IntraFish Seafood Investor Forum: Is diversification key for attracting investments?

Top execs from the global seafood industry and investors gathered in London last week. See our exclusive coverage here.

Tuesday, Sept. 5, 04.02 pm GMT

Russian Fishery steps into crab

On the wild side of the seafood industry, Russian Fishery is a giant in the whitefish harvesting sector as the world’s third largest pollock producer after Trident Seafoods and Maruha.

After much talk about salmon farming, Russian Fishery CFO Alexey Mashchenkov told the audience whitefish will also be an increasingly important source of protein for the growing population.

The giant fishing company has total harvests of 343,000 metric tons under TAC-managed species and an additional 60,000 metric tons of non-quota managed species.

It fishes pollock and herring and recently entered the crab fishing segment with the acquisition of licenses and two vessels.

“We recently started crab harvesting, our main focus is to harvest the quota we have for the 2 months that are left, which is a big enough challenge,” Mashchenkov said.

The company is well supported and plans to set off to an automatic extension of quotas in 2018, when the majority of company’s allocations expire.

“There are no further requirements for companies who haven’t been involved in illegal fishing, and have been harvesting within allocated limits ... They will get their quotas automatically extended,” Mashchenkov said.

--Lola Navarro

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Tuesday, Sept. 5, 03.59 pm GMT

Is diversification the key for attracting investment?

Vertical integration of companies, combined with diversification of species and geographies is the future of the seafood sector, according to finance experts at the IntraFish Investor Forum.

If you look at companies such as Leroy, Austevoll and Cooke, all of whom are involved with a number of species – both wild and farmed -- and in varied geographies, “this is the future," said Per Even Hauge, director DNB markets.

The customers, namely retailers, are looking for a diverse portfolio, so if one company can offer different species this is the key, said Hauge.

As a result, Hauge expects to see more consolidation within the salmon farming segment. "It is strange to me only two salmon companies listed on the Oslo Stock Exchange are geographically diversified, and also strange there are not others who have diversified species.

Thor Arne Talseth, portfolio manager at Amerra Capital Management, however, believes companies need to focus operationally, and questions whether one can be the best in everything from farming salmon, or bass, or catching cod.

“I think it’s possible, but it’s a fairly complex proposition,” he said. “On top of that there would need to be a sales or marketing department on top of it to get all the synergies -- very few have been successful.”

Nevertheless, Talseth believes ultimately this will happen.

“If we have this discussion 10 years from now, there will be a number of companies who are multi-species, multi product.”

Helge Moen, CEO Kverva, though thinks companies should stick to what they’re good at.

Salmon producers should focus on production and another on distribution and another on the consumer.

“It is a different strategy – whether it’s better or works, we’ll see, but I believe in focused operations and how you organize that.”

-- Dominic Welling

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Tuesday, Sept. 5, 03.47 pm GMT

Peru ripe for the taking

After a couple of years being impacted severely by El Nino, companies in Peru are becoming increasingly attractive for investors, said Per Even Hauge, director DNB markets.

“After a few tough years and a series of poor results, I think we will see opportunities in Peru for investors very soon.”

Referring to the successful of Copeinca by China Fishery a few year ago, Hauge is expecting similar deals to take place in the near future.

“There are now other companies struggling with how to refinance their debts – Peru is the area I expect more things to happen, and it is interesting the biomass is coming back, and balance sheets coming back.”

-- Dominic Welling

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Tuesday, Sept. 5, 03.31 pm GMT

Financial panel: Nothing like salmon in seafood investment

DNB Markets Director Per Even Hauge, Anavol Capital Senior Analyst Steven Chambers, KERVA CEO Helge Moen, and Amerra Xapital Management Portfolio Management's Thor Arne Talseth sat on the IntraFish discussion panel Investing in Seafood.

Panelists agreed that the salmon industry is the most developed of the international aquaculture sphere, and has had “tremendous” growth over the past years, all claiming there is no other seafood segment attracting near as much investment, or attention.

