain our volume of 100,000 tonnes harvested in 2020. So that's all for in this presentation. And now we move over to the Q&A session.
First question we have is from [ Thomas ] And that's related to the cost. And the first item of that was the currency rate and whether we have been using the currency rate at the end of the quarter, or if this is an average currency rate we have been using.And what we are doing is that we are using an average currency rate where we are calculating the cost of the biomass in U.K. and BC. And as you should know, that -- is that a weaker NOK has led to a higher cost through the quarter due to that. When it comes to the cost in general, maybe you can comment on that Andreas?
Yes. When it comes to Shetland, the underlying cost is moving in the right direction. Of course, as Atle Harald is saying, has to do also with the -- the cost has to do with the currency that we are using. So that's still too high as we guided on last quarter, but it is moving in the right direction in the longer term. Good thing is also that we see that the effect of the actions that we have done, especially on the smolt site, seems to work. And the survival rate of the fish is coming up during the quarter and also into Q2. But it will still take some quarter before where we should be in Shetland. There was also a question around BC. The production is going well. As you can see on the figures and the guiding for Q2, the production has gone quite very well. There is low-to-high cost on the fish due to write-offs that we had in -- extraordinary write-offs that we had in 2019. But the cost going forward in BC will be stable to decreasing.
Yes. Then we also have a question related to costs from [indiscernible] and that's about the cost in Q2 compared to Q1, Andreas.
Yes. I will, as said, being quite stable in Shetland may be coming a bit down there.
Yes. And [ Colben ] is also asking about the contract price level.
As you know, [ Colben ] I never comment on prices.
[indiscernible] a question related to prices in retail, [ a bit more down ]. Andreas?
The retail prices, and there is always a lag in that before the consumer really see the prices in the wholesale. So we expect that 3 to 6 months, it will take before everything is coming through to the consumer. That said, the retailers now ask for more and more volume for promotion to add into this. So we think that the prices in retail will gradually come down to the consumer and such also hopefully boost the demand even more, depending very much on the capacity in the processing industry in Europe.
Yes. Okay. And Carl-Emil have a question related to the working capital and the building off of the working capital in Q1. And where that comes from? Very much of that is actually related to a little bit higher cost on the biomass that we have in the end of the quarter. And we see that, especially in Finnmark, the production has been a little bit more difficult due to the different biology challenges that we had in that -- in this quarter. So a little bit higher cost is driving up the working capital in the biomass and linked to especially the biology in Finnmark.
Yes. Next question? How high percent of the -- from Carl-Emil in Pareto. How high percent of the fish is impacted by winter wounds in Finnmark in Q1? And what do you expect in Q2? Roughly half of the fish was impacted of winter wounds in Q1. And the issue was actually that we were not alone. There was quite a lot of production fish in the market at the time. And that's also impacted price achievement, and the impact of this would have been high if there was normal output of the production fish, which they were not. So we have had that issue with winter wounds in North, which we have put a lot of effort in to find out why it happened this year. Never seen it before as this high in my 25 years in the business. So it was a surprise, for sure. So into Q2, we expect still to be impacted by the winter wounds with the fish that we are harvesting. That said, the impact, hopefully, will not be that big for Q2 due to the fact that the fish is significantly bigger, 4.5 per kilo gutted weight, which we're harvesting, which is also a fine size for the industry and for further processing. So a less impact on quality, better sizes, but still, it will have impact on the price achieved in Finnmark in Q2.
And also a question from Carl on the reason for the high harvest volume in Canada in Q2.
Well, it's planned that way. Usually, we see a good market in Q2. And when we plan this, nobody knows about the corona situation. So it's a bit special, but it also has to do with the fluctuation between the years and the output in the West Coast and the East Coast of Vancouver Island this year, there is a huge volume now in Q2 due to the output.
And a question from [ Hanning ]. And that is, do you see a strong or weaker demand development from Q1, Q2 to Q3, Q4 than normal? And specified on HoReCa and retail in Europe and other markets?
I think that even looking into the situation now with the corona and a very weak NOK, let's say, if we look away from the prices, the demand has been there. Although we haven't seen the price decrease coming to the consumer yet, we still see that the European market has been fairly good compared to what you could maybe expected. The same in the American market, when the first wave went over. Asia, the demand has been very good all the time. The issue has actually been to move the fish. We have not been able to have air transport to move to Asia enough. We see now that the market in Asia, especially in China, South Korea and these areas that the demand is coming up. The logistics is starting to grow much better. And so I will not say it is back to normal, but it is very close to normal as we look at the market like China. U.S. market, it's a bit different from Europe, 60% of the fish in the U.S. market was sold in the HoReCa segment and 40% in retail. We have seen a lot of shifts now in the processing logistics industry in U.S. with high creativity. Logistic companies that only distributed to HoReCa segment, they have moved everything to retail. HoReCa segment starting home delivery, starting e-commerce. A lot of good things going on there. I think the market is definitely not back to normal, but we see gradually our opening in different markets, also in Europe. Germany is coming quite good now. Spain has been very good all the time, although most of the people are sitting at home. And France is moving in the right direction. Italy is holding a -- still a little bit back. But the demand is there. It's more a question about what will be the price point.
Yes. And following up question from [ Hanning ] Do you see the cost increase by feed costs in the second half in 2020 in Norway?
Yes. That's due to the fact that a lot of this feed ingredients is imported, and we have a weak NOK.
