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IntraFish Investor Forum: Recap on a full day of talks

Top execs from across the the global seafood industry gathered in London Thursday. Recap on a full day of talks here.

Thursday, Sept. 13, 4:57 pm GMT

Sea lice -- the mother of all diseases

Sea lice, “as the mother of all diseases," should be the main regulator for the growth of the salmon industry moving forward, according to Ole-Eirik Leroy, chairman of Marine Harvest.

He said the foundation for sustainable growth will come from using the sea lice level as a marker to regulate growth in production or, perhaps, reduce it.

“That is why Marine Harvest is heavy on advocating for strong, clever and intelligent regulations in all salmon farming countries,” he said.

This as well as certifications, better market development and development licenses, is and will be the key to a successful industry. Most of the future, in my opinion lies in the market,” he said.

“We need to focus on what we’re doing today but much better than in the past, get the new development licenses up and running and do a much, much better marketing of our products."

-- Dominic Welling

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Thursday, Sept. 13, 4:52 pm GMT

Introducing the salmon playbook to bass and bream

After entering the bass and bream sector by snapping up Selonda and Nireus earlier this year, Thor Thalseth, CEO of Amerra Capital, believes the industry can learn a lot from salmon.

It is about “introducing the salmon playbook” to other sectors and species, said Thalseth.

“While this is about production, it is also related to product development [and] making the product available to a broader customer base,” he said. Salmon can be even better, but it is still way ahead of every other seafood product.

In bass and bream, for example, 95 percent is sold whole, round.

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"So there is a tremendous potential in creating new products and adding value, and we will lead that," said Thalseth.

He also said the acquisition of Selonda and Nireus was about consolidation of a “tremendously fragmented sector. They were financially weak companies that drove undisciplined harvesting, and that obviously is not sustainable."

However, it is not just about salmon or bass and bream for Amerra.

“Seafood is cyclical. At any given time there is one or several segments ready to be taken on -- we want to find a good platform and build on that."

And Thalseth believes there are a number of other opportunities out there to consolidate a fragmented global aquaculture industry, and possibilities to take advantage of the equipment and technology that’s been developed for other species.

“Of course it is not without challenges implementing this in other geographies and cultures, but if it happens, it has a tremendous effect on production and costs."

Wild harvest fisheries are also a segment that interests Amerra, he said.

-- Dominic Welling

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Thursday, Sept. 13, 4:50 pm GMT

Technology to the rescue

Advancements in the aquaculture field, especially land-based and offshore farming, are cutting-edge technologies expected to mitigate problems such as salmon escapes and disease outbreaks.

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“These problems are not new, and they are still present," Steven Rafferty, director of aquaculture at Global Maritime and former CEO of feed giant Skretting, told the audience. "There was a very significant escape in Chile and another in Washington, these environmental catastrophes have to be tackled."

But the farming side is not the only part of the industry that will be reshaped with technology. The change in the marketplace will likely have a greater and more noticeable impact in the short term.

“Alibaba, Amazon, e-commerce in general is the new way of shopping. They will have a big impact in the salmon industry and in seafood consumption,” said Rafferty.

--Lola Navarro

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Thursday, Sept. 13, 4:30 pm GMT

Consolidation is the right thing to happen

Chile is the “living example of how cyclical the salmon industry is,” said Moises Saravia, CFO of Chilean salmon company Australis.

But the latest developments have set the industry off for an era of growth through more mergers and acquisitions.

“Organic growth is not possible, there were already strict regulations in place and now they have made them even more restrictive, so the only way forward is further consolidation,” Saravia said.

A series of improvements can be expected from consolidation, he said.

“With fewer companies selling and dealing with challenges such as SRS and caligus, conditions will improve, bring costs down and stablize supply and prices.”

--Lola Navarro

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Thursday, Sept. 13, 4:15 pm GMT

Investments needed in downstream, processing

Jon Hindar, CEO of Havline and former CEO of Cermaq, believes investment is needed in the salmon processing sector.

“There should be more moves into the downstream industry,” he told the investor roundtable.

While only a handful of big salmon producers so far are also present in processing – think Marine Harvest, Leroy – “historically farmers have not shown much interest in downstream,” said Hindar.