“What is positive is to see how technologies used in salmon farming can be applied in farming of other species,” said Talseth. “But we don’t see any investment near the evolution that we see in salmon farming.”

There are many lessons other segments can learn from the salmon segment, especially aimed at maximizing the value of volumes, and not just volumes themselves.

But there are more barriers to seafood investment, they said.

“You have very few companies that have the necessary liquidity, too often we see companies where shareholding is so concentrated that they can’t raise capital, or companies that are just too small to attract investors at all,” said Talseth.

“I believe that there are many seafood companies out there that wish they had never gone public in the first place.”

However, even within the salmon industry, there’s much to learn.

It is in very early stages, and there are great divisions, with the largest producing country, Norway, doubling the second largest in output; and the largest salmon company, Marine Harvest, also doubling its nearest competitor.

“Chile is a immature, they’ve had some issues and although it’s coming back, there is an important lack of liquidity in the industry, this is not the case in Norway,” said DNB’s Hauge.

--Lola Navarro

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Tuesday, Sept. 5, 02.44 pm GMT

Marine Harvest: Still much more to tap into

There is still a lot of untapped potential in the global salmon market, according to Ole Eirik Lerøy, chairman of Marine Harvest.

There is growth to be had in mature markets, as well as new markets, he said, while the US provides a significant opportunity.

The United States salmon market is the largest in the world at more than 400,000 metric tons, but consumption per capita is tiny at just 1.3 kilos, said Leroy.

For example, the world’s largest retailer Walmart only started selling fresh salmon in the country a year ago, and Marine Harvest is a key supplier, but now discounters such as Aldi and Lidl are also taking fresh salmon to the US in MAP packaging.

“China also has great potential now it has reopened its doors to Norway,” Leroy said. Here there is barely any per capita consumption of salmon at 0.1 kilos, “but now Norway is re-entering this will increase”.

-- Dominic Welling

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Tuesday, Sept. 5, 02.30 pm GMT

Camanchaca thrives in its unique position

The Chilean salmon industry has seen two major events affecting production in the past -- the first in 2009 with a devastating ISA outbreak, and second, a combination of two oceanographic phenomenon in 2016.

The largest El Nino phenomenon to ever hit Chile developed into an unprecedented algal bloom in early 2016 that reduced overall salmon production and led to spikes in global salmon prices over the remainder of 2016, and into 2017.

In Chile, salmon production is expected to normalize this year, but regulations implemented in the past 12 months will impede aggressive growth by individual companies, as those increasing production by over 3 percent or reporting poor biological performance will be forced -- together with their neighbors- -- to lower stocking densities, which would likely drive up production costs.

“In this context, Camanchaca is in a unique position in Chile because we will be able to increase our production and reach 54,000 metric tons, using facilities that we had rented or leased to other companies, and have been in use these years,” Ricardo Garcia, Camanchaca CEO, told the audience.

“This means increasing production significantly, without having any impact at all in Chilean production.”

As an integrated business both horizontally and vertically, Camanchaca also enjoys a good position as one of the largest distributors in the US market, where it trades seafood products from other companies.

“We have integrated all the way to the market place, collaborating in different markets for the distribution of products, something that gives us tremendous leverage.”

The company is back on track with an advantaged position on different fronts, with ex-cage costs healthier than those of many competitors, and mortality levels back down to those seen prior to El Nino.

--Lola Navarro

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Tuesday, Sept. 5, 01.44 pm GMT

Land-based salmon's 'huge' US potential

There is a “huge” potential for farmed salmon in the United States -- and in particular land-based production -- with an easy possibility of doubling consumption, according to Thue Holm, Co-founder & CTO of Atlantic Sapphire.

"The US market for Atlantic salmon is the worlds largest and has a strong growth profile and large potential," he said.

“The US could double its consumption even just by getting to the same level as Germany,” he said.

After gaining experience through various trials and tribulations in Denmark – where it has been operating for 6 years -- Atlantic Sapphire decided to set up a land-based salmon facility in Miami Florida to tap this potential.

And it did so in spite of the bureaucracy involved.