Then some questions from Alexander Aukner in DNB. What are the NOK 200 million to NOK 300 million investment that can be postponed? I can comment a little bit on that one. And as a starting point, we have a combination of maintenance investment, growth investment and the Newfoundland project. When it comes to maintenance investment, we have a very good level when it comes to -- or quality of the investment that we have in Norway. So we always will have an opportunity to move some of those investments half year, 1 year. That's one thing. When it comes to the growth, it's about setting up new locations, especially in Finnmark. And when we are looking at the production plans, we also have the opportunity to move that a little bit. It could be half a year, for instance. And the second one is Newfoundland project. So we are considering how fast we will ramp up the production in that area. And one thing that we are looking at is to be build the land-based facility, the first phase of that within 2 years instead of 1 year. The case is that we already, this year, will have smolt into that. But what we could postpone is the post-smolt investment, which is more to [ further ] cost even bigger or the smolt even bigger. So that's the opportunity that we have in the investments.And then Andreas, how much of Finnmark's volume in Q2 will be affected by the winter ulcers?
It's not easy to say before we have harvested but we think that we will have a downgrading in the range of 40% to 45% less than we had in Q1, but in this range. Of course, there is still -- in Finnmark, there is still cold water, significantly below what we would have expected. And that will also affect that the healing of the winter wounds will take longer time before we start seeing any healing of that. So unfortunately, this will be the case in Q2 in Finnmark.
Alexander is following up and asking about the causes for these challenges in Finnmark? And what can be done in order to avoid this going forward?
We have put in place groups internally -- that were put in place industry groups also to look -- overlook what we can do here. And we are measuring with a high degree of big data. We are using that to now find out what is common, if there is anything common. If it is another Moritella that is causing this. Is it a vaccine that's causing this or the combination of vaccine or the way we are doing the vaccination on the fish, all is investigated. And this we just have to avoid for the future. So it's an industry question. And [ we see ] question in particular, talking today.
Then moving to Christian Nordby. And that question goes to a little bit to biomass. And we are planning a 20% growth the coming 3 quarters. And right now, the biomass is 8% above related to that growth. And the question is, are we still confident with the 100,000 tonnes?
Yes, we are confident with 100,000 tonnes. And remember also, if you compare '19 to '20, 2019 was a year where we built up to the confident level when it comes to the biomass. The biomass we haven't seen is at the level that we are confident going forward. What can affect this is, of course, the better situation, et cetera, the growth in the sea and temperature in the sea. But as we see today, we are still -- we are still confident on the 100,000 tonnes guidance that we have given.
And then back to the winter also in Finnmark. It's Lars Johnsen in Carnegie asking about why we had this sudden jump in downgrading due to this winter ulcer in Finnmark? And could we do something with the treatment measures? Yes, smolt quality or site-specific things in order to deal with this.
Yes, that's what actually what we are trying to do. Looking over everything from breeding, feeding, sites, vaccination, all of this. Winter wounds is something that in the cold water often we'll find in the winter, in a very minor -- in a minor presence. But this year has been extraordinary, I will say. We have never seen it, at least, I haven't seen this level in my 25 years in the industry. And I don't think anyone else either have seen this. And in a so broad presence as it has been. So we do everything to find out again what caused this. The winter wounds, when it starts, it comes quite quickly. It's not something that's just evolving over a long time, when it comes, it comes quite quick. We try to avoid it with taking out the affected cases with more comp. So that in combination with our harvest of the [ ISA ] site, the small average rate with fish 1 to 2 and 2 to 3 kilo with winter wounds. It's not a very good size for the industry to process, and that's also why the price point became so low on this fish. But we do our utmost out of this and try to avoid that this is going to happen again.
Then we have a last question from [ Christopher Serna ] Can you please say something about the logistic issues? And how this has affected the cost levels?
The truck transport has run relatively normal, but there also has been extra cost due to the safeguarding both for the drivers, for our processing plants, et cetera. So some costs but bear in mind are compared to the air transport. When we look at air transport, that became a huge problem and a huge challenge. You could be half the way from Finnmark to Oslo or half the way from Finnmark to Frankfurt to go to China and in between, they cancel the flight. Most of the freighted volume from Norway is on the back of volume coming in from Asia to Europe. So we have been -- we have had quite good rates going the other way, meaning that if you go to Asia, somewhere China, NOK 8 to NOK 10, NOK 11 has been the normal prices. So the prices went up 3x, maybe 4x for some destinations in Asia during this period level. And that was not easy to get all that back from the customers. But there is no more capacity in -- of course, it was chaos in the beginning. But now it starts to come down. We see that the rates now start normalizing. Again, still a little bit high compared to what we are used to. But -- and also the offers now is much higher. The passenger planes that this seats is ripped out and that uses us to lower the rate and to get more salmon in the [ bay ].So on the airfreight side, still to Asia, it's okay, but okay-ish. But the other way, going from Europe to North America, there is still less offer and the prices and the cost of that is also significantly higher than we would like it to be. So that's also why we've done. You don't see that much volume floating from Norway to -- or Europe to U.S. for the time being. We have also had our production close to Vancouver, where there is a lot of -- there is a huge Chinese population in that area. And so the passenger planes has been moving on not as before, but less affected from Vancouver to China. So that has been an outlet for our fish in British Columbia.
Okay, that was the last question. So then...
Yes. Thank you for listening in. It has been a bit strange quarterly presentation, but hopefully, we can meet again sometimes in Oslo. So thank you very much.
Yes. Thank you.