“The industry is very fragmented and not particularly profitable with high salmon prices,” but with a big backer, this could help reduce costs, while increasing volumes and products.

“There is a lot to be done in that industry in terms of product development, how made, presented and shown to consumer,” said Hindar.

“There is a long way to go, but Leroy is a great example of what you can do even though there is also still a lot more they can do."

-- Dominic Welling

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Thursday, Sept. 13, 3:35 pm GMT

Irony: biological success might be the worst thing for salmon farmers

Former Cermaq CEO Jon Hindar, now internal advisor with Summa Equity, warned investors at the event to look for potential changes in the supply side of the business, which could come from success in beating biological challenges.

“If someone has good news [in sea lice, disease management solutions] investors should be worried because production will then go up,” Hindar said.

“Sea lice treatments may ironically be the worst thing that can happen to the salmon industry from a financial point of view, because even though it would reduce costs, it would help production and prices would go down.”

His advice for investors, look very closely at what can change supply.

“In this sense, I believe the success of land-based salmon farming will substantially change the dynamics of the industry.”

--Lola Navarro

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Thursday, Sept. 13, 3:33 pm GMT

Good is not great

The industry fundamentals of the salmon sector look good for the future, with stable supply and robust demand, but “when the market expects great, good is not enough,” according to Alexander Aukner, analyst at DNB Markets.

The industry seems to expecting price levels of around NOK 65 (€6.80/$7.90) in the fourth quarter but Aukner has a more sobering expectation of around NOK 56 (€5.80/$6.80).

“And if this happens, it is a good entry opportunity for investors,” he said.

Nevertheless caution is still warranted he said. “High expectations makes delivering tough, and the risk reward looks stretched,” said Aukner.

“I am by no means saying the golden times for seafood are over, but things are more likely to stabilize at high levels.”

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Positively speaking, supply might be less than expected, demand might be higher than expected, the Norwegian krona could weaken further and all this will prolong the super cycle for salmon.

“There is a lot of positive momentum already built into share price, however factors such as new regions [Iceland] and new technologies [offshore] coming online, could change the demand or supply landscape.”

Global supply estimates have been revised up slightly, mainly due to Chile where production is becoming more stable and regulated.

In the past five years global supply has only increased by 150,000 metric tons. But in the next two years Aukner is predicting growth of around 300,000 metric tons, mainly thanks to Chile and also development licenses in Norway.

“Although the volume growth not substantial, the price is going to stabilize at current levels and the market will have no problems absorbing it.

“Chile’s growth will be more in line with Norway over the next two years at around 3-5 percent.”

-- Dominic Welling

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Thursday, Sept. 13, 3:03 pm GMT

Leroy: A story of becoming global seafood player

Oslo-listed Leroy Seafood’s goal to become a global seafood supplier is becoming increasingly likely.

How? A strong demand forecast for fish, some very promising emerging markets and the adaptation of new formats that add value to the processed raw material and encourage consumers to eat more seafood.

In 2006, there were around 200 outlets selling fresh-packed fish in Norway, now there are 15,000 -- and consumers can find fresh seafood pretty much at every retailer in the country, said Sjur Malm, CFO of Leroy.

The change was driven by consumer-friendly formats. Portioned salmon, for example, has been a gamechanger for consumption trends, he said.

With this in mind, Leroy – which was until not long ago the world’s second largest salmon producer – continues to establish itself in key markets with processing plants that allow it to supply fresh fish to consumers.

The company has invested heavily in its value-added production. It is Norway’s largest producer of sushi and it has big contracts for ready-to-eat meals across its markets.

For the future, the company sees strong demand for both salmon and whitefish, and expects the Chinese market to drive an explosion in seafood demand that is expected to last for the foreseeable future.

--Lola Navarro

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Thursday, Sept. 13, 2:16 pm GMT

A new era of sea lice treatments?

“Everyone in the audience is aware of how big a problem sea lice is in the salmon industry,” said Benchmark CEO Malcolm Pye.

As a bio-technology company tackling issues in the aquaculture industry, Benchmark has a key role to play in bringing solutions to the aquaculture sector, while at the same time driving profitability.

The company’s latest treatments against sea lice are currently being trialled in Norway. Around 17,500 metric tons of salmon have been treated so far and the trials are going “extremelly well,” Pye said.