“US regulations not really set up for fish farming,” said Holm. For example, to get the permits needed to establish themselves in the US, Atlantic Sapphire needed to deal with 14 different entities. In Denmark it dealt with just one.

The 40 acre facility in Florida is targeting production of 90,000 metric tons by 2026, said Holm. Based on current factors – current salmon prices, KPIs in Denmark -- it expects to achieve an EBITDA of around $750 million by 2026.

Holm argues land-based salmon farming is more cost effective than current salmon farming models and has an added of advantage of being located close to the market – 95 percent of farmed salmon in the US is imported.

"By locating the US, Atlantic Sapphire avoids the costly air freight cost or around NOK 15 per kilo currently carried by salmon farmers exporting to the US.”

In addition Florida has “unique conditions” for land based salmon farming, and the Miami site has not only the sufficient groundwater resources required but also “logistically and management-wise it is unique and a potential new salmon region.

-- Dominic Welling

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Tuesday, Sept. 5, 12.44 pm GMT

Finmark, hub for salmon farming growth

Grieg Seafood recently reported the best second quarter of the company’s history.

The company continues to encounter long-lasting struggles in its Shetland operations, to do mainly with biological risks in the area, however, there are plans in place to improve conditions such as the adjustment of site positions.

Grieg expects to produce 100,000 metric tons of salmon by 2020, with a 10 percent yearly growth between 2018 and 2020.

This, according to CEO Andreas Kvame, will be driven by higher smolt production, in terms of size and number. This year, the company is increasing smolt input by 29 percent compared with 2016, and it continues to collaborate with NRS and Bremnes for the production of large smolts.

The biggest increase in production will be in Finmark, North of Norway, where production costs were high in the second quarter but are expected to decrease in the current quarter.

The company got approval for two new sites in this region in the past quarter, something that is “extremely important” to support the growth plans.

“We are currently producing 25,000 metric tons n Finmark, but have a capacity of 38,000 metric tons,” that will be possible to achieve with the new centers.

--Lola Navarro

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Tuesday, Sept. 5, 12.15 pm GMT

Leroy: Becoming a ‘fully fledged’ seafood supplier

Norwegian salmon farmer Leroy is already relatively well established in salmon, and now it is taking on cod in a bid to become a "fully-fledged preferred seafood supplier" to retailers.

According to Sjur Malm, the company’s CFO, there is a “revolution in fish distribution” happening and the company is capitalizing on it.

“The revolution in fresh/refreshed fish distribution is well advanced in salmon but we have just started in whitefish,” he said.

For example, fresh and refreshed MAP packets give way to a more efficient value chain, significant improvements in availability as well as more convenient products.

“This is driving demand and a willingness to pay for both salmon and cod,” Malm said.

He gave an example of a lost cost retailer in Norway which some years ago did not even offer fresh fish. Now its shelves are packed with a number of convenient, ready to eat, value added seafood products.

“In many European markets this trend is well advanced for salmon, but barely started for whitefish,” said Malm.

“European retailers see this trend and will to an increasing extent prefer suppliers who can supply a full palette of seafood products.”

Being fully integrated now in both salmon and whitefish, Leroy is ideally positioned to become a “fully fledged” preferred seafood supplier, said Malm.

-- Dominic Welling

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Tuesday, Sept. 5, 12.00 pm GMT

Iceland's salmon industry challenging but still promising

Norway Royal Salmon (NRS) is one of the five companies in the Icelandic salmon farming scene after buying a 50 percent stake in Icelandic Arctic Fish over a year ago.

“There have been ups and downs, but we have already learned a lot, and we still believe there is much potential in Iceland for salmon farming,” Charles Hostlund, CEO of NRS, said.

In a recent assessment, the Icelandic Marine Research Institution (MRI) determined production levels should be 50,000 metric tons in the Westfjords and 21,000 metric tons in the Eastfjords -- the only areas open to salmon farming in Iceland.

This was a reduction of levels recommended in previous assessments, especially due to concerns related to interaction between farmed and wild stocks.