“The treatment does not affect the fish at all; it is something unheard of, and there is no detectible medicine discharge, so it has zero environmental impact,” Pye said.

The company calculates peak sales of the medicine will hit £45 million (€50.4 million/$58.9 million).

“It is a very interesting opportunity, I think this may be the beginning of a potential new era,” Pye said.

Benchmark expects to obtain the license for the product by 2020.

--Lola Navarro

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Thursday, Sept. 13, 2:07 pm GMT

Bakkafrost profit jumps sixfold in 7 years

Faroese salmon farmer Bakkafrost – which claims to have the longest value chain in the industry – saw its operational EBIT increase nearly six times between 2010 and 2017 from DKK 247 million (€33.1 million/$38.7 million) to DKK 1.4 billion (€187.7 million/$219.3 million).

Over the same period its revenue multiplied by five from DKK 820 million (€109.9 million/$128.4 million) in 2010 to DKK 3.8 billion (€509.4 million/$595.2 million) in 2017.

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The company benefits from a brand premium which is placed on salmon that comes from the Faroe Islands, meaning it can charge around €1 per kilo more than its Norwegian counterparts. While hard to narrow down the specific reasons why, Regin Jacobsen said this was mainly based on larger fish, a good reputation combined with market and product strategy.

“Since 2012 we have significantly improved our competitive position compared with other listed companies – margin per kilo is crucial.”

The company has also expanded geographically over the years. Back in 2002, around 86 percent of its sales happened in continental Europe. In 2017, however, this figure was only 15 percent as the company has seen a strong development in sales to the United States, Asia and Eastern Europe over the years.

The company has no plans to slow down either and is estimating a 55 percent growth in harvests by 2023 to reach roughly 76,000 metric tons.

This is part of its DKK 3 billion (€402.2 million/$469.9 million) investment plan, which includes a new portfolio of sites in Suduroy, which will add an extra 10,000 metric tons, while it is also looking at a roll out of its large smolt strategy, of which 15,000 metric tons are expected by 2022.

-- Dominic Welling

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Thursday, Sept. 13, 1:25 pm GMT

Starting to look around the corner

Grieg Seafood is targeting production volumes of 100,000 metric tons by 2020 with costs at or below industry average at around NOK 37.90 (€4/$4.60) per kilo.

According to Andreas Kvame, CEO of Grieg Seafood, this growth will come through both improved capacity utilization in all regions – Rogaland, Finnmark, British Colombia, and Shetland – but also by making operations more efficient through improved digitalization.

This specifically includes applying advanced sensors, big data, artificial intelligence and automation in order to generate better decisions, thereby increasing yield and resource efficiency, he said.

“Technology and data are changing the way we operate,” said Kvame. “Before we were manually orientated, looking in the rear view mirror, and relying a lot on gut feeling and experience, there was poor data quality and little focus on standardization."

Today it is about using real time data, as consolidation and data storage improves.

The future, though, will be more about "looking around the corner," with more integrated solutions, cloud-based services, the internet of things and big data analytics.

“It will be about data-driven predictions and simulations,” Kvame said.

Through better use of data, Grieg will be able to boost sustainability and productivity while also reducing costs.

“Precision farming is key for delivering on our sustainable growth strategy and efficient operations," said Kvame. “All in all we can already see clear signs that by gathering data and using cutting edge artificial intelligence, it improves sustainability and productivity while reducing costs.”

-- Dominic Welling

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Thursday, Sept. 13, 12:05 pm GMT

NRS top exec: Be open, tell your story

Social acceptance is a crucial factor for success in the salmon farming industry -- and at the same time perhaps the weakest point for most producers.

Much more has been done lately to engage with communities but the mistakes of the past seem to still have an impact. And the fast pace at which information travels can be a doubled-edged sword. As the industry expands, it is important to start on the right foot on new farming zones.

Charles Hostlund, CEO of NRS, said the only way forward is to tell the right story and to be completely open about salmon farming.

“We are entering into Iceland now, it’s about telling the story and letting people know about the industry. It’s about telling the right information,” Hostlund said.

“In a way, as salmon farmers we are feeding into a lot of the mega trends that we have at the moment, and when you look at our production there is nothing to be ashamed of, we could be completely transparent about the entire process,” he said.

“We haven’t done that very well in the past, but hopefully it will get better from now on.”

--Lola Navarro

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Thursday, Sept. 13, 11:09 am GMT

Farmers: Take a leaf out of the feed sector’s book

The salmon farming sector can learn a lot from the feed industry when it comes to expanding and encouraging disruptive behavior, according to Steven Rafferty, aquaculture director of Global Maritime and former managing director of Skretting.

“I think the feed industry historically is more of a pioneer than the salmon farmers themselves,” he said. “In the sense of being truly international.”

According to Rafferty, the feed industry has “more knowledge of all markets” and is more tailored made to each individual country and species. This is in comparison to the big salmon companies, where only a handful can truly call themselves international.

Where feed companies have been backing start-up companies, investing in them or helping them grow, this is what salmon farmers should be doing too when it comes to disruptive technologies.

For example with land-based production, “salmon farmers should follow what feed companies have been doing by partnering with start-up companies – or by buying them,” said Rafferty.

“This is not just up to the feed companies to do, and if the farmers don’t get involved they could be left behind."

-- Dominic Welling

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Thursday, Sept. 13, 11:00 am GMT

The big tech change is coming

It became clear long ago that all global industries and companies will be affected to some degree by the technological and digital revolution.

Though this impact was certainly most noticed in sectors such as media and telecoms, other industries that might have avoided the hit so far are surely going to see changes. And these changes will become obvious very soon, David Perez, partner at The Boston Consulting Group, said.

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Aquaculture is one of those sectors where the impact of digitalization is still unknown, but there are some indicators showing it might be the only way to fix current flaws.

At this point is crucial to start aggregating technologies in daily operations. Being two years behind in the implementation of technology opens a gap that will be very hard to fill, Perez said.

In aquaculture, the main issues to be tackled with digitalization are traceability, lack of information, lack of analytical software for better documentation, poor sales and operations planning, labor-heavy feeding operations, and the high degree of uncertainty in production.

The most likely solutions? GPS, sensors, robots for automated maintainance of feeding, high-tech machinery, artificial intelligence, big data, cloud computing.

“There is a number of techs available," Perez said. "We are not quite there yet but when it’s implemented we will see the big change."

But when will the industry really begin to digitalize? Well that, as so many things in aquaculture, is also segmented by sector.

“In salmon farming, big producing companies will probably be the aggregators of data, but in other more segregated sectors like shrimp, the aggregators will probably be stakeholders such as large feed producers,” he said.

--Lola Navarro

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Thursday, Sept. 13, 10:41 am GMT

NRS targets 70,000 tons with new farming projects

Norway Royal Salmon (NRS) is setting itself a milestone production target of 70,000 metric tons, once its new salmon farming projects come online.

The company has been granted eight development licenses for its Artic Offshore Farming project, equating to around 5,900 metric tons maximum allowed biomass (MAB), which will be designed to cope with more harsh, exposed environments for salmon farming.

It is currently in the design and testing phase, but NRS has the target of releasing the fish for this project in 2020.

“It is an extremely exciting part of the future for the industry,” said Charles Hostlund, CEO of NRS. “There is lots of work to be done, but by the end of year decide we will decide exactly where to build it."

The entire structure has a diameter of around 79 meters and weighs 2,500 metric tons, “so it is massive,” said Hostlund.

In addition to the Arctic Offshore project, NRS has also applied for six development licenses for its FlipCage project.

The concept is a “multifunctional, rotatable cage," which can alternate between open operations and closed operations.

Meanwhile, NRS’s salmon farming joint venture in Iceland, Arctic Fish, is also gaining traction and has “great potential for growing more," said Hostlund.

Combined with its existing farming operations, all of these additional future growth areas, should help the company hit its target of 70,000 metric tons.

For this year though, the company is guiding for a production of 36,000 metric tons.

Hostlund added the company’s Q2 figures, however, were “fairly disappointing” due to the impact of an ISA outbreak.

In the second quarter, NRS posted an operational EBITDA of NOK 203 million (€21.2 million/$24.6 million) on revenues of NOK 1.2 billion (€125.1 million/$145.3 million).