NRS has a current production capacity of 6,800 metric tons, and has applied for a further 22,400 metric tons via its subsidiary Arctic Fish.

In addition, the company is the first to invest in the construction of a hatchery in Iceland, formed of three different buildings of which two are already built.

It has also made a number of appointments for the Icelandic operations and is currently working on education programs for employees in the country.

“We have the know-how, the smolt production capacity, and the farming licenses,” said Hostlund. “It will take a long time but I don’t see why we shouldn’t be able to succeed in Iceland.”

--Lola Navarro

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Tuesday, Sept. 5, 11.18 am GMT

Pioneering transparency

Transparency is key to eliminate misconception, something the fish farming industry is still struggling with.

Cargill's Einar Wathne said the marine sector is a pioneer in corporate social responsibility.

“The consumer cares about the origin of the fish, coming from other sectors in the agricultural business, [and] in my opinion the marine sector has pushed forward in its responsibility to communicate, to be transparent, and to reduce skepticism among consumers,” Wathne said.

--Lola Navarro

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Tuesday, Sept. 5, 11.15 am GMT

Cargill exec: Need 'broader menu' of fish feed proteins

The industry has done a "great job" in reducing the dependency on marine ingredients over the past 10 years, especially with replacements of Omega-3 in feed ingredients.

But the industry needs "a wider menu to choose from" when it comes to fish feed nutrients, Einar Wathne, president of Cargill Aqua Nutrition, said.

Constraints on feed formulation is a challenge, not just due to restrictions imposed by regulators in different areas, but also due to limitations feed giants set in their formulation.

The industry, Wathne said, needs more investment to develop a broader menu of protein for feed composition.

--Lola Navarro

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Tuesday, Sept. 5, 11.05 am GMT

Striking a balance

While clearly there is a need for different kinds of ingredients for fish feed, the idea there will be a lack of marine ingredients going forward is overplayed, according to Andrew Mallison, director general at IFFO.

During a panel on the future of feed, Mallison recognized the excitement around alternative ingredients and conceded there is a common goal to see the growth of the aquaculture industry.

“There are not enough [good alternative ingredients for feed] and there is a gap that needs to be filled,” he said. “But we must strike a balance.”

In addition, he said certain negative forecasts about a lack of availability of marine ingredients is overstated.

While availability might reduce in terms of whole fish -- which is increasingly heading into human consumption -- as aquaculture increase, so do byproducts, which can be used instead, he said.

“General byproduct availability [from aquaculture] will increase around 25-30 percent in the coming years to go into fishmeal production.”

Although using less oily species such as pangasius, for example, will present problems on the fish oil side of things.

“We wish the alternatives well,” said Mallison. “But the concerns around the availability of fishmeal, at least, are misplaced.”

-- Dominic Welling

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Tuesday, Sept. 5, 10.45 am GMT

NRS sets out for organic growth

Growth is Norway Royal Salmon's (NRS) main driver, with a set goal of producing 45,000 metric tons in the future.

And the company is on track: This year it will produce 34,000 metric tons, up from 26,800 metric tons in 2016, Charles Hostlund, CEO of NRS, told the audience at today's investor forum.

Costs were high in Norway’s north region in the first and second quarter of the year -- and will remain high during the third quarter. But this is the region where the company expects the biggest growth.

At the moment, it farms 8 percent of its production in northern Norway.

“We will start seeing lower costs in the fourth quarter of the year in the north," Hostlund said. "This region should deliver good results within our operations."

--Lola Navarro

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Tuesday, Sept. 5, 10.22 am GMT

Bakkkafrost targets 70,000 tons production by 2020

Faroese salmon farmer Bakkafrost plans to reach a production of around 70,000 metric tons by 2020 -- if its new smolt program goes ahead as planned.

As part of the company’s latest investment strategy -- looking to 2020 -- it plans to increase its hatchery capacity in a bid to produce smolt of 500 grams in size.

According to Gunnar Nielsen, CFO at Bakkafrost, to do this the company is investing heavily in its hatchery operations.