-- Dominic Welling

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Thursday, Sept. 13, 10:30 am GMT

Don’t put all your eggs in one basket

Atlantic Sapphire’s Bluehouse salmon farming project in Miami has drawn much attention over the past years from investors and stakeholders.

The first phase of constructing the promising high-tech facility is well underway, and Atlantic Sapphire plans to stock the first smolts by the end of November, CEO Johan Andreassen told the audience this morning.

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Looking into market opportunities and natural conditions allowing for an unlimited intake and discharge of water, the unique Florida groundwater provided the perfect setting for an industrial-scale land-based farming operation, he said.

But the true groundwork was laid at the firm's Danish operations, Andreassen said. After reporting a mass die-off last year, Langsand Laks is restarting harvests at the facility this very week.

Langsand's farming model has served as a base to identify flaws and improve the technology for the Miami’s mega-project. One of the improvements to be made at the new location is to distribute and reduce risks by building six different water systems at the new facilities.

“In Denmark, we have all the eggs in one basket, with just one water system," Andreassen said. "In Miami we are building six different systems, reducing exposure from 100 percent to 12.5 percent."

Atlantic Sapphire's shares currently trade at around NOK 50 (€ 5.20/$6.10) on Oslo's Merkur Market, taking the company’s market capitalization to around NOK 3 billion (€ 313.1 million/$363.6 million).

--Lola Navarro

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Thursday, Sept. 13, 9:16 am GMT

How long can we squeeze the lemon?

The current state of the salmon industry is very healthy, with prices and profits at all-time highs -- but for how long can this situation last?

“The state of the union is very good,” said Dag Sletmo, senior analyst at DNB Bank, adding “I can’t think of another industry with a higher number of positive mega trends."

The industry has seen strong salmon prices for the last few years, but profit and share prices are high because stagnant volumes are lifting prices.

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“But how long can we squeeze the lemon?” said Sletmo. Lower volumes equal higher profits as price increases more than the volume drops, but this logic has its limits. “Zero volume doesn’t produce infinite volumes,” he warned.

Another reason for the step change in profits over the last five years is because prices and costs have decoupled, meaning prices are no longer determined by costs.

“Costs are up but so far the consumer is picking up the bill, will that continue? Probably not,” said Sletmo.

The higher prices, though, are not the concern, he said. And the markets accept these levels. It is the high margins and profitability that’s more of a worry. “It is so high it attracts attention."

For example, this could trigger massive innovation, new players, and potential disruptive changes down the road, he warned.

Disruption could come in the form of saving costs, which is good for everyone, there could be known disruption which is good for some but bad for most as barriers are lowered, and then there is unknown disruption – which is “good for very few, and bad for everyone else as the market is totally redefined."

The industry needs to look at how to drive value from here, as there is a limit to how high prices can go, said Sletmo.

Nevertheless, “all the mega trends are in favor of the fish farming industry,” and there is still plenty of room for further growth.

-- Dominic Welling

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Thursday, Sept. 13, 8:15 am GMT

Global seafood execs, investors descend on London

Some of the world's most powerful seafood executives are coming together with investors from around the globe in the heart of London's financial district for a full day of presentations, panel debates and unrivaled networking at the IntraFish Seafood Investor Forum.

This year's speaker lineup at the event is one of our best: Some of the top C-suite execs from the salmon farming industry will be offering their views into the future of the seafood industry's most dynamic sectors.

Our lineup includes: Johan Andreassen, CEO of Atlantic Sapphire; Ricardo Garcia, CEO of Salmones Camanchaca; Charles Hostlund, CEO of Norway Royal Salmon; David Perez, partner at Boston Consulting Group; Dag Sletmo, senior corporate analyst at DnB; Steven Rafferty of Global Maritime Consultancy; Andreas Kvame, CEO of Grieg Seafood; Sjur Malm, CFO of Leroy Seafood Group; Regin Jacobsen, CEO of Bakkafrost; Malcolm Pye, CEO of Benchmark Holdings; Alexander Aukner, analyst at DnB Markets; Per Even Hauge of DnB; Moises Saravia, CFO of Australis; and Marine Harvest Group Chairman Ole-Eirik Leroy.

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.

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

Click here for the day's agenda.

-- IntraFish Media

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