Capacity already increased in 2016 with a new 8,000 cubic meter hatchery at Vidareidi, but in 2018 the company will take this further and open a 29,000 cubic meter hatchery in Strond which will boost total smolt capacity “fourfold."

By increasing smolt size transferred to sea to 500 grams, Bakkafrost hopes to shorten the seawater production cycle, and in turn boost overall salmon production to 70,000 metric tons by 2020.

“We can reach 70,000 tons, but this is highly dependent on the smolt and biology,” said Nielsen.

The company is planning to invest more than DKK 2.2 billion between 2016 and 2020, the vast majority of which will be spent on it’s operations on land -- finalizing its harvest/VAP factory, increasing the hatchery capacity, and installing a new feed line.

In addition the company wants to build a new salmon meal and oil plant, Nielsen said.

“We want to use the offcuts to produce salmon oil and meal. The investment on this will start later this year, giving additional value to the salmon we are producing.”

-- Dominic Welling

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Tuesday, Sept. 5, 9.35 am GMT

Young's CEO: Profitability 'a challenge' after Brexit

Inflation rates of raw material after Brexit increased up to 7 percent for chilled products in the 12 weeks following the vote, and more than 6 percent in frozen products, Bill Showalter, CEO at Young's Seafood, said.

“Immediately after the Brexit vote the British pound fell against many key currencies, and that has obviously put immediate inflationary pressure [on margins],” he told delegates at the IntraFish Seafood Investor Forum.

A survey carried out by the company suggested consumers would, in the first place, reduce consumption of fishery products if prices were to increase, in the second instance, their choice was to shift from branded products to private label.

“The UK market as it is today is not going to be receptive to an increase in prices,” Showalter said. “Maintaining current profitability in the UK is a challenge.”

--Lola Navarro

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Tuesday, Sept. 5, 9.20 am GMT

The future tech for salmon farming

Fish farming capacity is not a fixed given number -- it can be improved by applying technologies, regulations and farming practices

But what parts of technologies apply to salmon farming?

“The internet of things, sky computing and artificial intelligence,” said Dag Sletmo, senior analyst at DNB and keynote speaker at the IntraFish Investor Forum in London.

Big companies are using innovation, digitalization and smart robots for salmon farming, that will lead to sustainable levels, reduced production costs, and reduced entry barriers.

Issues such as sea lice, biological risks and sustainability problems are a strong barrier for the salmon industry that should be lifted to attract investment, Sletmo said.

--Lola Navarro

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Tuesday, Sept. 5, 9.12 am GMT

Young's strikes deal to enter US retail market

United Kingdom-based seafood processor Young's Seafood is entering the United States market through a new partnership with The Fishin’ Company, CEO Bill Showalter announced at the IntraFish Seafood Investor Forum in London, Tuesday.

Through the partnership, Young’s said it will soon be launching Young's branded products in two US retailers.

Click here to read the full story.

-- Dominic Welling

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Tuesday, Sept. 5, 8.15 am GMT

Seafood financiers gather in London

The IntraFish Seafood Investor Forum takes place today in London.

The event, sponsored by seafood bank DNB, will be held at the DNB offices in the City of London, and is attended by advisers, investors and industry experts from around the world.

Speakers will include top seafood executives Ole-Eirik Leroy, chairman salmon giant Marine Harvest; Einar Wathne, president of feed producer Cargill Aqua Nutrition, Bill Showalter, CEO of UK processor Young’s Seafood, and Ricardo Garcia, CEO of Chilean fishing and salmon farming company Camanchaca.

During the event, speakers will give a thorough update on their respective sectors, and will hold a number of discussion panels to cover the challenges and opportunities of investing in the seafood industry, and the future of feed.

Dag Sletmo, senior corporate analyst at DNB, will be keynote speaker at the event, and Per Even Hauge, director of DNB Markets, and Alexander Aukner, equity research analyst at DNB will share their insight on the outlook of the seafood industry.

Keep checking back here to get all the updates from the event.

-- IntraFish Media

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